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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Van Elle Holdings Plc | LSE:VANL | London | Ordinary Share | GB00BYX4TP46 | ORD 2P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 38.00 | 37.00 | 39.00 | 38.00 | 38.00 | 38.00 | 43,473 | 08:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Engineering Services | 148.73M | 4.68M | 0.0438 | 8.68 | 40.56M |
TIDMVANL
RNS Number : 1768H
Van Elle Holdings PLC
26 July 2023
26 July 2023
Van Elle Holdings plc
('Van Elle', the 'Company' or the 'Group')
Results for the year ended 30 April 2023
Analyst Briefing & Investor Presentation
'Record revenues, improved profitability and higher return on capital employed'
Van Elle Holdings plc, the UK's largest ground engineering contractor, announces its results for the year ended 30 April 2023 ('FY2023').
GBPm Year ended Year ended 30 April 30 April 2023 2022 -------------------------------------- ----------- ----------- Revenue 148.7 124.9 EBITDA (1) 12.0 9.8 Operating profit 5.9 4.4 Operating profit margin 3.9% 3.5% Profit before taxation 5.4 3.6 Basic earnings per share 4.4p 1.7p Net funds excl. IFRS 16 property and vehicle lease liabilities 7.5 5.9 Net funds 0.4 0.1 Return on capital employed 12.2% 9.4% Operating cash conversion 83.1% 86.1% Total dividend for the year 1.2p 1.0p -------------------------------------- ----------- -----------
1. EBITDA is defined as earnings before interest, tax, amortisation and depreciation.
Highlights:
-- Record revenues with growth of 19% compared with FY2022, driven by increased activity levels across all divisions.
-- Improved operating margins and return on capital following further progress in delivery of the strategic plan.
-- Operating profit increased by 34% to GBP5.9m (FY2022: GBP4.4m) driven by higher margins in General Piling, and an increased contribution from ground engineering services, coupled with higher activity levels improving overhead recovery rates.
-- The Group's diversity of end markets and its broad range of capabilities has enabled growth despite economic uncertainties and project delays in some market segments.
-- Further progress in enhancing the resilience of the Group, with a growing presence in the UK energy transmission and distribution infrastructure market, expansion of Housing sector foundation services, and diversification of Rail capability into Canada.
-- Capital investment of GBP6.2m including spend on new rigs and the Group's HGV fleet.
-- Improved net funds position of GBP7.5m (excluding IFRS 16 lease liabilities) at 30 April 2023.
-- Strong balance sheet and an undrawn bank facility of up to GBP11m, providing capacity to fund bolt-on M&A and organic growth investment.
-- Proposed final dividend of 0.8p per share, to deliver full year dividends of 1.2p (FY2022: 1.0p).
Current trading and outlook
-- Strong trading momentum from FY2023 has continued into FY2024 with all divisions operating at high activity levels.
-- Strong activity levels in the Housing sector during Q1 FY2024 but a decrease in demand is anticipated from Q2 F2024. Delays to Highways schemes and the Smart Motorway Programme Alliance experienced in FY2023 are also expected to ease by FY2025.
-- The Group has a strong pipeline of opportunities in the energy transmission and distribution sector and is preferred bidder on three of its targeted schemes in FY2024 to date.
-- Rail sector activities remain buoyant but are expected to soften ahead of Network Rail's Control Period 7. The Group's Canadian rail subsidiary is now established and has developed a strong pipeline of opportunities with the first projects due to commence in August 2023.
-- Inflationary pressures remain and are mitigated as far as possible through contract pricing.
-- Order book at 30 April 2023 of GBP30.8m (GBP39.0m at 30 April 2022) which excludes framework agreements and preferred bidder positions, with estimated annual revenues of GBP30m-GBP40m (subject to timing and allocation of workload).
Mark Cutler, Chief Executive, commented:
"I am delighted to report a strong set of results, building on last year's excellent progress as we emerged from the pandemic. The breadth of the Group's expertise, strength of balance sheet and depth of resource allows us to offer the best value to our customers, with whom we are forging closer long-term partnerships. The actions taken over the last three years are starting to deliver sustainable results that put us firmly on-track to deliver our medium-term financial objectives.
"I want to extend my sincere thanks to our employees, suppliers and customers for their hard work and support over the last year."
Analyst Briefing: 9.30am on Wednesday 26 July 2023
A briefing for Analysts will be held at 9.30am this morning - Wednesday 26 July 2023. Analysts interested in attending should contact Walbrook PR on vanelle@walbrookpr.com or 020 7933 8780.
Investor Presentation: 3.30pm on Wednesday 26 July 2023
Mark Cutler, Chief Executive Officer, and Graeme Campbell, Chief Financial Officer, will hold a presentation to review the results and prospects following their release at 3.30pm on Wednesday 26 July 2023, 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:
Van Elle Holdings plc Via Walbrook Mark Cutler, Chief Executive Officer Graeme Campbell, Chief Financial Officer Peel Hunt LLP (Nominated Adviser and corporate Tel: 020 7418 8900 broker) Ed Allsopp / Mike Bell Walbrook PR Limited Tel: 020 7933 8780 or vanelle@walbrookpr.com Tom Cooper / Nick Rome 07971 221 972 or 07748 325 236
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 35 years.
CHAIRMAN'S STATEMENT
Overview
I am pleased to report that the Group has made further progress against its strategic targets, delivering another year of record revenues with growth in all divisions. A strong recovery was achieved in the prior year, and this momentum has been sustained throughout FY2023.
The Group delivered full year revenue of GBP148.7m, and an increase of 19% on the preceding year. Profit before tax increased by 49% over FY2022 to GBP5.4m. The balance sheet remains strong, with net funds (excluding IFRS 16 lease liabilities) increasing from GBP5.9m to GBP7.5m in the year. The Group also has an undrawn borrowing facility of up to GBP11m.
The Group was impacted by supply chain disruption during the year, through both a lack of availability of raw materials and significant input price inflation. Towards the end of the financial year, these challenges eased, with improved stability of prices and availability. Inflationary pressures, including wage increases, also impacted the Group's cost base and we continue to mitigate this as far as possible through contract pricing mechanisms. Labour shortages have remained challenging throughout the year, which has been managed successfully through focussing on employee recruitment and retention strategies.
We have made good progress on delivery of the Group's strategic plan and are developing stronger relationships with key customers, which has resulted in several significant contract and framework awards in the year. This provides increased visibility and reliability of future workload. Despite more challenging market conditions expected in the short term, the Group's core markets are attractive, and the Board remains confident in achieving the medium-term strategic targets.
Capital structure and allocation
The capital structure of the Group is reviewed regularly by the Board, taking into account the need, availability and cost of sources of funding. The Group's objective is to maximise shareholder value whilst maintaining a balance sheet structure that safeguards the Group's financial position through normal economic and sector-specific cycles and supports investment in medium term growth strategies including expected increases in working capital.
The Group has a borrowing facility of up to GBP11m on a revolving basis, secured against receivables and certain tangible assets. The facility was undrawn at the end of the financial year. The arrangement matures in October 2024 and negotiations have commenced regarding extending the facility. The Group had hire purchase debt of GBP1.3m remaining at the year end, with GBP1.1m being repaid during the first quarter of FY2024.
