Mears Group PLC

('Mears' or 'the Group' or 'the Company')

Preliminary Results for the year ended 31 December 2025

 

Strong financial, operational and strategic progress

New contract awards valued at over £300m

 

Mears Group PLC, the leading provider of services to the Housing sector in the UK, announces its preliminary financial results for the year ended 31 December 2025 ('FY25').

 

Financial Highlights

 

	FY 2025	FY 2024	Change
Total Revenue (£m)	1,135.5	1,132.5	+0%
Revenue - Maintenance-led (£m)	620.4	555.8	+12%
Revenue - Management-led (£m)	515.0	576.7	-11%
Statutory operating profit (£m)	75.0	72.6	+3%
Statutory operating margin %	6.6%	6.4%
Adjusted operating profit (pre-IFRS 16) (£m)1	64.8	63.6	+2%
Adjusted operating margin %1	5.7%	5.6%
Profit before tax (£m)	63.5	64.1	-1%
Basic EPS (p)	55.70	50.27	+11%
Diluted EPS (p)	53.86	48.86	+10%
Dividend per share (p)	17.50	16.00	+9%
Average daily adjusted net cash2 (£m)	52.8	59.6	-11%

 

·      Group revenues increased to £1,135.5m (FY24: £1,132.5m). Strong growth in Maintenance-led activities (organic, +11%), which represents 55% of Group revenue (FY24: 49%) offset, as anticipated, by a reduction in Management-led revenues, a trend that is expected to continue.

·      Profit before tax marginally lower at £63.5m (FY24: £64.1m) but adjusted operating margin strengthened further to 5.7%¹ (FY24: 5.6%) reflecting robust commercial and operational performance.

·      Excellent cash performance with average daily adjusted net cash of £52.8m (FY24: £59.6m)

o  Cash conversion at 82% of EBITDA, including, as anticipated, an unwind in negative working capital (FY24: 101%, last four years: 104%).

o  Adjusted net cash at 31 December 2025 of £51.8m² (FY24: £91.4m) after absorbing £17.2m purchase of own shares, £8.9m of M&A and £25.1m of property acquisitions.

·      The Board is recommending a final dividend of 11.90p, increasing the full year dividend by 9% to 17.50p (FY24: 16.00p) reflecting the Board's increasing confidence in the outlook.

 

Clear progress against our key strategic objectives:

·      Growth in our traditional Maintenance-led activities underpinned by excellent contract retention through an unusually busy period of rebids. Key highlights include:

o  Announcement today of two significant new contract retentions with livin (Sedgefield) and Leeds City Council, with an estimated total contract value ('TCV') of £210m (10 years) and £100m (5 years) respectively

o  100% retention on contracts maturing in 2025 including Milton Keynes City Council (TCV £230m, 5 years)

o  The award of a new 10-year contract with Birmingham City Council, (TCV £450m), which was a key growth target and Cross Keys Homes (Peterborough, TCV £250m, 10 years)

o  As a result, the order book as at today's date has increased to an all-time high of £4.0bn (2024: £2.9bn, excluding FM).

·      The acquisition of Pennington Choices ('Pennington') during the year extended Mears' capabilities in Compliance, accelerating progress in this key component of the strategic plan.

·      We were proud to once again be named in the Top 10 Best Big Companies to work for, a testament to the dedication, teamwork, and shared values that unite our colleagues across the Group.

·      Consistent with the Group's capital allocation strategy, underpinned by excellent revenue and profit visibility, and robust generation of free cash flows, the Board has today approved the launch of a new £20m share buyback programme.

 

Solid start to 2026 - existing guidance maintained despite FM disposal

·      Disposal of the non-core Facilities Management ('FM') activities for cash consideration of £18m which brings a further simplification to the Group, reinforcing our focus to delivering housing services. The Group's FM activities reported revenue and profit before tax in FY25 of £32.1m and £2.8m respectively,

·      The positive progress in contract bidding re-enforces a high level of confidence in delivering Maintenance-led annual growth in line with previous guidance of 5-9%

·      The Board anticipates a continued revenue reduction within its Asylum Services, as revenues normalise from the previously elevated levels, although the reduction timing remains uncertain

·      The Board anticipates that the profit reduction from the disposal of the FM activities will be fully offset in the current year by an outperformance in the Core business.

·      The Board is confident that adjusted operating margins will be maintained within the range of 5-6%, underpinned by the robust approach to operational and commercial management.

 

Lucas Critchley, Chief Executive Officer of the Group, commented:

"I am delighted to report another strong year of operational and financial performance, and a period in which we have continued to make strong progress against our key strategic objectives. Delivering strong growth in our traditional Maintenance-led activities is a key achievement which continues to be underpinned by excellent contract retention. We have extended the scope of our Compliance offer both organically, and through acquisition; the addition of Pennington in the second half of the year was a particular highlight. We continue to maintain a robust and disciplined operational approach which drives both service excellence and strong commercial performance."

 

1.     Adjusted operating margin is stated before the impact of IFRS 16, as detailed in the Financial Review

2.     Adjusted net cash excludes IFRS 16 lease obligations, as detailed within the Financial Review

 

For further information, contact:
Mears Group PLC	Tel: +44(0)1452 634 600
Andrew Smith
Lucas Critchley
Deutsche Numis	Tel: +44(0)207 260 1000
Julian Cater
Kevin Cruickshank
Panmure Liberum	Tel: +44(0)207 886 2500
Tom Scrivens
James Sinclair-Ford

 

About Mears

Mears is a leading provider of services to the Housing sector, providing a range of services to individuals within their homes. We manage and maintain around 450,000 homes across the UK and work predominantly with Central Government and Local Government, typically through long-term contracts. We equally consider the residents of the homes that we manage and maintain to be our customers, and we take pride in the high levels of customer satisfaction that we achieve.

Mears currently employs over 5,000 people and provides services in every region of the UK. In partnership with our Housing clients, we provide property management and maintenance services. Mears has extended its activities to provide broader housing solutions to solve the challenge posed by the lack of affordable housing and to provide accommodation and support for the most vulnerable.

We focus on long-term outcomes for people rather than short-term solutions and invest in innovations that have a positive impact on people's quality of life and on their communities' social, economic, and environmental wellbeing. Our innovative approaches and market leading positions are intended to create value for our customers and the people they serve while also driving sustainable financial returns for our providers of capital, especially our shareholders.

 

Chairman's Statement

 

I am delighted to introduce another year of strong performance across all aspects of our business, including significant progress against all of our key strategic goals. It is particularly satisfying to deliver strong growth in our traditional Maintenance-led activities which has been a key strategic aim.

 

An important highlight has been the strength of our contract retentions, as several key contracts reached the end of their term and were the subject of a new procurement. Naturally any tender process brings some risk to the incumbent, and this risk was magnified given the unusually high number of rebids over a short period. Our near-100% success rate on rebids reflects the quality of our service delivery and the strength of client relationships, which ensured that those customers had little appetite for change.

 

Once again, I wish to place on record my thanks and recognition to all my Mears colleagues, many of whom go above and beyond to provide a first-class service in an often-challenging environment, where we support vulnerable and complex service user groups, delivering our services with skill and empathy. I regularly visit branches, and I continue to be impressed by the commitment, hard work, professionalism and loyalty of our employees.

 

We were proud to once again be named in the Top 10 Best Big Companies to work for, a testament to the dedication, teamwork, and shared values that unite our colleagues across the Group. For the past seven years, we have partnered with Best Companies to gather colleague feedback through its independent survey. The insights we gain help us to understand areas in which we can further improve.

 

The acquisition of Pennington Choices was a key strategic milestone, extending Mears' capabilities, and accelerating the progress in building a full asset management and compliance service offer. We welcomed 150 new colleagues to the Group, and the cultural fit between the two teams has been evident.

 

Training and investment in our workforce remain a priority. This year, we welcomed 140 new apprentices, the largest cohort yet, joining roles spanning front line operations to business administration. By welcoming apprentices, we are supporting their careers, strengthening our workforce, energising our teams, and building the skills and ideas that will shape the future of Mears. Our Chief Executive, Lucas Critchley, began his own career at Mears as a trainee, and his journey demonstrates the value of nurturing talent from the start, benefiting both individuals and the wider business.

 

Results

 

Group revenues showed a small increase to £1,135m (2024: £1,133m). The organic growth in our Maintenance-led activities has been mirrored by a reduction in our Management-led revenues. Growing our Maintenance revenues is a key strategic objective and has been driven by a combination of excellent contract retention, new orders secured and growing client spend driven by increased regulation. As reported previously, the Group has experienced elevated volumes in its Management-led activities, relating to the Asylum Accommodation and Support contract ('AASC'). These peaked in 2024 as we have worked with our client to reduce the use of contingency accommodation and secure alternative, more cost-effective solutions, by increasing the capacity of dispersed residential accommodation. This work will continue during 2026.

 

Profit before tax was marginally lower at £63.5m (£64.1m) but operating margins continued to strengthen to 6.6% (2024: 6.4%). Adjusted operating margin (as defined in the Financial Review), which is stated before the impact of IFRS 16, increased to 5.7% (2024: 5.6%). The robust contract review process, which demands strict adherence to businesses processes, continues to bring operational, customer and commercial improvements which flow through to the bottom line. Whilst we recognise that the reduction in AASC revenues will reduce central overhead recovery leading to potential margin dilution, this is being countered through organic growth in Maintenance and by other areas of the business delivering improvements to productivity and other efficiencies.

 

Diluted Earnings Per Share ('EPS') increased by 10% to 53.9p (2024: 48.9p). This improvement is driven by a reducing share count, as a result of the share buyback programme. The Group has now repurchased around one quarter of its share capital since it initiated a rolling programme of buybacks in May 2023.

 

The Group has continued to deliver strong underlying cash performance, with conversion of EBITDA to operating cash of 82% (2024: 101%). As stated previously, the Group enjoyed a timing benefit in previous periods, and this working capital benefit unwound during 2025, contributing to the lower conversion metric in the year. The Group's EBITDA to operating cash conversion over the last four years has averaged in excess of 100%, reflecting both the quality of earnings, and disciplined approach to working capital management. Continuing to deliver a high conversion of EBITDA into operating cash remains an important ongoing performance target.

 

Dividend and Capital Allocation

 

Given the excellent trading performance of the Group, the continued generation of cash and the positive outlook, the Board is proposing a final dividend of 11.90p per share (2024: 11.25p). This brings the total dividend for the year to 17.50p, an increase of 9% (2024: 16.00p). The Board continues to believe that a capital allocation policy combining a progressively growing dividend within a cover range of 2.0-2.5x, with the return of any excess capital via on-market buyback purchases of shares, remains appropriate. In the short term, the Board has allowed dividend cover to increase beyond the range outlined above, in line with our profit trajectory.

 

During the first half of the year, the Board approved a return of surplus capital of £16m to shareholders, implemented through a buyback programme of on-market purchases. This resulted in the purchase and cancellation of 4.3m ordinary shares of 1p each at an average price of 371p. Over the last three years, buybacks have reduced the Group's ordinary share count by 27.4m shares at an average price of 325p and a total cash cost of £89m. In addition, the Employee Benefit Trust ('EBT') has purchased 5.3m shares over that same period at a cash cost of c.£18m, with the EBT retaining 4.1m shares at the year end.

 

Our capital allocation policy remains consistent and prioritises the allocation of capital to support our organic growth strategy, augmented by strategic bolt-on acquisitions to further enhance our service offering and accelerate the delivery of our plan. The excellent visibility of future revenue and profits, combined with strong cash generation underpins a progressive dividend and other routes for returning surplus funds to shareholders remain in focus.

 

Consistent with the Group's capital allocation strategy, the Board has approved a new £20m share buyback programme which is expected to be launched in April 2026. 

 

 

Corporate Governance

 

Ø Non-Executive appointment

 

Whilst the Group has a relatively small Board with just three independent Non-Executive Directors, I have been satisfied that we have an suitable balance of skills, experience and knowledge which are appropriate to effect oversight of the Group's strategy. I am, however, also mindful that having such a small Board could leave the Group exposed in the event of an unanticipated absence. In January 2025, the tenure of Dame Julia Unwin, former Non-Executive Director, came to an end, resulting in the loss to the Board of Julia's considerable and varied experience. Following an extensive search, I am delighted to announce that Dame Clare Tickell will join the Board on 1 April 2026. Clare's experience over three decades spans housing, public service delivery, and corporate governance. She brings a deep understanding of the interface between public accountability and commercial delivery and is a good fit for Mears' purpose-led, contract-based business model.

 

Ø Succession Planning

 

While identifying and developing talent across the Group remains primarily the responsibility of management, the Board has a duty to secure its long-term success. I meet, individually, with all the senior executive team at least once each year, and I continue to be impressed by the quality and strength we have in the Group sitting immediately below the Board level. The Group has a track record of developing talent internally, with both Executive Directors having grown within the business prior to their Board appointments. I can already see members of the senior team who will, in time, have the opportunity to develop further as leaders of the business over the long term. In addition, as part of our focus on succession planning, 2025 saw a number of key external appointments, which complement the strengths of the existing management team.

 

Ø Employee Director (non-statutory) and employee relationship team (ERT)

 

Hema Nar was appointed as Employee Director in 2023. This was a position that the Board first created in 2018 and the value of this role has increased year on year since then. A key development, implemented in 2023, was the addition of both a Deputy Employee Director and a Trade Representative. Since that time, these three individuals have performed regular branch visits, and are highly visible and in frequent contact with the Executive team, which has become an increasingly valuable channel of communication. The Board understands the vital role that our workforce plays in the success of the Group. The ERT ensure that the Board receives full, open and honest insight into the views from its workforce on how strategic initiatives are being implemented.

 

Hema's tenure came to a natural end on 2 January 2026. The Board would like to place on record their thanks and recognition of the tremendous progress made by the ERT over the last three years, spearheaded by Hema. Our new incoming Employee Director is Kiren Sampla, who was selected after an intensive internal application process.

Chief Executive Review

 

I am delighted to report another strong year of operational and financial performance, and a period in which we have continued to perform well against our key strategic objectives.

 

Key strategic highlights include:

 

Ø Growing our Local Government work

 

We have delivered robust growth in our traditional Maintenance-led activities, which continues to be underpinned by strong contract retention. The Group is now approaching the end of an unusually busy period for rebids, which has seen close to half of the Group's traditional maintenance activities subject to re-tender within a narrow 24-month window. It was key to the delivery of our strategic plan that the Group converted near-100% of the re-bids. The Group now anticipates a quiet period of bidding activity on its existing contract estate, and focus can switch to securing new growth opportunities.

 

The Group was delighted to receive notification of a contract award from Birmingham City Council ('BCC') which will see Mears deliver extensive maintenance and planned improvement works to BCC housing stock within the BCC West-Central region. This new contract has an estimated value of £450m over the initial period of 10 years and will see the Group deliver work to 11,500 housing units. The new contract is expected to mobilise in July 2026.

 

Ø Developing our services to our key Central Government clients

 

We place emphasis on ensuring we are delivering at a high level and understanding the needs and requirements of Ministers and Central Government. We approach challenges with a partnering ethos.

 

Our Asylum Accommodation and Support contract ('AASC') has received significant focus over the last year, and it is disappointing that press comment rarely represents the integrity and probity shown by Mears in delivering quality services to a vulnerable user group. Mears has remained focussed on securing sufficient residential accommodation to remove the requirement for short-term contingent solutions. AASC revenues have reduced from the peak seen in 2024, and there is a clear political drive to exit hotels, which Mears will work collaboratively to support.

 

The preliminary market engagement is continuing in respect of the future provision of asylum services, which will in time replace AASC. The intention is for the new contracts to commence in September 2029, and Mears believes that it is well placed to play a part in this subsequent provision, as well as supporting Central Government with future housing related contracts.

 

Ø Extending our Compliance service capabilities

 

The Group identified a significant growth opportunity developing a full Compliance and Asset Management offer. The housing compliance market is fragmented, largely single service led, and driven by strong regulatory drivers with the introduction of the Building Safety Act and Awaab's Law. Whilst we have a clear organic growth strategy, we have also looked to augment progress in this area where small-scale acquisitions provide additional service capabilities. The Group had made solid progress in building its technical and internal delivery capabilities, and this was transformed with the acquisition of Pennington Choices ('Pennington'). Pennington is a recognised and trusted brand in the social housing market, delivering a range of Compliance activities such as stock condition surveys, fire risk assessments, energy performance certification, asbestos testing and consultancy services. The Pennington acquisition has extended Mears' capabilities in this area, strengthening its well-rounded, holistic service offer and accelerating progress in this key component of the strategic plan. The initial integration has gone well, and the cultural fit between the two teams has been evident.

 

Ø Divestment of our non-core activities

 

Mears has a consistent and well-communicated strategy focussed entirely on delivering housing services to the public and regulated sector. The Group owned a small FM business, Morrison Facilities Services ('MFS'), which was a legacy from a previous acquisition. This business has been largely self-contained, and has delivered consistent financial outputs, with limited resources allocated from the wider Group. Given the Group's focus on housing, the Board took a decision to divest this business. The transaction process ran throughout 2025, and the disposal was completed after the year end, on 2 March 2026. Further detail is included within the Financial Review section.

 

 

Operational Review

	2025	2024	Change
Revenue (£m)
Maintenance-led	620.4	555.8	12%
Management-led	515.0	576.7	-11%
Total	1,135.5	1,132.5	0%
Operating profit before tax measures:
Statutory operating profit (£m) 1	75.0	72.6	+3%
Statutory operating margin (%)1	6.6%	6.4%
Adjusted operating profit (pre-IFRS 16) (£m) 2	64.8	63.6	+2%
Adjusted operating margin (pre-IFRS 16) (%)2	5.7%	5.6%
Profit before tax measure (£m)
Statutory profit before tax	63.5	64.1	-1%

1.   Statutory operating profit includes share of profit of associate.

2.   Adjusted measures are defined in the Alternative Performance Measures section of the Financial Review.

 

The Group delivered solid financial results that stand up compared to a strong prior year. Group revenues edged up to £1,135m (2024: £1,133m). The sales mix has seen our Maintenance-led activities increase to 55%, which brings an improved balance to the business and is a trend that is expected to continue.

 

Profit before tax showed a small reduction to £63.5m (2024: £64.1m). The Group has used an unadjusted figure as its headline profit measure reflects the steady state of the business, and the quality of the earnings.

 

The statutory operating margin strengthened to 6.6% (2024: 6.4%). The Group also reports an adjusted operating margin, which is stated before the impact of IFRS 16, of 5.7% (2024: 5.6%) which is the measure most closely aligned with how contracts are priced and reflects how operational performance is analysed. The margin performance has been driven by maintaining a strict adherence to process through robust operational and commercial performance reviews, and a continuing disciplined approach to bidding.

