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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% | 40.50 | 40.00 | 41.00 | 40.50 | 40.50 | 40.50 | 0.00 | 07:44:28 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Engineering Services | 148.73M | 4.68M | 0.0438 | 9.25 | 43.23M |
TIDMVANL
RNS Number : 5155A
Van Elle Holdings PLC
22 January 2020
Van Elle Holdings plc
22 January 2020
Interim results for the six months ended 31 October 2019
Van Elle Holdings plc ("Van Elle", the "Company" or the "Group"), the leading geotechnical engineering company offering a wide range of ground engineering techniques and services to customers in a variety of UK construction end markets, announces its interim results for the six months ended 31 October 2019.
Highlights
6 months ended 6 months ended Change 31 Oct 2019 31 Oct 2018 % --------------------------------- --------------- --------------- ------- Revenue (GBPm) 48.5 42.9 13.1 Underlying* EBITDA (GBPm) 3.7 5.2 (28.8) Reported EBITDA (GBPm) 3.5 4.8 (27.1) Underlying* operating profit (GBPm) 1.5 3.0 (50.0) Reported operating profit (GBPm) 1.2 2.6 (53.8) Underlying* profit before taxation (GBPm) 1.1 2.8 (60.7) Reported profit before taxation (GBPm) 0.9 2.4 (62.5) Underlying* earnings per share (p) 1.2 2.8 (57.1) Reported earnings per share (p) 0.9 2.4 (62.5) Dividend per share (p) 0.2 1.0 (80.0) Operating cash conversion **(%) 41.8% 100.3% Return on capital employed*** (%) 2.8% 6.4% --------------------------------- --------------- --------------- -------
* before share-based payments and exceptional costs
** defined as cash generated from operations divided by EBITDA less profit on sale of fixed assets
*** Return on capital employed calculated as underlying operating profit divided by net assets less cash and excluding loans and borrowings
The October 2019 results are not directly comparable to the previous periods as a result of the adoption of IFRS 16. The impact on the results is not considered to be material and is explained in note 1
Summary highlights
-- Despite a challenging market backdrop, the benefit of self-help initiatives and revenue growth resulted in an improving performance as the half progressed
-- Revenue grew by 13.1% to GBP48.5m (H1 2019: GBP42.9m), reflecting growth in the housing and highways markets, contrasted with subdued conditions in commercial and rail markets
-- Underlying PBT reduced to GBP1.1m (H1 2019: GBP2.8m), reflecting a weak first quarter and adverse sales mix across the period
-- Progress against the previously announced transformation programme remains on track, with phase 1 now substantially complete:
o Simplified divisional structure implemented with each under new, strengthened leadership;
o All operations now based at a single site in Kirkby in Ashfield;
o Positive developments with strategic customer engagement and development of bid pipelines;
o Operational performance stabilised, with a continued focus on margin improvement;
o Ongoing investment in the development of new products and services to diversify capabilities
-- Cash performance was affected by some long running final accounts, but net debt is manageable at GBP10.4m (H1 2019: GBP5.6m) after adjustment for adoption of IFRS16
-- Due to subdued profitability in the first half the Board is recommending a reduced interim dividend of 0.2 pence per share (FY2019: 1.0 pence)
-- The Group's new Chief Financial Officer, Graeme Campbell, joins Van Elle from Severfield plc on 17 February 2020
Mark Cutler, Chief Executive, commented:
"The business continues to improve and, despite challenging market conditions through the first half, we have made progress. We have a clear strategy focused on three core markets - housing, infrastructure and regional construction - where we offer a broad range of end-to-end technical capabilities through our extensive and well-invested rig fleet. Good progress continues to be made in building long term and strategic relationships with our key customers in all sectors.
"Operational performance is stable with previous challenges now substantially addressed. The simplified divisional structure with motivated, co-located teams under strengthened leadership means that we are more efficient and joined-up. This allows us to focus even more intently on customer service, operational excellence, margin improvement and cash generation.
"Whilst mindful of ongoing volatility across construction markets and recognising a slower Q3 than previous years due to subdued rail activity, the Board expects some market improvement and further progress in the balance of the second half. This is also supported by the benefits of ongoing improvements under the Group's transformation programme. Consequently, the Board expects to deliver results for the full year within the range of market expectations."
For further information please contact:
Instinctif Partners (Financial PR) Tel: 020 7457 2020 Mark Garraway James Gray Rosie Driscoll Peel Hunt LLP (Broker) Tel: 020 7418 8900 Charles Batten Mike Bell Edward Allsopp
Van Elle Holdings plc - Interim Report to 31 October 2019
Strategic overview
Van Elle continues to be in transition, following a plan focused on improving the performance of the business through a range of organisational, commercial and operational actions whilst also putting in place the building blocks of future sustainable growth in line with our updated strategy.
Good progress is being made in delivery of the three-phase transformation programme and early benefits are starting to be evidenced despite the challenging market conditions that have prevailed though FY2019 and the first half of FY2020.
Phase one of the three-phase transformation programme is now substantially complete, with highlights including:
- The restructuring of the business divisions is substantially complete with several key managerial changes made during the period aimed at improving the leadership capability and acting on areas of identified efficiency opportunity.
- The rationalisation of multiple offices into a single open plan site in Kirkby was completed in the first quarter. This has improved internal communications and facilitated greater efficiency of information flow and back office support.
- The bidding process and governance has been strengthened alongside a programme of more intensive customer engagement. This continues to deliver a strong order book despite increased levels of competition in a market which remains volatile.
- Further commercial appointments have been made to strengthen the divisional capabilities.
- Operational performance is satisfactory and, in particular, the issues faced last year in the General Piling business have been addressed. Across the Group, consistency of delivery has been enhanced through the roll-out of the Perfect Delivery programme which applies lessons learned from past performance to focus on operational excellence and customer satisfaction.
