24 July 2024

Van Elle Holdings plc

('Van Elle', the 'Company' or the 'Group')

Results for the year ended 30 April 2024

Analyst Briefing & Investor Presentation

'Resilient FY2024 performance; well positioned in structural growth markets'

Van Elle Holdings plc, the UK's largest ground engineering contractor, announces its results for the year ended 30 April 2024 ('FY2024').

1.     EBITDA is defined as earnings before interest, tax, amortisation and depreciation.

2.     IFRS 16 property and vehicle lease liabilities as at 30 April 2024 were £7.1m (30 April 2023: £7.2m).

Highlights:

·      Revenue in line with expectations, 6% below the prior year, against a strong comparative (12% lower on a like-for-like basis).

·      Resilient performance delivering an underlying operating margin of 3.9%, consistent with FY2023, despite challenging market conditions.

·      Acquisition of Rock & Alluvium in November 2023 which established a stronger presence in London and the South East and has traded in line with the pre-acquisition plan.

·      Impact of a softer housing market partially mitigated by the Group's diverse customer base including partnership and affordable housing customers.

·      Good progress in developing closer customer relationships in the energy and water sectors.

·      Establishment and commencement of trading of the Canadian rail subsidiary.

·      Strong balance sheet maintained with an undrawn bank facility of up to £11.0m, providing capacity to fund bolt-on M&A and organic growth investment.

·      Capital investment of £5.5m (excluding IFRS 16 leases) in the year, including expanding the capacity of the precast pile factory, and £2.9m of plant and equipment added as part of the Rock & Alluvium acquisition.

·      Proposed final dividend of 0.8 pence per share to deliver full year dividends of 1.2p (FY2023: 1.2p).

Current trading and outlook

·      Market conditions are expected to remain challenging throughout the remainder of calendar year 2024.

·      Despite housebuilding volumes being anticipated to remain subdued in the immediate future, orders in Housing post year end are over 30% higher when compared to the equivalent prior year period.

·      Strong customer relationships, national frameworks and significant investment programmes in UK and Canada infrastructure underpin the Board's confidence of medium-term growth.

·      A broad range of capabilities and diverse exposure to multiple sectors, positions the Group well to benefit from improvements in the market.

·      FY2025 will see the Group make further progress against its strategy and strategic financial targets.

·      In Q1 FY2025 the Group acquired certain assets from Fussey Piling Ltd, strengthening its sheet piling and ground improvement capability.

·      Order book at 30 April 2024 of £35.1m (£30.8m at 30 April 2023) excluding framework agreements and preferred bidder positions (estimated annual revenues of £30m-£40m subject to timing and allocation of workload).

Mark Cutler, Chief Executive, commented:

"Van Elle delivered a resilient performance in the year, benefitting from the breadth of its capabilities and end markets, despite very challenging market conditions across most sectors.

"The Group has continued to expand its offering, grow geographically and enter new sectors, through the acquisition of Rock & Alluvium, its strategy for the water and energy sectors, and the establishment of rail operations in Canada.

"We start the new financial year with a strong order book and multiple framework agreements. Our focus on key customer partnerships and strategic markets is expected to deliver significant growth opportunities over the medium term."

Analyst Briefing: 10.00am on Wednesday 24 July 2024

A briefing for Analysts will be held at 10.00am this morning - Wednesday 24 July 2024. Analysts interested in attending should contact Walbrook PR on vanelle@walbrookpr.com or 020 7933 8780.

Investor Presentation: 3.30pm on Wednesday 24 July 2024

Mark Cutler, Chief Executive Officer, and Graeme Campbell, Chief Financial Officer, will hold a presentation to review the results and update its growth strategy at 3.30pm on Wednesday 24 July 2024, through the digital platform Investor Meet Company.

Investors can sign up to Investor Meet Company for free and add to meet Van Elle Holdings plc via the following link https://www.investormeetcompany.com/van-elle-holdings-plc/register-investor.

Investors who have already registered and added to meet the Company will automatically be invited. Questions can be submitted pre-event to vanelle@walbrookpr.com, or in real time during the presentation via the "Ask a Question" function.

For further information, please contact:

About Van Elle Holdings plc:

Van Elle Holdings is the UK's largest specialist geotechnical engineering contractor. Formed in 1984 and listed on AIM in 2016, the Company provides a wide range of ground engineering techniques and services including ground investigation, general and specialist piling, rail geotechnical engineering, modular foundations, and ground improvement and stabilisation services.

Van Elle operates through three divisions: General Piling, Specialist Piling and Rail, and Ground Engineering Services; and is focused on diverse end markets including residential and housing, infrastructure and regional construction - across which the Group has completed more than 20,000 projects over the last 40 years. The Company acquired ScrewFast Foundations Limited in April 2021 and Rock & Alluvium Limited in November 2023.

CHAIRMAN'S STATEMENT

Overview

I am pleased to report that the Group has delivered another strong financial performance, building on the progress achieved in recent years. As expected, the UK market conditions proved to be challenging for most of the year, particularly in the housing and infrastructure sectors, but the Group responded well to deliver underlying profit in line with market forecasts. We have benefited from strong customer relationships across a broad range of end-markets in the UK construction sector, and this has provided resilience to the softer market conditions.

The housing sector delivered very strong revenues during the first quarter of the financial year but has since been impacted by lower volumes on new-build housing starts. Strong relationships with housebuilders in the social housing sector has reduced the impact from market factors, and this has partially mitigated the lower volumes seen across the sector as a whole.

In the construction sector, a strong demand for logistics warehousing and data centres has helped to mitigate uncertainty in the regional commercial markets, albeit we experienced early signs of recovery in London for which we are well positioned to benefit following the acquisition of Rock & Alluvium Limited ("Rock & Alluvium") from Galliford Try in November 2023.

