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Mitie sells social housing arm to Mears
Mitie has sold its social housing business to rival Mears in a deal worth up to £35m.
Mitie sells social housing arm to Mears #ukhousingThe outsourcing giant confirmed this morning it would be selling off the division that provides repairs and maintenance work to more than 30 social housing providers, with the money being used to strengthen its balance sheet and reduce its pension deficit.
Mears will pay an initial £22.5m in cash for the business and then pay a further £12.5m over the next two years, dependent on the business achieving certain performance milestones.
The deal is conditional on Mears completing a private placement to raise funds to pay for the acquisition, and the legal completion of the TUPE transfer of the 1,000 affected Mitie staff.
The social housing activities of Mitie Property Management (MPM) will initially transfer to a new company called MPS Housing Limited.
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This will enable Mears to buy just the social housing services, while Mitie’s other parts of its property services division, such as roofing and commercial painting, will stay with the business.
The business’s managing director Vicky Fordham-Lewis will remain in the role as part of Mears’ enlarged operation.
Mitie’s social housing arm currently employs 1,000 people and provides repairs and maintenance services across 14 branches in the UK.
For the 12-month period ending 31 March, Mitie posted pre-tax profit of £5m on turnover of £128m. The businesses gross assets as of the balance sheet dated 30 September 2018 was £40.3m.
Last week it picked up its latest contract after it landed a £32m deal from Waverley Council to manage maintenance across the area for the next decade.
Mitie is currently carrying out a turnaround plan after issuing three profit warnings between September 2016 and January 2017. The plan aims to make annual savings of £50m by 2020.
Phil Bentley, chief executive at Mitie, said: “Mitie’s strategy is to focus on its core businesses and core clients, where service delivery and margin can be enhanced by the use of technology to deliver the critical environment reliability and cost efficiency that our clients increasingly demand from their ‘connected workspace’.
“MPM is a specialist provider of repairs and maintenance services to the social housing sector. The sale of MPM to Mears will allow Mitie to continue to focus and build scale in its core businesses. Mears is highly regarded in the social housing sector and has the specialist skills required to deliver to its client base.”
David Miles, group chief executive of Mears, said: “I am delighted with the acquisition of MPS Housing Limited, which will further strengthen Mears’ market leadership and contract profile in social housing. Given our strong operational platform and differentiated service delivery, together with our proven ability to turn around underperforming businesses, I am confident that we will deliver significant improvements to contracts, customers, tenants and employees.”
In a note to investors, analysts Canaccord Genuity said the deal would strengthen Mitie’s balance sheet and retained a ‘buy’ recommendation for the business’s shares.
In the 12 months to March this year, the social housing business generated revenues of £128m and adjusted earnings before interest, tax and other deductions of £5m.
Mitie’s share price fell in the early trading this morning, but had since recovered to 1.16% up on its previous closing position. Mears’ share price had dropped 8% this morning at the time of writing.
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