Van Elle Holdings plc

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

Results for the year ended 30 April 2022

Analyst Briefing & Investor Presentation

'Record revenues and return to profit following a strong recovery

driven by high levels of activity across all divisions'

Van Elle Holdings plc, the UK's largest ground engineering contractor, announces its results for the year ended 30 April 2022 ('FY2022').

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

2. Share-based payments have been reclassified from 'non-underlying' to 'underlying' in FY2022. The comparative period has been restated to reflect this reclassification. Current year non-underlying items have a net value of £nil and are disclosed in note 4 (FY2021: £0.1m).

3. Adjusted basic earnings per share is stated before non-underlying items of £nil (FY2021: £0.1m) and the one-off deferred tax charge of £1.1m relating to the enacted change to the future corporation tax rate (see note 6).

Highlights:

·      Record activity levels and revenues following strategic targeting of structurally growing end markets.

·      Significant growth across all divisions, notably in higher margin Specialist Piling, Rail and Ground Engineering Services.

·      Appointed to the 10-year Smart Motorways Programme Alliance framework (SMPA), with work on current contracts and construction of emergency refuge areas continuing despite the announced pause to the programme.

·      Piling work commenced on the Core Valley Lines rail network, the Group's first major electrification project since 2018.

·      Success in passing on cost and managing the inflationary environment and supply chain challenges.

·      Capital investment of £4.9m including the addition of 8 rigs to the fleet.

·      Strong balance sheet with significant reduction of Group debt to just £1.1m (excl. IFRS 16 lease liabilities) at 30 April 2022 and an unused bank facility of up to £11m.

·      Net cash position of £5.9m (excluding IFRS 16 lease liabilities) at 30 April 2022.

·      Reinstatement of dividends with final dividend of 1p per share recommended.

Current trading and outlook:

·      Trading momentum in FY2022 has continued into FY2023 with all divisions operating at high activity levels.

·      Supply chain challenges moderating, albeit inflationary pressures remain.

·      Investment in infrastructure, including the decarbonisation and electrification of the rail network, where the Group has established a market-leading position, expected to continue in the longer term.

·      Appointed, post period end, to the piling framework for the TransPennine Route Upgrade programme (TRU).

·      Order book at 30 June 2022 of £39.0m (£39.0m at 30 April 2022)

·      Current levels of activity and demand support prospects for FY2023.

·      Further progress expected in achieving the Group's medium-term financial targets.

Mark Cutler, Chief Executive, commented:

"These results are the first to reflect a full year's trading post COVID and demonstrate the positive progress the Group is making under its transformation strategy launched in 2019. Although the sector continues to face several wider challenges, we have significant opportunities ahead to further improve, and momentum has continued into the new financial year. Overall, it is pleasing to see the actions taken over the last three years starting to deliver sustainable results that put us firmly on-track to deliver our medium-term objectives.

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 3 August 2022

A briefing for Analysts will be held at 9.30am this morning - Wednesday 3 August 2022. Analysts interested in attending should contact Walbrook PR on [email protected] or 020 7933 8780.

Investor Presentation: 3.30pm on Wednesday 3 August 2022

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 3 August 2022, 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 [email protected], or in real time during the presentation via the "Ask a Question" function.

For further information, please contact:

About Van Elle Holdings plc:

Van Elle Holdings is the UK's largest specialist geotechnical engineering contractor. The Company provides a 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 three end markets: residential and housing, infrastructure and regional construction - across which the Group has completed more than 20,000 projects over the last 35 years.

General Piling provides a range of larger piling and ground engineering solutions for open-site construction projects. Specialist Piling and Rail provides a range of geotechnical solutions in operationally constrained environments including on-track rail applications. Ground Engineering Services offers a range of ground investigation and geotechnical services and modular foundation solutions such as Smartfoot®. Van Elle has a market-leading reputation and the UK's largest rig fleet of 122 rigs.

Having floated on AIM in 2016 it now has a strong national presence, diversified offering and market-leading brand name.

CHAIRMAN'S STATEMENT

Overview

I am pleased to report that FY2022 has been a year of record revenues, following a strong recovery for the Group, driven by high levels of activity across all divisions. Following the relaxation of Covid-related restrictions, and our strategy of working closely with key customers, we saw a strong rebound in revenues across all sectors. As a result, trading has been well ahead of pre-pandemic levels, and the Group has returned to profitability in the year. The Group generated full year revenue of £124.9m, an increase of 48% on the preceding year and operating profit of £4.4m, an increase of £5.2m over FY2021. 

