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Van Elle reports profit drop despite record revenues

Van Elle

Gains in the housing market have boosted Van Elle’s full year results to record revenues of £103.9M for the year to 30 April 2018, up 10.4% from £94.1M for the same period last year.

Despite the jump in sales, underlying profit before taking into account almost £1M bad debt from Carillion plus other exception costs has fallen back slightly to £11.1M from £11.6M in 2017.

According to Van Elle, the drop in profits was due to contract specific issues in the rail and ground stabilisation units together with challenging market conditions in H2.

“Following the challenging conditions experienced at the start of 2018, recovery has been slow in a number of our end markets which has resulted in a relatively quiet first quarter for the group as a whole,” said Van Elle chairman Adrian Barden.

“However, we are seeing an increase in opportunities across each of our divisions, particularly in the housebuilding and infrastructure markets. We continue to monitor conditions in our core markets actively and whilst mindful of the current conditions, we are cautiously optimistic about the Group’s prospects, being well positioned to deliver further value to shareholders in the medium term.

“The year to 30 April 2019 will be an important one of transition for the group, with our new CEO, Mark Cutler, joining the board in a few weeks’ time. As a leader in the UK geotechnical engineering market, Van Elle has established a strong platform from which to pursue its growth strategy. In the near term the board is focused on refining the group’s commercial approach, continuing to enhance its processes and operations and maximising the returns from the substantial investment in the rig fleet.”

Cutler will take over the role of CEO from interim CEO Steve Prendergast who is understood to have undertaken some restructuring of the management team but this has not yet been confirmed by Van Elle. GE understands that business development director Mark Williams has left the business and will be replaced by Philip Norville.

It is also understood that Phillip Chippendale who was director of the Smartfoot precast modular foundation system has also left the firm and will be replaced by Tony Pontiero. The Smartfoot division is also reported to be relocating from Nottinghamshire to Scotland, which some industry specialist have suggest may deliver short term productions savings but will create increased transport costs in the long term and questioned the viability of the relocation.

The results in detail

After a good start to its financial year, a number of factors compounded to impact on Van Elle’s profitability resulting in a 4% drop in operating profit despite recording its fifth successive year of revenue growth.

The biggest factor was the collapse of Carillion which is reported to have had a £1M impact on the business, which is less than the £1.6M originally anticpated. Nonetheless, Van Elle has said that although satisfactory terms were agreed to recommence some of the halted contracts this only had a limited benefit in the second half.

Poor weather between January and March 2018 delayed a number of small but important projects in Van Elle’s fourth quarter.

Loss making contract in the Ground Engineering Services was also a factor, along with £238,000 of costs associated with an abandoned acquisition and the extraordinary general meeting called in December after Michael Ellis tried to re-join the board.

Van Elle has said that robust internal risk controls have been introduced so that it can identify and understand all risk starting at the bidding stage and applying rigorous management and monitoring of contract performance to ensure that the circumstances resulting in each of these situations do not occur again.

Van Elle has said that going forward, the business is seeing an increase in opportunities across each of its divisions, particularly in the housebuilding and infrastructure markets. The firm said it is continuing to monitor conditions in its core markets actively and, while mindful of the current conditions, is cautiously optimistic about the group’s prospects.

 

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