In the infrastructure sector, highways and rail activity levels were lower due to the cyclical nature of infrastructure spending. The transition between CP6 and CP7 resulted in a drop off in volumes for the wider supply chain, but the Group remains set to benefit from the increased investment priorities of CP7, new frameworks and deeper customer relationships.  

The Group has developed strong positions in the water and energy sectors where there is a clear pipeline of large-scale, essential investment across the UK, which is expected to contribute materially to our activity levels from FY26 and beyond.

Despite some short-term volatility in market conditions, we continue to see strong levels of demand for the Group's services and remain confident that our end markets are attractive, particularly with an anticipated recovery in the housing sector and significant future investment expected in UK infrastructure.

Capital structure and allocation

The Group maintains a strong balance sheet with a healthy cash position, low debt and flexibility provided by a borrowing facility of up to £11.0m.

As part of the acquisition of Rock & Alluvium, three piling rig finance lease contracts were transferred to Van Elle. Total debt (excluding IFRS 16 lease liabilities), including these contracts was £0.5m at the year end.

The Group's borrowing facility is provided on a revolving basis, secured against receivables and certain tangible assets, and was not drawn during the financial year. The facility was extended in September 2023 for a further three years and now expires in September 2026.

Net funds, excluding IFRS 16 property and vehicle lease liabilities, decreased to £5.5m at 30 April 2024 (30 April 2023: £7.5m). This reduction in net funds reflects £3.6m of net capital expenditure (after disposals), £2.5m of consideration for acquisitions, £1.3m in dividends and an increase in working capital as a result of higher activity levels in the final quarter of the financial year.

We operate 132 rigs and continue to allocate capital across all divisions, to ensure we maintain a market-leading fleet of plant and machinery. Total capital expenditure was £5.5m in the year, a slight reduction over the prior year. We continually review our existing fleet and dispose of ageing assets, particularly those with low utilisation.

The Board continues to be disciplined in reviewing potential bolt-on acquisitions of established businesses, which would be earnings accretive and augment and strengthen the Group's offering.

Dividend

The Board recognises the importance of maintaining a sustainable dividend distribution. A prudent approach has been taken in recent years reflecting the significant future opportunities for growth, which will require capital investment.

Following another year of profitable performance, a strong balance sheet and a healthy cash position, the Board is pleased to recommend the payment of a final dividend of 0.8p per share (FY2023: 0.8p per share). If approved, the proposed FY2024 will be paid on 18 October 2024 to shareholders on the register as at the close of business on 4 October 2024. The shares will be marked ex-dividend on 3 October 2024.

An interim dividend of 0.4p per share (FY2023 interim dividend: 0.4p per share) was paid on 15 March 2024. The total dividend payable for FY2024 will therefore be 1.2p (FY2023: 1.2p).

ESG and our people

We are committed to reducing the impact of our activities on the environment and our carbon footprint as we make the journey towards net zero emissions. I am pleased to report that we have made good progress this year via the Group's Sustainability Working Group which has representation from across the business. We have signed up to the Science Based Targets initiative (SBTi) and have developed a carbon reduction roadmap which we are using to track progress.

At Van Elle, our people engage across local communities, contributing to social value initiatives local to our head office, as well as supporting several customer projects.

Our people are our strongest asset, and I am proud of our collective achievements in the past year. Their health, safety and well-being is our main priority. We have made excellent progress on improving our safety performance during the year. The RIDDOR Accident Frequency Rate (AFR) improved from 0.19 in FY2023 to zero in FY2024.

On behalf of the Board, I would like to thank all our employees for their hard work and commitment over the past year.

Board and governance

The Board's composition is reviewed regularly to ensure that we continue to have an appropriate mix of expertise and experience within the Board. There were no changes to the Board in the current year, which has provided a stable platform as we continue to deliver the Group's strategy.

During the year, we completed a comprehensive internal review of the Board's structure and performance, and an action plan is in progress to ensure continuous improvement of the Board's effectiveness.

I would like to extend my thanks to my Board colleagues for their significant contribution and commitment over the past year.

The Group is committed to the highest standards of corporate governance and prioritises effective shareholder communication and engagement. We have continued to adopt the Quoted Companies Alliance Corporate Governance Code, complemented with other suitable governance measures appropriate for a company of our size.

Outlook

The Board expects the current challenging market conditions to continue throughout the remainder of calendar year 2024, particularly in the housing and infrastructure sectors. However, the Group's broad range of capability and diverse exposure to multiple sectors, provides strong resilience against macroeconomic factors and means Van Elle is well-placed to benefit from improvements in the market.

Despite the expectation that the first half of FY2025 is likely to be impacted by the softer market, all the Group's end markets are expected to recover in the near term and, combined with strong positions being developed in the water and energy sectors and a fast-growing rail business in Canada, the Board expects there to be significant opportunity for growth in the medium-term.

We remain confident of delivering our medium-term financial targets of 5-10% annual revenue growth, 6-7% operating profit margin and 15-20% ROCE.

Frank Nelson

Non-Executive Chair

23 July 2024

CHIEF EXECUTIVE'S STATEMENT

OPERATING REVIEW

Full year expectations achieved

The Group delivered another resilient performance in FY2024, despite challenging market conditions across most sectors. As expected, revenue was 6.2% below the prior year at £139.5m (FY2023: £148.7m). On a like-for-like basis, excluding the impact of Rock & Alluvium, which was acquired on 30 November 2023, revenues decreased by 11.7%. 

Notwithstanding these challenging market conditions, the Group delivered a robust performance, in line with expectations, with underlying profit before tax of £5.1m (FY2023: £5.3m). Underlying operating margin also remained stable at 3.9% (FY2023: 3.9%).