- Efficiency savings are continuously targeted through process improvement and a streamlining of overhead structures as appropriate, without inhibiting our capacity to grow. A cost reduction programme is focused on waste reduction and synergies across the business.
- Investment in new products and services, both enhancements to existing core capabilities and the development of new specialist techniques and services continues through an active innovation programme.
- Best practice forums, corporate learning, training programmes and employee engagement programmes all continue to improve operational efficiency.
In the second half of the financial year, the focus will remain on further embedding these internal improvements and continuing to develop the foundations for expected growth. The Board expects some modest improvement in market conditions in the second half which should support continued positive momentum, building on the progress seen in the first half.
Trading review
For the six months ended 31 October 2019, revenue increased by 13.1% GBP48.5m (H1 2019: GBP42.9m). Sales were segmented to our end markets as follows: Residential 51.3% (H1 2019: 50.8%), Infrastructure 25.9% (H1 2019: 28.2%) and Regional Construction 22.5% (H1 2019: 19.7%).
As previously reported, trading activity in the first quarter was relatively subdued and below prior year levels as a result of weak contractor confidence and continued project delays. The second quarter saw a promising upturn in overall activity as key projects were mobilised in certain segments of the UK construction market.
In terms of divisional performance, whilst General and Specialist Piling revenues were slightly down compared to the comparative period in the prior year, there has been significant growth within Ground Engineering Services, up approximately GBP7m to GBP17m; driven primarily by housing sector growth as a result of improved customer focus and closer relationships with national housebuilders which are seeking faster build times and integrated piling and foundation solutions.
In contrast the Group has seen increased competition in the regional construction market and subdued activity levels in the rail sector (as a result of delays to Network Rail's CP6 programme), impacting on several of the Group's higher margin activities.
Underlying Profit Before Tax was weaker at GBP1.1m (H1 2019: GBP2.8m), resulting from the impact on overhead recovery of lower revenues in the first quarter and the generally adverse sales mix across the first half, described above. The Group also completed two challenging contracts in the first quarter which suffered delay and additional costs and are subject to ongoing commercial resolution.
Despite increased levels of competition in a market which remains volatile, the Group's focus on bidding process and governance, alongside a programme of more intensive customer engagement continues to deliver a strong orderbook, which, adopting the more prudent basis previously advised, sits at GBP32.0m at the period end (FY 2019: GBP34.0m).
Working capital performance has been more challenging than in previous periods, primarily due to several projects awaiting final account resolution and some evidence of poor payment practice amongst a minority of our customers. Action has been taken to further strengthen customer risk assessment processes and strengthen the divisional commercial teams to address this. Whilst the Group doesn't envisage any material issues with receivable recovery, it has deemed it appropriate to take a further GBP150K provision against aged debtors.
The Group has continued to invest positively in the development of new and innovative products and services while maintaining a cautious rig investment programme. These include the development of a new operational capability for vibro stone columns ('vibro') targeted at the housing and industrial building sectors; the continued development of the Group's unique rail track bed stabilisation system; the wider application of the Smartfoot modular foundations system in housing, and several other specialist piling techniques that will support long term growth opportunities. In the period the cost of new property, plant and equipment (PPE) investment has been GBP2.3m and related development expenditure was GBP420K, the latter capitalised as intangible assets in accordance with IAS 38.
Whilst rig acquisition remains selective, management continues to appraise opportunities to increase its fleet on a strategic basis. In line with this approach, the Group acquired an additional new driven rig targeted at its housing sector operations, certain specialist assets at auction following the liquidation of rail competitor Aspin and two second hand vibro rigs in the period
Net debt at 31 October 2019 of GBP10.4m (H1 2019: GBP5.6m) includes GBP3.9m of lease liabilities arising from the adoption of IFRS16. The comparison of net debt is set out in note 7.
The Group's banking facilities are unchanged with a GBP2.5m unused overdraft facility in place with Lloyds. The Group also has a GBP900K business loan secured against freehold property which is due to be repaid by the end of 2020. This loan has been reclassified as repayable on demand due to a breach in the original covenants caused by low first half profitability. While the Board is satisfied that the Group continues to operate with sufficient cash reserves (and the cash position has improved further since the period end) in view of the more challenging working capital position and increased debtors, while focused on the objective to reduce net debt by year end, the Board have implemented more rigorous cash management disciplines and regularly reviews cashflow forecasts.
Operating performance in the period
General Piling
Revenue was marginally lower at GBP17.7m (H1 2019: GBP18.5m), primarily as a result of a subdued first quarter, reflecting delays to projects experienced at the end of FY 2019 and a single challenging contract on which the Group's entitlement is the subject of ongoing claims recovery. As the Group's largest division, the impact of the lower revenue in the early part of the year had a significant impact on overhead recovery and together with a weaker work mix, with reduced levels of rotary piling, contributed to a reduction in underlying operating profit of 51% to GBP227K (H1 2019: GBP465K).
Under new leadership since the beginning of the financial year, the division has continued the operational and work winning improvements outlined previously and progress was evident from Q1 into Q2 as a result. However, whilst volume levels were more encouraging, the division continues to experience a sub-optimal work mix with fewer higher margin rotary schemes and greater competition from major rivals than in prior years. Several of the smaller rigs have also been redeployed to the Housing division in order to take best advantage of the opportunities available to the Group.
Specialist Piling
The division, comprising the Specialist Piling and Rail business units saw revenue marginally reduced to GBP14.0m (H1 2019: GBP14.5m) although underlying operating profit was down 80% at 394K (H1 2019: GBP1.93m).
After continued delays in Q1 and a challenging contract now commercially resolved and which is subject to re-pricing for future phases, the Specialist Piling unit performed in line with expectations during the second quarter. The improvements as a result of successfully mobilised and commenced operations on several Smart Motorways projects, some of which will run for up to two years. The previously announced, more selective approach to ground stabilisation activity (and the closure of the former dedicated division) has been successfully implemented and continues to compliment the wider integrated range of services.