Capital expenditure was GBP6.2m, an increase over the previous three years as a result of prudent cash management during the pandemic, and was focused on upgrading or replacing ageing rigs, investing in new rigs to meet growth opportunities and renewal of the Group's HGV fleet.
The Board continues to review and appraise acquisition opportunities, in line with its disciplined criteria and approach. The Board will look to supplement organic growth with earnings accretive, bolt-on acquisitions of established businesses which can augment and strengthen the Group's offering.
Dividend
The Group reinstated the payment of dividends following the recovery of our core markets, and an improved financial performance in the prior year. A final dividend of 1.0p per share was paid on 7 October 2022.
With a stronger performance in FY2023, the Board is pleased to recommend the payment of a final dividend of 0.8p per share to be paid on 13 October 2023 to shareholders on the register as at the close of business on 29 September 2023. The shares will be marked ex-dividend on 28 September 2023.
An interim dividend of 0.4p (interim dividend FY2022: nil) was paid on 17 March 2023. The total dividend payable for FY2023 will therefore be 1.2p (FY2022: 1.0p).
People
I would like to thank all our employees for their hard work and commitment over the past year. The Group has delivered significant growth, with some difficult market conditions, and I am proud that our people have responded positively to these challenges.
We recognise the importance of attracting and retaining the highest-quality workforce and accordingly take steps to understand the views of all employees. Our annual employment survey allows the Group to gather feedback from all employees and to develop action plans which support and improve employee engagement.
Through our dedicated Training division, we are highly focussed on developing our people. We ensure that all our workforce hold valid industry certifications and we offer training opportunities across the workforce.
The Board recognises the cost-of-living crisis that is being experienced in the UK. Employee pay has been reviewed on a more regular basis and higher salary increases have been targeted for lower paid employees.
Board and governance
There have been no changes to the Board during the current year. Van Elle remains committed to promoting the highest standards of corporate governance and ensuring effective communication with shareholders. The Group adopts and complies with the Quoted Companies Alliance Corporate Governance Code, complemented with other suitable governance measures appropriate for a company of its size.
I wish to thank my Board colleagues and the management team for their commitment over the past year as the Group has achieved significant growth and navigated some challenging market conditions.
Outlook
The Board anticipates that the current market uncertainty will continue over the coming year, particularly in the housebuilding sector. Notwithstanding these market challenges, activity levels in the first quarter of FY2024 have sustained and are broadly consistent with trading volumes throughout FY2023.
The Group's core markets have a positive outlook in the medium to long term and there are some good opportunities for growth including the high voltage power sector and geographical expansion of our rail capability. There is also a strong pipeline of opportunities across all divisions.
The Board remains confident of achieving its medium-term financial targets of 5-10% annual revenue growth, 6-7% operating profit margin and 15-20% ROCE.
Frank Nelson
Non-Executive Chair
25 July 2023
CHIEF EXECUTIVE'S STATEMENT
OPERATING REVIEW
Overview
The Group made excellent progress against its strategy in FY2023, delivering record revenues with strong trading momentum in all divisions throughout the majority of the financial year. Building on the strong growth achieved in the previous year, full year revenue increased to GBP148.7m, 19% higher than the prior year (FY2022: GBP124.9m). Each of the Group's three segments reported revenue growth in the year.
General Piling revenue increased by 41% on the prior year, with a strong brought forward order book and several large contracts won and delivered in the year. Revenue growth was primarily from high activity levels on major energy and logistics projects.
Specialist Piling and Rail revenue was 2% higher when compared to the prior year. The Specialist Piling division experienced softer market conditions in the second half of the year, primarily as a result of delays to highways projects, although in the medium-term opportunities for the division remain positive. The Rail division performed very well, despite some disruption caused by rail strikes in the first quarter of the financial year. The division experienced a strong workload from closer customer partnerships formed during CP6 ahead of the transition to CP7 in 2024. Large electrification projects provided a solid baseline of work throughout the year, particularly on the Midland Mainline and Core Valley Lines projects and numerous stations, slopes and embankment schemes across the UK.
Ground Engineering Services revenue increased by 32%. The housebuilding market, into which the Group delivers a range of services including its Smartfoot ground beam system, experienced high demand throughout the year. Softer market conditions are expected in FY2024, but the division delivers a range of services with a diverse customer base which is expected to mitigate some of the wider market impacts ahead of improved conditions expected in FY2025.
The supply chain disruption which impacted the Group's results over recent reporting periods has eased, with improved stability of input prices and more reliable availability. However, inflationary pressures adversely affected the Group's cost base, particularly through wage, utilities and fuel cost increases. These cost increases are mitigated through contract price mechanisms as far as possible, however, in some cases there is a lag in recovery. Group overheads have been unavoidably impacted by wage growth, as retention of key skills remains a priority to deliver our strategy.
Despite some challenges due to wider economic uncertainty and some softer market conditions in certain segments, the Group reported a materially improved profit before tax of GBP5.4m (FY2022: GBP3.6m), operating margins improving to 3.9% (FY2022: 3.5%), progressing towards our target range of 6-7%. Basic earnings per share increased by 159% to 4.4p (FY2022: 1.7p). Return on capital employed improved to 12.2%, demonstrating good progress towards achieving the Group's strategic target range of 15-20%.
The safety and wellbeing of all employees is Van Elle's first priority. Greater investment in resources and systems has been delivered in FY2023, including the launch of an upgraded Integrated Management System, involving an overhaul of all operational processes to embed best practices and improved consistency. The Group's headcount increased to an average of 648 (FY2022: 601) but pleasingly the number of safety incidents reduced, with three RIDDOR reportable accidents in FY2023 compared to four in FY2022. Accordingly, the Group's Accident Frequency Rate reduced to 0.19 (FY2022: 0.28).
Net funds, excluding IFRS 16 property and vehicle lease liabilities, increased to GBP7.5m at 30 April 2023 (30 April 2022: GBP5.9m). Working capital increased by GBP1.9m, primarily due to the impact of higher trading activity. Net capital expenditure of GBP5.6m (FY2022: GBP4.6m) primarily represents increased investment in rigs and the Group's HGV transport fleet.
The Group maintains a strong balance sheet with a healthy cash balance and significant liquidity headroom against its GBP11.0m funding facility. An additional GBP1.5m of new hire purchase finance was arranged during the year on a variable interest rate basis, with no early repayment charges. Total hire purchase finance at the end of the year was GBP1.3m, of which GBP1.1m has been repaid in Q1 FY2024. Group debt remains well within the target leverage threshold of less than 1.5 times EBITDA.
ESG
The Group launched its sustainability strategy in FY2021, which is aligned with the UN Sustainable Development Goals that are most applicable to our business operations.
Our strategic plan includes goals, targets and performance indicator measures, and allocates business leaders to manage actions. We aim to measure our strategy against the indicators annually to monitor our performance and identify continuous improvement measures. Our long-term 'Net Zero by 2050' commitment is supported in the medium-term by a roadmap to 2030 which provides a clear strategic pathway to a 30% reduction in our greenhouse gas emissions from a 2020 baseline.
