MIDAS SHARE TIPS: Fix your finances with Mears Group

When David Miles joined Mears Group as an operations manager, there were fewer than 100 employees, annual turnover was barely £12million and business was largely gleaned from the local Gloucester area. 

That was in 1996. Mears is still based in Gloucester but Miles is now chief executive and the firm is on track to deliver sales of more than £870million for 2021. Staff numbers have grown to around 6,500 and contracts stretch across the country, from Scotland to the South West. 

Mears specialises in maintenance and repair work for local authorities and housing associations. 

On the move: Housing maintenance expert Mears has announced its third profits upgrade in less than six months

Contracted to provide support for around 750,000 homes, the firm takes on up to 60,000 jobs a day. 

Some fall into the mildly irritating category – a stiff lock or a leaky tap. Others are urgent – electricity failure or blocked drains. Many are in between. In each case however, homeowners and tenants expect Mears to do its work as quickly and effectively as possible. And it does. 

Yet the shares do not reflect Mears’ recent progress, prospects or resilience through tough economic times. At £2.05, the price should rise.

Last week, Miles revealed that sales and profits for last year would be ahead of market expectations, the third upgrade in less than six months. Lockdowns in 2020 and 2021 meant that all but the most urgent jobs were cancelled or postponed. Now that restrictions have been lifted across the UK, the company is firing on all cylinders, with employees working night and day to complete the backlog of tasks. 

Mears has been winning new business too, signing contracts with councils nationwide and developing a rich pipeline of work for 2022 and beyond. 

Repairs and maintenance remain the backbone of the group but Miles has expanded into housing management, providing fully serviced homes for local authorities, as well as the Ministry of Defence, the Ministry of Justice and the Home Office. 

The Ministry of Defence used to house virtually all its UK staff on military bases. Today, thousands of service personnel, key workers and their families are given places to stay in nearby towns and villages. Accommodation ranges from one-bedroom flats to large, family homes. In each case however, staff can move straight in, utilities are provided and repairs and maintenance are covered. Mears began working with the MoD in 2016, the contract is up for renewal in April and City analysts are hopeful that it will remain in place for several more years. 

Last summer, Miles added the Ministry of Justice to his roster, providing homes for low-level former convicts, who might otherwise find themselves in hostels, where they are far more likely to reoffend. 

Through the Home Office, Mears provides accommodation for asylum seekers, many of whom are housed in expensive hotels – an issue that Home Secretary Priti Patel is keen to address.

And the group works with local authorities too, helping to house the homeless. In each of these cases, Mears secures homes – often run-down or neglected – from council or private landlords. The group spruces them up so they are fit-for-purpose and lets them out to central and local government, which uses them to house those in need. 

The business is growing fast, generating plenty of profit and serving a useful social purpose too. 

Looking ahead, the group should continue to win more contracts from this division and drive revenue across the original repairs and maintenance business. 

Having been at Mears for nearly three decades, Miles, 55, has amassed a wide network of contacts across the social housing sector and developed a reputation as a sound and reliable operator. Mears is regulated and registered too, so government officials trust the firm to deliver homes of a certain standard and to keep data, such as the whereabouts of military personnel, safe. 

A few years ago, large investors criticised Mears for building up too much debt. Today, there are negligible borrowings, the balance sheet is robust and dividends are likely to rise. 

A payout of 7.8p is expected for 2021, rising to 9p for the current year and increasing again thereafter. Profits of £25.5million are forecast for the year just ended, rising to £28million in 2022 and more than £30million next year.

Midas verdict: Social housing maintenance may not sound glamorous but the work is necessary, the benefits are tangible and contracts last for years. Most are inflation-linked too, providing an extra layer of security in today’s uncertain environment. At £2.05, Mears shares are likely to deliver long-term growth and attractive dividends too. Buy. 

Traded on: Main market Ticker: MER Contact: mearsgroup.co.uk or 0870 607 1400 

This post first appeared on Dailymail.co.uk