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LONDON (Alliance News) - Social housing and care sector support services company Mears Group PLC on Tuesday attacked the UK government's delay to social care reforms as a constraint on its revenue growth, despite posting higher revenue and pretax profit in the first half of the 2015.
The group said its pretax profit for the six months to the end of June was GBP14.7 million, up from GBP14.0 million a year earlier, as lower amortisation costs offset higher finance charges and as its sales revenue rose to GBP430.0 million from GBP428.1 million. The group said it would pay an interim dividend of 3.10 pence, up from 2.85 pence.
Mears said revenue in its social housing arm was up to GBP366.5 million in the half from GBP364.9 million a year before and said its operating margin in the division improved to 5.0% from 4.2%. The improvement was driven by further efficiencies the group achieved in legacy contracts and by a better sales mix skewed towards higher-margin housing management work.
Care revenue was up to GBP63.5 million from GBP63.2 million, though Mears's operating margin in the division deteriorated to 5.8% from 7.8% thanks to higher carer pay and the impact of new contract mobilisations in the unit.
But Mears said its order book at the close of the half was GBP3.2 billion, down from GBP3.7 billion a year earlier, primarily due to a short-term delay in new bidding opportunities over the past 12 months.
Chief Executive David Miles said revenue growth in both divisions has been constrained by a temporary hiatus in new bidding opportunities for social housing maintenance work and by a decision to delay social care reforms by the UK government, which leaves the short-term outlook for the care business looking "negative".
"The government's decision to delay reforms to social care funding would appear to leave it with no plan for social care, with funding reform having gone backwards five years. The recent Budget announcement regarding the National Living Wage has further increased pressures on councils, trusts and care providers. The sector has reached breaking point with a number of our competitors looking for the exit. However, in the long-term, we continue to see significant opportunity in the care sector," Miles said.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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