The Rail business unit has been heavily impacted throughout the period by delays to Network Rail's CP6 programme and the completion of some longer running CP5 projects, resulting in redeployment of personnel and restructuring including some redundancies. In parallel, the business has focussed intensively on customer key account development and preparations for growth in CP6 and has diversified slightly in order to increase resilience, including a more comprehensive sheet piling offer and development of its first track bed stabilisation opportunities in Ireland.
The rail sector is typically the Group's highest margin segment and so the impact of the very challenging market conditions in this sector during the first half have had a material adverse impact on divisional and Group profitability. However, Van Elle remains a clear market leader in these activities and the potential opportunities presented by the mobilisation of major investment programmes, including CP6 and HS2, are significant.
Ground Engineering Services
Revenue increased significantly to GBP16.9m (H1 2019: GBP9.9m) and underlying operating profit increased 24% to GBP804K (H1 2019: GBP647K)
Ground Engineering Services comprises the Housing division, including the Smartfoot modular foundation system and Strata, the Geotechnical division. Revenues have grown strongly driven by closer relationships with national housebuilders which are seeking faster build times and integrated piling and foundation solutions. This is a segment in which the Group continues to invest for the long term and in the period has diversified its services though the development of specialist vibro piling techniques and further developments to its precast concrete Smartfoot foundation system. Strata has also seen strong revenue growth driven primarily by ground investigation on major highways projects in which we are developing a strong reputation alongside our piling activity.
Market overview
Across the Infrastructure sector the Group experienced mixed fortunes in the period. In highways, the Group successfully mobilised several Smart Motorway projects where it enjoys a market leading position. In rail volumes were significantly down on the prior year as preparations for Network Rail's CP6 programme impacted workload across the market. Although some restructuring and redeployment has been necessary, the business is well positioned with a strong reputation and differentiated capabilities to be able to mobilise quickly once spending starts to accelerate as expected in the second half.
The regional construction market has been and remains highly competitive, but due to closer working relationships with our customers, including earlier engagement on projects, the Group has secured several good quality projects and has improved its execution compared to last year. The Group is not expecting a material improvement in regional markets in the second half, although some confidence is expected to return following the UK General Election result.
The residential market continues to offer growth opportunities to the Group, both in private housing and also larger scale residential and retirement sectors. The business has successfully diversified its offering in the period in order to take greater advantage of these opportunities and has redeployed resources internally to enable greater operational control as our customer base widens.
Board news
The Board is pleased to confirm that Graeme Campbell will take up the role of Chief Financial Officer on 17 February 2020, following the announcement of his appointment in September 2019. Graeme was previously Chief Financial Officer of ASX-listed engineering services company Engenco and joins Van Elle from Severfield plc.
Dividend
In view of the weak trading performance in the first half and the dependence on improved second half trading, the Board is declaring a reduced dividend of 0.2 pence per share (H1 2019: 1.0 pence) and will decide on the level of dividend for the year once the second half performance is known. The interim dividend will be paid on 27 March 2020 to shareholders on the register on 14 February 2020. The shares will be marked ex-dividend on 13 February 2020.
The board has become aware of a technical compliance irregularity concerning the final dividend for the year ended 30 April 2019 approved at the Company's annual general meeting on 12 September 2019. This is explained in note 1.
Current trading and outlook
Current activity levels and prospects in Housing and Highways remain positive, with further opportunities presented by the development investment made in the first half.
As expected, and in light of the subdued market activity levels during the delayed transition to the CP6 funding period, the Group undertook significantly less rail work over the Christmas period than in the prior year. Nevertheless, the Board does expect modest improvement to both the rail and commercial building markets as the second half progresses, which may be further bolstered in the event that CP6 rail spending accelerates and/or the HS2 project is given the go-ahead, although the timing of any such recovery remains uncertain.
The actions being taken by the management team under the Group's transformation programme to improve operational performance are yielding early benefits and these actions will continue in tandem with expected increased activity levels and improved work mix described above, in the second half and beyond.
Whilst mindful of the ongoing volatility across construction markets, the Board expects the Group to make further progress in the second half, supported by the benefits of ongoing improvements under the Group's transformation programme. Consequently, the Board expects to deliver results for the full year within the range of market expectations.
Consolidated statement of comprehensive income
6 months 6 months to to 12 months to 31 Oct 2019 31 Oct 2018 30 Apr 2019 Note (unaudited) (unaudited) (audited) GBP'000 GBP'000 GBP'000 ------------------------------------ ---- ------------------------------ --------------------- -------------- Revenue 2 48,524 42,921 88,468 Cost of sales (35,282) (28,841) (60,281) ------------------------------------ ---- ------------------------------ --------------------- -------------- Gross profit (13,242) 14,080 28,187 Administrative expenses (12,013) (11,453) (23,625) ------------------------------------ ---- ------------------------------ --------------------- -------------- Operating Profit 1,229 2,627 4,562 ------------------------------------ ---- ------------------------------ --------------------- -------------- Operating profit before share-based payments and exceptional costs 1,455 3,038 5,244 Share based payments 5 (80) (80) (123) Exceptional cost 4 (146) (331) (559) ------------------------------------ ---- ------------------------------ --------------------- -------------- Operating profit 1,229 2,627 4,562 ------------------------------------ ---- ------------------------------ --------------------- -------------- Finance expense (322) (297) (579) Finance income 12 25 52 ------------------------------------ ---- ------------------------------ --------------------- -------------- Profit before tax 919 2,355 4,035 Income tax expense (175) (471) (823) ------------------------------------ ---- ------------------------------ --------------------- -------------- Total comprehensive income for the year 744 1,884 3,212 ------------------------------------ ---- ------------------------------ --------------------- -------------- Earnings per share (pence) Basic 5 0.9 2.4 4.0 Diluted 5 0.9 2.4 4.0 ------------------------------------ ---- ------------------------------ --------------------- --------------
All amounts relate to continuing operations. There was no other comprehensive income in either the current or preceding period/year.
