Mears Group – unexpected Update lifts shares to 372p, on 7 times pe and 5% yield, with 499p Target Price

Mark Watson-Mitchell - 10.12.2025

This week’s unexpected Trading Update from Mears Group (LON:MER) has resulted in analysts upgrading their current year estimates.

We will have to wait until next month for a detailed report on the UK’s leading housing services provider’s business report for its full year to end-December.

The group released the unscheduled release confirming that it will perform towards the top end of market expectations, due to improved sales and margins.

The market reaction has seen the shares rise from 350p to a 379p peak this week, before slipping back to the current 372p, at which level they trade on only 7.1 times current year earnings, while brokers target them 35% higher.

The Business

Mears is a leading provider of services to the Affordable Housing sector, providing a range of services to individuals within their homes.

The group manages and maintains around 450,000 homes across the UK and works predominantly with Central Government and Local Government, typically through long-term contracts.

It currently employs over 5,000 people and provides services in every region of the UK.

The company 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.

The Unscheduled Update

On Monday of this week, the group announced that it has traded strongly in the second half to date and anticipates that adjusted profit before tax for the financial year to the end of this month, which is now expected to be at the top end of previous market guidance.

The Equity

There are some 92.75m shares in issue.

The larger holders include Hauck & Aufhauser Fund Services (11.43%), Fidelity Management & research (9.96%), Shareholder Value Management (9.06%), Gresham House Asset Management (7.35%), JP Morgan Asset Management (6.72%), Premier Fund Managers (6.10%), Huntington Partners (5.21%), Artemis Investment Management (5.11%), Link Fund Solutions (5.10%) and Heronbridge Investment Management (4.98%).

Analyst Views

There are at least six analysts following the group, with the consensus average Target Price being 493p, the lowest at 425p, with the highest at 550p a share.

At Panmure Liberum, its analysts Adrian Kearsey and Kate Middleton, rate the group’s shares as a Buy, setting a Target Price of 499p.

Upon the latest Update they raised their current year estimates which are looking for the group in the year to the end of this month to show revenues of £1,115m (£1,133m), while looking for pre-tax profits of £61.0m (£64.1m), with earnings of 52.6p (49.4p) and paying out an increased dividend of 17.0p (16.0p) per share.

For the 2026 year, the analysts have now pencilled in £1,009m sales, £48.9m profits, a fall in earnings to 42.6p, but with another uplift in dividend to 18.0p per share.

The brokers are looking for end-year cash balances at £26.4m this year, then almost doubling to £50.7m by the end of next year.

My View

I have been following the growth of this group for nearly thirty years, witnessing its incredible corporate growth and that of its share price from around 9p in the late 1990’s up to over 525p a few years ago.

Now at 372p, with such a low earnings rating and with an eventual 34% uplift sought by brokers, its shares, which also offer a 5% yield, have distinct medium-term investment attractions.

(Profile 21.06.23 @ 285p set a target Price of 320p*)