 

Whilst the Executive team remains focused on maintaining operating margins, there is recognition of the requirement for additional investment in headcount to expand our capabilities to service and support the new and emerging market opportunities. This new investment includes increasing our technical and service delivery capabilities in Compliance, the extension of our approach to contract bidding and enabling the delivery of an accelerated programme of IT development. Investment in these areas has built over the course of the year and is likely to continue through 2026.

 

The progress on operating margins was achieved despite the introduction of the increased rate of Employers' National Insurance and a reduction in the associated threshold, which is particularly significant in respect of employees at the lower end of the pay scale. This change increased the Group's annual payroll cost by c.£5 million, the additional cost having been absorbed within the reported financials.

 

The Executive team is mindful that the elevated Management-led revenues have delivered additional economies of scale and an increased level of overhead recovery, which has been a factor behind an increasing operating margin across recent periods. As the revenues for this segment normalise, and some of this increased overhead recovery diminishes, the impact has been mitigated by efficiency improvements within the business, and it is particularly pleasing that the operating margin has been maintained.

 

The Group has reported 11% organic growth in Maintenance-led revenues which, when combined with the acquired Pennington activities, have increased to £620.4m (2024: £555.8m). A key highlight in the year was the mobilisation of a short-term contract with Moat Homes, delivering responsive and voids maintenance services to around 22,000 properties in the South of England. This contract delivered revenues of £12m in the period, and the procurement for the long-term contract opportunity is well advanced. The Group also reported growth within its North Lanarkshire Council ('NLC') contract, which mobilised in 2024, and under which new workstreams come online over a two-year period. During FY25, the NLC contract reported revenues of £85m (2024: £65m). The near-100% Maintenance-led contract retention rate during the year ensured that all new work secured was additive.

 

As anticipated, Management-led activities reduced by 11%, owing to the continued normalisation of revenues relating to AASC which, in isolation, decreased by 16% to £370m (2024: £440m). The Group anticipates that AASC revenues will continue to normalise to an annual revenue of c.£200m, although the timing is uncertain. The other Management-led activities delivered for the Ministry of Defence and Ministry of Justice reported modest growth.

 

 

 

Business Development

 

The Group's forward order book today stands at £4.0bn (2024: £2.9bn) and it is reassuring that the Group now has full visibility of market forecast revenue for FY26.

 

The Group has a strong record of retaining contracts. Re-bids naturally bring some risk of attrition and require a shift in focus away from bidding new works. It is extremely significant that the Group was able to celebrate new long-term contracts with our Local Authority clients in Medway, Folkestone, Thanet, Dover and Milton Keynes during FY25. Since the year end, Cross Keys Homes, Leeds City Council and Livin have been added to this list.

 

The award of a new contract with Milton Keynes City Council ('MKCC') was a key highlight. The MKCC partnership has been a flagship contract for Mears since it was originally secured in 2016. The local Mears team, epitomises Mears' culture and values and has delivered tremendous performance for almost a decade, which has been recognised through this new contract award. The base contract is valued at £230m over the initial period of five years and it will see the Group continue to deliver both planned and reactive maintenance works across the Council's housing stock. There is an option for the Council to extend for a further period of five years, which would increase the total contract value to an estimated £475m.

 

On a similar note, the Group secured a new contract with Cross Keys Homes, which is one of the Group's longest standing relationships, and this new contract is valued at £250m over the initial 10-year term.

 

Having experienced an unusually hectic period of retention-bids, the Group hopes to now enjoy a period with few existing contract expiries, meaning focus can be applied to securing new growth opportunities. The table below provides detail of contracts expiring over the last three years, and the Group's expectation, subject to being awarded anticipated extensions, of contracts expected to be the subject of re-bid over the next three years:

 

Contract expiry	Contract number	Annual value at risk £m	Annual value resecured £m	Annual value lost on rebid £m	Retention % (by value)
2024	2	70	65	5	93%
2025	5	95	95	-	100%
2026*	6	103	68	9	88%
2027	2	38
2028	-	-
2029	-	-

*2026: Cross Keys (£26m), Leeds (£22m) and Livin (£20m) have all been secured. Eastbourne (£9m) is the single contract loss. Thurrock (£15m) and Moat (£12m) are both active live bids and are excluded from the above retention %.  

 

The Executive team recognises that whilst the Group has a strong track record of retaining works on re-bid, its ability to secure work from new customers has been less consistent. Additional investment has been allocated to enhance the Group's pre-sales capabilities, increasing prospective clients' knowledge of Mears' service quality and capabilities before the commencement of new procurement processes. Given the elongated bid process, the impact from the additional investment may take 24 months to crystallise.

 

The Group remains disciplined and highly selective when targeting new contract opportunities. One priority client target was secured through a significant new contract with Birmingham City Council. The contract is expected to deliver annual revenues of around £45m, and this new hub will allow the Group to more easily extend its services across the Midlands.

 

Following the acquisition of Pennington Choices in September 2025, the integration of the business is on track. Since the acquisition, the business has enjoyed a strong period of securing orders with new clients. The increased scope of the Group's Compliance capabilities has seen new opportunities created with both existing Mears and Pennington clients. One such example is the award of a contract to deliver Fire Risk Assessments to the London Borough of Havering. This contract is for an initial period of 10 years and is valued at £7.5m.

 

The Group has continued to develop its operational and commercial expertise to deliver standalone planned works, including retrofit. Over recent years, Mears has looked to create an end-to-end decarbonisation service to assist our clients with the huge challenge of improving social housing stock. The Group has performed well in supporting clients securing grants through the Social Housing Decarbonisation Fund (SHDF). Mears submitted applications on behalf of clients in respect of SHDF Wave 3, securing £30m of grant funding, contributing to over £60m of total works value to be delivered over the course of 2026 and 2027. The SHDF Wave 4 has not yet been committed. This future wave of funding will sit within the wider Warm Homes policy framework.

 

The reformed Decent Homes Standard (DHS2) has introduced a materially strengthened regulatory framework for housing quality to social housing in England, with compliance required from April 2035. Government modelling indicates that bringing the sector up to the new standard will require approximately £11.3bn of capital investment. This represents a substantial uplift from the previous framework. Spread across roughly a decade of preparation and delivery, this equates to circa £1bn per annum of additional maintenance and planned works investment across England's social housing stock. DHS2 should be viewed as a regulatory capital cycle that will operate alongside retrofit, energy efficiency and other building safety programmes.

 

Outlook

 

The Group has made a strong start to FY26. Further contract retentions combined with the award of the Birmingham City Council contract provide a high level of confidence that the Group is on track to deliver against its Maintenance growth target of 5-9% per annum. The low level of renewals in the next three years and a strong pipeline of new bidding opportunities, provides confidence that this growth can be sustained over the medium term.

 

The Group continues to develop its operational and commercial expertise to deliver planned works, which will be further buoyed by the reformed Decent Homes standard. The combined Mears-Pennington Compliance offer will increase the addressable market and opportunity for growth in that area.

 

The Group anticipates that AASC revenues will continue to normalise to an annual revenue of c.£200m, although the timing is uncertain. Over the medium term, the Group believes that it is well positioned to deliver additional housing related services to Central Government clients.

 

The Group is well positioned to maintain adjusted operating margins within the range of 5-6% underpinned by a disciplined approach to new contract bidding and a robust approach to operational and commercial management.

 

We expect to continue to deliver strong underlying cash generation, reflecting the quality of earnings and the low capital intensity nature of our operating model.

 

 

Financial review

 

This section provides further key information in respect of the financial performance and financial position of the Group to the extent not already covered in detail within the Chief Executive Officer's Review.

 

Alternative performance measures (APMs)

 

The Strategic Report includes both statutory and adjusted performance measures. APMs are considered useful to stakeholders in assessing the underlying performance of the business, adjusting for items which could distort the understanding of performance in the year and between periods, and when comparing the financial outputs to those of our peers. The APMs have been set considering the requirements and views of the Group's investors and debt funders among other stakeholders. The APMs and KPIs are aligned to the Group's strategy.

 

Reflecting the steady state of the business and the quality of the earnings, the Group has used an unadjusted profit before tax and earnings per share as its headline profit measures. The Group makes regular reference throughout the Strategic Report to an adjusted operating profit, measured before the impact of IFRS 16, and stated both in pounds (£) and as a percentage margin (%). This adjusted measure is a key metric for the senior management team when assessing new contract opportunities and existing branch performance.

 

The Group also uses an adjusted net cash measure which excludes IFRS 16 lease obligations from the statutory net debt measure. This is referenced in both a spot measure (on 31 December) and in a 365-day average.

 

These APMs should not be considered as a substitute for or superior to International Financial Reporting Standards (IFRS) measures, and the Board has reported both statutory and alternative measures with equal prominence throughout this preliminary announcement.

 

The method of calculation and a reconciliation between each APM and the relevant statutory measure are detailed below, together with an explanation as to why management considers the APM to be useful in helping users to have a better understanding of the Group's underlying performance. This section of the Strategic Report also provides additional analysis to give the user an easier route to understand underlying performance and deriving their own profit and EBITDA measures.

	Note		2025 £'000	2024 £'000
Profit before tax		Income Statement	63,488	64,141
IFRS 16 profit impact		See below	4,629	3,744
Net finance income (non-IFRS 16)		5	(3,299)	(4,275)
Adjusted operating profit pre-IFRS 161		APM	64,819	63,610
Amortisation of software and acquisition intangibles		12	2,254	2,244
Depreciation and loss on disposal (non-IFRS 16)		4/13	7,608	7,574
EBITDA pre-IFRS 161		APM	74,681	73,428
IFRS 16 profit impact		See below	(4,629)	(3,744)
Finance costs (IFRS 16)		5	14,851	12,693
Depreciation, profit on disposal and impairment (IFRS 16)		4/14	72,519	62,733
EBITDA post-IFRS 161			157,422	145,110
Amortisation of software and acquisition intangibles		12	(2,254)	(2,244)
Depreciation, loss on disposal and impairment (IFRS 16)		4/14	(72,519)	(62,733)
Depreciation and loss on disposal (non-IFRS 16)		4/13	(7,608)	(7,574)
Operating profit post-IFRS 161		Income Statement	75,041	72,559

 

1    Operating profit and EBITDA measures include share of profits of associates.

 

The Directors use the Operating profit pre-IFRS 16 measure to generate the Group's headline operating margin. Whilst this generates a lower operating margin, it reflects how the underlying contracts have been tendered, how the senior executive team assess performance, and is also more aligned to the underlying cash generation. In addition, this measure is also used for the purposes of assessing the Group's compliance with its banking covenants which utilise pre-IFRS 16 measures.

	Note	2025 £'000	2024 £'000
Revenue	Statutory	1,135,461	1,132,510
Adjusted operating profit pre IFRS 16	APM	64,819	63,610
Adjusted operating margin %	APM	5.7%	5.6%

 

 

IFRS 16 profit impact

 

The profit impact in respect of IFRS 16, which was included within the APM analysis above, is detailed below:

	2025 £'000	2024 £'000
Charge to income statement on a post-IFRS 16 basis	(86,514)	(74,793)
Charge to income statement on a pre-IFRS 16 basis	(82,741)	(71,682)
Profit impact from the adoption of IFRS 16 and before impairment	(3,773)	(3,111)
Impairment of right of use assets	(856)	(633)
Profit impact from the adoption of IFRS 16	(4,629)	(3,744)

 

Accounting standards require that, where a contract is identified as a lease under the rules of IFRS 16, the Group recognises its right to use a leased asset and a lease liability representing its obligation to make lease payments. The depreciation cost of the leased asset is typically charged to profit within cost of sales, and the interest cost of the newly recognised lease liability is charged to finance costs. On the basis that depreciation is required to be charged on a straight-line basis, but the interest element is charged on an amortised cost basis, this results in a higher charge being applied to the income statement in the early years of a lease, with this impact reversing over the later years. Ultimately, IFRS 16 has no impact on the lifetime profitability of the contracts and there are no cash flow impacts, but the standard alters the phasing over time, front-loading the cost.

 

Net cash/(debt)

 

The Group excludes the financial impact of IFRS 16 from its adjusted net cash measure. This adjusted net cash measure has been introduced to align the net borrowing definition to the Group's banking covenants, which are required to be stated before the impact of IFRS 16.

 

The Group does not recognise lease obligations as traditional debt instruments given a significant proportion of these leases have break provisions which allow the Group to cancel the associated lease obligation with minimal associated cost. A reconciliation between the net debt and the adjusted measure is detailed below:

 

	Note			2025 £'000	2024 £'000
Cash and cash equivalents	Cashflow Statement			51,807	91,404
Lease liabilities (current)		19	(80,652)		(66,861)
Lease liabilities (non-current)		19	(238,069)		(230,641)
Net debt (including IFRS 16 lease obligations)			(266,914)		(206,098)

 

Statutory profit before tax

 

The Board believes that the statutory Profit before tax measure is a true reflection of the underlying performance of the business, and no alternative measure is considered necessary or appropriate. The Board recognises that any reported profit will include singular components which, in isolation, may be considered unusual, infrequent, non-recurring or non-underlying. Additional detail is disclosed separately within the notes to the preliminary announcement, and these are signposted below to assist the user in accessing these and to better understand the underlying performance in the period.

	Note	2025 £'000	2024 £'000
Impairment of right of use assets	14	(856)	(633)
Amortisation of acquired intangibles	12	(387)	(245)
Loss on sale and leaseback transaction	23	(122)	(283)
Increase in fair value of other investments	15	1,500	785
Onerous contract provisions (provided in year less amounts released unused)	20	(1,289)	(759)
Legal provisions (provided in year less amounts released unused)	20	(2,025)	(4,792)
Settlements on exiting LGPS pension schemes	28	-	2,413

 

IFRS 16 and IAS 36: Impairment of right of use asset

 

Under IAS 36, the Directors are required to consider for each asset or group of assets with separately identifiable cash flows if there are indicators of impairment at the year end. Where such indicators are present, a full impairment review must be carried out, comparing the carrying value of the assets to their value in use (or fair value less costs of disposal, if that is higher). In particular, the Directors consider that for each Community Housing scheme, the relevant group of right of use assets has identifiable cash inflows and therefore they must assess whether there are any indicators of impairment for each of these housing schemes. Certain Community Housing assets were the subject of an earlier impairment, which means that those affected assets are more sensitive to further changes in the assumptions underlying their value in use.

 

Property yields for residential properties similar to those used in the Community Housing business have shown a small increase in 2025. Property maintenance costs have also been broadly consistent during 2025, having stabilised since the rising costs experienced in the period following the pandemic. The increasing regulation attached to affordable housing brings some additional cost pressure, especially in respect of fire risk. An increase in the costs of maintaining these property schemes, to the extent that they cannot be passed onto the customer or recovered through other mechanisms, will reduce the value in use. The reassessment of cash flows and other key assumptions resulted in an additional impairment charge of £0.9m (2024: £0.6m) to align the carrying value of the right of use assets to their value in use. This additional charge applied to 2025 will be mirrored by a reduction in depreciation in future periods and ultimately has no impact on the lifetime profitability of the underlying assets.

 

AASC property acquisitions and sale and leaseback

 

The Group has utilised its balance sheet strength to fund property acquisitions to support the requirement for additional properties within the Asylum Accommodation and Support Contract ('AASC'). This approach has played a critical role in enhancing the service offering and delivering against client expectations.

 

The Group purchased 221 properties in 2023 for a cash cost of £22.7m, which were the subject of a sale and leaseback in 2024. On a similar basis, the Group procured 200 properties across a similar geography in 2024 for a cash cost of £25.5m and these were the subject of a second sale and leaseback in 2025. This second transaction saw the Group receive £18.1m in cash on completion, with the balance taking the form of a £6.5m interest-bearing loan, combined with a continuing 25% equity interest in this investment vehicle. The transaction crystallised a small loss on disposal of £0.1m. These properties will continue to be used to support the delivery of the AASC until the contract expiry.

 

During 2025, the Group purchased 230 properties in Scotland for a cash cost of £38.4m which are held on the Balance Sheet at the year end.

 

Acquisition - Pennington Choices Group Limited ('Pennington')

 

In September 2025, the Group acquired 100% of the issued share capital of Pennington, a provider of building compliance services. This acquisition has enhanced the Group's ability to deliver compliance services to its key customer groups, which remains a key pillar of the Group's strategy.

 

The purchase consideration was £9.5m plus £0.3m for excess working capital, comprised entirely of cash on completion.  The assets and liabilities recognised as a result of the acquisition were as follows:

 

	£'000
Net tangible assets acquired	996
Goodwill	3,117
Identified intangible assets acquired	5,673
Cash consideration	9,786

 

The identified intangible assets acquired comprises customer relationships and brand and will be amortised on a straight-line basis over 10 years. The goodwill is attributable to the workforce and the expected synergies from combining the operations of the acquired business with those of the existing Group.

 

 

Disposal - Morrison Facilities Services (transaction completed post balance sheet date)

 

In March 2026, the Group completed the disposal of 100% of the share capital in Morrison Facilities Services Limited, a business delivering Facilities Management with a focus on the education and health sectors. This business was previously identified as non-core and has been the subject of a competitive sales process.

 

The sale was for a total consideration of £18.0m, settled in cash on completion. The business is sold on a debt and cash-free basis, and with a normal level of working capital. In the financial year ended 31 December 2025, the Group's FM activities reported revenue and profit before tax of £33m and £2.7m respectively, and these activities have previously been reported within the Maintenance-led segment. The net assets sold are estimated at £9.2m, and the profit on disposal, net of legal and other transaction-related costs, is c.£7.5m.

 

The associated assets and liabilities that are the subject of the disposal are classified as held for sale as at 31 December 2025 as detailed below:

 

 

	£'000
Assets classified as held for sale	18,376
Liabilities directly associated with assets classified as held for sale	(9,145)
Net assets subject to disposal	9,231

 

Taxation

 

Mears does not engage in artificial tax planning arrangements but takes advantage of available tax reliefs. The tax position in any transaction is aligned with the commercial reality, and any tax planning is consistent with the spirit as well as the letter of tax law. Given the Group's activities are largely involved in servicing public sector clients, the risk of reputational damage flowing from a tax compliance failure is higher than in other sectors. This leads the Group to take a risk-averse approach if there is an element of uncertainty regarding a particular treatment.

 

The tax charge for the year was £17.5m (2024: £17.2m), at an effective tax rate of 27.6% (2024: 26.8%). It is anticipated that the effective tax rate will remain above the standard corporation tax rate of 25.0%.

 

Mears is a significant contributor of revenues to the UK Exchequer, paying £224.8m of taxes in the year (2024: £203.3m). This relates to taxes borne by Mears (principally corporation tax and Employers' National Insurance) and taxes collected by Mears (being VAT, income tax under PAYE and Employees' National Insurance). Further detail in respect of the taxes paid during 2025 are provided below:

 

	Taxes borne £m	Tax collected £m	Total £m
Corporation Tax	15.7	0.0	15.7
VAT and Insurance Premium Tax1	0.5	128.7	129.2
Construction Industry Scheme	0.0	13.4	13.4
Employment taxes	0.9	32.6	33.5
National Insurance	23.6	9.4	33.0
Total	40.7	184.1	224.8

1    VAT excludes the disallowance of input tax recovery on the Group's exempt supplies.

 

Earnings per share ('EPS')

	2025	2024
Basic earnings per share (p)	55.70	50.27
Diluted earnings per share (p)	53.86	48.86
Weighted average number of shares (for basic EPS) (m)	82.99	92.56
Weighted average number of shares (for diluted EPS) (m)	85.81	95.22

 

Diluted earnings per share increased by 10% to 53.9p (FY24: 48.9p). The improvement is driven by the reduction in the weighted average number of shares as a result of the share buyback programme.