The housing market delivered very strong revenues in the first quarter of the financial year, but activity levels reduced materially over the remainder of the year, in line with the lower new build volumes widely reported by major housebuilders. Our diverse customer base, with additional exposure to partnership and affordable housing customers, partially mitigated this impact, where volumes were affected to a lesser extent.

In infrastructure, the Group has made excellent progress in developing closer customer relationships and strengthened market positions in all segments, but market challenges persisted throughout the year from a combination of budget and inflationary pressures, project delays and transition between investment cycles. A strong pipeline of opportunities has been developed in the energy and water sectors, where there is a clear pipeline of planned investment. These sectors are expected to contribute materially to Group performance in the medium term. Both rail and highways sectors reported lower activity levels during the year. Rail was impacted by lower spending during the final year of Network Rail's CP6 investment period. Highways revenues were also reduced, impacted by the cancellation of further Smart Motorways projects, other project cancellations and delays in regional delivery programmes.

Costs associated with establishing the Group's Canadian rail subsidiary have been absorbed in the year and activity levels are now increasing to sustainable levels, despite delays to the major Metrolinx GO Expansion programme in Toronto, for which we are now preferred bidder for the foundations strategic partner role, covering design development and early works ahead of main construction starting in FY26.

In the regional construction sector market, conditions were also challenging, with developer confidence affected by build cost inflation. The Group completed several important schemes in the growing segments of data centres and industrials. Commercial schemes have suffered delays in most regions. In London, progress has been impacted by the new Building Safety Act which requires more rigorous design and planning conditions for buildings over 18 stories, albeit the initial backlog will ease during FY2025. In November 2023, the Group acquired Rock & Alluvium Limited from Galliford Try Holdings plc., which has provided an established presence in London and the South East. Trading under the wider Galliford Try trading agreement is in line with expectations.

We continue to focus on efficiency projects both to improve operational effectiveness and to leverage the Group's IT infrastructure and systems. Further cost saving initiatives have also been identified, which are being delivered as part of our drive for continuous improvement.

Strong balance sheet

The Group maintained a strong balance sheet with a healthy cash balance, low debt and significant liquidity headroom against its undrawn £11.0m funding facility. The facility term was extended during the year and now expires in September 2026.

The Group assumed three small lease liabilities over rigs as part of the acquisition of Rock & Alluvium Limited, but Group debt remains well within our target leverage threshold of less than 1.5 times EBITDA. Total debt (excluding IFRS 16 lease liabilities) was £0.5m at the year-end (30 April 2023: £1.4m).

Net funds, excluding IFRS 16 property and vehicle lease liabilities, decreased to £5.5m at 30 April 2024 (30 April 2023: £7.5m). This reduction in net funds reflects £3.6m of net capital expenditure (after disposals), £2.5m of consideration for acquisitions, £1.3m in dividends and an increase in working capital as a result of higher activity levels in the final quarter of the financial year.

Health and safety

The health, safety and well-being of our employees is our first priority. We have made excellent progress during the year with significantly improved internal communication and reporting, which is driving a stronger safety culture in the business.

A health and safety survey was conducted during the year with strong levels of engagement across the workforce. The survey responses are being used to drive an action plan for further improvement.

We have built on the progress made in the prior year on the Group's upgraded Integrated Management System, which now captures all operational processes and procedures. These have been briefed out to all employees to embed best practices and improved consistency.

Our safety record improved again in the year, with a RIDDOR Accident Frequency Rate (AFR) per 100,000 hours worked of zero in FY2024 (FY2023: 0.19).

People

The Group continued to develop its workforce and core management capabilities, with new development programmes in place for supervisors and management. Our in-house training centre coordinated and delivered all the Group's training needs, delivering a high level of internal training days, broadly consistent with the prior year. Group average headcount was stable throughout the year at 639, assisted by reduced resource demand on HS2. Voluntary churn was lower at 14% (FY2023: 18%).

During the year some restructuring was undertaken to improve the efficiency of the operating business units, reduce duplicated processes and roles and to improve collaboration. As part of these changes Malcolm O'Sullivan was appointed as Chief Operating Officer and several other internal promotions were implemented.

Strategy

The Group made further progress in the year, with continued focus on the final phase of our strategic plan to deliver market leading performance. The medium term financial KPIs (annual revenue growth of 5-10%, underlying operating margins of 6-7%, ROCE of 15-20% and leverage of less than 1.5 times EBITDA) remain the Group's objectives.

Strategic highlights in the year include:

-     As the pipeline of investment under the UK energy sector's Accelerated Strategic Transmission Investment (ASTI) programme becomes clearer, we have developed strong customer partnerships for delivery of future works. Significant investment is expected in the UK high-voltage power network over the medium to long term and our breadth of capability puts the Group in a very strong position to be able to support major project activity.

-     The acquisition of Rock & Alluvium from Galliford Try Holdings plc was completed to provide wider growth opportunities for the Group in London and the South East. The integration of Rock & Alluvium has progressed in line with expectations and the business traded profitably in the final quarter of the year.

-     A five-year trading agreement with Galliford Try was entered into, under which Van Elle has started to provide piling and geotechnical services.

-     The Group was awarded new framework agreements including Network Rail's southern region CP7 civils programme and with the Coal Authority for national ground investigation services.

-     Continued investment in the establishment of the Group's Canadian operations, with a pipeline of identified opportunities now exceeding CAD $40m.

-     Continued leadership training with the first leadership development programmes in place for high potential leaders and supervisors.  

-     Re-development of the Group's freehold premises at Pinxton to provide additional capacity.

Sustainability and ESG

The Group's sustainability strategy is aligned with the UN Sustainable Development Goals, which we consider to be the most applicable to our business operations. We have signed up to the Science Based Targets initiative (SBTi) to set achievable emissions reduction targets against a representative base year to achieve Net Zero by 2050.

