(Reuters) - Profit at Britain’s Mears Group (MERG.L) declined in the first half of the year as it scaled back its home development business, although its order book remained strong thanks to a government contract win and contributions from acquisitions.
The company, which provides support services to the social housing and care sectors in Britain, said adjusted pretax profit for the six months ended June 30 fell 10% to 17.1 million pounds. Revenue rose 10% to 480.8 million pounds.
Mears had acquired certain assets and contracts from support services firm Mitie Plc’s (MTO.L) property maintenance business in 2018 and has been in the process of integrating it into its own business.
The company, founded in 1988 as a maintenance company with a single van in western England, decided to exit new build activities that would require the company to invest more and reduce its presence in the development business
In its development business, Mears builds homes in clusters at 10 different locations in Britain.
The company, which has been seeking to cut its debt levels, has been trying to focus more on housing and social care services. It has also committed to reallocate capital to areas that deliver financial returns or use it to cut debt.
Average daily net debt reduced to 110.7 million pounds from 112.1 million pounds a year earlier. Mears is expected to reduce its level of debt to around one times core earnings by the end of December 2020, which would be around 50 million pounds.
Mears shares slipped 0.7% lower by 1340 GMT.
When asked about the impact of the recent fall in value of the pound on Mears, Chief Executive David Miles said that he currently did not see any impact.
“I guess if the pound continues to fall against foreign currencies, it could have an impact on us in the long term,” Miles said, adding that 15% of what the company spends goes into building materials, often bought outside Britain.
The company’s order book was up 43% to 3 billion following recent contract wins for government asylum accommodation.
In early 2019, Mears snagged contracts worth $3.7 billion from the British government along with Serco Group Plc (SRP.L) to provide accommodation and support for asylum seekers. Mears said the contract would add about 100 million pounds per year to its annual revenue for the next 10 years.
Reporting by Sangameswaran S in Bengaluru; Editing by Shounak Dasgupta/Keith Weir