Consolidated statement of financial position
As at 31 October 2019
31 Oct 2019 31 Oct 2018 30 Apr 2019 (unaudited) (unaudited) (audited) GBP'000 GBP'000 GBP'000 ------------------------------- ---- ------------- ------------- ------------ Non-current assets Property, plant and equipment 19,150 39,038 38,486 Right-of-use assets 22,987 - - Intangible assets 2,685 2,303 2,289 ------------------------------------- ------------- ------------- ------------ 44,822 41,341 40,775 ------------------------------------ ------------- ------------- ------------ Current assets Inventories 2,960 2,372 2,882 Trade and other receivables 21,931 19,946 20,558 Corporation tax receivable - - 118 Cash and cash equivalents 3,949 9,384 7,997 ------------------------------------- ------------- ------------- ------------ 28,840 31,702 31,555 ------------------------------------ ------------- ------------- ------------ Total assets 73,662 73,043 72,330 ------------------------------------- ------------- ------------- ------------ Current liabilities Trade and other payables 15,922 14,830 16,506 Loans and borrowings 5,231 5,071 4,695 Provisions 236 253 236 Corporation tax payable 6 438 - ------------------------------------- ------------- ------------- ------------ 21,395 20,592 21,437 ------------------------------------ ------------- ------------- ------------ Non-current liabilities Loans and borrowings 9,121 9,945 7,534 Deferred tax 1,061 1,016 1,298 ------------------------------------- ------------- ------------- ------------ 10,182 10,961 8,832 ------------------------------------ ------------- ------------- ------------ Total liabilities 31,577 31,553 30,269 ------------------------------------- ------------- ------------- ------------ Net assets 42,085 41,490 42,061 ------------------------------------- ------------- ------------- ------------ Equity Share capital 1,600 1,600 1,600 Share premium 8,633 8,633 8,633 Retained earnings 31,834 31,239 31,810 Non-controlling interest 18 18 18 ------------------------------------- ------------- ------------- ------------ Total equity 42,085 41,490 42,061 ------------------------------------- ------------- ------------- ------------
The unaudited interim consolidated statement was approved by the Board of Directors on 21 January 2020.
Consolidated statement of cash flows
For the 6 months ended 31 October 2019
Note 6 months 6 months 12 months to 31 Oct to 31 Oct to 30 Apr 2019 (unaudited) 2018 (unaudited) 2019 (audited) GBP'000 GBP'000 GBP'000 -------------------------------------- ----- ------------------ ------------------ ---------------- Cash flows from operating activities Cash generated from operations 6 1,403 4,786 9,463 Interest received 12 25 52 Interest paid (322) (297) (579) Income tax paid (287) (740) (1,366)
-------------------------------------- ----- ------------------ ------------------ ---------------- Net cash generated from operating activities 806 3,774 7,570 -------------------------------------- ----- ------------------ ------------------ ---------------- Cash flows from investing activities Purchases of property, plant and equipment (1,376) (735) (2,390) Disposal of property, plant and equipment 354 323 393 Purchases of intangibles (422) - (10) ---------------- Net cash absorbed in investing activities (1,444) (412) (2,007) -------------------------------------- ----- ------------------ ------------------ ---------------- Cash flows from financing activities Repayment of bank borrowings (75) (75) (150) Repayments of Invest to Grow loan (15) (47) (95) Payments to lease creditors (2,520) (2,896) (5,561) Dividends paid (800) (1,840) (2,640) -------------------------------------- ----- ------------------ ------------------ ---------------- Net cash absorbed in financing activities (3,410) (4,858) (8,446) -------------------------------------- ----- ------------------ ------------------ ---------------- Net decrease in cash and cash equivalents (4,048) (1,496) (2,883) Cash and cash equivalents at beginning of period 7,997 10,880 10,880 -------------------------------------- ----- ------------------ ------------------ ---------------- Cash and cash equivalents at end of period 7 3,949 9,384 7,997 -------------------------------------- ----- ------------------ ------------------ ----------------
Consolidated statement of changes in equity
For the 6 months ended 31 October 2019
Non-controlling Share Share interest Retained Total capital premium earnings equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------- ------------------- ------------------- -------------------------- -------------------- ------------------ Balance at 1 May 2018 (audited) 1,600 8,633 18 31,115 41,366 ------------------------- ------------------- ------------------- -------------------------- -------------------- ------------------ Total comprehensive income - - - 1,884 1,884 Share-based payment expense - - - 80 80 Dividend payment - - - (1,840) (1,840) ------------------------- ------------------- ------------------- -------------------------- -------------------- ------------------ - - - 124 124 ------------------------- ------------------- ------------------- -------------------------- -------------------- ------------------ Balance at 31 October 2018 (unaudited) 1,600 8,633 18 31,239 41,490 ------------------------- ------------------- ------------------- -------------------------- -------------------- ------------------ Total comprehensive income - - - 1,328 1,328 Share-based payment expense - - - 43 43 Dividend payment - - - (800) (800) ------------------------- ------------------- ------------------- -------------------------- -------------------- ------------------ - - - 571 571 ------------------------- ------------------- ------------------- -------------------------- -------------------- ------------------ Balance at 30 April 2019 (audited) 1,600 8,633 18 31,810 42,061 ------------------------- ------------------- ------------------- -------------------------- -------------------- ------------------ Total comprehensive income - - - 744 744 Share-based payment expense - - - 80 80 Dividend payment (note 1) - - - (800) (800) ------------------------- ------------------- ------------------- -------------------------- -------------------- ------------------ - - - ------------------------- ------------------- ------------------- -------------------------- -------------------- ------------------ Balance at 31 October 2019 (unaudited) 1,600 8,633 18 31,834 42,085 ------------------------- ------------------- ------------------- -------------------------- -------------------- ------------------
Notes to the interim results
For the 6 months ended 31 October 2019
1. Basis of preparation
The unaudited interim consolidated statement of Van Elle Holdings plc is for the six months ended 31 October 2019 and do not comprise statutory accounts within the meaning of section 435 of the Companies Act 2006. These consolidated financial statements have been prepared in compliance with the recognition and measurement requirement of International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) as adopted by the EU. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the group's annual report. The unaudited interim consolidated statement has been prepared in accordance with the accounting policies that are expected to be applied in the report and accounts for the year ending 30 April 2020.