We have committed to developing Science Based Targets to allow us to set achievable emissions reduction targets against a representative base year to achieve Net Zero by 2050. We are actively engaging with our supply partners to understand the greenhouse gas emissions arising from the materials and services with which they provide us.
The use of fuel is the main contributor to our Scope 1 emissions, and we are looking at transitional solutions to reduce emissions whilst new technologies are developed. We expanded our company car scheme offering to include hybrid and electric vehicles and these have been taken up by several employees. At Head Office we have installed electric chargers for employee and visitor use.
The Group has limited its Scope 2 emissions through a new electricity purchase agreement which is from 100% renewable sources (certified under the Renewable Energy Guarantees of Origin scheme). In addition, we are ESOS phase 2 compliant, and are in the process of achieving ISO 50001 Energy Management certification.
A key pillar of the Group's sustainability strategy is engagement with our supply chain and joint participation in innovation projects. We are trialling battery powered electric tools and are involved in the trial of low carbon cement in our precast factory operations. Our near-term roadmap to 2030 includes trials of hybrid machinery and fleet such as hydrogen/diesel, where technology is available.
Strategy
The business has continued to make solid progress against its strategy, with a clear focus on Phase 3 of the 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. The results for FY2023 are positive steps towards delivery of those targets.
Strategic highlights in the year include:
- A stronger focus on major project and framework opportunities, now led by a dedicated director. The Smart Motorways Programme Alliance and the TransPennine Route Upgrade framework are two of the major frameworks that present growth opportunities for the Group in FY2024 and beyond, both progressing through design phases during FY2023.
- Launch of our Canadian rail subsidiary and commencement of operations in Canada, with initial framework contracts expected to be awarded in H1 FY2024.
- An increased focus on the UK energy market, with excellent progress made in FY2023 on delivery of high voltage infrastructure projects with our preferred customers. The award of a major new framework is expected in H1 FY2024 and others are at preferred bidder stage. Several customer partnerships are being developed ahead of strong growth in investment driven by the UK Government's and the regulator's energy security strategy.
- The launch of the Group's Smartdeck housing foundation solution providing an alternative to Smartfoot where appropriate. Initial projects are expected to be awarded in Q2 FY2024.
- Further expansion of the Group's ground improvement capability, reaching GBP10m turnover in these specialised techniques in FY2023.
- Increased rig fleet investment following a restricted level of capital expenditure during the pandemic. This is to support a long-term replacement and renewal strategy and enable expansion in key strategic growth areas such as rail, ground improvement and sheet piling.
- The launch of the Van Elle leadership development programme in FY2023, aimed at developing and retaining the next generation of leadership talent. An initial cohort of 14 managers will be followed by a second group in FY2024.
- Expansion and refurbishment of the Group's premises at Kirkby in Ashfield and nearby Pinxton to provide additional capacity; and
- Expanded in-house training services to meet the needs of growth in the Group's headcount.
Markets
The Group operates in three market segments:
-- Residential constituted 38% of Group revenues in the year (down from 43% in FY2022). Divisional teams deliver integrated piling and foundation systems for national and regional housebuilders, retirement homes and multi-storey residential properties.
Following the severe impact on the segment during the pandemic there was a strong recovery in workloads which resulted in significant revenue growth in FY2022. This high level of demand was sustained throughout the majority of FY2023, with 7% revenue growth, building on the strong prior year sector performance.
To expand its range of foundation systems, the Group launched Smartdeck, an innovative piled raft foundation solution which integrates piling and foundations to floor slab level. The system complements the Company's Smartfoot precast foundation beam system. Discussions are ongoing with key customers and the Company expects to deploy Smartdeck on projects commencing in Q2 FY2024.
Industry forecasts predict weaker market conditions in the segment throughout FY2024. The Group has experienced some slowdown in new-build housing starts during the second half of the financial year, although general activity levels have remained strong as housebuilders have been active in advance of the new Part L Building Regulation changes which were effective from June 2023. The Group is closely involved with several national housebuilders to help develop efficient foundation solutions ahead of further Building Regulations changes planned for 2025.
The impact of increasing interest rates is likely to slow new-build starts further and this is being reflected in recent housebuilder forecasts. A reduction in sector activity levels during FY2024 is therefore expected and the divisional cost base will be reduced to mitigate the financial impact as far as possible.
The Group operates across a diverse range of customers, tenures and geographies in the housebuilding sector, and this is expected to provide some protection against reduced volumes experienced by private housebuilders.
The recent challenges faced by certain modular housebuilders will not have a significant impact on Group performance. Offsite/modular housing is still at early-stage lifecycle development and although several projects have been delivered, revenues on such projects have, to date, not been material and due to its credit control processes, the Group had no financial exposure.
Notwithstanding the short-term challenges in the housebuilding sector, medium and longer-term opportunities remain compelling, as the government drives its agenda to deliver 300,000 net additional dwellings per annum.
-- Infrastructure constituted 42% of Group revenues in the year (up from 35% in FY2022). The segment includes specialist ground engineering services to the rail, highways, coastal and flooding, energy and utility sectors.
Infrastructure saw the largest absolute, and relative, growth in the year of 44% over FY2022, despite experiencing major delays or cancellations to certain major projects in the Highways sector which it previously expected to deliver or commence delivery during the year. Work continued to be delivered under both local authority and National Highways frameworks, but the government's pause, and subsequent cancellation of all new Smart Motorways, impacted the pipeline of work in this programme.
Design work for the 10-year National Highways Smart Motorway Programme Alliance has continued for important additional safety measures on the existing network, including new emergency refuge areas, being planned for delivery in H2 FY2024 onwards.
Activity levels increased in the Rail sector with ongoing electrification programmes in South Wales and the East Midlands and strong revenues as CP6 entered the final year before CP7 commences in 2024. The Group also delivered several high profile and complex schemes at stations and to stabilise slopes, embankments and cuttings including the Dawlish seafront where we have been working for almost two years. The Group has been appointed as a framework partner to the TransPennine Route Upgrade (TRU) programme with the first revenues expected to be delivered in H2 FY2024.
In order to widen the opportunities available for our specialist rail engineering capabilities and provide some protection against the cyclical nature of UK rail investment, a Canadian subsidiary has been established, based in Toronto. The first framework delivery contracts are expected to commence in Q2 FY2024.
Although participation in Phase 1 (London to Birmingham) to date has been modest, HS2 continues to offer medium-term opportunities to parts of the Group, primarily on Phase 2 (north of Birmingham) where customer partnerships are being established at an early stage.
There is a rapidly growing pipeline of opportunities in the energy sector, reflecting the increased investment in distribution and transmission infrastructure for which the Group is well-placed due to its range of capabilities, and in particular the ScrewFast solution. During FY2023, several sub-station, switch-room and power line schemes were delivered. Further major transmission line schemes and frameworks are in negotiation.
-- Regional Construction constituted 20% of Group revenues (down from 22% in FY2022). 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.
