Mears Group flags solid strategic progress

(Sharecast News) - Mears Group said in an update on Thursday that it made significant progress against its strategic objectives in the year ended 31 December, as the housing services provider reported strong second-half trading and maintained profitability despite a shifting revenue mix. In a pre-close trading update ahead of full-year results due on 26 March, Mears said adjusted profit before tax for the 2025 financial year was expected to come in at the top end of previous market guidance, at no less than £62.5m, compared with £64.1m a year earlier.

Operating margin on a pre-IFRS 16 basis was expected to be broadly in line with the prior year's 5.6%, despite additional investment in business development and IT capabilities.

Maintenance-led revenues were expected to exceed £610m, up from £556m in 2024, reflecting organic growth of around 10%.

The London-listed group said the performance was supported by the full-year contribution from new contracts with North Lanarkshire Council and Moat Homes, alongside a "near-100%" contract retention rate.

By contrast, management-led revenues were expected to fall to more than £500m from £577m, driven by a reduction in asylum accommodation services contract revenues, with further declines anticipated in 2026, although the timing remained uncertain.

Mears said the integration of Pennington Choices, acquired in September, was progressing to plan and had already contributed to new client wins and cross-selling opportunities, supported by an expanded compliance offering.

Contract retention during the year also included a new £250m agreement with Cross Keys Homes over an initial 10-year term, extending one of the group's longest-standing partnerships.

On the balance sheet, Mears maintained an average daily net cash position of £52.8m during the year and said it expected to report adjusted net cash of more than £50m at year end, down from £91.4m in 2024.

EBITDA-to-operating cash conversion was around 80%, in line with guidance, reflecting a normalisation of working capital.

The group also highlighted property acquisitions linked to its management-led activities, including a December sale-and-leaseback of 199 properties, generating £18m in cash on completion, and the extension of its £70m revolving credit facility with Barclays and HSBC to December 2029 on improved terms.

"2025 was a period of significant progress against all of the group's key strategic goals," said chief executive Lucas Critchley.

"Delivering strong growth in our traditional Maintenance-led activities is a key achievement which continues to be underpinned by strong contract retention.

"We have extended the scope of our compliance offer both organically, and through acquisition; the addition of PCL in the second half of the year has been a particular highlight.

"We continue to maintain a robust and disciplined operational approach which drives both service excellence and strong commercial performance."

At 1018 GMT, shares in Mears Group were up 3.01% at 359p.

Reporting by Josh White for Sharecast.com.