The tragedy meant its social housing clients would be delaying work orders.
Companies: Mears Group PLC
Social housing contractor Mears Group (LON: MER) has seen its shares fall 11% today as it warns revenue and profits for 2017 will be hit as a result of the Grenfell disaster.
The events at Grenfell are set to continue to impact the Social Housing sector later this year as Mears' clients review their housing portfolios to ensure they are safe and fully compliant.
The news confirms just how far and wide the Grenfell disaster has reached, as Mears expects delays in planned work orders this year. Anticipated revenue from Social Housing has been revised to £800m down from original expectations of £830m. This will subsequently result in a lower profit margin and overhead recovery for the Group.
Mears reiterated that it had no involvement with Grenfell Tower or any properties run by Kensington and Chelsea council.
The Group's interim results today reported revenue of £470.8m, up just 1% from H1 16. The Board remains confident in the Group's long-term prospects, however, declaring an interim dividend of 3.45p per share (2016: 3.30p), an increase of 5%.
Group Chief Executive David Miles commented, saying:
"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."
Mears has had an operating margin of circa 3.5% for the 5 years to 2016, and whilst this was expected to remain the same for 2017, the news of work order delays is sure to hurt this figure. Net debt rose over £12m in 2016, after almost being cleared in the years prior, and a result of Grenfell, social housing regulation is set to become increasingly tightened. This has the potential to hurt Mears' ability to clear the debt as quick as planned before the tragic events of June 2017.
