Mears profit warning as Grenfell fire hits social-housing contracts

SHARES in support services company Mears slid nearly 8pc yesterday as the firm warned that profits would be hit as a result of the impact of the Grenfell Tower fire.

The company said that the fire meant its social housing clients were reviewing the way they commissioned work and the safety of their homes, resulting in delays to planned work orders this year.

As a result, Mears’s housing division, which is 85pc of its business, will have revenues of £800m in 2017, rather than the original expectation of around £830m, with a resulting loss of profit.

This is despite the fact that Mears had no involvement in Grenfell Tower itself. The company employs more than 13,000 people on maintenance and repair of social housing.

“These delays in procurement decisions are expected to be temporary given the contractual nature of the work,” Mears said.

But the announcement that profits would be lower than expected hit the firm’s stock, sending shares down 36.75p to 448.25p yesterday.

David Miles, the chief executive of Mears, said he remained “confident and optimistic” for the future.

“Whilst the likely revenue shortfall for the full year is frustrating, it is entirely understandable in the circumstances and the group will be working closely with its partners and clients at this time to address their immediate priorities. Our order book remains strong and the board remains confident in the group’s future prospects.” He added that the firm’s market is becoming larger as its customers ask it to help find homes for different types of tenants.

The timing of the announcement is an extra blow to Mears, which has struggled this year amid difficult trading conditions for its care division, which makes up the remaining 15pc of the business.

In the first six months of the year, the care arm reported £68.7m of revenues, down from £76.6m in the same period last year. In March, Mears ditched one fifth of its care contracts, sending the division to a £1.2m loss in the first quarter, blaming funding cuts in the sector. Over the half year, losses were reduced to £1m.

Mr Miles said: “Given the scale of the reductions in the portfolio in the last 12 months, the revenue performance of care in the period is encouraging.”

Overall, the firm’s revenues in the first six months of the year rose 1pc to £470.8m, and pre-tax profits were flat at £12.7m. Mears raised its interim dividend by 5pc to 3.45p.