We have faced a number of supply chain challenges during the year with lack of availability of key materials impacting operations. In addition, the Group has experienced price inflation across the spectrum. We have been able to pass on some, but not all, of these price increases with the consequential impact on contract margins. These challenges are starting to show early signs of moderating, and the impacts of further material price inflation are being managed, as far as possible, through contract pricing mechanisms.

Significant progress has continued to be made on delivery of the of the Group's strategic plan, focused on improving operational performance and establishing strong positions for future growth. Several significant contracts and framework appointments were awarded in the year in the key infrastructure growth sectors of Rail and Highways.

FY2022 represents the first full year of ScrewFast Foundations Limited ('ScrewFast') being part of the Group, having acquired the business on 1 April 2021. In line with the Board's expectations at the time of the acquisition, ScrewFast has strengthened the Group's position in its growth markets, notably highways and energy with significant potential identified in rail and housing. The business has been fully integrated, with projects being bid for, and delivered, in an integrated model within the Specialist Piling division.

Capital structure and allocation

The Group's capital structure is reviewed regularly by the Board and management, taking into account the need, availability and cost of sources of funding. The Group's objective is to deliver long-term value to shareholders 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.

In October 2020, the Group secured up to £11m of asset backed lending facilities on a revolving basis over 4 years, secured against the receivables and certain tangible assets. The facility was not drawn at any time during the financial year. Group debt has been further reduced to £1.1m at 30 April 2022, excluding IFRS lease liabilities.

Rig fleet and equipment investment was increased in the year to £4.9m having been restricted over the previous two financial years in order to manage cash resources during the pandemic. Capital investment is focused on both maintaining and upgrading existing rigs and investing in new rigs to meet growth opportunities and to replace ageing rigs.

The Board continue to review and appraise acquisition opportunities, in line with its disciplined criteria and approach. Whilst not core to the delivery of the Group strategy, 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

I am pleased to confirm the reinstatement of dividends with the recovery of the Group's core markets. In light of the performance in the year and given the importance to shareholders of dividends as part of total shareholder return, the Board is recommending a final dividend of 1.0p per share. If approved, the final dividend will be payable on 7 October 2022 to shareholders on the share register as at 16 September 2022. The shares will be marked ex-dividend on 15 September 2022.

People

The Group has strengthened the leadership team with significant industry and corporate experience in recent years. This management team is now embedded into the Group structure, supported by strengthened teams at a divisional level.  Bringing together a mix of experience and capability has allowed the Group to maximise opportunities during the post-pandemic market recovery and puts it well placed to deliver on its vision and strategy. Increased levels of training are now being delivered with internal training days doubling between FY2021 and FY2022. FY2023 sees the launch of the inaugural Van Elle leadership programme.

Van Elle is proud to be supported by an outstanding group of employees. My thanks go to all employees for their hard work in a year of such significant levels of trading, and with the additional challenges caused by supply chain disruption.

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.

Outlook

The Board is pleased with the progress made in FY2022, with many of the Group's end markets having shown sustained and strong levels of trading. The trading momentum in FY2022 has continued into FY2023 and the Group's order book continues to be maintained at high levels. Significant framework appointments such as the Smart Motorways Programme Alliance and TransPennine Route Upgrade programmes are expected to provide considerable future workflows for the Group and help underpin Van Elle's growth expectations. Investment in infrastructure, including the decarbonisation and electrification of the rail network, where the Group has established a market-leading position, is expected to continue in the longer term. Future prospects in other growth markets also remain encouraging. The Board is therefore increasingly confident of achieving its mid-term financial targets of 5-10% annual revenue growth, 7-8% operating profit margin and 15-20% ROCE.

Frank Nelson

Non-Executive Chair

2 August 2022

CHIEF EXECUTIVE'S STATEMENT

OPERATING REVIEW

Overview

The high levels of demand across Van Elle's core markets were sustained throughout the financial year, resulting in the Group reporting record revenues in FY2022 and delivering a 3.5% operating profit margin.

Market conditions started to recover from the COVID-19 pandemic towards the end of the previous year and the Group entered the year with a strong pipeline of projects and increasing enquiry levels.