 

Net Assets

 

The Group reported an increase in net assets from £187.5m to £204.8m. Notwithstanding the significant distribution to shareholders through both ordinary dividends and share buybacks, the profit generation has ensured a robust position has been maintained. The key movements are detailed below:

	£m
Net assets at 1 January 2025	187.5
Profit after tax	45.9
Dividends	(13.9)
Share buybacks including purchases by EBT	(17.2)
Share based payment charges	2.3
Other equity movements	0.2
Net assets at 31 December 2025	204.8

 

 

Defined benefit pension arrangements

 

The Group's defined benefit pension arrangement can be categorised three ways:

 

·      Two principal Group pension schemes, where the Group is fully at risk over the long term.

·      Three schemes where the Group holds Admitted Body Status in a Local Government Pension Scheme ('LGPS'), but where the Group holds a back-to-back indemnity under the associated customer contract, removing the Group's exposure to changes in pension contributions and future deficit risk. ('Indemnified')

·      Nine other schemes, the majority of which are LGPS, but where there is no indemnity in place. However, the risk attached to these schemes matches the time horizon of the underlying contract, which whilst not removing risk, reduces the period over which deficits can arise. The Group is therefore only carrying the pension risk over the medium term. ('No indemnity')

 

The two principal Group schemes enjoy a strong financial position and have done consistently over the last 10 years. Both schemes are mature, and most assets held are matched to the underlying obligations. It was extremely positive to reach a position where both Group schemes can be considered self-sufficient. The Directors acknowledge the robust and disciplined performance of the scheme managers and trustees who have managed this pension risk so well over many years to reach the position reported today.

 

The Directors are comfortable with the position on both the indemnified and other schemes. The Group enjoys a significant surplus on many of these schemes, but these are largely not recognised as assets as there is uncertainty around the ability to recover a surplus.

	Group £'000	Indemnified £'000	No indemnity £'000	Total £'000
Total scheme assets	119,784	55,815	66,260	241,859
Total obligations	(96,449)	(34,498)	(40,306)	(171,253)
Funded status	23,335	21,317	25,954	70,606
Surpluses not recognised as assets	-	(20,858)	(25,066)	(45,924)
Assets held for sale	-	-	(585)	(585)
Pension surplus	23,335	459	303	24,097

 

Cash flow and working capital management

 

The Group reported an adjusted net cash position at the year-end of £51.8m (2024: £91.4m). Whilst it is reassuring to report a strong cash position within the year-end balance sheet, of much greater significance is the performance over the 365-day period. The year-end performance was also mirrored in the average daily adjusted net cash for the year at £52.8m (2024: £59.6m).

	2025 £'000	2024 £'000
Average daily adjusted net cash	52,826	59,626
Adjusted net cash at 31 December	51,807	91,404

 

During the year, the Group allocated c.£27.4m of capital (net of sale and leaseback proceeds) in properties to provide additional support to the AASC contract, purchased its own shares at a cost of £17.2m, and paid out £13.9m in ordinary dividends, whilst registering only a small reduction in the adjusted net cash balance over that period.

 

Mears fosters a "cash culture", whereby the Group's front-line operations understand that invoicing and cash collection are intrinsically linked, and that a works order is not complete until the monies are banked. This culture has underpinned our cash performance over many years. A key performance measure for the Group is the percentage of EBITDA that is converted into operating cash flow. The ability of the Group to bank its profits over multiple periods provides a clear indication of the quality of the earnings.

	2025 £'000	2024 £'000
Profit before tax	63,488	64,141
Net finance costs	11,552	8,418
Depreciation and amortisation	9,862	9,818
Right of use asset depreciation and impairment	72,519	62,733
EBITDA	157,422	145,110
Other adjustments	574	278
Change in inventories	263	290
Change in operating receivables	(24,684)	(7,021)
Change in operating payables and provisions	(5,234)	7,551
Operating cash flow	128,340	146,208
Operating cash to EBITDA conversion	82%	101%

The Group has consistently delivered operating cash flows in excess of EBITDA over the last 4 years reporting the conversion of 104% of EBITDA into operating cash flows over that period as detailed below. Whilst the surplus cash generated in excess of the reported EBITDA reflects the high quality of earnings, combined with strong working capital management, the Group enjoyed a timing benefit in respect of certain contractual mechanisms linked to payments on account and gainshares. This benefit has largely unwound during the period. .

 

	4-year total £'000	2025 £'000	2024 £'000	2023 £'000	2022 £'000
EBITDA	515,775	157,422	145,110	118,375	94,868
Operating cash flow	535,103	128,341	146,208	145,224	115,330
EBITDA to operating cash conversion	104%	82%	101%	123%	122%

 

Share Capital

 

During 2025, the Board approved a return of surplus capital of £16m to shareholders, which was implemented through a programme of on-market purchases, resulting in the purchase and cancellation of 4.3m ordinary shares of 1p each at an average price of 371p. As detailed below, over the last three years, buybacks have reduced the Group's ordinary share count by 27.4m shares at an average price of 325p and a total cash cost of £89.2m. The Board has approved a new £20.0m share buyback programme which is expected to be launched in April 2026.

Year	Opening basic share count (millions)	Buyback (millions)	Option exercises (millions)	Closing basic share count (millions)	Buyback cash cost £m
2023	111.0	(12.2)	2.7	101.6	(33.2)
2024	101.6	(10.9)	0.2	90.8	(40.0)
2025	90.8	(4.3)	0.0	86.4	(16.0)
Total	111.0	(27.4)	2.9	86.4	(89.2)

 

 

 

 

In addition to the shares acquired through the share buyback programmes, the Group holds 4.1m shares through its Employee Benefit Trust ('EBT'), which waives its entitlement to a dividend and also reduces the share count when calculating EPS measures.

 

Banking and financial covenants

 

The Group has a simple approach to its debt funding arrangements, holding a single revolving credit facility (RCF) which provides a total commitment of £70m but allows the Group to draw down monies as required, mirroring an overdraft facility. The Group also has a traditional overdraft which is carved out from this facility to provide additional flexibility. The Board is grateful for the tremendous support that has been provided to the Group by its banking partners over several decades.

 

The financial covenants included within the RCF, which are tested twice-yearly on 30 June and 31 December, are detailed below.

 

Covenant	Formulae	Covenant ratio
Leverage	Consolidated net borrowing1 divided by adjusted consolidated EBITDA2	3.00x
Interest cover	Adjusted consolidated EBITDA2  divided by consolidated net finance charges3	3.50x

 

¹ Net borrowing is stated on a pre-IFRS 16 basis

²  Adjusted EBITDA on a rolling 12-month basis, pre IFRS 16, and stated before non-underlying items and share-based payments.

³  Net finance charges are stated on a pre-IFRS 16 basis and comprise all commission, fees, and other finance charges payable in respect of financial indebtedness. This excludes income/costs relating to Group pension arrangements.

 

A margin ratchet ranging from 1.45-2.45% is applied to drawdowns under the RCF, determined by the Group's leverage ratio at each quarter end. This margin is payable in addition to the Sterling Overnight Index Average (SONIA).

 

Consolidated statement of profit or loss

For the year ended 31 December 2025

	Note	2025 £'000	2024 £'000
Sales revenue	2	1,135,461	1,132,510
Cost of sales		(869,622)	(879,257)
Gross profit		265,839	253,253
Administrative expenses		(190,811)	(181,708)
Operating profit	4	75,028	71,545
Share of profits of associates	15	12	1,014
Finance income	5	4,526	5,367
Finance costs	5	(16,078)	(13,785)
Profit for the year before tax		63,488	64,141
Tax expense	8	(17,549)	(17,205)
Profit for the year		45,939	46,936
Attributable to:
Owners of Mears Group PLC		46,222	46,526
Non-controlling interest		(283)	410
Profit for the year		45,939	46,936
Earnings per share
Basic	10	55.70p	50.27p
Diluted	10	53.86p	48.86p

 

The accompanying accounting policies and notes form an integral part of this preliminary announcement. All activities were in respect of continuing operations.

 

Consolidated statement of comprehensive income

For the year ended 31 December 2025

	Note	2025 £'000	2024 £'000
Profit for the year		45,939	46,936
Other comprehensive income that will not be subsequently reclassified to the Consolidated Statement of Profit or Loss:
Actuarial gain on defined benefit pension schemes	28	284	2,665
Pension guarantee asset movements in respect of actuarial gain	28	(296)	(516)
Deferred tax credit/(charge) in respect of defined benefit pension schemes	25	3	(537)
Other comprehensive income for the year		(9)	1,612
Total comprehensive income for the year		45,930	48,548
Attributable to:
Owners of Mears Group PLC		46,213	48,138
Non-controlling interest		(283)	410
Total comprehensive income for the year		45,930	48,548

 

The accompanying accounting policies and notes form an integral part of this preliminary announcement. All comprehensive income for the year attributable to owners of Mears Group PLC arises from continuing operations.

 

Consolidated balance sheet

As at 31 December 2025

	Note	2025 £'000	2024 (restated*) £'000
Assets
Non-current
Goodwill	11	118,206	121,868
Intangible assets	12	9,695	6,244
Property, plant and equipment	13	51,919	38,836
Right of use assets	14	289,308	272,171
Investments	15	3,786	2,274
Loan notes and other non-current receivables	24	20,196	10,195
Pension and other employee benefits	28	24,097	23,245
Total non-current assets		517,207	474,833
Current
Inventories	16	824	1,173
Trade and other receivables	17	155,034	133,205
Current tax assets		186	730
Cash and cash equivalents	24	48,479	91,404
		204,523	226,512
Assets classified as held for sale	22	18,376	-
Total current assets		222,899	226,512
Total assets		740,106	701,345
Equity
Equity attributable to the shareholders of Mears Group PLC
Share capital and premium	26	3,506	3,489
Capital redemption reserve	26	274	231
Share-based payment reserve		4,637	3,604
Treasury shares	26	(13,897)	(14,985)
Merger reserve		7,971	7,971
Retained earnings		199,254	183,797
Total equity attributable to the shareholders of Mears Group PLC		201,745	184,107
Non-controlling interest		3,075	3,358
Total equity		204,820	187,465
Liabilities
Non-current
Deferred tax liabilities	25	5,606	3,518
Lease liabilities	19	238,069	230,641
Non-current provisions	20	10,742	9,765
Total non-current liabilities		254,417	243,924
Current
Trade and other payables	18	185,049	192,278
Lease liabilities	19	80,652	66,861
Provisions	20	6,023	10,817
		271,724	269,956
Liabilities directly associated with assets classified as held for sale	22	9,145	-
Total current liabilities		280,869	269,956
Total liabilities		535,286	513,880
Total equity and liabilities		740,106	701,345

* The comparative figures have been restated in respect of a change in presentation of equity, as described in note 26.

The accompanying accounting policies and notes form an integral part of this preliminary announcement.

 

Consolidated cash flow statement

For the year ended 31 December 2025

	Note	2025 £'000	2024 £'000
Operating activities
Profit for the year before tax		63,488	64,141
Adjustments	27	94,507	81,247
Change in inventories		263	290
Change in trade and other receivables		(24,684)	(7,021)
Change in trade, other payables and provisions		(5,234)	7,551
Cash inflow from operating activities before taxation		128,340	146,208
Taxes paid		(15,689)	(17,407)
Net cash inflow from operating activities		112,651	128,801
Investing activities
Payment for acquisition of subsidiary, net of cash acquired		(8,889)	-
Payments for property, plant and equipment		(45,243)	(29,816)
Payments of software development costs		(1,703)	(1,442)
Loans to related parties		(3,160)	-
Proceeds from sale and leaseback of residential property	23	18,094	16,285
Repayment of loans from related parties		110	-
Proceeds from sale of property, plant and equipment		305	141
Distributions from associates	15	-	147
Movement in short-term cash deposits held for investment purposes		-	7,090
Interest received		3,028	4,036
Net cash outflow from investing activities		(37,458)	(3,559)
Financing activities
Proceeds from share issue		60	251
Proceeds on distribution of shares from treasury		6	6
Purchase of own shares	26	(17,792)	(52,050)
Proceeds from sale of own shares		552	-
Net cash outflow relating to other credit facilities		-	(11,244)
Principal element of lease payments		(68,347)	(57,907)
Interest paid		(15,383)	(13,262)
Dividends paid - Mears Group PLC shareholders	9	(13,886)	(12,933)
Net cash outflow from financing activities		(114,790)	(147,139)
Cash and cash equivalents, beginning of year	27	91,404	113,301
Net decrease in cash and cash equivalents		(39,597)	(21,897)
Cash and cash equivalents, end of year	27	51,807	91,404

 

 

Consolidated statement of changes in equity

For the year ended 31 December 2025

	Attributable to equity shareholders of the Company						Non- controlling interest £'000	Total equity £'000
	Share capital and premium £'000	Capital redemption reserve* £'000	Share- based payment reserve £'000	Treasury reserve £'000	Merger reserve £'000	Retained earnings £'000
At 1 January 2024	3,348	-	1,883	(5,122)	7,971	189,428	2,948	200,456
Restatement	-	121	-	-	-	(121)	-	-
As restated	3,348	121	1,883	(5,122)	7,971	189,307	2,948	200,456
Net profit for the year	-	-	-	-	-	46,526	410	46,936
Other comprehensive income	-	-	-	-	-	1,612	-	1,612
Total comprehensive income for the year	-	-	-	-	-	48,138	410	48,548
Tax credit on share-based payments	-	-	-	-	-	565	-	565
Issue of shares	251	-	-	-	-	-	-	251
Purchase of treasury shares	-	-	-	(11,733)	-	-	-	(11,733)
Cancellation of shares	(110)	110	-	-	-	(40,317)	-	(40,317)
Share options - value of employee services	-	-	2,622	-	-	-	-	2,622
Share options - exercised or lapsed	-	-	(901)	1,870	-	(963)	-	6
Dividends	-	-	-	-	-	(12,933)	-	(12,933)
At 1 January 2025	3,489	231	3,604	(14,985)	7,971	183,797	3,358	187,465
Net profit for the year	-	-	-	-	-	46,222	(283)	45,939
Other comprehensive income	-	-	-	-	-	(9)	-	(9)
Total comprehensive income for the year	-	-	-	-	-	46,213	(283)	45,930
Tax credit on share-based payments	-	-	-	-	-	199	-	199
Issue of shares	60	-	-	-	-	-	-	60
Purchase of treasury shares	-	-	-	(1,619)	-	-	-	(1,619)
Disposal of treasury shares	-	-	-	552	-	-	-	552
Cancellation of shares	(43)	43	-	-	-	(16,173)	-	(16,173)
Share options - value of employee services	-	-	2,286	-	-	-	-	2,286
Share options - exercised or lapsed	-	-	(1,253)	2,155	-	(896)	-	6
Dividends	-	-	-	-	-	(13,886)	-	(13,886)
At 31 December 2025	3,506	274	4,637	(13,897)	7,971	199,254	3,075	204,820

* The nominal value of shares repurchased and cancelled has been re-presented in the capital redemption reserve as detailed in note 26.

The accompanying accounting policies and notes form an integral part of this preliminary announcement.

 

Notes to the preliminary announcement

For the year ended 31 December 2025

1. Accounting policies

Accounting policies are detailed in their respective notes, where relevant. Policies that are not specific to a particular note are detailed below.

Basis of preparation

The financial information in this announcement does not constitute the Group's or the Company's statutory accounts as defined in section 434 of the Companies Act 2006 for the years ended 31 December 2025 or 2024 but is derived from those accounts. Statutory accounts for 2024 have been delivered to the registrar of companies, and those for 2025 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The preliminary announcement has been prepared in accordance with United Kingdom adopted International Accounting Standards, United Kingdom adopted International Financial Reporting Standards (IFRS) and the requirements of the Companies Act 2006. While the financial information included in this announcement has been computed in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS.

The consolidated financial statements of the Group have been prepared in conformity with the requirements of the Companies Act 2006 and in accordance with United Kingdom adopted International Financial Reporting Standards (IFRS). The financial statements are prepared under the historical cost convention as modified by the revaluation of investments and assets in the Group's defined benefit pension schemes. They are presented in Sterling and all values are rounded to the nearest thousand (£'000).

The preparation of financial statements in accordance with IFRS requires the use of estimates and judgements that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Although these estimates are based on management's best knowledge of the amounts, actual results may ultimately differ from those estimates. The most significant judgements and estimates made by management in the financial statements are set out in the accounting policies to which they relate.

Government and societal responses to climate change are still developing and are interdependent upon each other, and consequently financial statements cannot capture all possible future outcomes as these are not yet known. There were no material impacts of climate change in determining asset and liability valuations and the timing of future cash flows to be incorporated into the financial statements.

Mears Group PLC is the ultimate parent company of the Group. It is incorporated and domiciled in the United Kingdom (registration number 03232863). Its registered office and principal place of business is 2nd Floor 5220 Valiant Court, Gloucester Business Park, Brockworth, Gloucester GL3 4FE. Mears Group PLC's shares are listed on the Main Market of the London Stock Exchange.

Basis of consolidation

The Consolidated Balance Sheet includes the assets and liabilities of the Company and its subsidiaries and is made up to 31 December 2025. Entities for which the Group has the ability to exercise control over financial and operating policies are accounted for as subsidiaries. Control is achieved where the Company has existing rights that give it the current ability to direct the activities that affect the Company's returns and exposure or rights to variable returns from the entity. Interests acquired in entities are consolidated from the effective date of acquisition and interests sold are consolidated up to the date of disposal.

All significant intercompany transactions and balances between Group enterprises, including unrealised profits arising from intra-group transactions, are eliminated on consolidation; no profit is taken on sales between Group companies.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholders' share of changes in equity since the date of the combination.

A joint venture is a joint arrangement whereby the parties that have joint control have the rights to the net assets of the arrangement. Associates are entities over which the Group does not have control but has significant influence. Investments in joint ventures and associates are accounted for using the equity method of accounting. Under this method, the Group's share of post-acquisition profits or losses is recognised in the Consolidated Statement of Profit or Loss; the cost of the investment in a given joint venture or associate, together with the Group's share of that entity's post-acquisition changes to shareholders' funds, is included in investments within the Consolidated Balance Sheet.

