Mears Flexes Its Housing Muscle
Let’s cut straight to the chase – when a company serving Britain’s strained housing sector delivers a 37% profit surge alongside a chunky dividend hike, investors should sit up and take notice. Mears’ 2024 results aren’t just good – they’re the sort of numbers that make you check your glasses aren’t smudged.
The Numbers That Matter
First, the headline act:
- £1.13bn revenue (+4% YoY) – steady growth in a sector where margins are usually tighter than a London studio flat
- Profit before tax up 37% to £64.1m – proof that operational grip beats top-line bloat
- Dividend boosted 23% to 16p/share – the fifth consecutive increase, for those counting
Cash Machine Still Clinking
While adjusted net cash dipped to £91.4m (from £109.1m), this was after £40m in share buybacks and strategic property acquisitions. The kicker? 101% EBITDA cash conversion – Mears isn’t just profitable, it’s profitably liquid.
Order Book: The Golden Goose
That £3bn order book (up from £2.5bn) isn’t just padding – it’s rocket fuel. Two deals tell the story:
- North Lanarkshire Council: 8-year £125m/year contract showing local authority trust
- Moat Housing Association: Emergency £12m contract win proving crisis capability
With a 41% bid conversion rate, Mears is playing contract chess while competitors struggle with checkers.
Strategic Plays Worth Watching
CEO Lucas Critchley’s 5-year plan reads like a housing sector masterclass:
- Compliance Kingmaker: Building safety focus aligns perfectly with post-Grenfell regulatory winds
- Decarbonisation Drive: £85m in social housing retrofit grants already banked
- Government Gambit: MoD and MoJ contracts show Whitehall’s stamp of approval
The Buyback Bonus
Mears has been aggressively shrinking its share count – 27.4m shares bought back since 2023 at average 325p. With shares now hovering around 362p, that’s not just confidence – it’s management putting pension-fund money where their mouth is.
Risks? Let’s Be Adults
No analysis is complete without noting the watchpoints:
- Asylum contract revenues normalising (current run-rate £60m below peak)
- IFRS 16 adjustments creating accounting headwinds
- Margin maintenance as decarbonisation costs bite
But crucially, these are known quantities rather than hidden tripwires.
The Thompson Take
Here’s why I’m bullish: Mears has cracked the public sector code. Their dual engine of local authority maintenance and central government housing solutions creates natural hedging. When councils tighten belts, Whitehall contracts hum. When asylum numbers dip, retrofit grants surge.
The 5.6% operating margin (pre-IFRS 16) might not set pulses racing in tech circles, but in this sector it’s borderline alchemy. Combine that with a £3bn order book and you’ve got visibility most FTSE 250 CEOs would mug their granny for.
Final thought? That 16p dividend costs just £13.5m annually against £59.6m average daily cash. This isn’t a company stretching – it’s one casually flexing. In a housing market crying out for competent operators, Mears isn’t just participating – it’s setting the playbook.