Full year revenue was £124.9m, representing an increase of 48% on the preceding year (FY2021: £84.4m). After adjusting for the impact of the acquisition of ScrewFast Foundations Limited ('ScrewFast'), the year-on-year increase in revenue was 41%. Revenue was also 41% higher than FY2019 (32% after adjusting for the acquisition of ScrewFast), which was the last year unaffected by the COVID-19 pandemic.

There was a significant increase in demand and activity levels across all divisions. Workload in the rail sector lagged behind the recovery of our other core markets, but activity levels accelerated and increased during the second half of the financial year. Piling work commenced on the Core Valley Lines rail network, the Group's first major electrification project since 2018. Since the year end, Van Elle has been appointed to the piling framework for the TransPennine Route Upgrade (TRU) programme with site activity expected to commence later in FY2023.

Whilst the Group reports a slight improvement in contract margins overall, mainly due to better execution and higher utilisation of the rig fleet, there have been a number of supply chain challenges during the year. A lack of availability and price inflation of raw materials impacted contract margins. The Group has successfully passed through price increases to partially offset the inflated input costs, however some disruption to site work caused by material shortages has been unavoidable.

In order to attract and retain high quality employees, Van Elle took steps in the year to review remuneration and benefits, which has resulted in an increase to the Group's cost base. In the short term, particularly on longer term contracts already mobilised, these increased costs could not be fully recovered in all cases.

Despite the supply chain challenges and wage inflation, the Board is pleased to report a return to profitability for the Group, following two financial years impacted by the COVID-19 pandemic. Operating profit was £4.4m, an increase of £5.2m over the loss in FY2021.

The Group acquired ScrewFast on 1 April 2021, and over the course of the year the business was integrated into the wider Van Elle structure, whilst retaining key employees and the brand. The team has continued to deliver high quality projects in line with its previous strong track record. Going forward, the Group anticipates an increase in demand for ScrewFast's helical piling and steel modular foundation solutions, particularly in the highways sector.

The safety and wellbeing of all employees is Van Elle's primary operational priority. Van Elle's average headcount increased by 12% to 577 and the safety performance in FY2022 improved on that of the previous year, with the accident frequency rate dropping to 0.28 (FY2021: 0.59) and the positive indicators also improving.  During the year, Van Elle has strengthened the health and safety team and introduced significantly more internal training, with training days double those of FY2021.

In the previous financial year, Van Elle took measures to strengthen its balance sheet, including a refinancing of existing debt facilities in October 2020, following which the Group has access to a debt facility of up to £11m. This facility remained undrawn throughout the financial year. In FY2022, Van Elle further reduced Group debt by continuing to repay hire purchase liabilities, whilst financing all capital expenditure from cash resources. The remaining hire purchase debt at 30 April 2022 was £1.1m (30 April 2021: £4.0m). On acquiring ScrewFast, the Group inherited certain bank loans and hire purchase debt totalling £1.3m, all of which was repaid in FY2022. These actions leave the Group in a net cash position, with adequate liquidity headroom to support further growth and future investment.

ESG

The Group launched its sustainability strategy last year, aligned to industry best practice including the Construction Leadership Council programme. The Group's teams are passionate about making positive changes to their equipment and processes to considerably reduce waste and carbon production and limit the negative impact of their activities.

Van Elle's newly appointed Environment Manager will take the lead in delivering the Group's vision, which is to help create a sustainable future through innovation, engagement and collaboration with local communities, customers, and broader industry.

In addition to the focus on sustainability of site operations, the Group has undertaken a number of initiatives, including establishing an electric company car scheme, installing vehicle charging points at its offices, and planning to install solar panels at the Group's head office and main depot in Kirkby-in-Ashfield through FY2023.

Van Elle's target is to achieve Scope 1 and Scope 2 carbon neutral by 2050, however, to achieve this the Group needs to deliver on all of aspects of its strategy, and harness opportunities within the supply chain, product development and site operations.

Van Elle's social initiatives include various charitable activities, including partnering with a local charity, which is selected by employees. Van Elle also promotes volunteering and teams have completed activities to support the local community over the course of the year.

Strategic approach

Van Elle is making good progress against Phase 3 of the Group strategy and is seeing the early benefits of actions taken under Phases 1 and 2 which are substantially complete, although subject to continuous improvement, as summarised below:

Phase 1: Stabilising and improving performance

Simplifying the Group structure, improving leadership capability, strengthening commercial capability, cost reduction and efficiency improvements, safety and asset utilisation performance, and employee engagement activities.