Going concern

The Directors do not consider going concern to be a critical accounting judgement. In reaching this determination, the Directors have taken account of the Group's trading for 2025 and the budget for 2026. The Group has modelled its cash flow outlook for the period to 30 June 2027 and the base forecast indicates significant liquidity headroom will be maintained above the Group's borrowing facilities and that financial covenants will be met throughout the period, including the covenant tests on 30 June 2026, 31 December 2026 and 30 June 2027.

The Board approved a budget for 2026 which was considered to reflect solid performance. The forecast was built up on a contract-by-contract basis for the next 12 months and rolled forward. The forecast for 2026 is based upon revenues generated from existing customer relationships, and a business that is generating contract margins that are broadly in line with recent run rates. The forecast assumes no new work is secured. The model also reflects the normalisation of the Asylum (AASC) contract, with revenues reducing to a level reflecting the preferred delivery through dispersed accommodation and the closure of short-term contingent accommodation, such as hotels.

In making their going concern assessment, the Directors are required to consider whether there is a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for at least 12 months following the signing of the financial statements. The Directors have used a going concern period for this purpose up to 30 June 2027. This assessment considers whether the Group will be able to maintain adequate liquidity headroom above the level of its borrowing facilities and to operate within the financial covenants applicable to those facilities, which will be measured on 30 June 2026, 31 December 2026 and 30 June 2027. On 31 December 2025, the Group held £70m of undrawn committed borrowing facilities, maturing in December 2029. The principal borrowing facilities are subject to covenants as detailed in the Financial Review section of this preliminary announcement. The Annual Report and Accounts 2025 also details the principal risks and uncertainties and how the Group manages its risks.

In making its assessment of going concern, the Board has confirmed that there have been no post-balance sheet changes that have a material negative impact on the business or liquidity.

A range of scenarios that encompass the principal risks have been applied to the base case. These downside cases were prepared by management to consider the impact of adverse changes in key variables used within the base case forecast and projections. These downside cases were intended to represent a reasonable worst-case scenario that could affect solvency or liquidity in "severe but plausible" scenarios. No mitigating actions were included within any of these downside scenarios, which was considered conservative and unrealistic.

The Group has carried out stress tests against the base case to determine the performance levels that would result in a breach of covenants or a reduction of headroom against its borrowing facilities to £nil. The Directors carried out reverse stress testing, increasing the severity of the assumptions to measure the trigger points at which the going concern of the Group could be impacted. A reverse stress test was conducted to identify the magnitude of trading profit decline required before the Group breaches its debt covenants. All stress test scenarios would require a very severe deterioration compared to the base case forecasts.

After making these assessments, the Directors consider any scenario or combination of scenarios which could cause the business to be no longer a going concern to be remote. The Directors have a reasonable expectation that the Company and its subsidiaries have adequate resources to continue in operational existence until 30 June 2027. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

Fair value

The Group measures certain assets and liabilities at fair value on a recurring basis, including certain investments and assets in the Group's defined benefit pension schemes.

Trade and other receivables, trade and other payables and other loans are initially measured at fair value and are subsequently held at amortised cost. Other assets are measured at fair value when they are assessed for impairment or on classification as held for sale.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group uses valuation techniques that maximise the use of relevant observable inputs using the following valuation hierarchy, ordered from highest to lowest priority:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included in level 1 that are observable either directly or indirectly.

Level 3 - Unobservable inputs, typically derived from the Group's own information with any necessary adjustments to eliminate factors specific to the Group.

For assets and liabilities measured at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by assessing the lowest level input that is significant to the most recent measurement.

Details of the particular valuation techniques used by the Group are provided in the relevant notes for each type of asset or liability measured at fair value.

Use of judgements and estimates

The preparation of financial statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenditure during the reported period. The estimates and associated judgements are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

The estimates and underlying judgements are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

In the preparation of the consolidated financial statements, key estimates and judgements have been made by management concerning the following:

·      •       provisions necessary for certain liabilities, including discount rates used in estimating such provisions (note 20);

·      •       estimates used in forecasts used to assess future profitability and cash flows (note 20);

·      •       judgements involved in the recognition of right of use assets for lease accounting (note 14);

·      •       the timing of revenue recognition (note 2);

·      •       the recoverability of contract assets (note 17); and

·      •       actuarial estimates in respect of defined benefit pension schemes (note 28).

Actual amounts could differ from those estimates. Further details of key estimates and judgements are provided in the appropriate notes.

2. Revenue

Accounting policy

Revenue is recognised in accordance with IFRS 15 'Revenue from Contracts with Customers'. IFRS 15 provides a single, principles-based, five-step model to be applied to all sales contracts. It is based on the transfer of control of goods and services to customers. The detail below sets out the principal types of contracts and how the revenue is recognised in accordance with IFRS 15.

Repairs and maintenance contracts

For contracts in this category, the customer raises orders on demand, for example to carry out responsive repairs. Payments from the customer take the form of lump-sum periodic payments, task-based payments, or a mixture of both, depending on the terms of the individual contract.

Where a lump-sum payment is in place, it may cover the administrative element of the contract or may cover the majority of the tasks undertaken within that contract, with exclusions to this being charged in addition to the lump-sum charge. For the works covered by the lump-sum payment, the performance obligation is being available to deliver the goods and services in the scope of the contract, not the performance of the individual works orders themselves. Revenue is recognised on a straight-line basis as performance obligations are being met over time.

For works orders not covered by a lump-sum payment, each works order represents a distinct performance obligation and, as the customer controls the asset being enhanced through the works, the performance obligation is satisfied over time. Each works order can be broken down into one or more distinct tasks which are either complete or not complete. The stage of completion of the works order is assessed by looking at which tasks are complete. The transaction price for partly completed works orders is recognised as cost plus expected margin. The transaction price for completed works orders is the invoice value, which is typically determined by a pricing schedule referred to as a Schedule of Rates that provides a transaction price for each particular task.

Contracting projects

For contracting projects, the contract states the scope and specification of the works to be carried out, for a fixed price. Typically, this type of contract covers planned and regeneration works that follow a programme across a portfolio of customer properties. Mears is continuously satisfying the single performance obligation of completing the programme as cost is incurred, determining progress against the performance obligation on an output basis. The customer controls the portfolio as the work is being performed on it and, therefore, revenue is recognised over time.

Under the output method, an assessment is made of the value of the work delivered to date against the contractual price for each element of the work to determine the stage of completion. The output method matches the transfer of services to the customer, so is considered a suitable method to determine progress.

Contract variations are always accounted for as if they were part of the existing contract because the nature of the contract means that any additional services required will not be distinct from the originally agreed scope of services. The variations are incorporated into the assessment of the transaction price and progress against the overall performance obligation.

Property and lease income

Where the Group is providing an accommodation and support service, each day of providing the service is a separate performance obligation and revenue is recognised over time for that day. For some contracts, the performance obligation is linked to the service user and revenue is therefore recognised only on days when the accommodation is occupied. For other contracts, the performance obligation is the availability of the service and revenue is therefore not linked directly to occupancy.

Where the transaction price is linked directly to a performance obligation (such as a service user in accommodation for a day), it is allocated to that performance obligation. Contracts typically provide for an amount to be paid that is not linked directly to a performance obligation, such as a monthly amount to contribute to overheads. Where these amounts are small in the context of the overall contract and the number of performance obligations completed in a month is consistent, these amounts are recognised over the month for which they are paid.

In one contract, the element of the price that is not directly linked to a performance obligation is more substantial and the profile of performance obligations completed in a month is highly variable over time. In that instance, the transaction price is allocated across the performance obligations based on the activity in each period across the entire contract life.

Some contracts may include an element of variable revenue related to service credits arising from elements of the service delivery being outside agreed parameters. Management estimates the expected service credits and recognises revenue on the contract only to the extent it is highly probable not to be reversed by service credits.                        

When the Group arranges for certain goods or services to be provided to its customers by third parties, it evaluates whether it is acting as a principal or an agent in relation to those goods or services. For example, in some contracts the Group arranges and pays for utility services that are delivered directly to the customer. To determine whether it is acting as an agent, the Group assesses whether it controls the goods or services before they are transferred to the customer. If the Group is acting as an agent, it recognises neither revenue from the customer's payment nor an expense for the amount paid to the supplier. Any amounts paid to the supplier for which reimbursement has not yet been received from the customer are recorded within Other debtors.

Where the Group enters into arrangements with customers for the provision of housing property, an assessment is made as to whether this income is recognised as a lease under IFRS 16, or as service revenue under IFRS 15. The contract between the Group and the customer is deemed to contain a lease where the contract conveys the right to control an identified asset for a period of time in exchange for consideration. In this instance, the rental income is recognised on a straight-line basis over the life of the lease. All such sub-leased residential property leases are classified as operating leases. Lease income in respect of sub-leased residential property is disclosed separately.

Care services

The standalone selling prices for providing care are overtly stated in the contract, and the method of application of the rate of charge is on a unit of time basis, usually expressed as a rate per visit. Revenue will be recognised in respect of this single performance obligation, by reference to the chargeable rate and time for completed care visits in the period.

From time to time, care contracts with customers include a fixed fee per period for performing a consistent scope of care services. For these contract types, the revenue recognition is consistent with lump-sum payments included in repair and maintenance contracts, as described above.

Professional services

Professional services includes standalone property compliance services and decarbonisation retrofit analysis. The transaction price for this type of work is either a fixed fee per task or on a time basis. The performance obligations in respect of these services are recognised over time as the Group has an enforceable right to payment for performance completed at any given point.

Other

From time to time, the Group receives revenue that does not fall within any of the categories above but is not individually significant enough to require a specific policy. In these cases, the revenue is considered separately and recognised in accordance with IFRS 15.

Gainshare

Across all revenue types, some contracts include an element of gainshare. The details vary by contract, but gainshare is typically a reduction in the revenue that would otherwise be due from the customer based on a share of profits generated above a contractual target. Gainshare is typically agreed on an annual basis following the end of each contract year and where the profit share has not been agreed at a period end, management's best estimate of any profit share due to the customer is recognised as a reduction to revenue and included within repayments due to customers. Estimation uncertainty is typically low, as the calculation of gainshare is prescribed in the contract with the customer.

Critical judgements in applying the Group's accounting policies

Revenue recognition

The valuation techniques used for revenue and profit recognition in respect of contracting and variable consideration contracts require judgements to be made about the stage of completion of certain contracts and the valuation of contract assets. Each contract is treated on its merits and subject to a regular review of the revenue and costs to complete that contract.

The Group's revenue disaggregated by nature is as follows:

	2025 £'000	2024 £'000
Revenue from contracts with customers
Repairs and maintenance	551,071	455,058
Contracting	49,563	77,956
Property income	486,839	551,198
Care services	22,372	22,164
Professional services	5,337	579
Other	140	56
	1,115,322	1,107,011
Lease income	20,139	25,499
	1,135,461	1,132,510

 

Repairs and maintenance and care service revenue is typically invoiced between 1 and 30 days from completion of the performance obligation. Contracting revenue is typically invoiced based on the stage of completion of the overall contract. Property income is typically invoiced monthly in arrears. Lease income is typically invoiced monthly in advance. Payment terms for revenue invoiced are typically 30 to 60 days from the date of invoice.

A maturity analysis of future minimum lessor income as at 31 December is shown in the table below:

	2025 £'000	2024 £'000
Less than 1 year	4,733	5,439
Between 1 and 2 years	3,243	4,051
Between 2 and 3 years	2,355	3,317
Between 3 and 4 years	2,348	2,429
Between 4 and 5 years	2,348	2,422
Over 5 years	6,727	9,299
	21,754	26,957

Due to the nature of short-term tenancy agreements, the future minimum lessor income for the majority of leased properties is substantially lower than the lease income the Group expects to receive. The above table discloses only lease income to which tenants were contractually committed at the balance sheet date.

3. Segment reporting

Accounting policy

Segment information is presented in respect of the Group's operating segments based on the format that the Group reports to its chief operating decision maker for the purpose of allocating resources and assessing performance.

The Group considers that the chief operating decision maker comprises the Executive Directors of the business.

The Executive Directors manage the Group as a single Housing business, but information provided to the Board and historically to stakeholders has included a split between Maintenance and Management. Therefore, management has concluded that providing segmental information along the same lines would be helpful to the users of the financial statements.

	2025			2024
	Maintenance £'000	Management £'000	Total £'000	Maintenance £'000	Management £'000	Total £'000
Revenue	620,437	515,024	1,135,461	555,813	576,697	1,132,510
Cost of sales	(465,416)	(404,206)	(869,622)	(420,722)	(458,535)	(879,257)
Gross profit	155,021	110,818	265,839	135,091	118,162	253,253
Administrative costs	(122,648)	(68,163)	(190,811)	(109,191)	(72,517)	(181,708)
Share of profits of associates	(40)	52	12	1,014	-	1,014
Net finance income/(costs)	4,108	(15,660)	(11,552)	4,673	(13,091)	(8,418)
Profit/(loss) before tax	36,441	27,047	63,488	31,587	32,554	64,141
Tax expense			(17,549)			(17,205)
Profit for the year			45,939			46,936

 

All revenue and all non-current assets arise within the United Kingdom. All of the revenue reported is external to the Group. The Group's largest single customer relationship is in respect of the Asylum Accommodation and Support Contract (AASC) with the Home Office, included within the Management segment. At the time that this contract was won, the Group expected to report annual revenues of around £160m for 2025, which would, under normal conditions, amount to around 15% of Group revenues. The AASC has continued to experience elevated volumes and as a result, this customer relationship accounted for over 30% of Group revenues in 2025. In the longer term, this contract is expected to reduce back to a normal level. No other customer comprises more than 10% of reported revenue.

For the purposes of the disaggregation of revenue in note 2, all property income and lease income is included within the Management segment. All other revenue is included within the Maintenance segment, except £8.0m (2024: £nil) of repairs and maintenance income that is included in the Management segment.

4. Operating costs

Operating costs, relating to continuing activities, include the following:

	Note	2025 £'000	2024 £'000
Share-based payments	7	2,286	2,622
Depreciation of property, plant and equipment	13	6,639	6,783
Depreciation of right of use assets	14	71,800	62,249
Impairment of right of use assets	14	856	633
Amortisation of acquisition intangibles	12	387	245
Amortisation of other intangibles	12	1,867	1,999
Loss on sale and leaseback		122	283
Loss on disposal of property, plant and equipment		848	508
Profit on disposal of right of use assets		(138)	(150)

 

Fees payable for audit and non-audit services during the year were as follows:

	2025 £'000	2024 £'000
In respect of continuing activities:
Fees payable to the auditor for the audit of the Group's financial statements	696	722
Other fees payable to the auditor in respect of:
- auditing of financial statements of subsidiary undertakings pursuant to legislation	552	587
- additional fees in respect of the prior year audit*	248	18
- other non-audit services	-	1
Total auditor's remuneration	1,496	1,328

*

 

5. Finance income and finance costs

	2025 £'000	2024 £'000
Interest charge on overdrafts and loans	(560)	(957)
Interest on lease obligations	(14,851)	(12,698)
Finance costs on bank loans, overdrafts and leases	(15,411)	(13,655)
Other interest	(667)	(93)
Interest charge on defined benefit pension obligation	-	(37)
Total finance costs	(16,078)	(13,785)
Interest income resulting from short-term deposits	2,521	3,791
Interest income resulting from defined benefit pension asset	1,249	926
Other interest income	756	650
Total finance income	4,526	5,367
Net finance charge	(11,552)	(8,418)

 

6. Employees

Staff costs during the year were as follows:

	2025 £'000	2024 £'000
Wages and salaries	204,108	189,290
Social security costs	24,549	20,513
Other pension costs	7,815	4,882
	236,472	214,685

 

The average number of employees of the Group during the year was:

	2025	2024
Site workers	2,828	2,552
Carers	612	632
Office and management	2,076	2,287
	5,516	5,471

 

7. Share-based employee remuneration

Accounting policy

All share-based payment arrangements are recognised in the consolidated financial statements in accordance with IFRS 2.

The Group operates equity-settled share-based remuneration plans for its employees. All employee services received in exchange for the grant of any share-based remuneration are measured at their fair values. These are indirectly determined by reference to the fair value (excluding the effect of non-market-based vesting conditions) of the share options awarded. Their value is determined at the date of grant and is not subsequently remeasured unless the conditions on which the award was granted are modified. The fair value at the date of the grant is calculated using the Monte Carlo option pricing model and the cost is recognised on a straight-line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the vesting period. For Save As You Earn (SAYE) plans, employees are required to contribute towards the plan. This non-vesting condition is taken into account in calculating the fair value of the option at the grant date.

All share-based remuneration is ultimately recognised as an expense in the Consolidated Statement of Profit or Loss. For equity-settled share-based payments there is a corresponding credit to the share-based payment reserve.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital, with any excess being recorded as share premium.

As at 31 December 2025, the Group maintained four (2024: four) active share-based payment schemes for employee remuneration.

Details of the share options outstanding and movement during the year are as follows:

	2025		2024
	Number '000	Weighted average exercise price p	Number '000	Weighted average exercise price p
Outstanding at 1 January	4,353	139	2,553	48
Granted	713	1	2,628	206
Forfeited	(237)	289	(130)	250
Exercised	(674)	10	(698)	37
Outstanding at 31 December	4,155	128	4,353	139

 

The weighted average share price at the date of exercise for share options exercised during the year was 393p. The weighted average remaining contractual life of options outstanding at 31 December 2025 was 6.4 years. At 31 December 2025, 0.3m options had vested and were still exercisable at prices between 1p and 429p (weighted average of 288p).

The weighted average fair value of options granted was 368p. The fair values of executive scheme options granted, which included a market-related performance condition, were determined using the Monte Carlo model, while those for all-employee schemes used the Black-Scholes-Merton option pricing model. Significant inputs into the calculations included the market price at the date of grant, the exercise price and share price volatility. Furthermore, the calculations incorporated an estimate of the future dividend yield and the risk-free interest rate. The share price volatility was determined from the daily log-normal distributions of the Company share price over a period commensurate with the expected life as calculated back from the date of grant. The risk-free interest rate utilised the zero-coupon bond yield derived from UK Government bonds as at the date of calculation for a life commensurate with the expected life. Adjustments are made to reflect expected and actual forfeitures during the vesting period due to failure to satisfy service conditions.

There were 0.71m options granted during the year and 0.24m options that were forfeited during the year. The market price at 31 December 2025 was 358p and the range during 2025 was 312p to 418p.

All share-based employee remuneration will be settled in equity. The Group has no legal obligation to repurchase or settle the options.

The Group recognised the following expenses related to share-based payments:

	2025 £'000	2024 £'000
Giving rise to share-based payment reserve:
All-employee schemes	533	416
Executive schemes	1,753	2,206
	2,286	2,622

 

The Group is currently running four active schemes, detailed below:

Sharesave plan (All-employee scheme)

Options are available to all employees. Options are granted for a period of three years. Options are exercisable at a price based on the quoted market price of the Company's shares at the time of invitation, discounted by up to 20%. Options are forfeited if the employee leaves Mears before the options vest, which impacts the number of options expected to vest. If an employee stops saving but continues in employment this is treated as a cancellation, which results in an acceleration of the share-based payment charge.