A medium-term sustainability roadmap is established, which provides a clear pathway to a 30% reduction in our greenhouse gas emissions from a 2020 baseline. Our Sustainability working group, which has executive level leadership, is using this roadmap to track progress against our targets and objectives. The Group measures and reports Scope 1 and Scope 2 emissions.

During the year, our people have engaged with numerous social value initiatives, both during customer projects and also locally within the community around our offices.

Our sustainability targets for next year include:

-     Full validation of our targets with SBTi.

-     Become accredited sustainable procurement, ISO 20400.

-     Develop processes to measure and report Scope 3 emissions.

-     Review and implement solar panels where appropriate.

-     Trial low carbon concrete and steel.

-     Embed carbon footprint estimations for all projects at the design stage.

Markets

The Group operates in three market segments:

·      Residential constituted 41% of Group revenues in the year (up from 38% in FY2023). Divisional teams deliver integrated piling and foundation systems for national and regional housebuilders, retirement homes and multi-storey residential properties.

Demand for the Group's Smartfoot precast concrete foundation system (reported in the Group's Ground Engineering Services segment) was very strong during the early part of the financial year. New building regulations, introduced towards the end of Q1 FY2024, resulted in the acceleration of some residential projects, which provided a temporary increase to revenues.

As anticipated, the impact of increasing mortgage rates and general market uncertainty caused a decrease in the rate of new build starts from the second quarter, which continued throughout the remainder of the financial year. Whilst this resulted in significantly lower activity levels in private housing, some impact was mitigated by the Group's balanced exposure to affordable and partnership housing customers.

Industry forecasts are still cautious regarding the recovery of the housing market, and we anticipate the remainder of the year to show only a modest improvement in volumes, however early indications are positive, with order intake in the financial year to date over 30% ahead of the corresponding period last year. The award of the former Boots site in Nottingham by Keepmoat, worth up to £3m, is our largest single scheme awarded in the last 12 months and represents the 15^th with Keepmoat over the last three years, demonstrating our cross-tenure diverse customer base. Interest rate cuts are widely expected during the second half of 2024 and the new government has committed to improve the planning process and introduce mandatory housebuilding targets.  

The Group is closely involved with several national housebuilders to help develop efficient foundation solutions ahead of further Building Regulations changes planned for 2025. We have recently invested in our precast pile factory through expanding our capacity by over 30% and have further diversified our capabilities by offering in-situ beams. A collaboration with leading groundworker M&J Evans has also been established to offer a joined-up service to major housebuilders.

Notwithstanding some short-term challenges, the long-term outlook for housebuilding remains very strong in the UK and in Q1 FY2025, orders for our Housing division are ahead of the same period in FY2024 by over 30%.

Despite the current challenges in the housing market, our total residential sector revenues were broadly consistent with prior year, primarily due to the acquisition of Rock & Alluvium Limited, where a large proportion of revenues were delivered in the residential sector and reported within the Group's General Piling segment.

·      Infrastructure constituted 40% of Group revenues in the year (down from 42% in FY2023). The segment includes specialist ground engineering services to the rail, highways, coastal and flooding, energy and utility sectors.

In the Rail sector, revenues during the first half of the year were strong as Network Rail's Control Period 6 (CP6) was delivering works in its final year, before the transition to CP7 commenced. As expected, this resulted in lower activity levels in the second half of the financial year.

Planned works in CP7 include greater focus on climate-related activities including slope stabilisation, drainage improvements, and maintenance works, which are expected to benefit the Group with a strong capability and track record across this type of work. With CP7 in the early planning and design stages, revenues are expected to remain subdued until early 2025.

The Group is well-placed for the medium term with multiple significant opportunities for growth in the UK rail sector.  In particular our activities as a framework partner on the TransPennine Route Upgrade (TRU) programme should grow materially over the next three years, and our award as a civils framework partner Network Rail's programme in the South East are both expected to generate a solid baseline of work for our Rail team. 

In Canada, operations were impacted by further delays to project start dates resulting in lower activity levels in FY2024 than expected. The commencement of major works on the Toronto Metro expansion project has been delayed until late 2025.  However, we have developed a strong position with a more diverse customer base ahead of the Metrolinx GO Expansion programme for which we are preferred bidder for the strategic partner role and expect to commence enabling works by the end of H1. The Group has also successfully completed its first piling scheme for another major customer using its advanced road-rail engineering methods which are unique to the region. Revenues are in line with our expectations for FY2025 to date.

Government spending in the highways sector has been lower than anticipated in the year, with several major projects being cancelled or delayed. The Group's activities on the Smart Motorways Programme Alliance (SMPA) framework were at reduced levels as expected due to the cancellation of new schemes. However, the Group delivered several emergency refuge areas during the second half. Following a reset of several target projects the Group has a good pipeline of schemes over the next three years going into National Highways RIS3 investment period and has been appointed as early partner on three large schemes for Bam and Galliford Try since the start of FY2025.

With the cyclical nature of investment impacting much of the UK's infrastructure activities, the Group has targeted the energy and water sectors for long-term strategic growth, particularly given significant level of national investment expected in the medium and long term. In energy, we have developed strong customer partnerships for delivery of future works under the Accelerated Strategic Transmission Investment (ASTI) programme, where our breadth of capability puts the Group in a very strong position to be able to support major transmission line and substation/converter station schemes. This capability has been diversified to include all expected foundation types, including modular systems based on the ScrewFast solution and associated civil engineering works, to reduce interfaces for customers and allow the Group to offer the best value solution for the project.

Strong progress has also been made in the water sector, where investment under AMP8 is committed to double to £88bn compared to AMP7.  Customer partnerships are in place for several regions including the previously announced trading agreement with Galliford Try. Design solutions have been developed based on the Group's ScrewFast system which modularises and standardises simple foundations for lower carbon and faster delivery compared to traditional methods.

