Headline takeaways from Mears Group’s 2025 prelims
Mears Group has delivered another steady year and doubled down on its strategy to focus on core housing services. The big headlines: a record £4.0bn order book, a proposed £20m share buyback launching in April 2026, and a 9% hike in the dividend to 17.50p.
There is a mix of resilience and transition here. Maintenance-led revenues grew strongly as management had guided, while Management-led revenues eased as asylum work normalises. Margins nudged higher, cash generation remained strong, and contract wins/retentions were excellent.
| Metric | FY25 | FY24 | Comment |
|---|---|---|---|
| Total revenue | £1,135.5m | £1,132.5m | Flat overall, mix improved |
| Maintenance-led revenue | £620.4m | £555.8m | +12% |
| Management-led revenue | £515.0m | £576.7m | -11% |
| Statutory operating margin | 6.6% | 6.4% | Up |
| Adjusted operating margin (pre-IFRS 16) | 5.7% | 5.6% | Up |
| Profit before tax | £63.5m | £64.1m | -1% |
| Basic EPS | 55.70p | 50.27p | +11% |
| Dividend per share | 17.50p | 16.00p | +9% |
| Average daily adjusted net cash | £52.8m | £59.6m | Still strong |
What’s driving performance under the bonnet
Maintenance-led growth shines
Maintenance-led revenues rose 12% to £620.4m and now make up 55% of Group sales (FY24: 49%). In simple terms, “Maintenance-led” is the day-to-day and planned works on social housing – the bread-and-butter activity with long-term, predictable contracts.
- Near-100% retention on 2025 re-bids, including Milton Keynes City Council (TCV £230m, 5 years).
- New wins: Cross Keys Homes (Peterborough, TCV £250m, 10 years).
- Major award: Birmingham City Council (West-Central), TCV £450m over 10 years, expected to mobilise July 2026.
Management-led normalises, as flagged
“Management-led” includes housing management and accommodation services such as the Asylum Accommodation and Support Contract (AASC). Revenue here fell 11% to £515.0m as the AASC winds back from exceptional levels. AASC itself declined 16% to £370m, and the Board still expects it to normalise to around £200m per annum over time, though the timing is uncertain.
Margins keep ticking up
Statutory operating margin rose to 6.6% and adjusted pre-IFRS 16 margin edged up to 5.7%. Quick explainer: IFRS 16 is the lease accounting standard that moves some rental costs into depreciation and interest; pre-IFRS 16 margins line up better with how contracts are priced and managed.
Order book, contract momentum and why it matters
The order book has jumped to an all-time high of £4.0bn (2024: £2.9bn, excluding FM). That is a big confidence marker for earnings visibility into 2026 and beyond, especially as re-bid risk now fades.
- Today’s announcements include two retentions: livin (Sedgefield, TCV £210m, 10 years) and Leeds City Council (TCV £100m, 5 years).
- Retention track record: 100% in 2025; expected 88% in 2026 with Eastbourne (£9m) the only stated loss so far.
- Compliance push: acquisition of Pennington Choices (£9.5m consideration plus £0.3m working capital) broadens services such as fire risk assessments, stock condition surveys and EPC work. Early traction includes a 10-year, £7.5m fire risk assessment deal with the London Borough of Havering.
- Decent Homes Standard (DHS2) and retrofit tailwinds: Mears helped secure £30m SHDF Wave 3 grants for clients, underpinning over £60m of works in 2026-27.
Why it matters: more Maintenance, more Compliance and stronger retention typically mean better quality revenue, improved pricing discipline and stickier margins over the cycle.
Cash, dividends and the new buyback
Mears remains a strong cash generator. Operating cash conversion was 82% of EBITDA in the year (reflecting an expected unwind of prior working capital benefits) and averages 104% over the last four years. Average daily adjusted net cash was £52.8m and year-end adjusted net cash stood at £51.8m.
- Dividend up 9% to 17.50p; proposed final dividend 11.90p.
- On top of £16m of buybacks in 2025, the Board has approved a new £20m on‑market buyback to start in April 2026.
- Since May 2023, c. one quarter of the share capital has been repurchased, boosting EPS – basic EPS rose 11% to 55.70p, helped by the lower share count.
My read: the combination of margin stability, cash visibility and record order book gives the Board confidence to keep returning capital while investing in growth areas like Compliance and IT.
Strategic simplification: FM disposal completed
Post year-end, Mears sold its non-core Facilities Management activities for £18m cash, sharpening focus on housing services. In FY25 those FM activities delivered revenue of £32.1m and profit before tax of £2.8m. The Board expects the current-year profit impact of the disposal to be fully offset by outperformance in the core business.
Outlook and guidance: steady as she goes
- Maintenance-led growth guidance maintained at 5-9% per annum.
- Adjusted operating margin expected to remain within 5-6%.
- AASC revenues to continue normalising towards c.£200m; timing still uncertain.
- Full FY26 revenue visibility already in place, supported by the £4.0bn order book and a quieter re-bid calendar.
Risks and watch-fors
- Mix shift: as AASC normalises, overhead recovery reduces – management is countering through Maintenance growth and efficiency gains.
- Cash conversion: 82% this year following a working capital unwind; still very healthy, but investors will watch that metric closely.
- Provisions and claims: onerous contract provisions total £8.96m; there are also two legal claims disclosed as contingent liabilities (one indicated at £11.0m). The Group denies liability.
- People cost inflation: the hike in Employers’ National Insurance added roughly £5m to payroll. Mears absorbed it in reported results, but it underscores the need for tight commercial management.
How I’d frame it as an investor
The positives that stand out
- Record order book of £4.0bn plus excellent retentions – that’s genuine revenue visibility.
- Maintenance-led revenues now the majority at 55%, with scope to grow further – a quality upgrade to the mix.
- Margins edging up despite normalising AASC – process discipline coming through in the numbers.
- Cash discipline intact; dividend up 9% and a fresh £20m buyback on the way.
- Compliance capability reinforced by Pennington – a logical, regulation-led growth lane.
The balanced bits
- Headline PBT dipped 1% to £63.5m, so this is steady rather than spectacular – the real story is mix, margin and order book.
- AASC unwind will keep dragging Management-led revenue and some overhead recovery; timing is outside Mears’ control.
- Cash conversion has normalised, which is fine, but the market will want to see it stay high.
Jargon buster
- Maintenance-led: Repairs, voids and planned improvement works on social housing. Typically long-term, framework-style contracts.
- Management-led: Housing management and accommodation services, including the Home Office’s AASC.
- IFRS 16: Lease accounting that moves rental expense into depreciation and interest. Pre‑IFRS 16 margins show the underlying contract economics more cleanly.
- TCV: Total contract value over the full life of a contract.
Bottom line
This is a solid set of results that strengthen the investment case: better sales mix, resilient margins, strong cash generation and a fortified order book. The strategy to simplify around housing, grow Maintenance and scale Compliance looks on track. The new £20m buyback and 9% dividend rise say the Board shares that confidence.
Key watch-fors are the pace of AASC normalisation and the ongoing delivery of high cash conversion. But with visibility for FY26 already in the bag and big wins like Birmingham City Council ready to mobilise, Mears feels well positioned for another year of disciplined progress.