Company Share Option Plan (Executive scheme)

The Company operates a discretionary unapproved share plan and a Company Share Option Plan. Options are exercisable at a price below market value at the date of grant and often at nominal value. The vesting period is three years. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited if the employee leaves Mears before the options vest. No awards to Executive Directors are proposed under these plans.

Long Term Incentive Plan (Executive scheme)

The Long Term Incentive Plan provides for awards of free shares (i.e. either conditional shares or nominal cost options), normally on an annual basis, which are eligible to vest after three years subject to continued service and the achievement of challenging performance conditions. Options are granted under this scheme to key senior management subject to performance conditions as detailed in the  Remuneration Report within the Annual Report and Accounts 2025.

Deferred Share Bonus Plan (Executive scheme)

The Deferred Share Bonus Plan relates to annual bonus payments where typically 33% are deferred into shares and vest subject to continued employment. Individuals may be able to receive a dividend equivalent payment on deferred bonus shares at the time of vesting equal to the value of dividends that would have accrued during the vesting period. The dividend equivalent payment may assume the reinvestment of dividends on a cumulative basis. Clawback provisions may apply for three years from the date of payment of any bonus or the grant of any deferred bonus share award.

Further details of schemes relating to the Directors can be found in the Report of the Remuneration Committee within the Annual Report and Accounts 2025.

8. Tax expense

Accounting policy

Current tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the accounting periods to which they relate, based on the taxable profit for the year.

Where an item of income or expense is recognised in the Consolidated Statement of Profit or Loss, any related tax generated is recognised as a component of tax expense in the Consolidated Statement of Profit or Loss. Where an item is recognised directly to equity or presented within the Consolidated Statement of Comprehensive Income, any related tax generated is treated similarly.

Deferred taxation is the tax expected to be repayable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method.

Deferred taxation liabilities are generally recognised on all taxable temporary differences in full with no discounting. Deferred taxation assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability, unless the related transaction is a business combination or affects tax or accounting profit.

Deferred taxation is calculated using the tax rates and laws that are expected to apply in the period when the liability is settled or the asset is realised, provided they are enacted or substantively enacted at the balance sheet date. The carrying value of deferred taxation assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available against which taxable temporary differences can be utilised. Deferred tax is charged or credited to either the Consolidated Statement of Profit or Loss, the Consolidated Statement of Comprehensive Income or equity to the extent that it relates to items charged or credited. Deferred tax relating to items charged or credited directly to equity is also credited or charged to equity.

Tax recognised in the Consolidated Statement of Profit or Loss:

	2025 £'000	2024 £'000
United Kingdom corporation tax	16,895	16,567
Adjustment in respect of previous periods	(69)	406
Total current tax charge recognised in Consolidated Statement of Profit or Loss	16,826	16,973
Deferred taxation charge:
- on defined benefit pension obligations	362	358
- on share-based payments	(258)	(466)
- on capital allowances	(189)	209
- on amortisation of acquisition intangibles	(97)	(61)
- on corporate tax losses	-	(274)
- on fair value adjustments	331	(14)
- other timing differences	70	73
Adjustment in respect of previous periods	504	407
Total deferred taxation recognised in Consolidated Statement of Profit or Loss	723	232
Total tax charge recognised in Consolidated Statement of Profit or Loss	17,549	17,205

 

The charge for the year can be reconciled to the profit for the year as follows:

	2025 £'000	2024 £'000
Profit for the year before tax	63,488	64,141
Profit for the year multiplied by standard rate of corporation tax in the United Kingdom for the year of 25.0% (2024: 25.0%)	15,872	16,035
Effect of:
- expenses not deductible for tax purposes	474	222
- income not subject to tax	-	(395)
- previously unrecognised losses	-	(274)
- permanent tax differences in respect of assets	768	803
- adjustment in respect of prior periods	435	814
Actual tax charge	17,549	17,205

 

Deferred tax is recognised on temporary differences between the treatment of items for both tax and accounting purposes. Deferred tax on the amortisation of acquisition intangibles is a temporary difference and arises because no tax relief is due on this kind of amortisation.

Tax losses generated in previous years which are expected to be utilised against future profits are recognised as a deferred tax asset and a subsequent charge arises as those losses are utilised. There are no losses for which deferred tax is not recognised.

Capital allowances represent tax relief on the acquisition of property, plant and equipment and are spread over several years at rates set by legislation. These differ from depreciation, which is an estimate of the use of an item of property, plant and equipment over its useful life. Deferred tax is recognised on the difference between the remaining value of such an asset for tax purposes and its carrying value in the financial statements. Permanent differences in respect of assets arise where certain types of capital expenditure do not qualify for tax relief.

The following tax has been charged to other comprehensive income or equity during the year:

	2025 £'000	2024 £'000
Deferred tax (credit)/charge/ recognised in other comprehensive income
- on defined benefit pension obligations	(3)	537
Total deferred tax (credit)/charge recognised in other comprehensive income	(3)	537
Current tax credit recognised directly in equity
- on share-based payments	(362)	(409)
Total current tax credit recognised in equity	(362)	(409)
Deferred tax charge/(credit) recognised directly in equity
- on share-based payments	163	(156)
Total deferred tax charge/(credit) recognised in equity	163	(156)

 

9. Dividends

Accounting policy

Dividend distributions payable to equity shareholders are included in "Current financial liabilities" when the dividends are approved in a general meeting prior to the balance sheet date.

The following dividends were paid on ordinary shares in the year:

	2025 £'000	2024 £'000
Final 2024 dividend of 11.25p (2024: final 2023 dividend of 9.30p) per share	9,271	8,660
Interim 2025 dividend of 5.60p (2024: interim 2024 dividend of 4.75p) per share	4,615	4,273
	13,886	12,933

 

The Directors recommend a final dividend of 11.90p per share. This has not been recognised within the consolidated financial statements as no obligation existed at 31 December 2025.

10. Earnings per share

					2025 p	2024 p
Earnings per share					55.70	50.27
Diluted earnings per share					53.86	48.86

 

For the purpose of calculating earnings per share (EPS), earnings have been calculated as follows:

					2025 £'000	2024 £'000
Profit for the year					45,939	46,936
Attributable to non-controlling interests					283	(410)
Earnings					46,222	46,526

 

The calculation of EPS is based on a weighted average of ordinary shares in issue during the year. The diluted EPS is based on a weighted average of ordinary shares calculated in accordance with IAS 33 'Earnings per Share', which assumes that all dilutive options will be exercised. IAS 33 defines dilutive options as those whose exercise would decrease earnings per share or increase loss per share from continuing operations.

	2025 Millions	2024 Millions
Weighted average number of shares in issue:	82.99	92.56
Dilutive effect of share options	2.82	2.66
Weighted average number of shares for calculating diluted earnings per share	85.81	95.22

 

The opening number of shares in issue for 2026 is shown below:

	2026 Millions
Opening number of shares in issue	86.5
Treasury shares to exclude	(4.1)
Opening number of shares in issue for calculating basic earnings per share	82.4

 

11. Goodwill

Accounting policy

Goodwill arises on the acquisition of subsidiaries and represents any excess of the cost of the acquired entity over the Group's interest in the fair value of the entity's identifiable assets and liabilities acquired and is capitalised as a separate item. Goodwill is recognised as an intangible asset.

Under the business combinations exemption of IFRS 1, goodwill previously written off directly to reserves under UK Generally Accepted Accounting Practice (GAAP) is not recycled to the Consolidated Statement of Profit or Loss on calculating a gain or loss on disposal.

Impairment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows: Cash-Generating Units (CGUs). Goodwill is allocated to those groups of CGUs that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which goodwill is monitored for internal management purposes.

Goodwill or groups of CGUs that include goodwill and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or CGUs are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised in the Consolidated Statement of Profit or Loss for the amount by which the asset's or CGU's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for groups of CGUs, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro-rata to the other assets in the group of CGUs. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

	Note	£'000
Gross carrying amount
At 1 January 2024 and 1 January 2025		121,868
Acquisition of a subsidiary	21	3,117
Assets classified as held for sale	22	(6,779)
At 31 December 2025		118,206
Accumulated impairment losses
At 1 January 2024, 1 January 2025 and 31 December 2025		-
Carrying amount
At 31 December 2025		118,206
At 31 December 2024		121,868

 

Goodwill on consolidation arises on the excess of cost of acquisition over the fair value of the net assets acquired on purchase of a company.

Purchased goodwill arises on the excess of cost of acquisition over the fair value of the net assets acquired on the purchase of the trade and assets of a business by the Group.

Goodwill is not amortised but is reviewed for impairment on an annual basis or more frequently if there are any indications that goodwill may be impaired. Goodwill acquired in a business combination is allocated to groups of CGUs according to the level at which management monitors that goodwill. Goodwill is carried at cost less accumulated impairment losses.

The carrying value of goodwill is allocated to the following groups of CGUs:

	2025 £'000	2024 £'000
Maintenance (excluding Housing with Care)	65,670	69,332
Management	33,447	33,447
Housing with Care	19,089	19,089
	118,206	121,868

 

The Group's cash inflows are largely independent at the individual branch level and each branch is, therefore, considered a CGU. However, the goodwill of the Group contributes to the cash inflows of multiple CGUs. It is, therefore, allocated to groups of CGUs and monitored for internal management purposes primarily at the operating segment level. The goodwill of Housing with Care is separately monitored and, therefore, allocated to a separate group of CGUs to which it relates.

An asset is impaired if the carrying value exceeds the CGU's recoverable amount. At 30 September 2025, impairment reviews were performed by comparing the carrying value with the value in use for the groups of CGUs to which goodwill has been allocated.

The value in use for each group of CGUs is calculated from the Board-approved one-year budgeted cash flows and extrapolated cash flows for the next four years discounted at a post-tax discount rate over a five-year period with a terminal value. The impairment reviews incorporated a terminal growth assumption, which is conservative when compared with the UK long-term growth rate and the underlying demographics, which will be positive for the Group's core markets.

The estimated growth rates are based on knowledge of the relevant sector and market and represent management's base level expectations for future growth. Changes to revenue and direct costs are based on past experience and expectation of future changes within the markets of the CGUs. All CGUs have the same access to the Group's treasury function and borrowing arrangements to finance their operations.

Management considers that reasonably possible changes in these assumptions would not cause the carrying amount of a group of CGUs to exceed its recoverable amount.

The rates used were as follows:

	Post-tax discount rate	Pre-tax discount rate	Volume growth rate (years 1-3)	Volume growth rate (years 4-5)	Terminal growth  rate
Maintenance	9.35%	11.90%	5.00%	2.00%	2.00%
Management	9.35%	11.07%	2.00%	2.00%	2.00%
Housing with Care	9.35%	11.67%	3.00%	3.00%	2.00%

 

No indicators of impairment arose between 30 September 2025 and 31 December 2025 to indicate that the impairment assessment should be updated.

12. Other intangible assets

Accounting policy

In accordance with IFRS 3 (Revised) 'Business Combinations', an intangible asset acquired in a business combination is deemed to have a cost to the Group of its fair value at the acquisition date. The fair value of the intangible asset reflects market expectations about the probability that the future economic benefits embodied in the asset will flow to the Group. Where an intangible asset might be separable, but only together with a related tangible or intangible asset, the group of assets is recognised as a single asset separately from goodwill where the individual fair values of the assets in the group are not reliably measurable. Intangible assets are amortised over the useful economic lives of those assets.

Development costs incurred on software development are capitalised when all the following conditions are satisfied:

·      Completion of the software module is technically feasible so that it will be available for use.

·      The Group intends to complete the development of the module and use it.

·      The software will be used in generating probable future economic benefits.

·      There are adequate technical, financial and other resources to complete the development and to use the software.

·      The expenditure attributable to the software during its development can be measured reliably.

Development costs not meeting the criteria for capitalisation are expensed as incurred. Careful judgement by management is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each balance sheet date. In addition, all internal activities related to the research and development of new software are continually monitored by management.

The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce and prepare the asset to be capable of operating in the manner intended by management. Directly attributable costs include employee costs incurred on software development.

Amortisation commences upon completion of the asset and is shown within other administrative expenses. Until the asset is available for use on completion of the project, the assets are subject to impairment testing only. Development expenditure is amortised over the period expected to benefit.

The identifiable intangible assets and associated periods of amortisation are as follows:

Acquisition intangibles       - over the period expected to benefit, typically five to ten years

Development expenditure - over the useful life of the resulting software, typically five to ten years

Purchased software            -    20% p.a., straight line

The useful economic lives of intangible assets are reviewed annually and amended if appropriate.

	Acquisition intangibles			Development expenditure £'000	Purchased software £'000	Total intangibles £'000
	Customer relationships £'000	Brand £'000	Total acquisition intangibles £'000
Gross carrying amount
At 1 January 2024	4,890	-	4,890	18,394	2,722	26,006
Additions	-	-	-	1,204	238	1,442
Disposals	-	-	-	(1,443)	(344)	(1,787)
At 1 January 2025	4,890	-	4,890	18,155	2,616	25,661
Acquisition of subsidiary	4,701	972	5,673	-	-	5,673
Additions	-	-	-	1,638	64	1,702
Disposals	-	-	-	(12,798)	(919)	(13,717)
Assets classified as held for sale	(4,890)	-	(4,890)	-	-	(4,890)
At 31 December 2025	4,701	972	5,673	6,995	1,761	14,429
Amortisation
At 1 January 2024	2,730	-	2,730	14,449	1,781	18,960
Provided in the year	245	-	245	1,478	521	2,244
Eliminated on disposal	-	-	-	(1,443)	(344)	(1,787)
At 1 January 2025	2,975	-	2,975	14,484	1,958	19,417
Provided in the year	363	24	387	1,664	203	2,254
Eliminated on disposal	-	-	-	(12,798)	(919)	(13,717)
Assets classified as held for sale	(3,220)	-	(3,220)	-	-	(3,220)
At 31 December 2025	118	24	142	3,350	1,242	4,734
Carrying amount
At 31 December 2025	4,583	948	5,531	3,645	519	9,695
At 31 December 2024	1,915	-	1,915	3,671	658	6,244

 

Acquisition intangibles relate entirely to customer relationships recognised at fair value on historical acquisitions.

Development expenditure is an internally developed intangible asset and relates to the development of the Group's contract management system and decarbonisation assessment software. It is amortised over its useful economic life of either five or ten years, depending on the resulting software.

All amortisation is included within other administrative expenses.

13. Property, plant and equipment

Accounting policy

Items of property, plant and equipment are stated at historical cost, net of depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow into the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Consolidated Statement of Profit or Loss during the financial period in which they are incurred.

Freehold land is not depreciated. Depreciation on other assets is calculated to write down the cost less estimated residual value over their estimated useful economic lives. The rates generally applicable are:

Freehold buildings              - 2% p.a., straight line

Leasehold improvements - over the period of the lease or expected useful life of the improvements if shorter, straight line

Plant and machinery          - 33% p.a., straight line

Equipment                            - 25% p.a., straight line

Fixtures and fittings             - 50% p.a., straight line

Motor vehicles                      - 20% p.a., straight line

Residual values are reviewed annually and updated if appropriate. The carrying value is reviewed for impairment in the period if events or changes in circumstances indicate the carrying value may not be recoverable. An asset's carrying value is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within "Administrative expenses" in the Consolidated Statement of Profit or Loss.

Identifying whether there are indicators of impairment in respect of property, plant and equipment involves some judgement and a good understanding of the drivers of value behind the asset. At each reporting period an assessment is performed in order to determine whether there are any such indicators, which involves considering the performance at both a contract and business level, and any significant changes to the markets in which we operate. This is not considered to be a critical judgement or an area of significant uncertainty.

In order to manage a significant number of short-life assets, which can be individually difficult to track, the Group's policy is to eliminate low-cost assets once they are fully depreciated.

	Freehold property £'000	Leasehold improvements £'000	Plant and machinery £'000	Fixtures, fittings and equipment £'000	Motor vehicles £'000	Total £'000
Gross carrying amount
At 1 January 2024	24,788	26,744	183	15,398	559	67,672
Additions	26,413	703	15	2,680	78	29,889
Disposals	(115)	(24)	-	(1,587)	(20)	(1,746)
Eliminated on expiry of useful life	-	(16,437)	(94)	(6,573)	(437)	(23,541)
Disposals on sale and leaseback	(22,725)	-	-	-	-	(22,725)
At 1 January 2025	28,361	10,986	104	9,918	180	49,549
Additions	43,242	126	324	1,759	4	45,455
Acquired with subsidiary	-	-	-	201	93	294
Transfers between categories	-	-	1,064	(1,064)	-	-
Disposals	(284)	(1,025)	-	(1,220)	(143)	(2,672)
Eliminated on expiry of useful life	-	(3,382)	(226)	(1,685)	-	(5,293)
Assets classified as held for sale	-	-	(16)	(77)	(14)	(107)
Disposals on sale and leaseback	(25,490)	-	-	-	-	(25,490)
At 31 December 2025	45,829	6,705	1,250	7,832	120	61,736
Depreciation
At 1 January 2024	335	18,374	144	9,773	513	29,139
Provided in the year	789	3,788	24	2,158	24	6,783
Eliminated on disposal	(4)	(10)	-	(1,069)	(14)	(1,097)
Eliminated on expiry of useful life	-	(16,437)	(94)	(6,573)	(437)	(23,541)
Disposal on sale and leaseback	(571)	-	-	-	-	(571)
At 1 January 2025	549	5,715	74	4,289	86	10,713
Provided in the year	1,041	2,582	473	2,517	26	6,639
Transfers between categories	-	-	389	(389)	-	-
Eliminated on disposal	(14)	(615)	-	(823)	(67)	(1,519)
Eliminated on expiry of useful life	-	(3,382)	(226)	(1,685)	-	(5,293)
Assets classified as held for sale	-	-	(1)	(35)	(4)	(40)
Disposal on sale and leaseback	(683)	-	-	-	-	(683)
At 31 December 2025	893	4,300	709	3,874	41	9,817
Carrying amount
At 31 December 2025	44,936	2,405	541	3,958	79	51,919
At 31 December 2024	27,812	5,271	30	5,629	94	38,836

 

Sale and leaseback

On 22 December 2025, the Group entered into a sale and leaseback arrangement in respect of 199 residential properties with a carrying value of £24.8m that had previously been acquired on the open market. Further details of this transaction are provided in note 23.

14. Right of use assets

Accounting policy

Where an asset is subject to a lease, the Group recognises a right of use asset and a lease liability on the balance sheet. The right of use asset is measured at cost, which matches the initial measurement of the lease liability and any costs expected at the end of the lease, and then depreciated on a straight-line basis over the lease term.

The lease liability is measured at the present value of the future lease payments discounted using the Group's incremental borrowing rate. Lease payments include fixed payments, variable payments based on an index and payments arising from options reasonably certain to be exercised.