Phase 2: Developing foundations for growth

Developing clear strategic plans for the Group's core sectors of housing, infrastructure and regional construction, improving customer relationships and tendering activity, maximising the integrated solutions offering, broadening the range of products and services, and strengthening the Group's balance sheet.

Phase 3: Establishing market leadership

Sustainable, profitable growth towards medium term objectives of revenue growth of 5-10% per annum, underlying operating margins of 7-8%, and return on capital employed of 15-20%.

The Group's vision is to be the leading, most trusted provider of Total Foundation Solutions and its strategic goals are aligned under three pillars of developing trusted partnerships, deploying the best people and assets and the perfect delivery of our projects. Some highlights in the year include:

-     further improvement in employee engagement scores from our annual employee survey;

-     a full review of employee remuneration and benefits, with improvement to terms targeted at employee engagement and retention;

-     doubling of internal training days delivered, compared to FY2021;

-     integration of ScrewFast into the Specialist Piling division, with aligned management and operational delivery teams;

-     further expansion of the Group's operational capabilities with excellent growth delivered in sheet piling, vibro and rigid inclusions, and the development of an ancillary civils capability in the Rail division. These techniques have been added to Van Elle's services and have all contributed positively to the financial result; and

-     further reduction in Group debt, with all capital expenditure in the year funded from cash resources. Outstanding hire purchase debt as at 30 April 2022 is £1.1m, and a funding facility of up to £11m remains available.

Markets

The Group operates in the following three market segments:

·      Residential constitutes approximately 43% of Group revenues (down from 45% in FY2021). Van Elle's teams deliver integrated piling and foundation systems for national and regional housebuilders, retirement and multi-storey residential properties.

The prior year financial results in the residential sector were heavily impacted by the COVID-19 pandemic, with housebuilders closing all sites during the first national lockdown. After a gradual recovery in in the first half of FY2021, demand and activity levels continued to increase. Demand from housebuilders for Van Elle's piling services and precast concrete modular foundation solution (Smartfoot) has been very strong, with the Housing division operating at near capacity levels throughout FY2022.

The long-term outlook for the sector is likely to remain strong, however changes to building regulations are expected to soften the exceptionally high demand seen this year as we progress through FY2023.

Van Elle remains confident that its Smartfoot system will continue to be popular with both traditional housebuilders and emerging modular housebuilders, due to the benefits of reduced delivery time, certainty of supply and cost, sustainability benefits and reduced on-site resource levels.

The Directors anticipate the residential sector will move increasingly to modern methods of construction as the time and resource savings of modular foundations become better appreciated, and the expanded range of integrated services from early ground investigation, ground stabilisation and improvement, followed by piling and foundations systems, provides a strong model to support housebuilder customers.

·      Infrastructure constitutes approximately 35% of Group revenues (up from 34% in FY2021) and includes specialist ground engineering services to the rail, highways, coastal and flooding, energy and utility sectors.

In the highways sector, Van Elle continues to deliver projects under local authority and Highways England frameworks. The Group was appointed to the 10-year Smart Motorways Programme Alliance (SMPA) framework in the second half of the year. Whilst there is a pause to the new-build programme to collect safety and economic data, design work, current contracts and construction of emergency refuge areas is continuing. The Group's helical piling and modular steel foundation solution (ScrewFast) is increasingly a gantry foundation solution of choice in many highways projects.

In the rail sector, revenues were slower to recover with subdued activity levels continuing through the first half of the year. However, the second half delivered strong revenue growth, with electrification work commencing on the Core Valley Lines rail network in South Wales, the Group's first major electrification project since 2018. Van Elle also delivered a series of high-profile station modernisation projects involving the rail and specialist piling divisions in tandem, including expansions of Gatwick airport station for Costain, Birmingham University station for Volker Fitzpatrick, and several other regional station schemes taking Van Elle's historical station portfolio to over 200 completed projects.  Van Elle also delivered several embankment and slope stabilisation schemes, often at short notice, including major schemes in Network Rail's southern region and has been delivering complex coastal rail works on the Dawlish coast on a series of projects throughout FY2022, and ongoing, for Bam Nuttall. Van Elle was also appointed to the piling framework for the TransPennine Route Upgrade (TRU) programme in the first quarter of FY2023.