Revenue has remained robust in the Regional Construction segment, increasing by 4% in FY2023, supported by industrial and logistics warehouse projects for private customers across the UK, and larger commercial projects in central London, delivered substantially by the General Piling division. Growth of our ground improvement capabilities (vibro and rigid inclusion techniques) has assisted in accessing a wider range of attractive projects in the industrial sector.
The regional construction market remained strong in the year but has continued to be relatively competitive and, as a result, price sensitive.
Operating structure
Van Elle's operational Group 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 41% in the year to GBP54.8m (FY2022: GBP39.0m), representing 37% of Group revenues.
The General Piling division operates across each of the Group's three market segments. Market conditions remained competitive throughout the year, with price-sensitive tendering continuing to be a key factor in work winning. However, the division made further progress in developing strong customer relationships and delivered high-quality contract works utilising its broad and significant technical capabilities.
Performance in the residential and regional construction segments was robust, assisted by the completion of several major projects across the UK, using the Group's rotary, CFA, precast driven, sheet piling and rigid inclusion capabilities. Strong revenue growth was also delivered in the infrastructure segment, with activity on two major energy contracts (total value of approximately GBP26m) in the year. The first of these contracts was completed in January 2023 and the second contract is now expected to complete in Q2 FY2024.
Inflationary pressures have remained challenging for the division (particularly fuel, raw materials and wages) but the increased activity levels resulted in significantly improved profitability in FY2023.
Underlying operating profit for the division was GBP3.4m (FY2022: GBP1.8m).
Specialist Piling and Rail
Revenue increased by 2% in the year to GBP46.6m (FY2022: GBP45.8m), representing 31% of Group revenues.
Specialist Piling experienced very high levels of demand in the first half of the financial year as a result of the division expanding its operational capability by investing in new rigs for growth and increasing the number of site gangs. Key contracts included the Group's 200(th) rail station project, the start of the M6 Smart Motorway scheme, several high voltage substations and several major ground stabilisation contracts for housebuilders.
Softer market conditions were experienced in the second half of the year, primarily because of delays to major infrastructure work on highways and a short-term decrease in demand for drill and grout activity. The medium-term outlook for the division's work in the infrastructure sector remains very positive, with work on existing Smart Motorways safety measures, including new emergency refuge areas, expected to commence during FY2024.
The Specialist Piling division is also developing a growing presence in the high voltage power sector, primarily due to the attractive capabilities of the ScrewFast solution. There is a strong pipeline of prospects in the sector and the division has already completed several contracts on substation and other infrastructure projects across the National Grid and regional distribution networks.
The Rail division performed strongly throughout the year, despite some early challenges due to the impact of rail strikes in the first quarter. In FY2023, we delivered our 200(th) rail station upgrade project and delivered several high-profile slope and embankment stabilisation schemes. Piling works continued for the decarbonisation and electrification of the Core Valley Lines rail network in south Wales and ongoing works on the Midland Mainline. The division has a strong reputation and has embedded relationships with several key customers.
Activity levels were positively impacted as CP6 entered the final year before CP7 commences in 2024. The Group was appointed to the piling framework for the TRU programme between Manchester and Leeds and work is expected to commence in FY2024, involving both the Specialist Piling and Rail divisions for up to three years.
Rail activities are impacted by the cyclical nature of the rail activity programme. A Canadian subsidiary has been established, where there are numerous opportunities to offer the specialist skills of our UK rail team.
A rolling programme of upgrade work on the Group's road/rail (RRV) piling rigs has continued and will be largely concluded by the end of FY2024.
Underlying operating profit for the division decreased to GBP2.2m (FY2022: GBP3.0m). The result was primarily impacted by short-term reduced activity volumes in Highways and some challenging contracts in the Specialist Piling division, which have been closed out in the financial year. Both Rail and Specialist Piling divisions were also impacted by inflationary factors across their cost base.
Ground Engineering Services
Revenue increased by 18% in the year to GBP47.1m (FY2022: GBP40.0m), representing 32% of Group revenues.
Ground Engineering Services consists of the Group's Housing division and Strata Geotechnics; Van Elle's geotechnical division. The Housing division delivers integrated piling and Smartfoot foundation beam solutions to UK housebuilders plus Smartdeck, an innovative piled raft foundation solution which integrates piling and foundations to floor slab level which was launched in the final quarter of the year.
Activity levels in the Housing division were high throughout the year with further revenue growth building on an already strong prior year performance. Normal production capacity was consistently exceeded, with precast production being partially outsourced to meet the demand of site works. Geographical expansion was a focus during the year, with new contracts being won and delivered in the South of England. The division has been heavily focussed on maximising operational efficiency, which has delivered further improvements to reported contract margins.
Housing revenues have continued to be strong as housebuilders have been active in advance of the new Part L Building Regulation changes which were effective from June 2023. However, softer market conditions as a result of interest rate rises and build cost inflation are expected later in the year, as reflected in industry forecasts.
Strata Geotechnics also reported increased revenue in the year. Further progress in infrastructure work has increased activity levels, particularly in the highways sector (including under the Highways England ground investigation framework) and on rail ground investigation projects.
Underlying operating profit for the division increased to GBP3.6m (FY2022: GBP2.1m).
Rig fleet
Capital expenditure increased to GBP6.2m in the year (FY2022: GBP4.9m) but was lower than expected due to long lead times on certain capital purchases, which will not be delivered until FY2024. With positive cash generation, investment was increased to both sustain the existing rig fleet as well as invest for growth in key strategic growth areas.
The Group invested GBP2.8m of capital spend in the Rail division, which included the continued rolling programme of mid-life overhauls of the rig fleet where major parts of the rigs are replaced and are expected to extend the rig life for at least another 7 years. In addition, two new RRV rigs were acquired to continue to expand the division's capacity and capabilities.
The HGV fleet has commenced a full renewal after relatively low investment during the pandemic. This refresh of the fleet will be completed in FY2024.
The total rig fleet size at the year-end was 132, up from 122 last year.
Summary and outlook
Activity levels in the first quarter of FY2024 have continued to be strong with a healthy pipeline of opportunities across all divisions.
All of the Group's core markets show a positive outlook in the medium to long term, despite some short-term challenges in certain sectors. Higher interest rates, high inflation and the cost-of-living crisis are contributing to greater market uncertainty, particularly in the housebuilding sector which is expected to deliver lower volumes during FY2024. Several projects in the infrastructure sector have also been cancelled or delayed. However, our other core markets are showing resilience, and the Group continues to focus on growth sectors, including an increasing presence in the high voltage power sector and expanding our rail capabilities geographically.
The Group is also benefitting from improved future work visibility, primarily due to being appointed to several framework agreements which are expected to deliver consistent future workloads.
Inflationary pressures on the Group's cost base have continued and are likely to persist in the short term, however, the Group continues to largely offset cost increases through contract pricing mechanisms.
Despite a more challenging macroeconomic environment currently impacting some of the Group's divisions, the diversity of our range of activities and operating segments, a focus on growth sectors, and continued delivery of the strategy results in a positive outlook in line with the medium-term targets previously announced.