The Group has elected to account for short-term leases and leases of low value assets using the practical expedients. Instead of recognising a right of use asset and a lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.

In the Consolidated Balance Sheet, right of use assets and lease liabilities are presented separately.

Critical judgements in applying the Group's accounting policies

The Group holds a considerable number of leases across its portfolio of residential properties, offices and vehicles. Whilst the Group endeavours to standardise the form of leases, operational demands dictate that many leases have specific wording to address particular operational needs and also to manage the associated operational and financial risks. As such, each lease requires individual assessment and the Group is required to make key judgements which include:

·      •       the identification of a lease;

·      •       assessing the right to direct the use of the underlying asset; and

·      •       determining the lease term.

The most typical challenges encountered and which form the key judgements are:

·      •       where the lease contains a one-way no-fault break in Mears' favour, the Group measures the obligation based on the Group's best estimate of its future intentions;

·      •       where the Group does not in practice have the right to control the use of the asset and the key decision-making rights are retained by the supplier; and

·      •       where a wider agreement for a supply of services includes a lease component which meets the definition of a lease under IFRS 16.

Investment property

Included within right of use assets are certain properties classified as investment properties in accordance with IAS 40. These properties are leased primarily to earn rentals from sub-leasing. The Group has chosen to apply the cost model to all investment property and, therefore, measurement is in line with IFRS 16 as described above.

	Investment property	Assets that are used directly within the business			Total £'000
	Residential property £'000	Residential property £'000	Offices £'000	Motor vehicles £'000
Gross carrying amount
At 1 January 2024	151,564	190,257	10,384	44,674	396,879
Additions*	12,683	70,557	1,811	10,695	95,746
Sale and leaseback	-	11,257	-	-	11,257
Disposals	(1,369)	(37,759)	(1,885)	(11,606)	(52,619)
At 1 January 2025	162,878	234,312	10,310	43,763	451,263
Additions*	3,595	66,601	1,843	11,327	83,366
Acquired with subsidiary	-	-	182	-	182
Sale and leaseback	-	10,623	-	-	10,623
Disposals	(354)	(23,203)	(1,204)	(5,112)	(29,873)
Assets classified as held for sale	-	-	(515)	-	(515)
At 31 December 2025	166,119	288,333	10,616	49,978	515,046
Depreciation
At 1 January 2024	46,385	88,535	6,387	21,923	163,230
Provided in the year	8,967	42,604	1,673	9,005	62,249
Impairments	633	-	-	-	633
Eliminated on disposals	(1,298)	(32,782)	(1,885)	(11,055)	(47,020)
At 1 January 2025	54,687	98,357	6,175	19,873	179,092
Provided in the year	9,548	50,685	1,787	9,780	71,800
Impairments	856	-	-	-	856
Eliminated on disposals	(354)	(19,166)	(1,204)	(4,943)	(25,667)
Assets classified as held for sale	-	-	(343)	-	(343)
At 31 December 2025	64,737	129,876	6,415	24,710	225,738
Carrying amount
At 31 December 2025	101,382	158,457	4,201	25,268	289,308
At 31 December 2024	108,191	135,955	4,135	23,890	272,171

*     Additions includes both new underlying assets and remeasurement of the right of use asset for changes in the lease terms.

 

During the year, the Group entered into a sale and leaseback arrangement in respect of 199 residential properties. Further details of this transaction can be found in note 23.

Investment property included above represents properties held by the Group primarily to earn rentals, rather than for use in the Group's other activities. The amount included in lease income in note 2 in respect of these properties is £22.0m (2024: £25.5m). Direct operating expenses of £19.6m (2024: £22.2m), excluding impairments, arose from investment property that generated rental income during the year. The carrying value of the right of use asset in respect of investment property is considered to be approximately equal to its fair value.

Impairment

The Group recognised an impairment loss of £0.9m (2024: £0.6m) in respect of certain right of use assets classified as investment property. These property portfolios are held to collect rent income, either directly from tenants or from Local Authorities. While trading in respect of these properties remained broadly in line with expectations during 2025, the Group's impairment assessments at 31 December 2025 resulted in an additional impairment.

In carrying out impairment assessments, management prepared detailed cash flow forecasts for the lives of the underlying leases on these properties and discounted them using an appropriate rate, in order to estimate the value in use. The range of discount rates used in these calculations was from 6.70% to 7.25%.

The impact of the impairments on the Consolidated Statement of Profit or Loss has been recognised within cost of sales.

15. Investments

Accounting policy

Investments include those over which the Group has significant influence but which it does not control. These are categorised as associates. It is presumed that the Group has significant influence where it has between 20% and 50% of the voting rights in the investee unless indicated otherwise. The Group also holds investments in joint ventures where the Group and other parties have joint control over their activities.

The basis by which associates and joint ventures are consolidated in the Group financial statements is through the equity method, as outlined in the basis of consolidation.

In addition to associates and joint ventures, the Group holds investments in entities over which it does not exert significant influence. These are accounted for at fair value through profit or loss.

	Associates £'000	Other investments £'000	Total £'000
At 1 January 2024	557	65	622
Share of profit	1,014	-	1,014
Increase in fair value	-	785	785
Distributions received	(147)	-	(147)
At 1 January 2025	1,424	850	2,274
Share of profit	12	-	12
Increase in fair value	-	1,500	1,500
At 31 December 2025	1,436	2,350	3,786

 

Other investments represents the Group's 6.16% holding in Mason Topco Limited, which is mandatorily held at fair value through profit or loss. During the year, management reassessed the fair value of this holding, increasing it by £1.5m (2024: £0.8m). This increase in fair value was recognised in administrative expenses in the Consolidated Statement of Profit or Loss.

Mason Topco Limited is an unquoted holding company that owns Terraquest Solutions Limited, following the disposal of that business by the Group in 2020. The fair value was assessed based on the latest available financial information in respect of the business, as well as several assumptions, including an estimate of the price/earnings (P/E) ratio that might be achieved, based on the original transaction (7.7x) and reflecting a suitable discount for lack of control and marketability (45%).

If the P/E ratio had been higher by 1.0x, the fair value would have been £0.7m higher. If the discount for lack of control and marketability had been 20 percentage points lower, the fair value would have been £0.8m higher.

Subsidiaries

The subsidiary undertakings within the Group at 31 December 2025 are detailed within note 15 of the Annual Report and Accounts 2025. All subsidiary undertakings prepare financial statements to 31 December.

16. Inventories

Accounting policy

Inventories are stated at the lower of cost and net realisable value. Cost is the actual purchase price of materials calculated on a first-in, first-out basis.

	2025 £'000	2024 £'000
Materials and consumables	824	1,173

 

The Group consumed inventories totalling £79.9m during the year (2024: £81.8m). No items are being carried at fair value less costs to sell (2024: £nil).

 

17. Trade and other receivables

Accounting policy

Trade receivables represents amounts due from customers in respect of invoices raised. They are initially measured at their transaction price and subsequently remeasured at amortised cost less loss allowance.

etention assets represents amounts held by customers for a period following payment of invoices, to cover any potential defects in the work. Retention assets are included in trade receivables and are, therefore, initially measured at their transaction price.

Contract assets represents revenue recognised in excess of the total of payments on account and amounts invoiced.

Critical judgements and key sources of estimation uncertainty

The estimation techniques used for revenue in respect of contracting require judgements to be made about the stage of completion of certain contracts and the recovery of contract assets. Each contract is treated on its merits and subject to a regular review of the revenue and costs to complete that contract. Contract assets represent revenue recognised in excess of the total of payments on account and amounts invoiced.

However, due to the estimation uncertainty across numerous contracts, each with different characteristics, it is not practical to provide a quantitative analysis of the aggregated judgements that are applied, and management does not believe that disclosing a potential range of outcomes on a consolidated basis would provide meaningful information to a reader of the financial statements.

	2025 £'000	2024 £'000
Current assets
Trade receivables	23,921	20,940
Contract assets	98,692	84,335
Contract fulfilment costs	-	148
Prepayments and accrued income	26,104	24,468
Other debtors	6,317	3,314
Total trade and other receivables	155,034	133,205

 

Included in trade receivables is £3.6m (2024: £2.7m) in respect of retention payments due in more than one year.

Trade receivables are normally due within 30 to 60 days and do not bear any effective interest rate. All trade receivables and accrued income are subject to credit risk exposure.

The maximum exposure to credit risk in relation to trade receivables and accrued income at the balance sheet date is the fair value of trade receivables and accrued income. The Group's customers are primarily a mix of Local and Central Government and Housing Associations where credit risk is minimal. The Group's customer base is large and unrelated and, accordingly, the Group does not have a significant concentration of credit risk with any one counterparty.

The amounts presented in the balance sheet in relation to the Group's trade receivables and accrued income balances are presented net of loss allowances. The Group measures loss allowances at an amount equal to lifetime expected credit losses using both quantitative and qualitative information and analysis based on the Group's historical experience.

The ageing analysis of trade receivables is as follows:

	2025			2024
	Gross amount due £'000	Expected credit loss £'000	Carrying value £'000	Gross amount due £'000	Expected credit loss £'000	Carrying value £'000
Not past due	20,398	(171)	20,227	18,378	(181)	18,197
Less than three months past due	4,103	(547)	3,556	3,032	(637)	2,395
More than three months past due	2,254	(2,116)	138	1,979	(1,631)	348
Total trade receivables	26,755	(2,834)	23,921	23,389	(2,449)	20,940

 

Expected credit losses relate to individual tenant customers and are calculated based on the Group's historical experience of default by applying a percentage based on the age of the customer's balance. Any remaining uncollected debt is written off once the tenant has left the property and a significant period of time has elapsed, at which point the likelihood of recovery is negligible.

Expected credit losses in respect of the majority of the Group's customers are rare, as Housing Associations, Local Authorities and Central Government do not typically default on debts. Where exceptional circumstances require an expected credit loss provision in respect of these customer types, they are assessed individually based on all the relevant facts.

The movement in expected credit loss during the year is shown below:

	2025 £'000	2024 £'000
At 1 January	2,449	1,722
Changes in amounts provided	403	727
Amounts utilised	(18)	-
At 31 December	2.834	2,449

 

No expected credit loss is typically required in respect of contract assets as they relate entirely to Housing Associations, Local Authorities and Central Government customers, which do not typically default on debts. The movement in contract assets during the year is shown below:

	2025 £'000	2024 £'000
At 1 January	84,335	79,703
Recognised on completion of performance obligations	1,094,537	1,093,075
Invoiced during the year	(1,080,180)	(1,088,443)
At 31 December	98,692	84,335

 

Included in contract assets is a balance of £23.9m recognised in respect of a single Maintenance contract, elements of which are subject to a dispute. The Directors have referred this dispute to an adjudication and may seek other routes of legal recourse in due course. The Group has taken legal advice and engaged an independent expert with quantity surveying proficiency. The carrying value reflects the Directors' best estimate of the likely outcome. The Directors recognise that there is litigation risk associated with any claim. Based on the information available to the Directors, a range of possible outcomes is considered to be +/- £2.0m above and below this net balance. The uncertainty is expected to be resolved within the next financial year, and the final settlement could result in a recovery which is either greater than or less than the net contract asset recognised at 31 December 2025.

18. Trade and other payables

	2025 £'000	2024 (restated) £'000
Trade payables	58,688	51,723
Accruals	51,649	48,355
Social security and other taxes	26,458	27,734
Contract liabilities	22,209	20,835
Repayments due to customers	23,516	41,141
Other creditors	2,529	2,490
	185,049	192,278

 

During the year, the Financial Reporting Council's (FRC) Corporate Reporting Review Team reviewed the Group's financial statements for the year ended 31 December 2024. The FRC sought clarification on the treatment of amounts due to customers under gainshare arrangements as contract liabilities. This review resulted in the Group restating the comparatives in the table above to reflect gainshare and other repayments due to customers in a new line separately from contract liabilities. The FRC has subsequently closed its review.

Due to the short duration of trade payables, management considers the carrying amounts recognised in the Consolidated Balance Sheet to be a reasonable approximation of their fair value.

The movement in contract liabilities during the year is shown below:

	2025 £'000	2024 (restated) £'000
At 1 January	20,835	17,260
Revenue recognised in respect of contract liabilities	(19,108)	(13,936)
Payments received in advance of performance obligations being completed	20,482	17,511
At 31 December	22,209	20,835

 

Contract liabilities relate to payments received from the customer on the contract, and/or amounts invoiced to the customer in advance of the Group performing its obligations on contracts. These amounts are expected to be recognised within revenue within one year of the balance sheet date.

19. Lease liabilities

Lease liabilities are separately presented on the face of the Consolidated Balance Sheet as shown below:

	2025 £'000	2024 £'000
Current	80,652	66,861
Non-current	238,069	230,641
	318,721	297,502

 

The Group had not committed to any leases which had not commenced at 31 December 2025. The majority of the Group's property leases contain variable lease payments that vary annually either by reference to an index, such as the Consumer Prices Index (CPI), or based on market conditions each year. The potential impact of this variation depends on future events and, therefore, cannot be quantified, but the Group would typically expect commensurate adjustments to income derived from these properties.

A smaller number of property leases contain termination or extension options. Management has assessed whether it is reasonably certain that the extension or termination options will be exercised, which is then reflected in the valuation.

The Group has elected not to recognise a lease liability for short-term leases and leases of low value. Payments made under such leases are expensed on a straight-line basis. Certain leases incorporate variable lease payments that are not included in the measurement of lease liabilities in accordance with IFRS 16. The expense relating to payments not included in the measurement of the lease liability is as follows:

	2025 £'000	2024 £'000
Short-term leases	68,623	64,678
Low value leases	503	850
Variable lease payments	737	859

 

The portfolio of short-term leases to which the Group is committed at the end of the reporting period is not dissimilar to the portfolio to which the above disclosure relates.

Other disclosures relating to lease liabilities are provided in the table below:

	Note	2025 £'000	2024 £'000
Depreciation of right of use assets	14	71,800	62,249
Impairment of right of use assets	14	856	633
Additions to right of use assets arising from new leases or modifications	14	83,366	95,746
Additions to right of use assets arising from sale and leaseback	14	10,623	11,257
Carrying value of right of use assets at the year end	14	289,308	272,171
Interest on lease liabilities during the year	5	14,851	12,698
Total cash outflow in respect of leases during the year	27	83,198	70,605

 

20. Provisions

Critical judgements and key sources of estimation uncertainty

By definition, provisions require estimates to be made of future outcomes and the eventual outflow may differ significantly from the amount recognised at the end of the year. Management has estimated provisions based on all relevant information available to it. For individually material provisions further information has been provided on the maximum likely outflow, in addition to the best estimate.

The carrying value of each class of provisions is shown below:

	2025			2024
	Current £'000	Non-current £'000	Total £'000	Current £'000	Non-current £'000	Total £'000
Onerous contract provisions	1,156	7,800	8,956	794	7,408	8,202
Property provisions	1,283	993	2,276	849	993	1,842
Insurance provisions	2,334	1,949	4,283	2,774	1,364	4,138
Legal and other provisions	1,250	-	1,250	6,400	-	6,400
Total provisions	6,023	10,742	16,765	10,817	9,765	20,582

 

A summary of the movement in provisions during the year is shown below:

	Onerous contract provisions £'000	Property provisions £'000	Insurance provisions £'000	Legal and other provisions £'000	Total £'000
At 1 January 2025	8,202	1,842	4,138	6,400	20,582
Provided during the year	1,649	524	1,933	2,525	6,631
Utilised during the year	(535)	-	(1,788)	(7,175)	(9,498)
Unused amounts reversed	(360)	(90)	-	(500)	(950)
At 31 December 2025	8,956	2,276	4,283	1,250	16,765

 

 

Onerous contract provisions

The Group has identified two contracts, one expiring during 2026, the other with a remaining term of 31 years, under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefit expected to be received under it. These unavoidable costs are the lower of the cost of fulfilling the contract and any compensation or penalties of exiting from the contract.

The largest component within onerous contract provisions is £8.2m (2024: £6.8m) relating to a single Community Housing contract which is reported within the Management segment. The remaining balance of £0.8m (2024: £1.4m) relates to the Maintenance segment.

In identifying the excess of costs over expected economic benefits, the Group has prepared cash flow forecasts for the lifetime of each contract, based on management's best estimates. For the contract where the time value of money is material, these cash flow forecasts have then been discounted using an appropriate discount rate.

Recognising that by their nature there is variability in future-looking cash flow forecasts, the cash flows for the Community Housing contract have incorporated an appropriate risk factor, before discounting at the relevant risk-free rate for the maturity profile. The discount rate used was a real rate, in line with the cash flows modelled, and was set at 2.55% at 31 December 2025.

If the discount rate used was 0.5 percentage points higher, the onerous contract provision would have been £0.5m lower.

The provisions recognised are also sensitive to the underlying cash flow forecasts. If the anticipated annual net cash outflow, ranging from £0.4m to £0.8m across the different contracts and forecast years, was 10% lower, the onerous contract provision would have been £0.9m lower.

Property provisions

Property provisions represent the expected costs of reinstating several office properties to their original condition upon termination of the lease.

Insurance provisions

The Group self-insures certain fleet and liability risks. Provisions for claims are recognised in respect of both claims received but not concluded, which are expected to be settled within one year, and claims incurred but not received, which are treated as non-current. The value of these provisions is estimated based on past experience of claims.

Legal and other provisions

Legal and other provisions relate to previously completed customer contracts where management is aware of probable liabilities and future losses associated with work defects or other commercial disputes. The balance reduced significantly in the period, with the settlement of the two highest value claims. Of these two claims, one settled with a shortfall compared to the opening provision, and the second settled below the opening provision. In aggregate, these two claims carried a provision at 31 December 2024 of £5.7m and settled at a combined cost of £7.2m, with the net shortfall of £1.5m being charged to the income statement in the period.

                                                                   

 

21. Acquisition

On 14 September 2025, the Group acquired 100% of the issued share capital of Pennington Choices Group Limited, a provider of building compliance services. This acquisition has enhanced the Group's ability to deliver compliance services to its key customer groups, which remains a key pillar of the Group's strategy.

 

The purchase consideration was £9.5m plus £0.3m for excess working capital, comprised entirely of cash on completion. The fair value of assets and liabilities recognised as a result of the acquisition were as follows:

 

 

 

	£'000
Intangible assets	5,673
Property, plant and equipment	294
Right of use assets	182
Trade and other receivables	3,147
Bank and cash	897
Trade and other payables	(1,867)
Lease liabilities	(182)
Deferred tax	(1,475)
Net identifiable assets acquired	6,669
Goodwill	3,117
Net assets acquired	9,786

 

The goodwill is attributable to the workforce and the expected synergies from combining the operations of the acquired business with those of the existing Group. It will not be deductible for tax purposes.

 

The gross contractual amount and fair value of trade and other receivables is £3.1m. The customers of the acquired business are largely Local Authorities and Housing Associations with very limited risk of default.