High Speed 2 continues to offer considerable medium-term opportunities, where Van Elle anticipates its services will be used by main contractors to provide additional capacity for the high workloads required to meet the project deadlines. In the year, Van Elle undertook various works on all the main works civil engineering sections on phase 1 (London to Birmingham).

Led primarily by customer interest in the ScrewFast solution, the Group has developed a growing presence in the high voltage power sector and has completed several contracts on substation and other infrastructure projects across the National Grid and regional distribution networks.

·      Regional Construction constitutes approximately 22% of Group revenues (up from 21% in FY2021). 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.

The regional construction market improved over the financial year, as greater confidence returned following the previous year impacts from COVID-19 and Brexit. The market remains highly competitive and, as a result, price sensitive. The most buoyant segment is the construction of industrial and logistics warehouses across the UK.  Van Elle has delivered several schemes in the year benefiting from a wider offering by the development of its ground improvement services (vibro stone columns and rigid inclusions) which are often specified alongside traditional driven and Continuous Flight Auger ("CFA") piling on the larger warehouse schemes.  

Van Elle has continued to secure projects and exited FY2022 with a robust and high-quality order book. Contract execution and commercial management have remained high focus areas in the General Piling division and further progress has been achieved in delivering improved contract gross margins.

The impact of delivering against the strategy to develop a diversified range of complementary services, as well as a strong balance sheet, has allowed the Group to be awarded several larger contracts, which contributed strongly to revenue growth in the year.

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 and precast driven piling.

·      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); ground investigation and geotechnical services (Strata Geotechnics).

Note: The results of ScrewFast Foundations Limited, acquired on 1 April 2021, are reported within the Specialist Piling and Rail segment.

General Piling

Revenue increased by 43% in the year to £39.0m (2021: £27.3m), representing 31% of Group revenues.

The primary target market of regional construction remained challenging throughout the year, with highly competitive, price-sensitive tendering required. However, the division continues to develop stronger relationships with its key customers and delivered multiple high-quality contracts in the year, requiring significant technical capabilities.

The General Piling division has had success in delivering larger projects, particularly in London, utilising its deep CFA technical capability and expertise, and the Group has furthered its investment to strengthen its capabilities in support of its strategy. Growth in rigid inclusions activity, a ground improvement technique which was recently added to the Group's capabilities has also supported revenue growth within the division. 

A strong order book is carried forward into FY2023, underpinned by a large contract in the energy sector, which represents the largest single contract award since the outset of the pandemic.

There has been a high focus on contract execution in the year, delivering a gradual increase in gross margins through improved operational performance.

Underlying operating profit for the division was £1.8m (2021: £0.3m).

Specialist Piling and Rail

Revenue increased by 56% in the year to £45.8m (2021: £29.3m), representing 37% of Group revenues. Revenue from the acquisition of ScrewFast is reported within the Specialist Piling and Rail segment. Revenue growth, after adjusting for the impact ScrewFast was 30%.

Specialist Piling recovered quickly following the first COVID-19 lockdown with strong demand across all of its target markets. The division has expanded its operational capability by investing in new rigs for growth and increasing the number of site gangs, having operated at near capacity throughout most of the financial year.

The division has developed a strong reputation for a broad range of technical capabilities, has seen further growth in ground stabilisation workload and has developed a strong sheet piling offering including the successful delivery of a major flood protection scheme to the A40 Llanegwad for the Welsh Government.

Similar to the prior year, the division benefited from several high-profile schemes in the infrastructure sector including selected highways projects and several rail station and geotechnical schemes. Despite the award of a partner role with the 10-year Smart Motorway Programme Alliance (SMPA), ongoing projects were fewer in FY2022 compared to previous years but are expected to ramp-up significantly in FY2023 onwards as the SMPA programme progresses.

ScrewFast has been fully integrated into Specialist Piling, with aligned management and operational delivery teams. The helical piling and steel grillage solution has seen strong demand in the highways and energy sectors. With expected increased demand, the Group has invested in increased steel fabrication capacity.

