Mears hit by profit drop, debt rise as demand wanes

LONDON: Mears shares slumped on Tuesday ater the British housing and care services provider’s pretax profit fell short of estimates and its net debt was higher than forecast.

Revenue for 2018 was hit by subdued demand for housing and social care services, businesses that Mears has focused on while moving away from its roots in contracting.

Mears said it would reallocate capital to areas that deliver financial returns or use it to cut debt, ater reporting its average net debt for the year was 113.2 million pounds ($150 million), missing a target it had set of 110 million pounds.

Shares in Mears, which fell more than 20 per cent in 2018, were 8.6 per cent lower at 265 pence at 1043 GMT. Concerns about the level of debt in British outsourcing firms have risen following the high-profile demise this year of Interserve, one of the British government’s biggest contractors, and the collapse of Carillion.

“It is frustrating because unlike other organisations we only do housing,” Mears’ chief executive David Miles said, when asked if there would be a knock-on effect from Interserve being taken over by its creditors and the failure of Carillion.

Miles said there would be both a negative read across for investors and on the willingness of banks to lend to the sector. “We are in no way close to Interserve. We made 40 million pounds in profit, we have low debt. Our debt is 2 times EBITDA (earnings before interest, tax, depreciation and amortisation) and literally 6 months ago I was geting criticised about you know why we don’t use more debt,” Miles said.