·      Regional Construction constituted 19% of Group revenues (unchanged from 19% in FY2023). The Group delivers a full range of piling and ground improvement services to the commercial and industrial sectors, from private and public sector building and developer-led markets across the UK.

Strong revenue growth in the prior year was primarily driven by a small number of large commercial projects in central London, delivered primarily by the General Piling division. With the backdrop of a more challenging and price sensitive regional construction market during the year, activity levels were below the prior year. 

The London market is expected to lead a recovery in developer confidence although the new Building Safety Act will result in a temporary delay as upfront design and planning workload is increased.  The Group's acquisition of Rock & Alluvium in November 2023 has significantly strengthened its South East presence and leaves it well positioned to play a leading role.  Elsewhere in the UK the major regional conurbations are all showing signs of some market recovery.  The industrial markets covering factories, data centres and warehousing also continue to offer significant opportunity for the Group's range of piling and ground improvement services.

Operating structure

Van Elle's operational structure has remained consistent and is reported in three segments:

·      General Piling: open site; larger projects; key techniques being large diameter rotary, CFA piling, precast driven piling, rigid inclusions and vibro stone columns.

·      Specialist Piling and Rail: restricted access and low headroom piling; extensive rail mounted capability; helical piling and steel modular foundations (ScrewFast); sheet piling, soil nails and anchors, mini-piling and ground stabilisation projects.

·      Ground Engineering Services: driven and CFA piling for housebuilders, precast concrete modular foundations (Smartfoot and Smartdeck); ground investigation and geotechnical services (Strata Geotechnics).

General Piling

Revenue increased by 3% in the year to £56.7m (FY2023: £54.8m), representing 41% of Group revenues. Reported revenue includes the impact of five months' trading of Rock & Alluvium and on a like-for-like basis, revenue was 11% down on prior year.

The General Piling division operates across each of the Group's three market segments. Market conditions remained highly competitive throughout the year, with price sensitive tendering being a key factor in work winning.

Revenue growth was achieved in the Residential sector with several significant contracts delivered, particularly in the first quarter of the financial year. The acquisition of Rock & Alluvium supported the strong growth in sector revenues, with the order book acquired being weighted towards CFA piling work in the residential sector.

Infrastructure workload benefited from the completion of the first phase of a major energy sector contract in H1. Regional Construction revenues were lower than the comparative period, mainly due to a very strong order book being brought forward into the previous year.

The Group acquired Rock & Alluvium Limited which increased the division's geographic activity in the South East and expands capacity for additional CFA piling, primarily reported in the General Piling division activities.

Underlying operating profit for the division increased to £5.2m (FY2023: £3.4m).

Specialist Piling and Rail

Revenue decreased by 6% in the year to £43.9m (FY2023: £46.6m), representing 31% of Group revenues.

Specialist Piling experienced softer market conditions throughout the first half of the year, primarily as a result of delays to major infrastructure work on highways and a short-term decrease in demand for drill and grout activity. Work-winning improved significantly in H2 and delivered very strong activity levels during the final quarter of the financial year.

In addition to the increased workload from core markets reported in H2, Specialist Piling maintained a strong focus developing customer partnerships in the energy and water sectors, where there is a clear pipeline of planned investment in the UK. These sectors are expected to contribute materially to segment and sector performance in the medium term.

The Rail division delivered strong revenues in H1, as Network Rail's CP6 entered its final year before CP7 commences. As expected, activity levels decreased significantly in H2, and are expected to remain lower than recent levels until CP7 work starts. However, the division is well-placed for medium term growth, particularly following the appointment as a framework partner on the TransPennine Route Upgrade (TRU) programme where work commenced in H2. The Rail division has also been appointed to Network Rail's civils and geotechnical programme in the South which is expected to generate material revenues in FY2025 and beyond.

Underlying operating profit for the division decreased to £1.2m (FY2023: £2.2m).

Ground Engineering Services

Revenue decreased by 18% in the year to £38.3m (FY2023: £47.1m), representing 27% of Group revenues.

Ground Engineering Services consists of the Group's Housing division and Strata Geotechnics.

The Housing division delivers integrated piling and Smartfoot foundation beam solutions to UK housebuilders plus Smartdeck and in-situ beam foundation solutions. Demand for Smartfoot was very strong during the early part of the financial year with new building regulations, introduced towards the end of Q1 FY2024, resulting in the acceleration of some residential projects, which provided a temporary increase to revenues.

As anticipated, there was a significant decrease in the rate of new build housing starts from the beginning of the second quarter, which continued throughout the remainder of the year. Whilst this resulted in significantly lower activity levels in private housing, some impact was mitigated by our exposure to affordable and partnership housing customers, where volumes remained more stable.

Strata Geotechnics delivered further revenue growth in the year, with good progress in the infrastructure sector, particularly on the National Highways national ground investigation framework and the Coal Authority framework, both of which have either been extended or renewed. Strata had secured a place on HS2's £800m phase 2 ground investigation framework, therefore the cancellation of phase 2b of HS2 was particularly disappointing. 

Underlying operating profit for the division decreased to £0.9m (FY2023: £3.6m).

Rig fleet

The Group operates 132 rigs in total, and we have continued to invest in the fleet to ensure that our market-leading capability is maintained. Total capital expenditure in the year was £5.5m (excluding new IFRS 16 leases), primarily relating to acquisition of new rigs and further investment in the Group's haulage fleet.

The Group also acquired £2.9m of plant and equipment at fair value (excluding leased assets) as part of the acquisition of Rock & Alluvium, primarily in relation to the acquired fleet of CFA piling rigs. In early FY2025, the Group acquired two sheet piling rigs and attachments from Fussey Piling Ltd, in line with our strategy to target high-quality second-hand rigs to accelerate our progress where the opportunity arises.