Rail revenue gathered strong momentum during the second half, after a subdued first half of the financial year. Work commenced on piling for the decarbonisation and electrification of the Core Valley Lines rail network, alongside a typically weekend-dominated workload of smaller schemes across all Network Rail regions.  Rail capabilities were expanded organically by the launch of an ancillary civil engineering service which complements the Group's piling and foundations specialisms.  The first major project was the re-opening of the Dartmoor line in north Devon which was successfully completed in the period for Linbrooke, a Network Rail signalling framework contractor.

The Group was appointed to the piling framework for the TransPennine Route Upgrade (TRU) programme between Manchester and Leeds in the first quarter of FY2023, with work due to commence later in the financial year and is expected to involve both the Specialist Piling and Rail divisions for up to three years.

The Group's fleet of 17 Colmar road and rail piling rigs are approaching an average age of 7 years, and require a major overhaul which has commenced in FY2022 and is to be concluded over the next 24 months at an anticipated cost of approximately £70k per rig. In addition to peak weekend demands, this has resulted in more hired, less reliable equipment than is preferable. Orders for five, new generation, UK designed and built rigs were placed in the period at a cost of approximately £2.5m, with delivery expected by mid FY2023, allowing the Group to expand the fleet to meet the greater levels of demand.

Underlying operating profit for the division increased to £3.0m (2021: £1.0m).

Ground Engineering Services

Revenue increased by 45% in the year to £40.0m (2021: £27.6m), representing 32% of Group revenues.

The Housing division delivers integrated piling and Smartfoot foundation beam solutions to UK housebuilders. The prior year was heavily impacted from the first COVID-19 lockdown at the start of the financial year, which resulted the cessation of all housebuilding activity for several weeks. Following the reopening of sites, the division saw a gradual increase in demand which continued throughout FY2022. The division has operated at capacity for the majority of the financial year, delivering significant revenue growth. A strong and high-quality order book is carried forward into FY2023.

There has been a high level of focus on operational efficiency to improve gross margins, in a highly competitive market, with a gradual improvement delivered over the year.

Strata, Van Elle's Geotechnical division, reported revenues of £5.9m (2021: £4.7m). Further progress has been made in the infrastructure sector, with increased activity levels in the highways sector (including under the Highways England ground investigation framework) and on HS2 ground investigation projects. The Group anticipates further growth in the infrastructure market under the Smart Motorway Programme Alliance and rail electrification and signalling programmes and have grown the division's workforce to meet this potential demand.

Underlying operating profit for the segment increased to £2.1m (2021: £0.2m).

Rig fleet

Capital expenditure was restricted in the last two financial years as we sought to manage cash resources during the pandemic. In FY2022 the Group increased its level of investment to sustain the existing rig fleet and expand the fleet in key strategic growth areas.

Capital spend in FY2022 was £4.9m, including 8 rigs added to the fleet. Three rigs were added in Specialist Piling to support growth in the ground stabilisation sector; a piling rig with deep CFA capability was added to the General Piling division, where the Group has developed a positive reputation for large schemes in the London region; and rigs were also added to the Ground Engineering Services division to expand capacity given the higher levels of demand.

Van Elle expects to continue to invest in the rig fleet at broadly similar levels in FY2023, with capital spend proposals being approved only where there is high confidence in a division's forward orders, and forecast ROCE contributes to the Group's medium-term target of 15-20%.

The total fleet size at the year-end was 122, up from 115 last year.

Summary and outlook

The strong momentum achieved throughout FY2022 has continued into the first quarter of FY2023 and all divisions continue to operate at high activity levels.

The supply chain challenges relating to cost inflation and availability issues remain a concern, although there are some signs of the issue moderating and generally the Group is able to recover cost inflation through contract pricing mechanisms. Access to raw materials for site works is improving, although inflationary cost increases have continued, albeit to a lesser extent than during FY2022.

The Group continues to monitor wage inflation and, in particular, the 'cost of living crisis' in the UK, which impacts all employees' living standards. Van Elle has made several changes to employees' terms of employment and benefits and will keep this under constant review to ensure that the Group continues to attract and retain the best people.

The Group has made good progress in the delivery of its three-phase strategy and is now firmly focussed on achieving a market leading position, including delivering the Board's medium term financial KPIs.