Mark Cutler
Chief Executive Officer
25 July 2023
CHIEF FINANCIAL OFFICER'S STATEMENT
FINANCIAL REVIEW
Revenue
Revenue in the year to 30 April 2023 was significantly ahead of the previous financial year, up 19% in total. Strong trading momentum in the later part of FY2022 was sustained throughout H1 of FY2023, despite a challenging macro environment, with all divisions operating at high activity levels and delivering record revenues in the first half of the financial year. Rates of revenue growth slowed in H2 due to the industry-wide softening and investment delays due to macro-economic factors in the housing and infrastructure markets. Despite market challenges and seasonal impacts on contract delivery during H2 revenues grew by 5% on the preceding year H2.
2023 2022 Change 2023 2022 GBP'000 GBP'000 % % % --------- ---------- --------- ------- ------ ------ H1 80,836 60,061 34.6 54.3 48.1 H2 67,898 64,854 4.7 45.7 51.9 --------- ---------- --------- ------- ------ ------ Revenue 148,734 124,915 19.1 100.0 100.0 --------- ---------- --------- ------- ------ ------
The Group tracks enquiry 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:
2023 2022 Change 2023 2022 GBP'000 GBP'000 % % % ----------------------- ---------- --------- ------- ------ ------ Residential 56,860 53,307 6.7 38.2 42.7 Infrastructure 62,592 43,378 44.3 42.1 34.7 Regional construction 28,943 27,879 3.8 19.5 22.3 Other 339 351 (1.5) 0.2 0.3 ----------------------- ---------- --------- ------- ------ ------ Revenue 148,734 124,915 19.1 100.0 100.0 ----------------------- ---------- --------- ------- ------ ------
Residential : Record levels of enquiries and contract activity reported in FY2022 continued into early FY2023, buoyed by pending changes in building regulations which resulted in significant levels of new builds being started. The levels of new build housing starts began to slow down in Autumn 2022 due to increasing interest rates and approaching regulation changes. Despite this, enquiry and order levels remained at strong levels throughout H2 of FY2022, albeit lower than H1 levels.
Infrastructure : Rail activity levels improved in FY2023 as Rail infrastructure spend levels increased ahead of the end of Control Period 6 in March 2024 and work was completed on the Group's first major electrification programme since 2018. The Group has also had success in delivering two significant industrial energy projects utilising its deep CFA technical expertise which drives the significant increase in this sector's revenues in FY2023. The government pause to the new 'all lane running' Smart Motorway projects resulted in a slow down in highways work during the year, albeit the final phase of the significant M6 contract, with installation of ScrewFast piles, was completed during the year and work on new emergency areas on the existing smart motorway network are due to commence in H1 of FY2024.
Regional construction : The sector has remained highly competitive despite an increase in activity levels. During the year the Group has continued to secure and deliver high quality projects whilst also continuing to focus on contract execution and commercial improvement. The Group has had success in delivering large schemes utilising our vibro, and recently developed rigid inclusions, techniques.
The mix of revenue by segment is shown below:
2023 2022 Change 2023 2022 GBP'000 GBP'000 % % % -------------------- ---------- --------- ------- ------ ------ General Piling 54,838 38,974 40.7 36.9 31.2 Specialist Piling and Rail 46,593 45,771 1.8 31.3 36.6 Ground Engineering Services 47,067 40,043 17.5 31.6 32.1 Head Office 236 127 85.8 0.2 0.1 Revenue 148,734 124,915 19.1 100.0 100.0 -------------------- ---------- --------- ------- ------ ------
General Piling revenues, whilst impacted by high levels of competition within the regional construction market have grown significantly in FY2023 with two significant industrial energy projects delivered during the year which, combined, delivered GBP18m of revenue in FY2023. Revenue was also supported by further growth in the Group's ground improvement capability, with several large projects completed successfully during the year.
The Specialist Piling and Rail segment includes ScrewFast, which, as of the beginning of the financial year was fully integrated into the Specialist Piling division. Growth in Rail revenues, driven by an increase in infrastructure spend ahead of the end of control period 6, delivery of significant electrification programmes and diversification into the rail civils market during the year, is offset by a reduction in activity within the Specialist Piling division predominately due to the slowdown in highways work as a result of the pause to the new Smart Motorways schemes. As such, revenue growth in this segment has been slower than the other segments in FY2023.
As part of the strategic plan to grow the Rail division and reduce exposure to cyclical workloads between control periods, Van Elle Canada Inc was incorporated in March 2023 ahead of major rail infrastructure and electrification opportunities in Ontario which are expected to commence in FY2024.
Growth in the Ground Engineering Services division's revenue reflects the significant demand in the residential sector during the year and expansion into rail and highways ground investigation. The division has operated at near-capacity for the majority of the year.
Head office revenues relate to the provision of training services delivered through the dedicated training facility located at Kirkby-in-Ashfield.
Gross profit
Gross margin remained consistent in FY2023 at 27% (FY2022: 27%).
The strong growth in Ground Engineering Services revenues, particularly Housing, has a negative mix impact due to the highly competitive sector delivering margins at the lower end of the Group's margin range. The two significant infrastructure projects supporting General Piling growth also have a negative mix impact with gross margins at the lower end of the Group's margin range.
Despite the negative revenue mix, gross margins have been maintained in FY2023 due to improved contract execution across all divisions, higher rig utilisation due to increased volumes and a softening of the supply chain challenges, including material availability and price volatility, seen in the previous financial year. Wage, utilities and fuel inflation has continued to impact the Group throughout the year, mitigated through contract price mechanisms as far as possible.
Operating profit
Total operating profit and operating profit margins have improved in FY2023 as record activity levels resulted in improved overhead recovery rates. The rate of operating profit growth is limited by inflationary pressures, particularly in wages, utilities and fuel experienced during the year. These cost increases have been mitigated through contract price mechanisms as far as possible, however, in some cases there is a lag in recovery.
2023 2022 GBP'000 GBP'000 ------------------ --------- --------- Operating profit 5,858 4,372 Operating margin 3.9% 3.5% ------------------ --------- ---------
Alternative performance measures
In previous years, the Group has presented 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 deduction of non-underlying items give a clearer indication of the actual performance of the business.
The Group's non-underlying items in FY2023 include a credit of GBP427,000 relating to the reduction in the deferred consideration due in respect of the acquisition of ScrewFast and a charge of GBP350,000 relating to two warranty claims where the estimated costs of remediation have increased in the current financial year. The total net value of GBP77,000 is recognised as a credit within administration expenses and forms part of underlying operating profits. Underlying operating profits and reported operating profits are consistent in FY2023. This is consistent with the presentation in the previous financial year.
Net finance costs
Net finance costs were GBP487,000 (2022: GBP779,000). Finance costs relate to interest on outstanding hire purchase agreements and interest on property and vehicle liabilities classified under IFRS 16. Finance costs in the preceding year included accelerated interest charges as a result of early repayment of loans and hire purchase agreements by ScrewFast in April 2022.