We continually review the existing fleet and dispose of older assets, particularly those with low utilisation. £1.9m of cash inflow was generated from such disposals.

Outlook

Market conditions are expected to remain challenging throughout the remainder of 2024.  However, inflation has reduced to BoE target levels, interest rates have stabilised and are expected to start to reduce later in 2024 and there are early signs of improved confidence since the general election. In addition, the budget constrained cyclical investment transition impacting many of the Group's infrastructure sectors has passed, with increased relevant investment expected in the next five-year periods for water, rail and highways along with significant new investment in the UK's energy transmission network.

The Group has continued to diversify its capabilities with a wider civil engineering offering now complementing its breadth of foundations and piling expertise, regional expansion into London and the South East through the acquisition of Rock & Alluvium and the establishment of a Canadian rail business in Toronto, with significant growth opportunity in the period FY2025 to FY2027.

As a result, further steady progress in Group performance is expected in FY2025 ahead of accelerated growth in FY2026 and FY2027.  We are confident of delivering at least 5-10% compound annual revenue growth over this period and in achieving our medium-term financial targets of 6-7% operating profit margin and 15-20% ROCE.

Mark Cutler

Chief Executive Officer

23 July 2024

CHIEF FINANCIAL OFFICER'S STATEMENT

FINANCIAL REVIEW

Revenue in the year to 30 April 2024 was below the previous financial year, down 6.2% in total and down 11.7% on a like-for-like basis with five months contribution from the acquisition of Rock & Alluvium in the second half of the financial year. The reduction in revenues was driven primarily by softer market conditions, with the housing and infrastructure sectors being impacted by lower levels of demand and project delays throughout the financial year. Industry-wide softening and investment delays had a greater impact on H1 with revenue decline slowing in H2. In Q4, revenues were particularly strong and ahead of Q4 in the previous financial year.

The Group tracks enquiries and activity levels by market sector, which helps to identify trends and target our activities into growth areas. The mix of revenue by end markets is shown below:

Residential: A large proportion of the revenues from the acquisition of Rock & Alluvium are reported in the residential sector and on a like-for-like basis, residential revenues are down 13.3% since last year. Following a period of record levels of enquiries and contract activity reported in FY2022 and FY2023, buoyed by changes in building regulations, levels of new build housing began to slow down, impacted by increasing interest rates and general market uncertainty. This caused a reduction in volumes, as anticipated, from Q2 of FY2024 which has continued throughout the remainder of the year.

Infrastructure: Substantial revenues in the prior year were driven by two large energy-from-waste projects delivered by the General Piling division that have not reoccurred in the current year. Activity levels in the rail sector were strong in H1 as CP6 entered its final year before the impact of the transition to CP7 impacted H2. The Group is a framework partner on the TransPennine Route Upgrade (TRU) programme for which site work commenced in H2 of FY2024. Government spending in the highways sector has been lower than anticipated, with several major projects being delayed. The Group's appointment to the Smart Motorways Programme Alliance (SMPA) framework in FY2023 has also delivered lower volumes than expected following the cancellation of any new all-lane running Smart Motorway projects although works on the retrofit emergency refuge areas did commence in H2 of FY2024. The Group has made good progress on substantial growth opportunities in the energy and water sectors, the latter increasingly with Galliford Try under the trading agreement established upon the acquisition of Rock & Alluvium.

Regional construction: With the backdrop of a more challenging and price sensitive regional construction market in the year, impacted by build inflation costs, activity levels were below the previous period. The Group's activities in London and the South East have been strengthened by the acquisition of Rock & Alluvium in H2.

The mix of revenue by operating segment is shown below:

Revenues for Rock & Alluvium were £8.1m for the five-month period to 30 April 2024 and are reported within the General Piling operating segment. On a like-for-like basis, General Piling revenues declined by 12.4% with prior year revenues including two significant industrial energy projects which, combined, delivered £18m of revenue in FY2023.The second of these projects was concluded early in FY2024. The reduction in infrastructure volumes and the high levels of competition within the regional construction market resulted in lower overall volumes in the financial year.

Specialist Piling experienced softer market conditions towards the end of the previous financial year, which continued into the first half of FY2024, primarily due to delays to major infrastructure work in highways and a short-term decrease in demand for ground stabilisation activity typically delivered in the housing sector. Work-winning and activity levels improved in H2, as expected. The Rail division delivered strong revenues in H1 as CP6 entered its final year however during H2 volumes declined in line with expectations as planning for CP7 commenced.  In Canada, rail work commenced in Q2, but delayed project start dates resulted in lower activity levels than expected. Activity levels have improved since January 2024. The major Toronto Metro expansion project has been delayed until late 2025 but a more diverse customer base has been established in the meantime.

The reduction in the Ground Engineering Services operating segment revenue reflects the subdued housing sector following a strong first quarter. Strata Geotechnics reported further growth during the year as progress was maintained in infrastructure work, particularly in the highways sector, in rail and on HS2 ground investigation projects.

Head office revenues relate to the provision of training services delivered through the training facility located at Kirkby-in-Ashfield.

Gross profit

Gross margin improved by 3.1% in FY2024 to 30.1% (FY2023: 27.0%). The increased gross margin is primarily due to better contract execution across divisions, as well as a positive mix impact. Improved mix is due to the subdued residential sector resulting in lower Housing revenues where margins are typically at the lower end of the Group's margin range. In addition, in the prior year, two significant infrastructure projects delivered by the General Piling division were delivered at the lower end of the Group's margin range.

Some inflationary pressures have continued to affect the cost base, particularly through wage inflation. Cost saving measures and efficiency projects are being implemented where possible. 

Operating profit

Total operating profit and total underlying operating profit declined in FY2024 as lower activity levels and the absorption of startup costs for the Group's Canadian rail subsidiary have partially been offset by improved margin and overhead reduction.