Van Elle's core markets continue to show a positive outlook, particularly in the infrastructure sector where government-backed investment is anticipated over the medium term. The Group is well-positioned on the Smart Motorways Programme Alliance on which a strong pipeline of current and retrofit works is forecast through to FY2025, while the government's review of new projects is ongoing.  Activity levels in the rail sector have improved, with a much clearer pipeline of opportunities in place on which the Group is already engaged or bidding, many of which span the CP6-CP7 transition. HS2 is expected to continue to take capacity out of the ground engineering market, and Van Elle expects to be increasingly involved in support of the phase 1 joint ventures. There is a growing number of opportunities for ScrewFast, which is now fully integrated into the wider Group structure, particularly in the highways and energy sectors.

Whilst mindful of the wider macro challenges affecting the sector, the Board is confident that the current levels of activity and demand will be sustained in FY2023, and further progress will be made on our strategy in this financial year.

Mark Cutler

Chief Executive Officer

2 August 2022

CHIEF FINANCIAL OFFICER'S STATEMENT

FINANCIAL REVIEW

Revenue

Revenue in the year to 30 April 2022 was significantly ahead of the COVID-19 impacted prior year. The recovery in the infrastructure, regional construction and housebuilding markets delivered strong order levels and significantly increased contract activity in the year with total revenue above pre-pandemic levels.

Throughout H1 of the prior year, there was a gradual recovery in contract activity, with revenues recovering to pre-COVID levels by H1 of FY2021. Recovery of the Group's core markets continued into H2 of FY2021 and throughout FY2022. High activity levels across all divisions throughout the year resulted in total revenue growth of £40.5m (+48.1%). FY2022 represents the first full year of ScrewFast trading as part of the Group. Revenue growth in FY2022, allowing for the impact of the acquisition of ScrewFast was £33.8m (+40.1%).

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:

Residential: The residential sector was impacted the most by COVID-19 restrictions in the preceding year. A strong recovery, assisted by the stamp duty holiday, resulted in high levels of demand. These market conditions continued, with enquiries and contract activity levels reported at record levels, despite the phasing out of the stamp duty holiday over the summer of 2021. The residential sector continues to lead the Group's revenues.

Infrastructure: The recovery in Rail, whilst initially lagging behind the other divisions, improved throughout the year with work commencing on the Group's first major electrification programme since 2018 in H2 of FY2022. The Group was appointed to the Smart Motorways Alliance Programme (SMPA) in the year for a period of up to 10 years, and whilst there is a pause to the programme to collect safety and economic data, design work, live contracts and investment in emergency refuge areas continues. ScrewFast solutions are primarily targeted at the infrastructure sector, with a focus on highways and power projects, and therefore the benefit of ScrewFast is largely reflected within this sector's revenues.

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 larger schemes in London, particularly utilising its deep CFA technical expertise.

The mix of revenue by division is shown below:

General Piling revenues, whilst impacted by high levels of competition within the regional construction market and by the industry-wide supply chain challenges (due to the higher raw material requirements of the division's contract works), increased due to higher demand and improved tender conversion during the year. Revenue was supported by further growth in rigid inclusions activity, a ground improvement technique which was recently added to the Group's capabilities.

The Specialist Piling and Rail division includes ScrewFast. Excluding ScrewFast, revenue growth was £9.7m (+34.3%). This division was least impacted by COVID-19 in the preceding year, with revenues returning to pre-pandemic levels quickly following the first COVID-19 lockdown. Investment in drill and grout ground stabilisation capability delivered strong revenue growth in the year and activity levels on infrastructure projects have also continued positively, with notably high levels of work on rail station projects.

Growth in the Ground Engineering Services division's revenue reflects the significant demand in the residential sector during the year, also supported by geographical expansion within the UK. 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 increased to 27.3% (2021: 26.1%). The improvement is partially due to a change in mix, with a greater proportion of Group revenues delivered by Specialist Piling and Rail, which typically deliver gross margins at the upper end of the Group's range of activities. There has also been a high focus across the Company on contract execution, with improved margins delivered across many contract activities.

Strong growth in Ground Engineering Services revenues, particularly Housing, resulted in a negative mix impact due to the highly competitive sector delivering margins at the lower end of the Group's margin range.

Supply chain challenges also impacted the Group, with the primary issues being a lack of availability and price inflation of key raw materials. Some of the impact was mitigated through higher pricing but unrecovered inflationary increases and the disruption caused by material shortages had a negative effect on contract margins. Wage inflation also impacted gross margins in the year, particularly on longer term contracts, where pricing could not be fully adjusted to reflect higher staff costs.