The comparative figures for the year ended 30 April 2019 do not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006, but they have been derived from the audited financial statements for that year, which have been filed with the Registrar of Companies. The report of the auditors was unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006 not a reference to any matters which the auditor drew attention by way of emphasis of matter without qualifying their report.
Dividends
The Board has become aware of an irregularity concerning technical compliance with the Companies Act 2006 in respect of the final dividend approved by shareholders at the Company's annual general meeting on 12 September 2019 (the "Dividend").
Note 12 (Dividends) to the Consolidated Financial Statements of the Group for the year ended 30 April 2019 (the "2018/19 Accounts"), in referring to the Dividend, stated that:
"The Board of the subsidiary company will pay a dividend to the Company in advance of the final proposed dividend being paid to ensure that the Company has sufficient distributable reserves in order to pay the dividend."
Regrettably, as a result of an administrative oversight, the subsidiary company dividend referred to in Note 12 to the 2018/19 Accounts was not made and as a consequence the requisite level of distributable reserves were not available within the Company prior to the payment of the Dividend. In addition, interim accounts should have been filed by the Company in respect of the payment of the Dividend. Consequently, the Dividend is technically unlawful.
The Group's historic reported trading results and financial condition and ability to pay future dividends are entirely unaffected, however to address the unlawful nature of the Dividend the Board intends to call a general meeting of the Company in due course at which various resolutions to address these issues will be proposed.
The directors have no reason to believe that the resolutions to be proposed at the general meeting will not be passed and therefore have accounted for the Dividend as a distribution in these financial statements.
Accounting policies
Except as described below, the accounting policies adopted in the preparation of the unaudited Group interim consolidated statement to 31 October 2019 are consistent with the policies applied by the Group in its consolidated financial statements as at, and for the year ended 30 April 2019.
This is the first set of the Group's financial statements where IFRS 16 Leases has been applied. The impact on this interim consolidated statement and the change to the Group's significant accounting policies are described in further detail below.
IFRS 16 Leases Overview
The Group has initially adopted IFRS 16 Leases from 1 May 2019. IFRS 16 Leases replaces IAS 17 Leases and provides a single lease accounting model, requiring the lessees to recognise right of use assets and lease liabilities in the balance sheet for all applicable leases. The Group has applied the modified retrospective adoption method in IFRS 16, and, therefore only recognised leases on balance sheet as at 1 May 2019. It has decided to measure right-of-use assets by reference to the measurement of the lease liability on that date. This meant there was no immediate impact to net assets on that date. In applying the modified retrospective approach, the Group has taken advantage of the following practical expedients:
-- A single discount rate has been applied to portfolios of leases with reasonably similar characteristics.
-- Initial direct costs have not been included in the measurement of the right-of-use asset as at the date of initial application.
-- For the purposes of measuring the right-of-use asset hindsight has been used. Therefore, it has been measured based on prevailing estimates at the date of initial application and not retrospectively by making estimates and judgements (such as the term of leases) based on circumstances on or after the lease commencement date
At 30 April 2019 operating lease commitments amounted to GBP9,313,000. The effect of discounting those commitments has resulted in lease liabilities of approximately GBP3,961,000 being recognised on 1 May 2019 with a corresponding right-of-use assets of GBP3,659,000, the figures being different due to the offset of GBP302,000 lease incentive accrual against the asset.
Instead of recognising an operating expense for its operating lease payments, the Group has instead recognised interest on its lease liabilities and amortisation on its right-of-use assets.
In the 6 months to 31 October 2019 this has decreased operating lease payments by GBP76,000, increased depreciation by GBP66,000 and finance charges by GBP72,000.
Changes in Accounting policy
The details of the new significant accounting policy and the nature of the change to previous accounting policy in relation to the Group's adoption of IFRS 16 Leases are set out below.