Taxation
The effective tax rate in the year is 12.9% (2022: 48.2%). The Group has benefitted from the super deduction allowances on qualifying items of plant and machinery during the year, resulting in an effective tax rate below the rate or corporation tax applicable in the financial year. The Group has carried forward taxable losses into the current financial year. Tax losses have been recognised on the basis that the Group has net deferred tax liabilities against which to offset those tax losses.
The Group's net deferred tax liabilities were restated from 19% to 25% in the preceding year resulting in an effective tax rate of 48.2% in FY2022.
Dividends
An interim dividend of 0.4p (2022: nil) was paid on 17 March 2023. The Board is recommending a final dividend of 0.8p (2022: 1.0p) taking the total dividend payable for the year to 1.2p (2022: 1.0p).
Subject to approval at the Annual General Meeting on Thursday 21 September, the recommended final dividend will be paid on 13 October 2023 to shareholders on the share register as at 29 September 2023. The associated ex-dividend date will be 28 September 2023.
Earnings per share
Basic and diluted earnings per share are 4.4p in FY2023 (2022: 1.7p). An adjusted earnings per share of 2.7p was reported in the preceding financial year based on profit before non-underlying items, net of tax, and the one-off deferred tax charge relating to the restatement of deferred tax liabilities from 19% to 25%.
Balance sheet
2023 2022 GBP'000 GBP'000 -------------------------------------------- --------- --------- Fixed assets (including intangible assets) 45,630 43,377 Net working capital 9,973 8,113 Net funds / (debt) 367 134 Deferred consideration (790) (1,220) Taxation and provisions (5,149) (3,793) -------------------------------------------- --------- --------- Net assets 50,031 46,611 -------------------------------------------- --------- ---------
Note: net working capital and taxation and provisions are stated net of claim liabilities and associated insurance assets
Net assets increased by GBP3.4m to GBP50.0m (2022: GBP46.6m). ROCE has increased in the period to 12.2% at 30 April 2023 (2022: 9.4%), reflecting the impact of the increased operating profit.
The Group invested GBP6.2m in capital over the course of the year with three new Rail rigs added to the fleet as well as the mid-life overhaul and upgrade of approximately one third of the existing Rail fleet. The programme of overhaul and upgrade commenced in the previous financial year and is due to conclude in FY2024. Investment in the Rail fleet supports growth opportunities in this sector in the UK and overseas. Approximately half of the Group's aging transport fleet was also replaced with more efficient vehicles in the financial year with the remainder due to be replaced in FY2024.
Working capital (defined as inventories, trade and other receivables and trade and other payables) increased to GBP10.0m (2022: GBP8.1m), due to increased activity in the year.
The estimated remaining balance due in respect of the acquisition of ScrewFast Foundations Limited on 1 April 2021 is GBP790k, of which GBP740k is a guaranteed sum due on 31 August 2023 and GBP50k is the expected outcome of the consideration payable based on post-acquisition performance to 31 May 2023 and payable on 31 August 2023. This is a reduction of GBP427k on the estimate as at 30 April 2022 and GBP1.1m below the maximum possible contingent consideration. Performance is expected to be at the lower end of the pay-out range due to the delay to several large highways projects caused by a pause, and subsequent cancellation of the Smart Motorways programme, a work bank that favours the ScrewFast piling solution. Significant opportunities for ScrewFast in highways, high voltage power and modular homes exist in FY25 and beyond.
The Group's deferred tax liability has increased in FY2023 due to utilisation of the super capital allowances scheme. Corporation tax receivables have also reduced in the year following the repayment of corporation tax as a result of an extended loss carry back claim made in April 2022.
Net funds
2023 2022 GBP'000 GBP'000 ------------------------------------------ --------- --------- Lease liabilities (8,518) (6,853) ------------------------------------------ --------- --------- Total borrowings (8,518) (6,853) Cash and cash equivalents 8,885 6,987 ------------------------------------------ --------- --------- Net funds 367 134 ------------------------------------------ --------- --------- Net funds excluding IFRS 16 property and vehicle lease liabilities 7,526 5,935 ------------------------------------------ --------- ---------
Net funds have increased during the year to GBP0.4m (2022: GBP0.1m) with total cash and cash equivalents increasing to GBP8.9m at 30 April 2023 (2022: GBP7.0m).
The Group's lease liabilities include GBP7.2m of IFRS 16 property and vehicle lease liabilities (2022: GBP5.8m). The increase in IFRS16 property and vehicle lease liabilities reflects the renewal of the Group's van fleet which commenced in previous years and was substantially complete in FY2023. Additional vans, required to service additional activity levels have also been taken during the year. Vans are leased on a long-term hire basis over a period of 4 years with early termination possible.
Remaining lease liabilities of GBP1.3m relate to outstanding hire purchase agreements. The majority of outstanding hire purchase debt relates to two new hire purchase agreements taken out in H1 of the current year, funded on a variable basis, expiring in August 2024.
The Group has an GBP11m asset back lending facility, secured against the Group's receivables and certain tangible assets. A draw down of the facility was made in H1 to support working capital investment given the significant increase in revenues. This was repaid in H2 and the facility remains undrawn as at 30 April 2023. There are no financial covenants associated with the facility which is due to expire in October 2024. It is expected that the facility will be extended for a further 4-year period to October 2028.
Cash flow
2023 2022 GBP'000 GBP'000 ------------------------------------------------- --------- --------- Operating cash flows before working capital 11,846 9,816 Working capital movements (including provisions and deferred consideration) (1,885) (1,442) ------------------------------------------------- --------- --------- Cash generated from operations 9,961 8,374 Income tax received 323 - ------------------------------------------------- --------- --------- Net cash generated from operating activities 10,284 8,374 Investing activities (5,602) (4,738) Financing activities (2,784) (5,167) ------------------------------------------------- --------- --------- Net decrease/increase in cash 1,898 (1,531) ------------------------------------------------- --------- ---------
Operating cash flows of GBP10.0m have primarily been used to repay outstanding debt and fund capital expenditure. Working capital increased in the year, due to the increased trading levels.
Graeme Campbell
Chief Financial Officer
25 July 2023
Consolidated statement of comprehensive income
For the year ended 30 April 2023
2023 2022 GBP'000 GBP'000 --------------------------------------------------- ---------- --------- Revenue 148,734 124,915 Cost of sales (108,646) (90,842) --------------------------------------------------- ---------- --------- Gross profit 40,088 34,073 Administrative expenses (35,089) (29,980) Credit loss impairment charge (45) (159) Other operating income 904 438 --------------------------------------------------- ---------- --------- Operating profit 5,858 4,372 --------------------------------------------------- ---------- --------- Finance expense (487) (779) Profit before tax 5,371 3,593 Income tax expense (693) (1,733) --------------------------------------------------- ---------- --------- Profit after tax and total comprehensive income for the year attributable to shareholders of the parent 4,678 1,860 --------------------------------------------------- ---------- --------- Earnings per share (pence) Basic 4.4 1.7 Diluted 4.4 1.7 --------------------------------------------------- ---------- ---------
All amounts relate to continuing operations. There was no other comprehensive income in either the current or preceding year.