On an underlying basis the Group reports an operating margin of 3.9%, consistent with FY2023.

Alternative performance measures

The Group presents alternative performance measures (APMs), which are not defined or specified under the requirements of IFRS. The Group believes that these APMs provide depth and understanding to the users of the financial statements to allow for further assessment of the underlying performance of the Group and comparability from one year to the next.

The Board believes that the underlying performance measures for operating profit, profit before tax and EPS, stated before the adjustment for non-underlying items give a clearer indication of the actual performance of the business.

The Group's non-underlying items in FY2024 include £228,000 of fees associated with the acquisition of Rock & Alluvium on 30 November 2023, a health and safety penalty of £250,000 in relation to the fatality of a third party haulier following the failure of a Van Elle piling rig in April 2021, management restructure costs of £83,000 being the initial costs incurred for a restructure programme which commenced at the end of FY2024 and which will continue into FY2025, research and development credits of £894,000 relating to FY2022 and FY2023 which are considered one-off in nature, and a credit of £149,000 for interest received on a protracted legal settlement that was concluded after the year end.

In FY2023 the Group's non-underlying items included a credit of £427,000 relating to the reduction in the deferred consideration due in respect of the acquisition of ScrewFast and a charge of £350,000 relating to two warranty claims where the estimated costs of remediation had increased in the financial year.

Net finance costs

Net finance costs were £178,000 in the current year (2023: £487,000). Finance costs relate to interest on outstanding hire purchase agreements and interest on property and vehicle liabilities classified under IFRS 16. In FY2024 net finance costs include £101,000 of interest received on cash balances held and £149,000 of interest received on a protracted legal settlement that was concluded in the post balance sheet period. Interest received in the previous financial year was nil.

Taxation

The effective tax rate in the year is 25.1% (2023: 12.9%). The increased effective tax rate in the current financial year is as a result of the change in corporation tax rate from 19% to 25% in April 2023 and the cessation of the super capital allowances scheme in March 2023. The Group benefitted from super capital allowances in the previous financial year resulting in an effective tax rate lower than the corporation tax rate applicable at the time. 

Dividends

An interim dividend of 0.4p (2023: 0.4p) was paid on 15 March 2024.  The Board is recommending a final dividend of 0.8p (2023: 0.8p) taking the total dividend payable for the year to 1.2p (2023: 1.2p).

Subject to approval at the Annual General Meeting on Thursday 26 September, the recommended final dividend will be paid on 18 October 2024 to shareholders on the share register as at 4 October 2024. The associated ex-dividend date will be 3 October 2024.

Earnings per share

Underlying basic earnings per share was 3.5p (2023: 4.4p), based on an underlying profit before tax of £5,145,000 (2023: underlying profit £5,294,000). Reported basic earnings per share was 3.9p (2023: 4.4p).

Underlying diluted earnings per share was 3.4p (2023: 4.4p) following vesting of a grant of options made under the Group's LTIP scheme in 2020 during the period. Reported diluted earnings per share was 3.9p (2023: 4.4p).

Balance sheet

Note: net working capital and taxation and provisions are stated net of claim liabilities and associated insurance assets

Net assets increased by £2.7m to £52.7m (2023: £50.0m). Underlying ROCE however decreased in the period to 10.5% at 30 April 2024 (2023: 12.2%). ROCE was adversely impacted in the year by the absorption of start-up costs for the Group's Canadian operation and the timing of the acquisition of Rock & Alluvium which contributes only five months of revenues and profits in the current year.

The Group invested £5.5m in capital over the course of the year. Investment included the purchase of a rig to support further rigid inclusions growth, a capability which has experienced growing demand in recent years. The mid-life overhaul and upgrade of the existing Rail fleet was completed during the year having commenced in FY2022 with approximately one third of the fleet being upgraded each year.  The remainder of the Group's aging transport fleet was also replaced during the year with more efficient vehicles. Approximately half of the fleet was replaced in the previous financial year. The acquisition of Rock & Alluvium added £2.9m of fixed assets, net of outstanding lease liabilities to the Group's balance sheet.  

Working capital (defined as inventories, trade and other receivables and trade and other payables) increased to £14.7m (2023: £10.0m), of which £0.6m was introduced on the acquisition of Rock & Alluvium. Whilst revenues have declined overall in FY2024 compared with FY2023 activity levels were strong in the last quarter of the year, with revenues £4.0m higher in Q4 of FY2024 compared with Q4 of FY2023. This increased activity in the final quarter of the financial year, as well greater research and development income in FY2024, which is unpaid at the year-end, that has resulted in a larger working capital investment as at 30 April 2024.

The Group paid the final remaining consideration of £0.7m for the acquisition of ScrewFast Foundations Limited during the year. The total consideration due for the acquisition of Rock & Alluvium Limited on 1 December 2023 is £3.9m of which £1.8m was paid on the date of acquisition and the remaining £2.1m is due on 1 December 2024. This deferred consideration is a guaranteed sum. 

Provisions in respect of outstanding warranty claims have increased by £420,000 during the year with one new claim being brought in the period and an increase in the estimated cost of settlement of one existing warranty claim.

The Group's deferred tax liability has increased in FY2024 due to utilisation of carried forward losses resulting in the unwind of the associated deferred tax assets in the financial year.

Net funds

Net funds have reduced during the year to a net debt position of £1.6m as at 30 April 2024 (2023: net funds of £0.4m) with total cash and cash equivalents decreasing to £6.0m as at 30 April 2023 (2023: £8.9m).

The Group's lease liabilities include £7.1m of IFRS 16 property and vehicle lease liabilities (2023: £7.2m). The repayment of these liabilities during the year was largely offset by the addition of two property leases on the acquisition of Rock & Alluvium. Vehicle lease liabilities for the Group's van fleet total £2.4m at 30 April 2024. Vans are leased on a long-term hire basis over a period of four years with early termination possible.