Amended accounting policy Previous accounting Nature of change in accounting policy policy The Group assesses whether The Group previously a contract is or contains determined whether a a lease at inception contract was or contained of the contract. policy a lease under IFRIC 4. in relation to the Group's In practice, all contracts adoption of IFRS 16 Leases that are classified as are set out below. a lease under IFRS 16 were also previously A contract is or contains classified as a lease a lease if the contract under IFRIC 4 and vice includes the right to versa. control the use of an identified asset for a period of time in exchange for consideration. Factors that are considered when making this assessment include: the Group's right to obtain substantially all the economic benefits from use of the asset; the Group's right to direct the use of the asset; and the supplier's right to substitute the asset ----------------------------- ---------------------------------- The Group allocates the Where substantially Under IAS 17, the Group consideration in the all the risks and previously classified contract to each lease rewards incidental leases as operating or component on the basis to ownership of a finance leases based of relative stand-alone leased asset have on its assessment of selling prices. For each been transferred to whether the lease transferred lease component, the the Group (a "finance significantly all the Group recognises a right lease"), the asset risks and rewards of of use asset and a lease is treated as if it ownership to the Group. liability at the lease had been purchased Under IFRS 16, the majority commencement date. outright. The amount of the Group's leases initially recognised are recognised on the as an asset is the balance sheet as right lower of the fair of use assets and lease value of the leased liabilities, including asset and the present those arrangements previously value of the minimum classified as either lease payments payable finance leases or operating over the term of the leases under IAS 17. lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated statement of comprehensive income over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor. ----------------------------- ---------------------------------- Lease liabilities are Where substantially Lease liabilities were presented as "obligations all the risks and only recognised under under leases" in the rewards incidental IAS 17 in respect of balance sheet. to ownership are not arrangements classified The lease liability is transferred to the as finance leases. This initially measured at Group (an "operating distinction no longer the present value of lease"), the total exists under IFRS 16. future lease payments, rentals payable under discounted at the interest the lease are charged Where an arrangement rate implicit in the to the consolidated was treated as a finance lease. Where the implicit statement of comprehensive lease under IAS 17, a interest rate cannot income on a straight-line liability was initially be determined, the Group basis over the lease recognised equal to the discounts the future term. The aggregate value of the asset capitalised lease payments using benefit of lease incentives within property, plant its incremental borrowing is recognised as a and equipment (see below). rate. reduction of the rental The liability was subsequently The lease liability is expense over the lease measured at amortised subsequently measured term on a straight-line cost using the effective at amortised cost using basis. interest method. There the effective interest is no material difference method. between the amounts recognised as liabilities or as
interest expense for such arrangements following the adoption of IFRS 16. Lease payments associated with operating leases were recognised as an expense on a straight-line basis over the lease term, with no amounts being recognised on the balance sheet. Under IFRS 16 lease liabilities are also recognised for leases previously classified as operating leases. The lease liability is recognised at the present value of the future lease payments. ----------------------------- ---------------------------------- Right of use assets are Assets were only recognised presented in "property, under IAS 17 in respect plant and equipment" of arrangements classified on the balance sheet. as finance leases. The right of use asset Where an arrangement is initially measured was previously treated at cost, representing as a finance lease under the initial amount of IAS 17, an asset was the lease liability adjusted recognised within property, for any up-front lease plant and equipment at payments, direct costs the fair value of the incurred or lease incentives asset or, if lower, the received. present value of the minimum lease payments. The right of use asset The asset was subsequently is subsequently depreciated depreciated on the same on a straight-line basis basis as other similar to the earlier of the assets purchased by the end of the useful life Group without recourse of the right of use asset to financing arrangements. or the end of the lease Such assets are now presented term. The estimated useful as right of use assets lives of right of use within property, plant assets are determined and equipment. There on the same basis as is no material difference those of property, plant between the amounts recognised and equipment. as assets or as depreciation expense for such arrangements following the adoption of IFRS 16. In addition, under IFRS 16 a right of use asset is now recognised within property, plant and equipment for assets under leases that were previously classified as operating leases under IAS 17, for which were lease payments were recognised as an expense on a straight-line basis over the lease term, with no amounts being recognised on the balance sheet. ----------------------------- ---------------------------------- No right of use asset The treatment of short-term or lease liability is leases and leases for recognised in respect low-value assets is unchanged of leases with terms on adoption of IFRS 16 of 12 months or less as all such leases were or in relation to low previously classified value assets. Lease payments as operating leases under associated with such IAS 17. leases are recognised as an expense on a straight-line basis over the lease term. ----------------------------- ----------------------------------
Functional currency
The unaudited interim consolidated statements are presented in Sterling, which is also the Group's functional currency. Amounts are rounded to the nearest thousand, unless otherwise stated.
2. Segment information
The Group evaluates segmental performance based on profit or loss from operations calculated in accordance with IFRS but excluding non-recurring losses, such as goodwill impairment and the effects of share-based payments. Specialist Piling includes the specialist and rail business units and Ground Engineering Services comprises housing and geotechnical (Strata) business units. Note that General Piling tends to undertake the larger residential projects. Loans and borrowings, 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 - 6 months to 31 October 2019
Ground General Specialist Engineering Head Total Piling Piling Services Office GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------ ------------------- ---------------------- ---------------------- ------------------ --------------------- Revenue 17,661 13,950 16,855 58 48,524 ------------------------ ------------------- ---------------------- ---------------------- ------------------ --------------------- Operating profit Underlying operating profit 227 394 804 30 1,455 Share-based payments (80) (80) Exceptional item (8) (93) (45) (146) ------------------------ ------------------- ---------------------- ---------------------- ------------------ --------------------- Operating profit 219 301 804 (95) 1,229 Finance expense (322) (322) Finance
income 12 12 ------------------------ ------------------- ---------------------- ---------------------- ------------------ --------------------- Profit before tax 219 301 804 (405) 919 ------------------------ ------------------- ---------------------- ---------------------- ------------------ --------------------- Assets Property, plant & equipment 2,710 4,157 4,785 7,498 19,150 Right-of-use assets 7,036 7,720 3,080 5,151 22,987 Inventories 1,058 720 1,165 17 2,960 ------------------------ ------------------- ---------------------- ---------------------- ------------------ --------------------- Reportable segment assets 10,804 12,597 9,030 12,666 45,097 Intangible assets 2,685 2,685 Trade and other receivables 21,931 21,931 Cash and cash equivalents 3,949 3,949 ------------------------ ------------------- ---------------------- ---------------------- ------------------ --------------------- Total assets 10,804 12,597 9,030 41,231 73,662 ------------------------ ------------------- ---------------------- ---------------------- ------------------ --------------------- Liabilities Loans and borrowings 14,352 14,352 Trade and other payables 15,928 15,928 Provisions 236 236 Deferred tax 1,061 1,061 ------------------------ ------------------- ---------------------- ---------------------- ------------------ --------------------- Total liabilities 31,577 31,577 ------------------------ ------------------- ---------------------- ---------------------- ------------------ --------------------- Other information Capital expenditure 25 404 1,885 3,795 6,109 Depreciation / amortisation 575 779 385 511 2,250 ------------------------ ------------------- ---------------------- ---------------------- ------------------ ---------------------
There are no individual customers accounting for more than 10% of Group revenue in either the current or preceding period/ year.