 

The acquired business contributed revenues of £4.6m and net profit of £0.1m for the period from 14 September to 31 December 2025. If the acquisition had occurred on 1 January 2025, consolidated revenue and profit for the year ended 31 December 2025 would have been £1,147.2m and £45.9m respectively.

 

	£'000
Cash consideration	9,786
Cash acquired	(897)
Net outflow of cash - investing activities	8,889

 

Acquisition-related costs of £0.1m are included in administrative expenses in the Statement of Profit or Loss and in operating cash flows in the Consolidated Cash Flow Statement.

 

22. Disposal group held for sale

During the year, management identified that one of its subsidiaries, Morrison Facilities Services Limited ('MFS'), had met the criteria to be treated as held for sale. MFS is a provider of facilities management services with a focus on the education and healthcare sectors and has historically been reported within the Maintenance segment.

 

A competitive sales process was commenced to identify whether a buyer could be found for MFS at a suitable price. Towards the end of 2025, the Group entered into an exclusivity agreement with a potential buyer to sell MFS for £18.0m on a debt- and cash-free basis with a normal level of working capital. MFS was therefore considered as held for sale at the year end.

 

The sale completed on 2 March 2026 on the basis set out above. A breakdown of the assets and liabilities of the disposal group held for sale at 31 December 2025 is set out below:	£'000
Goodwill	6,779
Intangible assets	1,670
Property, plant and equipment	67
Right of use assets	172
Pension assets	585
Inventories	87
Trade and other receivables	5,688
Bank and cash	3,328
Assets classified as held for sale	18,376
Trade and other payables	(8,476)
Lease liabilities	(171)
Current tax liabilities	(228)
Deferred tax liabilities	(270)
Liabilities associated with assets classified as held for sale	(9,145)
Net assets held for sale	9,231

 

 

MFS does not represent a separate major line of business or geographical area of operations for the Group and it has therefore not been classified as a discontinued operation.

 

The assets and liabilities included above are separately identifiable as belonging to the disposal group, with the exception of goodwill, which is an appropriate proportion of the goodwill allocated to the Maintenance group of CGUs. This proportion has been determined by comparing the estimated fair value of the group of CGUs including the disposal group and excluding the disposal group.

 

23. Sale and leaseback

On 22 December 2025, the Group entered into a sale and leaseback arrangement in respect of 199 residential properties with a carrying value of £24.8m. The transaction was effected via the disposal of Mears Property Company 3 Limited, the subsidiary entity that had previously purchased the properties on the open market. Immediately following the disposal, a long-term lease was put in place allowing the Group to continue to use the properties.

 

The Group received cash of £18.1m, as well as a loan note from the buyer for £6.5m as detailed in note 24. Additionally, the Group acquired a 25% holding in MPC 3 Holdco Limited, the buyer of Mears Property Company 3 Limited. The disposed entity held no cash or cash equivalents.

 

The carrying value of the assets in the disposed entity is matched by its debt, so it had £nil net assets at the point of the transaction. As such, the carrying value of the Group's investment in the entity measured using the equity method was £nil at both 22 December 2025 and 31 December 2025.

 

24. Financial instruments

Accounting policy

The Group uses a limited number of financial instruments comprising cash and liquid resources, borrowings and various items such as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to finance the Group's operations. The Group seeks to finance its operations through a combination of retained earnings and borrowings and investing surplus cash on deposit. The Group uses financial instruments to manage the interest rate risks arising from its operations and sources of finance but has no interest in the trade of financial instruments.

Financial assets and liabilities are recognised in the Consolidated Balance Sheet when the Group becomes party to the contractual provisions of the instrument. The principal financial assets and liabilities of the Group are as follows:

Financial assets

Investments in unlisted equities that do not convey control or significant influence over the underlying entity are recognised at fair value. They are subsequently remeasured at fair value with any changes being recognised in the Consolidated Statement of Profit or Loss.                                                      

Loan notes and other non-current debtors are held by the Group in order to collect the associated cash flows and not for trading. They are, therefore, initially recognised at fair value and subsequently measured at amortised cost, less any provision for impairment.

Financial assets generated from goods or services transferred to customers are presented as either trade receivables or contract assets. All of the Group's trade receivables are short term in nature, with payments typically due within 60 days of the works being performed. The Group's contracts with its customers, therefore, contain no significant financing component.

Mears recognises a loss allowance for expected credit losses on financial assets subsequently measured at amortised cost using the "simplified approach". Individually significant balances are reviewed separately for impairment based on the credit terms agreed with the customer. Other balances are grouped into credit risk categories and reviewed in aggregate.

Trade receivables and cash at bank and in hand are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables are initially recorded at fair value net of transaction costs, being invoiced value less any provisional estimate for impairment should this be necessary due to a loss event. Trade receivables are subsequently remeasured at invoiced value, less an updated provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the Consolidated Statement of Profit or Loss.

Cash and cash equivalents include cash at bank and in hand and bank deposits available at short notice that are subject to an insignificant risk of changes in value. The Group also considers its revolving credit facility to be an integral part of its cash management, although this facility was not drawn at 31 December 2024 or 2025.

Following initial recognition, financial assets are subsequently remeasured at amortised cost using the effective interest rate method.

Financial liabilities

The Group's financial liabilities are trade payables, lease liabilities and other creditors. They are included in the Consolidated Balance Sheet line items "Trade and other payables" and "Lease liabilities".

Bank and other borrowings are initially recognised at fair value net of transaction costs. Gains and losses arising on the repurchase, settlement or cancellation of liabilities are recognised respectively in "Finance income" and "Finance costs". Borrowing costs are recognised as an expense in the period in which they are incurred.

Trade payables on normal terms are not interest bearing and are stated at their fair value on initial recognition and subsequently at amortised cost.

Categories of financial instruments

	2025 £'000	2024 (restated*) £'000
Non-current assets
Fair value (level 3)
Investments - other investments	2,350	850
Amortised cost
Loan notes and other non-current receivables	20,196	10,195
Current assets
Amortised cost
Trade receivables	23,921	20,940
Other debtors	6,317	3,314
Cash and cash equivalents	48,479	91,404
	78,717	115,658
Non-current liabilities
Amortised cost
Lease liabilities	(238,069)	(230,641)
Current liabilities
Amortised cost
Trade payables	(58,688)	(51,723)
Lease liabilities	(80,652)	(66,861)
Repayments due to customers	(23,516)	(41,141)
Other creditors	(2,529)	(2,490)
	(165,385)	(162,215)
	(302,191)	(266,153)

* The comparative figures have been restated to reflect repayments due to customers, as detailed in note 18.

The amount recognised as an allowance for expected credit losses on trade receivables during 2025 was £0.4m (2024: £0.7m).

The IFRS 13 hierarchy level categorisation relates to the extent the fair value can be determined by reference to comparable market values. The classifications range from level 1, where instruments are quoted on an active market, through to level 3, where the assumptions used to arrive at fair value do not have comparable market data.

The fair values of investments in unlisted equity instruments are determined by reference to an assessment of the fair value of the entity to which they relate. This is typically based on a multiple of earnings of the underlying business.

There have been no transfers between levels during the year.

Fair value information

The fair value of the Group's financial assets and liabilities approximates to the book value as disclosed above.

Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including interest rate risk and price risk); credit risk; and liquidity risk. The main risks faced by the Group relate to the availability of funds to meet business needs and the risk of credit default by customers. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out under policies and guidelines approved by the Board of Directors.

Borrowing facilities

The Group's borrowing facilities are drawn on as required to manage its cash needs. Banking facilities are reviewed regularly and extended and replaced in advance of their expiry.

The Group has a revolving credit facility of £70.0m with Barclays Bank PLC and HSBC Bank PLC. In order to assist with short-term day-to-day treasury requirements, this facility includes an overdraft carve-out with Barclays Bank PLC of £10m.

The Group pays a margin over and above SONIA on bank borrowings when it uses its facility. The margin is based on the ratio of Group consolidated net borrowings to Group consolidated adjusted EBITDA and could have varied between 1.45% and 2.75% during the year.

During the year, the Group agreed an extension to its existing borrowing facilities that were originally due to mature in December 2026. As part of this extension, the banking consortium was reduced from three banks to two, resulting in Citi departing. The extension was agreed at a lower margin range (1.45%-2.45% compared with 1.75%-2.75%) but with the same available amount. The facility now expires in December 2029.

Details of the Group's banking covenants are provided within the Finance Review section of this preliminary announcement.

Interest rate risk management

The Group finances its operations through a mixture of retained profits and bank borrowings from major banking institutions at floating rates of interest based on SONIA.

The Group's policy is to accept a degree of interest rate risk, provided the effects of the various potential changes in rates remain within certain prescribed parameters.

At 31 December 2025, the Group had minimal exposure to interest rate risk relating to borrowing costs.

Liquidity risk management

The Group seeks to manage liquidity risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably.

Management monitors rolling forecasts of the Group's liquidity reserve (comprising undrawn borrowing facilities and cash and cash equivalents) on the basis of expected cash flows. This is carried out centrally for the Group as a whole in accordance with internal practice and limits.

The quantum of committed borrowing facilities of the Group is regularly reviewed and is designed to exceed forecast peak gross debt levels. For short-term working capital purposes, the Group utilises bank overdrafts as required. These facilities are regularly reviewed and are renegotiated ahead of their expiry date.

The table below shows the undiscounted maturity profile of the Group's financial liabilities:

	Within 1 year £'000	1-2 years £'000	2-5 years £'000	Over 5 years £'000	Total £'000
2025
Non-derivative financial liabilities
Trade payables	58,688	-	-	-	58,688
Lease liabilities	84,901	70,537	118,603	96,209	370,250
Repayments due to customers	23,516	-	-	-	23,516
Other creditors	2,529	-	-	-	2,529
2024
Non-derivative financial liabilities
Trade payables	51,723	-	-	-	51,723
Lease liabilities	70,229	61,906	109,019	104,224	345,378
Repayments due to customers	41,141	-	-	-	41,141
Other creditors	2,490	-	-	-	2,490

 

Credit risk management

The Group's credit risk is primarily attributable to its trade receivables, contract assets and work in progress.

Trade receivables are normally due within 30 to 60 days. Trade and other receivables included in the Consolidated Balance Sheet are stated net of an expected credit loss provision which has been estimated by management following a review of individual receivable accounts. There is no Group-wide rate of provision, and provision made for debts that are overdue is based on prior default experience and known factors at the balance sheet date. Receivables are written off against the expected credit loss provision when management considers that the debt is no longer recoverable.

Housing customers are typically Local and Central Government and Housing Associations. The nature of these customers means that credit risk is minimal. Other trade receivables contain no specific concentration of credit risk as the amounts recognised represent a large number of receivables from various customers.

The Group continually monitors the position of major customers and incorporates this information into its credit risk controls. External credit ratings are obtained where appropriate.

Details of the ageing of trade receivables are shown in note 17.

Loan notes receivable

Loan notes with a carrying value of £5.1m (2024: £4.7m) were received as part of the disposal of the Terraquest Group. They are repayable in December 2028 and accrue interest at 10% per annum.

Loan notes with a carrying value of £5.2m (2024: £5.3m) were received as part of the sale and leaseback transaction completed in 2024. Interest is payable monthly at 5% per annum. They are repayable in 2039 or on the event of a further sale of the properties by the buyer.

During the year, the Group entered into a sale and leaseback transaction as detailed in note 23. As part of this transaction, the Group received loan notes with a carrying value of £6.5m. Interest accrues monthly at 4% per annum on the balance outstanding and the loan notes are repayable in 2039 or on the event of a further sale of the properties by the buyer.

During the year, the Group provided a loan of £3.2m to MPC 3 Holdco Limited, an associate. The loan was utilised to fund the acquisition by MPC 3 Holdco Limited of a portfolio of properties that were being leased by the Group from a third party. The Group's lease arrangement was unchanged as a result of this transaction. Interest accrues monthly at 10% per annum on the balance outstanding and the loan notes are repayable in 2039 or on the event of a further sale of the properties by the buyer.

All loan notes are presented in non-current assets.

Capital management

The Group's objectives when managing capital are:

·      •       to safeguard the Group's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders;

·      •       to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk; and

·      •       to maintain an optimal capital structure to reduce the cost of capital.

The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors its equity and net cash (or debt) as capital. The year-end total of equity is that indicated in the Consolidated Balance Sheet and the net cash position is detailed in note 27.

25. Deferred taxation

Deferred tax is calculated on temporary differences under the liability method. Deferred tax relates to the following:

	Pension scheme £'000	Share-  based payments £'000	Leases £'000	Tax losses £'000	Capital allowances £'000	Acquisition intangibles £'000	Fair value adjustments £'000	Other £'000	Total £'000
At 1 January 2024	(4,799)	698	569	-	1,295	(540)	(128)	-	(2,905)
(Debit)/credit to Consolidated Income Statement	(319)	466	(56)	274	(872)	61	14	200	(232)
Credit to Consolidated Statement of Changes in Equity	-	156	-	-	-	-	-	-	156
Debit to Consolidated Statement of Comprehensive Income	(537)	-	-	-	-	-	-	-	(537)
At 31 December 2024	(5,655)	1,320	513	274	423	(479)	(114)	200	(3,518)
(Debit)/credit to Consolidated Income Statement	(390)	258	(57)	-	(20)	96	(543)	(67)	(723)
Debit to Consolidated Statement of Changes in Equity	-	(163)	-	-	-	-	-	-	(163)
Credit to Consolidated Statement of Comprehensive Income	3	-	-	-	-	-	-	-	3
Transfer to assets held for sale	146	-	-	-	(293)	417	-	-	270
Resulting from business combinations	-	-	-	-	(57)	(1,418)	-	-	(1,475)
At 31 December 2025	(5,896)	1,415	456	274	53	(1,384)	(657)	133	(5,606)

 

In accordance with IFRS 2 'Share-based Payment', the Group has recognised an expense for the consumption of employee services received as consideration for share options granted. A tax deduction will not arise until the options are exercised. The tax deduction in future periods is dependent on the Company's share price at the date of exercise. The estimated future tax deduction is based on the options' intrinsic value at the balance sheet date.

The cumulative amount credited to the Consolidated Statement of Profit or Loss is limited to the tax effect of the associated cumulative share-based payment expense. The excess has been credited directly to equity. This is presented in the Consolidated Statement of Comprehensive Income.

There are no unused tax losses that have not been recognised for the purposes of deferred tax.

Intangible assets acquired as part of a business combination are capitalised at fair value at the date of the acquisition and amortised over their useful economic lives. The UK tax regime calculates tax using the individual financial statements of the members of the Group and not the consolidated financial statements. Hence, the tax base of acquisition intangible assets arising on consolidation is £nil. The estimated tax effect of this £nil tax base is accounted for as a deferred tax liability which is released over the period of amortisation of the associated acquisition intangible asset.

It is expected that £0.2m of the net deferred tax liability will be settled within 12 months, with the remaining £5.4m being settled after 12 months.

26. Share capital and reserves

Classes of reserves

Share capital represents the nominal value of shares that have been issued. Mears Group PLC does not have a limited amount of authorised shares.

Share premium represents the difference between the nominal value of shares issued and the total consideration received.

The capital redemption reserve represents the nominal value of shares previously issued that have since been repurchased and cancelled by the Group.

Treasury shares are equity instruments of the Group that have been reacquired. They are recognised at cost and deducted from equity as a separate reserve.

The share-based payment reserve represents employee remuneration which is credited to the share-based payment reserve until the related share options are exercised or otherwise extinguished. Upon exercise or derecognition of the option, the share-based payment reserve is transferred to retained earnings.

The merger reserve relates to the difference between the nominal value and total consideration in respect of acquisitions, where the Company was entitled to the merger relief offered by the Companies Act 2006.

Share capital and premium

	2025 £'000	2024   £'000
Allotted, called up and fully paid
At 1 January: 90,764,444 (2024: 101,551,082) ordinary shares of 1p each	3,489	3,348
Issue of 30,003 (2024: 153,880) shares on exercise of share options	60	251
Cancellation of 4,319,819 (2024: 10,940,518) shares following share buybacks	(43)	(110)
At 31 December: 86,474,628 (2024: 90,764,444) ordinary shares of 1p each	3,506	3,489

 

During the year 30,003 (2024: 153,880) ordinary 1p shares were issued in respect of share options exercised.

Capital redemption reserve

	2025 £'000	2024 (restated) £'000
At 1 January: 23,103,356 (2024: 12,162,838) ordinary shares of 1p each	231	121
Cancellation of 4,319,819 (2024: 10,940,518) shares following share buybacks	43	110
At 31 December: 27,423,175 (2024: 23,103,356) ordinary shares of 1p each	274	231

 

During the year, 4,319,819 (2024: 10,940,518) shares were repurchased by the Group and cancelled at a cost of £16.2m (2024: £40.3m).

In the financial statements for the year ended 31 December 2024, the cumulative total nominal value of shares repurchased and cancelled was credited to retained earnings. Following a review, the cumulative total nominal value of shares repurchased is now presented as a capital redemption reserve.

 

Treasury shares

	Thousands	£'000
At 1 January 2025	4,461	14,985
Acquired during the year	400	1,619
Disposed of during the year	(150)	(552)
Distributed to satisfy the exercise of share options during the year	(644)	(2,155)
At 31 December 2025	4,067	13,897

 

27. Notes to the Consolidated Cash Flow Statement

The following non-operating cash flow adjustments have been made to the profit for the year before tax:

	2025 £'000	2024 £'000
Depreciation	78,439	69,032
Impairment of right of use assets	856	633
Loss on disposal of assets	710	358
Loss on sale and leaseback transaction	122	283
Amortisation	2,254	2,244
Share-based payments	2,286	2,622
IAS 19 pension movement	(200)	(544)
Movement in fair value of investments	(1,500)	(785)
Share of profits of associates	(12)	(1,014)
Finance income	(4,526)	(5,367)
Finance cost	16,078	13,785
Total	94,507	81,247

 

Movements in financing liabilities during the year are as follows:

	Revolving credit facility £'000	Lease liabilities £'000	Total £'000
At 1 January 2024	-	254,440	254,440
Inception of new leases*	-	95,746	95,746
Sale and leaseback	-	10,971	10,971
Termination of leases	-	(5,748)	(5,748)
Interest	440	12,698	13,138
Arrangement fees	31	-	31
Cash outflows including in respect of capital and interest	(471)	(70,605)	(71,076)
At 1 January 2025	-	297,502	297,502
Inception of new leases*	-	83,366	83,366
Liabilities acquired with subsidiary	-	182	182
Sale and leaseback	-	10,533	10,533
Termination of leases	-	(4,344)	(4,344)
Liabilities directly related to assets classified as held for sale	-	(171)	(171)
Interest	438	14,851	15,289
Arrangement fees	27	-	27
Cash outflows including in respect of capital and interest	(465)	(83,198)	(83,663)
At 31 December 2025	-	318,721	318,721

*     Including modifications to existing leases resulting in a change in lease liabilities.