Remaining lease liabilities of £0.5m relate to three outstanding hire purchase agreements, two of which were assumed on the acquisition of Rock & Alluvium. These three hire purchases agreements are scheduled to expire in 2024 and 2025.

The Group has an £11.0m asset backed lending facility, secured against the Group's receivables and certain tangible assets. The facility was not drawn during the year. There are no financial covenants associated with the facility which is due to expire in September 2026.

Cash flow

As mentioned above, the working capital investment during the year is due to increased trading levels in Q4 and increased research and development income which is unpaid at the year end. Working capital cash flows exclude the impact of working capital introduced on the acquisition of Rock & Alluvium. 

Operating cash flows of £8.7m have primarily been used to repay outstanding debt, fund capital expenditure, acquisition consideration payments and dividends. Dividend payments were £1.3m in the year.

During the period the Group repaid two variable rate hire purchase agreements early, resulting in a cash outflow of £1.0m, paid the final deferred consideration of £0.7m for the acquisition of ScrewFast Foundations Limited, and paid £1.8m of initial consideration for the acquisition of Rock & Alluvium. The Group also established an employee benefit trust during the year for the purposes of purchasing shares for issue on exercise of share options. A contribution of £0.5m was made to the employee benefit trust during the year.

Graeme Campbell

Chief Financial Officer

23 July 2024

Consolidated statement of comprehensive income

For the year ended 30 April 2024

All amounts relate to continuing operations.

Consolidated statement of financial position

As at 30 April 2024

Consolidated statement of cash flows

For the year ended 30 April 2024

Consolidated statement of changes in equity

For the year ended 30 April 2024

 Notes:

1.   Basis of preparation

The consolidated financial statements and announcement of Van Elle Holdings plc for the year ended 30 April 2024 were authorised for issue by the Board of Directors on 23 July 2024.

The financial information included within this announcement does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006 (the "Act"). The financial information for the year ended 30 April 2024 has been extracted from the statutory accounts on which an unqualified audit opinion has been issued.

The statutory accounts for the year ended 30 April 2024 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The Group financial statements have been prepared in accordance with UK adopted International Accounting standards in conformity with the requirements of the Companies Act 2006.The Group financial statements have been prepared on the going concern basis and adopting the historical cost convention.

Adoption of new and revised standards

New standards, interpretations and amendments effective from 1 May 2023

During the year, the Group has adopted the following new and revised Standards and Interpretations. Their adoption has not had any significant impact on the accounts or disclosures in these financial statements:

·      IFRS 17 Insurance contracts including amendments to IFRS 17 (issued on 25 June 2020)

·      Amendments to IAS 8 - Definition of Accounting Estimates

·      Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting policies

·      Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction

·      Amendment to IFRS 17 - Initial Application of IFRS 17 and IFRS 9 - Comparative Information

·      Amendments to IAS 12 International Tax Reform - Pillar Two Model Rules

New standards, interpretations and amendments not yet effective

The Group has not early adopted the following new standards, amendments or interpretations that have been issued but are not yet effective:

·      IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information

·      IFRS S2 Climate-related Disclosures

·      IFRS 18 Presentation and Disclosure in Financial Statements

·      IFRS 19 Subsidiaries without Public Accountability: Disclosures

·      Amendments to IAS 1: Classification of Liabilities as Current or Non-current

·      Amendment to IFRS 16 Leases: Lease liability in a Sale and Leaseback

·      Amendment to IAS 7 and IFRS 7 - Supplier Finance Arrangements

·      Amendment to IAS 21 - Lack of Exchangeability

2.   Segment information

The Group evaluates segmental performance based on profit or loss from operations calculated in accordance with IFRS but excluding non-recurring items. Inter-segment sales are priced along the same lines as sales to external customers, with an appropriate discount being applied to encourage use of Group resources at a rate acceptable to local tax authorities. Insurances and head office central services costs are allocated to the segments based on levels of turnover. All turnover and operations are based in the UK.

Operating segments - 30 April 2024

Geographical segments - 30 April 2024

Operating segments - 30 April 2023

Geographical segments - 30 April 2023

The Group had no customers with revenues greater that 10% in the current period (2023: one). Total revenues from the customer in 2023 were £18.4m and these are reported within the General Piling operating segment.

3.   Revenue from contracts with customers

Disaggregation of revenue - 30 April 2024

Head office revenue relates to revenue generated from the provision of training services and the release of overpayments received from customers that are greater than six years' old.

Disaggregation of revenue - 30 April 2023

4.   Income tax expense

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to profit/(loss) for the year are as follows:

During the year ended 30 April 2024, corporation tax has been calculated at 25% of estimated assessable profit for the year (2023: 25%).

Deferred tax balances as at 30 April 2024 are measured at the current corporation tax rate of 25%.

5.   Earnings per share

The calculation of basic and diluted earnings per share is based on the following data:

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders and on 106,703,045 ordinary shares (2023: 106,666,650), being the weighted average number of ordinary shares.

The dilutive shares of 1,209,000 (2023: 473,000) represent share options exercisable under the Group's LTIP scheme that vested during the financial year and are yet to be exercised. Share options exercisable under the Group's CSOP scheme were classified as dilutive in the prior year however are underwater as at 30 April 2024 and therefore have not been included in dilutive shares in the current year.

6.   Analysis of cash and cash equivalents and reconciliation to net debt

Cash flows in respect of lease liabilities include interest paid on leases of £335,000 (2023: £388,000) and principal paid of £3,553,000 (2023: £2,394,000).

Non-cash flows in respect of lease liabilities include the financing of £1,044,000 (2023: £2,903,000) of fixed assets on long-term hire, £1,639,000 of lease liabilities arising on business combinations and interest expense of £335,000 (2023: £388,000).