Consolidated statement of financial position
As at 30 April 2023
2023 2022 GBP'000 GBP'000 ------------------------------- --------- --------- Non-current assets Property, plant and equipment 41,917 38,719 Investment property - 811 Intangible assets 3,713 3,847 ------------------------------- --------- --------- 45,630 43,377 ------------------------------- --------- --------- Current assets Inventories 4,971 3,773 Trade and other receivables 35,544 34,112 Corporation tax receivable - 322 Cash and cash equivalents 8,885 6,987 49,400 45,194 ------------------------------- --------- --------- Total assets 95,030 88,571 ------------------------------- --------- --------- Current liabilities Trade and other payables 23,245 22,475 Deferred consideration 790 50 Lease liabilities 2,339 1,696 Provisions 8,143 7,738 ------------------------------- --------- --------- 34,517 31,959 ------------------------------- --------- ---------
Non-current liabilities Deferred consideration - 1,170 Lease liabilities 6,179 5,157 Deferred tax 4,303 3,674 10,482 10,001 ------------------------------- --------- --------- Total liabilities 44,999 41,960 ------------------------------- --------- --------- Net assets 50,031 46,611 ------------------------------- --------- --------- Equity Share capital 2,133 2,133 Share premium 8,633 8,633 Other reserve 5,807 5,807 Retained earnings 33,458 30,038 Total equity 50,031 46,611 ------------------------------- --------- ---------
Consolidated statement of cash flows
For the year ended 30 April 2023
2023 2022 GBP'000 GBP'000 ------------------------------------------------- --------- --------- Cash flows from operating activities Operating profit 5,858 4,372 Depreciation of property, plant and equipment 5,984 5,282 Amortisation of intangible assets 134 101 Depreciation of investment property 9 9 Property on disposal of property, plant and equipment (310) (122) Share based payment expense 171 174 ------------------------------------------------- --------- --------- Operating cash flows before movement in working capital 11,846 9,816 ------------------------------------------------- --------- --------- (Increase) in inventories (1,200) (750) (Increase) in trade and other receivables (1,434) (2,074) Increase in trade and other payables 344 1,280 Increase in provisions 405 102 ------------------------------------------------- --------- --------- Cash generated from operations 9,961 8,374 ------------------------------------------------- --------- --------- Income tax received 323 - ------------------------------------------------- --------- --------- Net cash generated from operating activities 10,284 8,374 ------------------------------------------------- --------- --------- Cash flows from investing activities Purchases of property, plant and equipment (6,167) (4,946) Proceeds from disposal of property, plant and equipment 615 384 Acquisition of subsidiary, net of cash acquired (50) - Purchases of intangibles - (176) Net cash absorbed in investing activities (5,602) (4,738) ------------------------------------------------- --------- --------- Cash flows from financing activities Proceeds from new hire purchasing finance 1,544 - Proceeds from new borrowings 3,000 - Repayment of borrowings (3,000) (812) Principal paid on lease liabilities (2,394) (3,637) Interest paid on lease liabilities (388) (608) Interest on borrowings (53) (110) Dividends paid (1,493) - Net cash absorbed in financing activities (2,784) (5,167) ------------------------------------------------- --------- --------- Net increase / (decrease) in cash and cash equivalents 1,898 (1,531) Cash and cash equivalents at beginning of year 6,987 8,518 Cash and cash equivalents at end of year 8,885 6,987 ------------------------------------------------- --------- ---------
Consolidated statement of changes in equity
For the year ended 30 April 2023
Share Share Other Retained Total Capital premium reserve earnings equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------------------------- --------- --------- --------- ----------- --------- Balance at 1 May 2021 2,133 8,633 5,807 28,004 44,577 ---------------------------- --------- --------- --------- ----------- --------- Total comprehensive income - - - 1,860 1,860 Share-based payments - - - 174 174 ---------------------------- --------- --------- --------- ----------- --------- Total changes in equity - - - 2,034 2,034 Balance at 30 April 2022 2,133 8,633 5,807 30,038 46,611 ---------------------------- --------- --------- --------- ----------- --------- Total comprehensive income - - - 4,678 4,678 Dividends paid - - - (1,493) (1,493) Share-based payments - - - 171 171 Deferred tax credit on share-based payments - - - 64 64 ---------------------------- --------- --------- --------- ----------- --------- Total changes in equity - - - 3,420 3,420 At 30 April 2023 2,133 8,633 5,807 33,458 50,031 ---------------------------- --------- --------- --------- ----------- --------- 1. Basis of preparation
The consolidated financial statements and announcement of Van Elle Holdings plc for the year ended 30 April 2023 were authorised for issue by the Board of Directors on 25 July 2023.
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 2023 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 2023 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 2022
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 3 Business Combinations -- IFRS 16 Property, Plant and Equipment -- IFRS 37 Provisions, Contingent Liabilities and Contingent Assets
-- Annual improvements to IFRSs (2018-2020 Cycle): IFRS 1; IFRS 9; Illustrative Examples accompanying IFRS 16; IAS 41
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 17 Insurance contracts including amendments to IFRS 17 (issued on 25 June 2020) -- IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information -- IFRS S2 Climate-related Disclosures -- Amendments to IAS 1: Classification of Liabilities as Current or Non-current -- 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 -- Amendment to IFRS 16 Leases: Lease liability in a Sale and Leaseback -- Amendments to IAS 12 International Tax Reform - Pillar Two Model Rules 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 2023
Specialist Ground General Piling Engineering Head Piling and Rail Services Office Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------------------------- --------- ----------- ------------- --------- --------- Revenue 54,838 46,593 47,067 236 148,734 ----------------------------- --------- ----------- ------------- --------- --------- Other operating income - - - 904 904 ----------------------------- --------- ----------- ------------- --------- --------- Operating profit / (loss) 3,403 2,236 3,642 (3,423) 5,858 Finance expense - - - (487) (487) Profit / (loss) before tax 3,403 2,236 3,642 (3,910) 5,371 ----------------------------- --------- ----------- ------------- --------- --------- Assets Property, plant and equipment 9,090 14,411 8,005 10,411 41,917 Intangible assets 11 3,483 219 - 3,713 Inventories 1,858 727 1,902 484 4,971 ----------------------------- --------- ----------- ------------- --------- --------- Reportable segment assets 10,959 18,621 10,126 10,895 50,601 Trade and other receivables - - - 35,544 35,544 Cash and cash equivalents - - - 8,885 8,885 Total assets 10,959 18,621 10,126 55,324 95,030 ----------------------------- --------- ----------- ------------- --------- --------- Liabilities Trade and other payables - - - 23,245 23,245 Provisions - - - 8,143 8,143 Deferred consideration - - - 790 790 Lease liabilities - - - 8,518 8,518 Deferred tax - - - 4,303 4,303 Total liabilities - - - 44,999 44,999 ----------------------------- --------- ----------- ------------- --------- --------- Other information Capital expenditure (including IFRS 16 leased assets) 1,171 4,188 1,351 1,977 8,687 Depreciation (including IFRS 16 leased assets) 1,422 2,262 1,421 879 5,984 ----------------------------- --------- ----------- ------------- --------- ---------