 

Cash outflows in respect of lease liabilities include £14.9m (2024: £12.7m) in respect of interest paid and £68.3m (2024: £57.9m) in respect of discharge of the underlying lease liabilities.

For the purpose of the Consolidated Cash Flow Statement, cash and cash equivalents comprise the following at 31 December:

	2025 £'000	2024 £'000
Bank and cash	43,479	85,404
Readily available deposits	5,000	6,000
Bank and cash attributable to assets held for sale	3,328	-
	51,807	91,404

 

 

28. Pensions

Accounting policy

The Group operates both defined benefit and defined contribution pension schemes as follows:

Defined contribution pensions

A defined contribution plan is a pension plan under which the Group pays fixed contributions to an independent entity. The Group has no legal obligations to pay further contributions after payment of the fixed contribution.

The contributions recognised in respect of defined contribution plans are expensed as they fall due. Liabilities and assets may be recognised if underpayment or prepayment has occurred and are included in current liabilities or current assets as they are normally of a short-term nature.

The assets of the schemes are held separately from those of the Group in an independently administered fund.

Defined benefit pensions

The Group contributes to defined benefit schemes which require contributions to be made to separately administered funds.

A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary. The legal obligations for any benefits from this kind of pension plan remain with the Group, even if plan assets for funding the defined benefit plan have been set aside.

Scheme liabilities are measured using the projected unit funding method, applying the principal actuarial assumptions at the balance sheet date. Assets are measured at market value. In accordance with IFRIC 14, the asset that is recognised is restricted to the amount by which the IAS 19 service cost is expected, over the lifetime of the scheme, to exceed funding contributions payable in respect of accruing benefits, or to the amount of any unconditional right to a refund, if greater.

Where the Group has a contractual obligation to make good any deficit in its share of a Local Government Pension Scheme (LGPS) but also has the right to recover the costs of making good any deficit from the Group's client, the fair value of that guarantee asset has been recognised and disclosed. Movements in the guarantee asset are taken to the Consolidated Statement of Profit or Loss and to the Consolidated Statement of Comprehensive Income to match the movement in pension assets and liabilities.

The Group recognises the pension liability and guarantee assets separately on the face of the Consolidated Balance Sheet.

Actuarial gains and losses are taken to the Consolidated Statement of Comprehensive Income as incurred. For this purpose, actuarial gains and losses comprise both the effects of changes in actuarial assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what has actually occurred.

Other movements in the net surplus or deficit are recognised in the Consolidated Statement of Profit or Loss, including the current service cost, any past service cost and the effect of curtailments or settlements. The net interest cost is also charged to the Consolidated Statement of Profit or Loss. The amount charged to the Consolidated Statement of Profit or Loss in respect of these plans is included within operating costs.

When the Group ceases its participation in a defined benefit pension scheme, the difference between the carrying value of the scheme as calculated on an IAS 19 basis and any deficit payment or surplus receipt due is recognised in the Consolidated Statement of Profit or Loss as a settlement.

The Group's contributions to the scheme are paid in accordance with the rules of the scheme and the recommendations of the scheme actuary.

Defined benefit assets

Assets for Group schemes are based on the latest asset information provided by the scheme administrators.

Scheme assets for other schemes have been estimated by rolling forward the published asset position from the previous year using market index returns over the period. This is considered to provide a good estimate of the fair value of the scheme assets and the values will be updated to actuals each time a triennial valuation takes place.

Defined benefit liabilities

A number of key estimates have been made, which are given below, and which are largely dependent on factors outside the control of the Group:

·      •       inflation rates;

·      •       mortality;

·      •       discount rate; and

·      •       salary and pension increases.

Details of the particular estimates used are included in this note. Sensitivity analysis for these key estimates is included below.

Where the Group has a contractual obligation to make good any deficit in its share of an LGPS but also has the right to recover the costs of making good any deficit from the Group's client, the fair value of that asset has been recognised and disclosed. The right to recover costs is limited to exclude situations where the Group causes the scheme to incur service costs in excess of those which would have been incurred were the members employed within Local Government. Management has made judgements in respect of whether any of the deficit is as a result of such situations.

The right to recover costs is also limited to situations where any cap on employer contributions to be suffered by the Group is not set so as to contribute to reducing the deficit in the scheme. Management, in conjunction with the scheme actuaries, has made judgements in respect of the predicted future service cost and contributions to the scheme to reflect this in the fair value of the asset recognised.

Key sources of estimation uncertainty

The net position on defined benefit pension schemes is a key source of estimation uncertainty. Given the importance of this area and to ensure appropriate estimates are made based on the most relevant information available, management has continued to engage with third-party advisers in assessing each of the underlying assumptions. The discount rate is derived from the return on corporate bond yields, and whilst this is largely observable, any change in discount rates in the future could have a material impact on the carrying value of the defined benefit obligation. Similarly, inflation rates and mortality assumptions impact the defined benefit obligation as they are used to model future salary increases and the duration of pension payments. Whilst current assumptions use projected future inflation rates and the most up-to-date information available on expected mortality, if these estimates change, the defined benefit obligation could also change materially in future periods.

Defined contribution schemes

The Group operates a defined contribution Group personal pension scheme for the benefit of certain employees. The Group contributes to personal pension schemes of certain Directors and senior employees. The Group operates a stakeholder pension plan available to all employees. During the year, the Group contributed £6.0m (2024: £4.8m) to these schemes.

Defined benefit schemes

The Group participated in 15 (2024: 15) principal defined benefit schemes on behalf of a number of employees which require contributions to be made to separately administered funds.

These pension schemes are operated on behalf of Mears Group PLC, Mears Limited, Morrison Facilities Services Limited, Mears Extra Care Limited and their subsidiary undertakings. The assets of the schemes are administered by trustees in funds independent from the assets of the Group.

The Group schemes are no longer open to new members and have no particular concentration of investments, so expose the Group only to typical risks associated with defined benefit pension schemes including the risk that investments underperform compared with movements in the scheme liabilities. The Group has an unconditional right to a refund of any surplus within the Group schemes on the basis that decisions over the use of such a surplus require the principal employer's consent and can include paying the surplus to the employers. The Group has, therefore, recognised those surpluses in accordance with IFRIC 14.

In certain cases, the Group will participate under Admitted Body status in the LGPS. The Group will contribute for a finite period until the end of the particular contract. The Group is required to pay regular contributions as detailed in the scheme's schedule of contributions. In some cases, these contributions are capped and any excess can be recovered from the body from which the employees originally transferred. Where the Group has a contractual right to recover the costs of making good any deficit in the scheme from the Group's client, the fair value of that asset has been recognised as a separate pension guarantee asset. Certain judgements around the value of this asset have been made and are discussed in the judgements and estimates disclosure within the accounting policies.

Upon exiting an LGPS, the surplus or deficit position of the scheme will be calculated by the scheme actuary on a funding basis. This is a different basis from IAS 19 and, therefore, may result in a different surplus or deficit position. Where the scheme is in surplus on a funding basis on exit, the pension authority has discretion over whether and to what extent the surplus will be distributed to the outgoing employer. The Group has, therefore, recognised any surplus in these schemes only to the extent that it will benefit from reduced contributions in the period prior to the expiry of the associated contract.

Management is aware of the Court of Appeal ruling in the case of Virgin Media Ltd v NTL Pension Trustees II Ltd & Others, regarding amendments to benefits for contracted out schemes. During 2024 the Group pension scheme administrators and trustees performed an initial review of rules amendments and identified a number of matters that require further investigation. In June 2025 the UK Government announced its intention to produce legislation which would allow retrospective approval of rule changes for which there was no contemporaneous actuarial certification. This legislation is included in the Pensions Bill 2025 which is expected to receive Royal Assent in 2026. Given this development it is not expected that the court ruling will have an impact on the liabilities of the Group's pension schemes.

The disclosures in respect of the two (2024: two) Group defined benefit schemes and the 13 (2024: 13) other defined benefit schemes in this note have been aggregated. Details of movements in pension guarantee assets are presented in a separate table.

The costs and liabilities of the schemes are based on actuarial valuations. The latest full actuarial valuations for the schemes were updated to 31 December 2025 by qualified independent actuaries using the projected unit funding method.

The principal actuarial assumptions at the balance sheet date are as follows:

	2025	2024
Rate of increase of salaries	2.85%	3.05%
Rate of increase for pensions in payment - based on CPI with a cap of 5%	2.50%	2.60%
Rate of increase for pensions in payment - based on RPI with a cap of 5%	2.70%	2.85%
Rate of increase for pensions in payment - based on CPI with a cap of 3%	2.05%	2.10%
Rate of increase for pensions in payment - based on RPI with a cap of 3%	2.15%	2.25%
Discount rate	5.60%	5.50%
Retail prices inflation	2.85%	3.05%
Consumer prices inflation	2.55%	2.65%
Life expectancy for a 65-year-old male*	21.4 years	21.2 years
Life expectancy for a 65-year-old female*	23.6 years	23.6 years
Pension-age life expectancy for a 45-year-old male*	22.4 years	22.4 years
Pension-age life expectancy for a 45-year-old female*	25.3 years	25.3 years

*     This assumption is set on a scheme-by-scheme basis, taking into account the demographics of the relevant members. The figures disclosed are an average across all schemes.

 

The amounts recognised in the Consolidated Balance Sheet are:

	2025			2024
	Group schemes £'000	Other schemes £'000	Total £'000	Group schemes £'000	Other schemes £'000	Total £'000
Quoted assets
Equities	-	53,897	53,897	1,781	54,765	56,546
Bonds	64,555	16,183	80,738	59,865	20,894	80,759
Pooled investment vehicles
Property	-	1,087	1,087	1,905	-	1,905
Multi-asset funds	18,191	4,166	22,357	48,145	3,617	51,762
Alternative asset funds	1,856	11,511	13,367	2,095	3,781	5,876
Return seeking funds	1,151	-	1,151	1,548	1,307	2,855
Other assets
Equities	-	15,736	15,736	-	7,053	7,053
Bonds*	29,917	5,011	34,928	-	4,529	4,529
Property	-	9,738	9,738	-	14,920	14,920
Derivatives	1,481	-	1,481	707	60	767
Cash and other	3,491	4,761	8,252	6,212	4,505	10,717
Investment liabilities
Derivatives	(858)	(15)	(873)	(3,379)	-	(3,379)
Group's estimated asset share	119,784	122,075	241,859	118,879	115,431	234,310
Present value of funded scheme liabilities	(96,449)	(74,804)	(171,253)	(97,210)	(76,705)	(173,915)
Pension surplus	23,335	47,271	70,606	21,669	38,726	60,395
Scheme surpluses not recognised as assets	-	(45,924)	(45,924)	-	(37,150)	(37,150)
Pension assets	23,335	1,347	24,682	21,669	1,576	23,245
Assets classified as held for sale	-	(585)	(585)	-	-	-
Pension assets recognised	23,335	762	24,097	21,669	1,576	23,245
Pension guarantee assets	-	-	-	-	-	-

 

The amounts recognised in the Consolidated Statement of Profit or Loss are as follows:

	2025			2024
	Group schemes £'000	Other schemes £'000	Total £'000	Group schemes £'000	Other schemes £'000	Total £'000
Current service cost	561	1,174	1,735	809	1,490	2,299
Past service cost	-	-	-	-	224	224
Settlement and curtailment	-	-	-	-	(2,413)	(2,413)
Administration costs	441	-	441	489	-	489
Total operating charge	1,002	1,174	2,176	1,298	(699)	599
Net interest	(1,215)	(2,206)	(3,421)	(926)	(1,261)	(2,187)
Effects of limitation of recognisable surplus related to net interest	-	2,122	2,122	-	1,298	1,298
Total charged to the profit for the year	(213)	1,090	877	372	(662)	(290)

 

Actuarial gains and losses recognised in other comprehensive income (OCI) are as follows:

	2025			2024
	Group schemes £'000	Other schemes £'000	Total £'000	Group schemes £'000	Other schemes £'000	Total £'000
Return on plan assets (below)/above that recorded in net interest	(1,773)	5,288	3,515	(12,755)	(377)	(13,132)
Actuarial gain arising from changes in demographic assumptions	(624)	10	(614)	1,337	178	1,515
Actuarial gain/(loss) arising from changes in financial assumptions	2,785	2,883	5,668	10,739	10,029	20,768
Actuarial gain/(loss) arising from liability experience	(225)	(558)	(783)	984	(11)	973
Effects of limitation of recognisable surplus related to OCI movements	-	(7,502)	(7,502)	-	(7,459)	(7,459)
Total gains/(losses) recognised in OCI	163	121	284	305	2,360	2,665

 

Changes in the present value of the defined benefit obligations are as follows:

	2025			2024
	Group schemes £'000	Other schemes £'000	Total £'000	Group schemes £'000	Other schemes £'000	Total £'000
Present value of obligations at 1 January	97,210	76,705	173,915	109,659	83,342	193,001
Current service cost	561	1,174	1,735	809	1,490	2,299
Past service cost	-	-	-	-	224	224
Interest on obligations	5,220	4,097	9,317	4,821	3,740	8,561
Plan participants' contributions	168	386	554	191	410	601
Benefits paid	(4,774)	(2,839)	(7,613)	(5,210)	(2,305)	(7,515)
Settlements	-	(2,384)	(2,384)	-	-	-
Actuarial gain arising from changes in demographic assumptions	624	(10)	614	(1,337)	(178)	(1,515)
Actuarial (gain)/loss arising from changes in financial assumptions	(2,785)	(2,883)	(5,668)	(10,739)	(10,029)	(20,768)
Actuarial (gain)/loss arising from liability experience	225	558	783	(984)	11	(973)
Present value of obligations at 31 December	96,449	74,804	171,253	97,210	76,705	173,915

 

Changes in the fair value of the plan assets are as follows:

	2025			2024
	Group schemes £'000	Other schemes £'000	Total £'000	Group schemes £'000	Other schemes £'000	Total £'000
Fair value of plan assets at 1 January	118,879	115,431	234,310	129,494	111,563	241,057
Expected return on plan assets	6,435	6,303	12,738	5,747	5,001	10,748
Employer's contributions	1,290	740	2,030	1,901	1,139	3,040
Share of surplus received	-	-	-	-	(2,413)	(2,413)
Plan participants' contributions	168	386	554	191	410	601
Benefits paid	(4,774)	(2,839)	(7,613)	(5,210)	(2,305)	(7,515)
Scheme administration costs	(441)	-	(441)	(489)	-	(489)
Settlements	-	(3,234)	(3,234)	-	2,413	2,413
Return on plan assets (below)/above that recorded in net interest	(1,773)	5,288	3,515	(12,755)	(377)	(13,132)
Fair value of plan assets at 31 December	119,784	122,075	241,859	118,879	115,431	234,310

 

Changes in the fair value of guarantee assets are as follows:

	2025 £'000	2024 £'000
Fair value of guarantee assets at 1 January	-	-
Recognised in the Consolidated Statement of Profit or Loss
Guarantee asset movement in respect of service cost	346	516
Guarantee asset movement in respect of net interest	(50)	-
Recognised in other comprehensive income
Guarantee asset movement in respect of actuarial losses	(296)	(516)
Fair value of guarantee assets at 31 December	-	-

 

Funding arrangements are agreed for each of the Group's defined benefit pension schemes with their respective trustees. The employer's contributions expected to be paid during the financial year ending 31 December 2026 amount to £1.7m.

Each of the schemes manages risks through a variety of methods and strategies to limit downside in falls in equity markets, movement in inflation and movement in interest rates.

The Group's defined benefit obligation is sensitive to changes in certain key assumptions. The sensitivity analysis below, prepared using the same methods and assumptions used above, shows how a reasonably possible increase or decrease in a particular assumption, in isolation, results in an increase or decrease in the present value of the defined benefit obligation as at 31 December 2025. This analysis excludes the impact on pension schemes with a guarantee in place as there would be no net impact on the balance sheet for these schemes.

 

	£'000	£'000
Rate of inflation - decrease/increase by 0.1%	(1,600)	1,600
Rate of increase in salaries - decrease/increase by 0.1%	(381)	381
Discount rate - decrease/increase by 0.1%	1,996	(1,996)
Life expectancy - decrease/increase by 1 year	(4,762)	4,762

 

29. Capital commitments

The Group had no capital commitments at 31 December 2025 or at 31 December 2024.

30. Contingent liabilities

The Group has received two legal claims relating to historical regeneration work from separate Local Authorities. In one case, the authority has indicated a potential claim value of £11.0m, although only limited substantiation and detail have been provided. The Group has denied liability. In the second case, no claim value has been specified, although the original works had a value of £4.3m. The Group does not consider either claim to have merit.

 

31. Related party transactions

Identity of related parties

The Group has a related party relationship with its pension schemes, its subsidiaries and its Directors.

Pension schemes

Details of contributions to pension schemes are set out in note 28.

Subsidiaries

The Group has a central treasury arrangement in which all subsidiaries participate. Management does not consider it meaningful to set out details of transfers made in respect of this treasury arrangement between companies, nor does it consider it meaningful to set out details of interest or dividend payments made within the Group.

Transactions with key management personnel

The Group has identified key management personnel as the Directors of Mears Group PLC.

Key management personnel held the following percentage of voting shares in Mears Group PLC at 31 December:

	2025 %	2024 %
Directors	0.7	0.5

 

Key management personnel's compensation is as follows:

	2025 £'000	2024 £'000
Salaries including social security costs	1,909	1,910
Contributions to defined contribution pension schemes	22	19
Share-based payments	720	1,477
	2,651	3,406

 

Further details of Directors' remuneration are disclosed within the Remuneration Report.

Dividends totalling £0.1m (2024: £0.1m) were paid to Directors during the year.

Transactions with other related parties

During the year, the Group provided maintenance services to Pyramid Plus South LLP, an entity in which the Group is a 30% member, totalling £16.4m (2024: £16.4m). Pyramid Plus South LLP also made recharges of certain staff costs to the Group totalling £0.7m (2024: £0.7m). At 31 December 2025, £5.7m (2024: £0.2m) was due to the Group in respect of these transactions. Pyramid Plus also owed the Group £1.3m (2024: £1.0m) in respect of agreed distributions.

During the year, the Group leased properties from Housing Ventures MPC1 Limited, a subsidiary of MPC 1 Holdco Limited, an entity in which the Group is a 25% member, totalling £2.0m (2024: £nil). No amounts were due at 31 December 2025 in respect of these transactions. The Group also held a loan note issued by MPC 1 Holdco Limited with a balance of £5.2m (2024: £5.3m), as described in note 24.

As part of the sale and leaseback transaction described in note 23, the Group received a loan note from MPC 3 Holdco Limited of £6.5m, as detailed in note 24. The balance at 31 December 2025 was £6.5m.

During the year, the Group made loans totalling £3.2m (2024: £nil) to MPC 3 Holdco Limited, an associate. These loans were used to acquire a portfolio of properties that were being leased to the Group from a third-party landlord. Further information about the loans are included in note 24. The amount outstanding at 31 December 2025 was £3.2m.