Operating segments - 6 months to 31 October 2018
Ground General Specialist Engineering Head Total Piling Piling Services Office GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------ ------------------- ---------------------- ---------------------- ------------------ ------------------ Revenue 18,537 14,461 9,923 42,921 ------------------------ ------------------- ---------------------- ---------------------- ------------------ ------------------ Operating profit Underlying operating profit 465 1,926 647 - 3,038 Share-based payments - - - (80) (80) Exceptional item - - - (331) (331) ------------------------ ------------------- ---------------------- ---------------------- ------------------ ------------------ Operating profit 465 1,926 647 (411) 2,627 Finance expense - - - (297) (297) Finance income - - - 25 25 ------------------------ ------------------- ---------------------- ---------------------- ------------------ ------------------ Profit before tax 465 1,926 647 (683) 2,355 ------------------------ ------------------- ---------------------- ---------------------- ------------------ ------------------ Assets Property, plant & equipment 13,077 12,458 4,287 9,216 39,038 Inventories 1,220 415 712 25 2,372 ------------------------ ------------------- ---------------------- ---------------------- ------------------ ------------------ Reportable segment assets 14,297 12,873 4,999 9,241 41,410 Intangible assets - - - 2,303 2,303 Trade and other receivables - - - 19,946 19,946 Cash and cash equivalents - - - 9,384 9,384 ------------------------ ------------------- ---------------------- ---------------------- ------------------ ------------------ Total assets 14,297 12,873 4,999 40,874 73,043 ------------------------ ------------------- ---------------------- ---------------------- ------------------ ------------------ Liabilities Loans and borrowings - - - 15,016 15,016 Trade and other payables - - - 15,268 15,268 Provisions - - - 253 253 Deferred tax - - - 1,016 1,016 ------------------------ ------------------- ---------------------- ---------------------- ------------------ ------------------ Total liabilities - - - 31,553 31,553 ------------------------ ------------------- ---------------------- ---------------------- ------------------ ------------------ Other information Capital expenditure 1,113 367 147 359 1,986 Depreciation / amortisation 699 794 233 429 2,155 ------------------------ ------------------- ---------------------- ---------------------- ------------------ ------------------
There are no individual customers accounting for more than 10% of Group revenue in either the current or preceding period/ year.
Operating segments - 12 months to 30 April 2019
Ground General Specialist Engineering Head Piling Piling Services office Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------------------------- ------- ---------- ----------- ------- ------- Revenue 37,201 28,630 22,637 - 88,468 ---------------------------- ------- ---------- ----------- ------- ------- Underlying operating profit 1,238 2,697 1,309 - 5,244 Share-based payments - - - (123) (123) Exceptional item - - - (559) (559) ---------------------------- ------- ---------- ----------- ------- ------- Operating profit 1,238 2,697 1,309 (682) 4,562 Finance expense - - - (579) (579) Finance income - - - 52 52 ---------------------------- ------- ---------- ----------- ------- ------- Profit before tax 1,238 2,697 1,309 (1,209) 4,035 ---------------------------- ------- ---------- ----------- ------- ------- Assets Property, plant and equipment 11,033 12,434 5,465 9,554 38,486 Inventories 1,142 890 828 22 2,882 ---------------------------- ------- ---------- ----------- ------- ------- Reportable segment assets 12,175 13,324 6,293 9,576 41,368 Intangible assets - - - 2,289 2,289 Trade and other receivables - - - 20,676 20,676 Cash and cash equivalents - - - 7,997 7,997 ---------------------------- ------- ---------- ----------- ------- ------- Total assets 12,175 13,324 6,293 40,538 72,330 ---------------------------- ------- ---------- ----------- ------- ------- Liabilities Loans and borrowings - - - 12,229 12,229 Trade and other payables - - - 16,506 16,506 Provisions - - - 236 236 Deferred tax - - - 1,298 1,298 ---------------------------- ------- ---------- ----------- ------- ------- Total liabilities - - - 30,269 30,269 ---------------------------- ------- ---------- ----------- ------- ------- Other information Capital expenditure 1,310 656 793 879 3,638 Depreciation/amortisation 1,249 1,588 581 918 4,336 ---------------------------- ------- ---------- ----------- ------- -------
There are no individual customers accounting for more than 10% of Group revenue in either the current or preceding period/ year.
2. Revenue from contracts with customers
Disaggregation of revenue - 6 months to 31 October 2019
Ground General Specialist Engineering Piling Piling Services Total End market GBP'000 GBP'000 GBP'000 GBP'000 ---------------------- ------- ---------- ----------- ------- Residential 8,569 1,447 14,903 24,919 Infrastructure 953 10,361 1,249 12,563 Regional Construction 8,139 2,107 691 10,937 Other - 35 70 105 ---------------------- ------- ---------- ----------- ------- Total 17,661 13,950 16,913 48,524 ---------------------- ------- ---------- ----------- -------
Disaggregation of revenue - 6 months to 31 October 2018
Ground General Specialist Engineering Piling Piling Services Total End market GBP'000 GBP'000 GBP'000 GBP'000 ---------------------- ------- ---------- ----------- ------- Residential 10,952 1,989 8,844 21,785 Infrastructure 1,969 9,485 651 12,105 Regional Construction 5,373 2,753 320 8,446 Public 161 234 108 503 Other 82 82 ---------------------- ------- ---------- ----------- ------- Total 18,537 14,461 9,923 42,921 ---------------------- ------- ---------- ----------- -------
Disaggregation of revenue - 12 months to 30 April 2019
Ground General Specialist Engineering Piling Piling Services Total End market GBP'000 GBP'000 GBP'000 GBP'000 ---------------------- ------- ---------- ----------- ------- Residential 16,076 2,687 20,044 38,807 Infrastructure 5,549 20,576 1,545 27,670 Regional Construction 14,494 5,143 895 20,532 Public 1,001 224 153 1,378 Other 81 - - 81 ---------------------- ------- ---------- ----------- ------- Total 37,201 28,630 22,637 88,468 ---------------------- ------- ---------- ----------- ------- 4. Exceptional costs 6 months 6 months 12 months to 31 Oct to 31 Oct to 30 Apr 2019 (unaudited) 2018 (unaudited) 2019 (audited) GBP'000 GBP'000 GBP'000 ------------------- ------------------ ------------------ ---------------- Exceptional costs 146 331 559 ------------------- ------------------ ------------------ ----------------
Exceptional costs for the six months to 31 October 2019 relate to restructuring and redundancy costs related to restructuring of the Group.
