Van Elle sales and profit both grew significantly in the first six months of its financial year, which ended on 31 October 2017. The business has reported that revenue was up 22.1% to £52.6M, while its underlying EBITDA was up 18.7% to at £8.4M.
The results go against claims by major shareholder and former chairman Michael Ellis late last year that the company was being mismanaged with profitability and work orders being affected. The claims were rejected by other shareholders.
Nonetheless, the results do not include the £1.6M of losses anticipated from the liquidation of Carillion last week, which is expected to be shown in the results for the second half of the company’s financial year. However, the ongoing impact of loss of rail-related work through Carillion is expected to be softened by news that Network Rail will work directly with contractors to deliver planned schemes.
Ellis also claimed that Van Elle’s board was using the Carillion fall out to hide financial issues within the business.
In a statement with the trading statement, Van Elle said: “Trading in the first half of the year has been positive reflecting the increased service offering with new techniques, rigs and geographical presence.”
The company also announced that a further £8M investment in new rigs will continue to support the business’s growth strategy.
Van Elle chief executive Jon Fenton said: “This good performance is a direct consequence of our growth strategy.
“As anticipated, we entered the second half in a strong position with activity levels remaining high and trading during November, December and the start of January satisfactory across the group as a whole.
“Unfortunately, the recent collapse of Carillion will have an impact on the business. Van Elle carried out regular work for Carillion as a specialist lead sub-contractor, principally in respect of rail improvement and maintenance work and, as previously confirmed, our outstanding debt and work-in-progress exposure with Carillion is approximately £1.6M. We also identified approximately £2.5M of anticipated revenue for the second half of the current year which related to work with Carillion.
“While the group is continuing to engage with the official receiver in respect of this outstanding balance, it is now expected that we may recognise an exceptional bad debt charge of approximately £1.6M in its full year results. All of this debt arose after 31 October 2017.
“We have also had constructive dialogue with both the official receiver and Network Rail in respect of the £2.5M of anticipated revenue and whilst it is possible that some of the anticipated contracts may be delivered in the current year, the status and timing of specific programmes remains uncertain. Van Elle would typically expect to achieve good margins on rail-related work and therefore these anticipated contracts are material in the context of the group’s financial results.
“The board believes it is prudent at this stage to recognise that the disruption to the expected order book due to the situation at Carillion will impact the group’s ability to achieve its previous expectations for the year as a whole.
“Meanwhile, enquiry levels across the group in general remain encouraging and beyond the specific risks associated with the Carillion situation, the current order book as at January 2018 remains substantial. However, the group’s second half expectation included a small number of important contracts which we had originally expected to commence in the fourth quarter but now believe will slip into the first quarter of next financial year.
“Van Elle continues to deliver strategic progress and, with the support of a strong balance sheet, the long-term opportunities for further profitable growth for the group are significant. Taking all these factors into account, the Board remains confident about the group’s prospects and, reflecting this confidence, has declared an interim dividend of 1.4p per share.”