Operating segments - 30 April 2022
Specialist Ground General Piling Engineering Head Piling and Rail Services Office Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------------------------------- --------- ----------- ------------- --------- --------- Revenue 38,974 45,771 40,043 127 124,915 ------------------------------------------------------- --------- ----------- ------------- --------- --------- Other operating income - - - 438 438 ------------------------------------------------------- --------- ----------- ------------- --------- --------- Operating profit / (loss) 1,804 2,998 2,115 (2,545) 4,372 Finance expense - - - (779) (779) Profit / (loss) before tax 1,804 2,998 2,115 (2,545) 3,593 ------------------------------------------------------- --------- ----------- ------------- --------- --------- Assets Property, plant and equipment 9,341 12,589 8,145 8,644 38,719 Intangible assets 18 3,594 233 2 3,847 Inventories 1,251 1,163 1,320 39 3,773 ------------------------------------------------------- --------- ----------- ------------- --------- --------- Reportable segment assets 10,610 17,346 9,698 8,685 46,339 Investment property - - - 811 811 Trade and other receivables - - - 34,434 34,434 Cash and cash equivalents - - - 6,987 6,987 Total assets 10,610 17,346 9,698 50,917 88,571 ------------------------------------------------------- --------- ----------- ------------- --------- --------- Liabilities Trade and other payables - - - 22,475 22,475 Provisions - - - 7,737 7,737 Deferred consideration - - - 1,220 1,220 Lease liabilities - - - 6,854 6,854 Deferred tax - - - 3,674 3,674 Total liabilities - - - 41,960 41,960 ------------------------------------------------------- --------- ----------- ------------- --------- --------- Other information Capital expenditure (including IFRS 16 leased assets) 2,097 2,462 1,207 254 6,020 Depreciation (including IFRS 16 leased assets) 1,166 1,907 1,296 913 5,282 ------------------------------------------------------- --------- ----------- ------------- --------- ---------
The Group has one customer with revenues greater than 10% in the current year (2022: none). Total revenues from the customer were GBP18.4m and these are reported within the General Piling operating segment. All revenue is generated in the UK.
3. Revenue from contracts with customers
Disaggregation of revenue - 30 April 2023
Specialist Ground General Piling Engineering Head Piling and Rail Services Office Total End market GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------------------- --------- ----------- ------------- --------- --------- Residential 13,924 4,840 38,096 - 56,860 Infrastructure 20,761 37,180 4,651 - 62,592 Regional construction 20,147 4,507 4,289 - 28,943 Other 6 66 31 236 339 ----------------------- --------- ----------- ------------- --------- --------- Total 54,838 46,593 47,067 236 148,734 ----------------------- --------- ----------- ------------- --------- ---------
Head office revenue relates to revenue generated from the provision of training services.
Disaggregation of revenue - 30 April 2022
Specialist Ground General Piling Engineering Head Piling and Rail Services Office Total End market GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------------------- --------- ----------- ------------- --------- --------- Residential 13,569 6,346 33,392 - 53,307 Infrastructure 5,224 34,333 3,821 - 43,378 Regional construction 20,177 4,872 2,830 - 27,879 Other 4 220 - 127 351 ----------------------- --------- ----------- ------------- --------- --------- Total 38,974 45,771 40,043 127 124,915 ----------------------- --------- ----------- ------------- --------- --------- 4. Income tax expense 2023 2022 GBP'000 GBP'000 --------------------------------------------------- --------- --------- Current tax credit Current tax on profit/loss for the year - - Adjustment for over-provision in the prior period - (238) --------------------------------------------------- --------- ---------
Total current tax credit - (238) --------------------------------------------------- --------- --------- Deferred tax expense Origination and reversal of temporary differences 1,176 842 Adjustment for over-provision in the prior period (483) 396 Effect of decreased tax rate on opening balance - 733 --------------------------------------------------- --------- --------- Total deferred tax expense 693 1,971 --------------------------------------------------- --------- --------- Income tax expense 693 1,733 --------------------------------------------------- --------- ---------
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:
2023 2022 GBP'000 GBP'000 --------------------------------------------- --------- --------- Profit / (loss) before income taxes 5,371 3,593 --------------------------------------------- --------- --------- Tax using the standard corporation tax rate of 19.5% (2022: 19%) 1,047 683 Adjustments for over-provision in previous periods (483) 159 Expenses not deductible for tax purposes 130 104 Income not taxable (83) (40) Tax rate changes 259 1,072 Previously unrecognised tax losses used to reduce current tax expense - (30) Capital allowances super deductions (177) (215) --------------------------------------------- --------- --------- Total income tax expense 693 1,733 --------------------------------------------- --------- ---------
During the year ended 30 April 2023, corporation tax has been calculated at 19% of estimated assessable profit for the 11-month period to 1 April 2023 and 25% for the 1-month period ending 30 April 2023 (2022: 19%).
Deferred tax balances as at 30 April 2023 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:
2023 2022 '000 '000 ------------------------------------------- -------- -------- Basic weighted average number of shares 106,667 106,667 Dilutive potential ordinary shares from 473 - share options ------------------------------------------- -------- -------- Diluted weighted average number of shares 107,140 106,667 ------------------------------------------- -------- -------- GBP'000 GBP'000 ------------------------------------------- -------- -------- Profit for the year 4,678 1,860 ------------------------------------------- -------- -------- Pence Pence ------------------------------------------- -------- -------- Earnings per share Basic 4.4 1.7 Diluted 4.4 1.7 Basic - adjusted* 4.4 2.7 Diluted - adjusted* 4.4 2.7 ------------------------------------------- -------- --------
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders and on 106,666,650 ordinary shares (2022: 106,666,650), being the weighted average number of ordinary shares.
The dilutive shares of 473,000 represent share options exercisable under the Group's CSOP scheme that vested during the financial year.
* Adjusted earnings per share in the prior year is stated before the one-off deferred tax charge of GBP1.1m, relating to the enacted change to the future corporation tax rate.
6. Analysis of cash and cash equivalents and reconciliation to net debt Cash Non-cash 2022 flows flows 2023 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------- --------- --------- --------- --------- Cash at bank 6,948 1,899 - 8,847 Cash in hand 39 (1) - 38 ------------------------------- --------- --------- --------- --------- Cash and cash equivalents 6,987 1,888 - 8,885 Lease liabilities (6,853) 2,782 (4,447) (8,518) ------------------------------- --------- --------- --------- --------- Net funds/ (debt) including IFRS 16 property and vehicle lease liabilities 134 4,680 (4,447) 367 ------------------------------- --------- --------- --------- ---------
Cash flows in respect of lease liabilities include interest paid on leases of GBP388,000 (2022: GBP608,000) and principal paid of GBP2,394,000 (2022: GBP3,637,000).
Non-cash flows in respect of lease liabilities include the purchase of GBP4,059,000 of fixed assets on long-term hire and interest expense of GBP388,000 (2022: GBP608,000).
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