Prior year exceptional costs related to restructuring and redundancy costs.
5. Earnings per share
The calculation of basic and diluted earnings per share is based on the following data:
6 months 6 months 12 months to 31 Oct to 31 Oct to 30 Apr 2019 (unaudited) 2018 (unaudited) 2019 (audited) '000 '000 '000 ------------------------------------ ------------------ ------------------ ------------------ Basic weighted average number of shares 80,000 80,000 80,000 Dilutive potential ordinary shares - - - from share options ------------------------------------ ------------------ ------------------ ---------------- Diluted weighted average number of shares 80,000 80,000 80,000 ------------------------------------ ------------------ ------------------ ---------------- GBP'000 GBP'000 GBP'000 ------------------------------------ ------------------ ------------------ ---------------- Profit for the period/year 744 1,884 3,212 ------------------------------------ ------------------ ------------------ ---------------- Add back / (deduct): Share-based payments 80 80 123 Exceptional costs 146 331 559 Tax effect of the above (28) (63) (106) ------------------------------------ ------------------ ------------------ ---------------- Underlying profit for the year 942 2,232 3,788 ------------------------------------ ------------------ ------------------ ---------------- Pence Pence Pence ------------------------------------ ------------------ ------------------ ---------------- Earnings per share Basic 0.9 2.4 4.0 Diluted 0.9 2.4 4.0 Basic - excluding exceptional costs and share-based payments 1.2 2.8 4.7 Diluted - excluding exceptional costs and share-based payments 1.2 2.8 4.7 ------------------------------------ ------------------ ------------------ ----------------
The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders and on 80,000,000 ordinary shares (6 months ended 31 Oct 2018: 80,000,000 and 12 months ended 30 Apr 2019: 80,000,000) being the weighted average number of ordinary shares.
The underlying earnings per share is based on profit adjusted for exceptional operating costs and share-based payment charges, net of tax, and on the same weighted average number of shares used in the basic earnings per share calculation above. The Directors consider that this measure provides an additional indicator of the underlying performance of the Group.
There is no dilutive effect of the share options as performance conditions remain unsatisfied and the share price was below the exercise price.
6. Cash generated from operations 6 months 6 months 12 months to 31 Oct to 31 Oct to 30 Apr 2019 (unaudited) 2018 (unaudited) 2019 (audited) GBP'000 GBP'000 GBP'000 -------------------------------------- ------------------ ------------------ ---------------- Operating profit 1,229 2,627 4,562 Adjustments for: Depreciation of property, plant and equipment 2,224 2,131 4,291 Amortisation of intangible assets 26 24 45 Profit on disposal of property, plant and equipment (120) (8) (26) Share-based payment expense 80 80 123 -------------------------------------- ------------------ ------------------ ---------------- Operating cash flows before movement in working capital 3,439 4,854 8,995 Decrease/(Increase) in inventories (78) 193 (317) Decrease/(Increase) in trade and other receivables (1,372) 2,279 1,666 (Decrease)/Increase in trade and other payables (586) (2,523) (847) Decrease in provisions - (17) (34) -------------------------------------- ------------------ ------------------ Cash generated from operations 1,403 4,786 9,463 -------------------------------------- ------------------ ------------------ ---------------- 7. Analysis of cash and cash equivalents and reconciliation to net debt 31 Oct 2019 31 Oct 2018 30 Apr 2019 (unaudited) (unaudited) (audited) GBP'000 GBP'000 GBP'000 ---------------------------- ------------- ------------- ------------ Cash at bank 3,901 9,340 7,953 Cash in hand 48 44 44 ---------------------------- ------------- ------------- ------------ Cash and cash equivalents 3,949 9,384 7,997 Bank loans secured (900) (1,050) (975) Other loans secured - (62) (15) ---------------------------- ------------- ------------- ------------ Plant and equipment leases (9,491) (13,902) (11,239) Property leases (3,961) ---------------------------- ------------- ------------- ------------ Total lease liability (13,452) (13,902) (11,239) ---------------------------- ------------- ------------- ------------ Net debt (10,403) (5,630) (4,232) ---------------------------- ------------- ------------- ------------
Property leases at 31 October 2019 are right-of-use assets capitalised under IFRS16.
INDEPENDENT REVIEW REPORT TO VAN ELLE HOLDINGS PLC
Introduction
We have been engaged by the company to review the unaudited interim consolidated statement in the half-yearly financial report for the six months ended 31 October 2019 which comprises the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of cash flows, the consolidated statement of changes in equity and the related notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the unaudited interim consolidated statement.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.
Our responsibility
Our responsibility is to express to the company a conclusion on the unaudited interim consolidated statement in the half-yearly financial report based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the unaudited interim consolidated statement in the half-yearly financial report for the six months ended 31 October 2019 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.
BDO LLP
Chartered Accountants
Nottingham
21 January 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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