Overall, an improved revenue mix, better contract execution and higher rig utilisation rates delivered an improved gross margin, despite the supply chain and wage inflation challenges.

Operating profit

Operating profit margins improved significantly in the year with the Group returning to profitability due to high levels of activity, improved gross margins and better overhead recovery rates.

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 FY2022 include a credit of £362,000 relating to the reduction in the deferred consideration due in respect of the acquisition of ScrewFast and a charge of £350,000 relating to two warranty claims arising in the year. The total value of £12,000 is recognised within administration expenses and forms part of underlying operating profits. Underlying operating profits and reported operating profits are consistent in FY2022.

During the preceding year, total non-underlying items of £0.1m were incurred in respect of the fees associated with the acquisition of ScrewFast Foundations Limited on 1 April 2021.

Net finance costs

Net finance costs were £779,000 (2021: £598,000). The increase in finance costs during the year reflects the absorption of debt on acquisition of ScrewFast Foundations Limited on 1 April 2021. All outstanding loans and hire purchase agreements in ScrewFast were repaid in April 2022 resulting in accelerated interest charges in the year.

Taxation

The Group has taken advantage of the extended loss carry back rules in the period, carrying back losses from the preceding financial year to the years ending 30 April 2019 and 30 April 2018, resulting in a refund which was received in Q1 of the FY2023 year.

The effective tax rate in the year was 48.2% (2021: -0.9%). The relatively high effective tax rate in the year is due to the enacted change to the future corporation tax rate from 19% to 25%. This has resulted in a restatement of the Group's deferred tax liabilities and a deferred tax charge in the current year of £1,072,000. Excluding this one-off deferred tax charge, the effective tax rate in the year was 18.4%.

The Group has a taxable loss in the current financial year due to the use of super deduction allowances on qualifying items of plant and machinery. Tax losses have been recognised on the basis the Group has net deferred tax liabilities.

Dividends

The Board is recommending a final dividend of 1.0p. No interim dividend was paid during the year. 

Subject to approval at the Annual General Meeting on Thursday 29 September, the recommended final dividend will be paid on 7 October 2022 to shareholders on the share register as at 16 September 2-22. The associated ex-dividend date will be 15 September 2022.

Earnings per share

Reported basic earnings per share were 1.7p (2021: -1.3p) and adjusted basic earnings per share were 2.7p (2021: -1.2p). There is no dilutive effect of outstanding share options as conditions remain unsatisfied or the share price is below the exercise price meaning diluted earnings per share is equal to basic earnings per share, as was the case in the previous financial year.

Adjusted basic earnings per share is based on profit before non-underlying items, net of tax, and the one-off deferred tax charge relating to future corporation tax rate changes enacted during the current year.

Balance sheet

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

Net assets increased by £2.0m to £46.6m (2021: £44.6m).

The Group increased its level of investment in the year (having restricted capital investment in the last two financial years to manage cash resources during the pandemic). A total of £4.9m was invested over the course of the year with 8 rigs added to the fleet. Three rigs were added to the Specialist Piling fleet to support growth in the drill and grout ground stabilisation sector. A rig was added to the General Piling division to support growth in deep CFA piling, where the Group has delivered a number of large schemes in the London region during the year. Rigs were also added to the Ground Engineering Services division to expand capacity given the high levels of demand.

On 1 April 2021 the Group acquired 100% of ScrewFast Foundations Limited, a specialist helical pile design, fabrication and installation business for consideration of £1,760,000 plus £740,000 payable on 31 August 2023, up to a further £65,000 payable on 31 August 2022, and up to £1,110,000 payable on 31 August 2023 subject to future performance. Goodwill of £2,116,000 was recognised on acquisition in the previous financial year. Management's assumptions are that, of the further potential payment of £1,175,000 subject to performance criteria, £543,000 will be payable based on current financial performance forecasts. This is a reduction of £362,000 on the estimate as at 30 April 2021. This reduction has been recognised as a credit within administration expenses in the period. The reduction in ScrewFast's performance forecast is driven by the pause to the smart motorways scheme which has affected the timing of some of the more significant opportunities for this part of the business.

Working capital (defined as inventories, trade and other receivables and trade and other payables) increased to £8.1m (2021: £6.9m), predominantly as a result of increased activity in the year.

ROCE has increased in the period to 9.4% at 30 April 2022 (2021: -1.8%), reflecting the impact of the increased operating profit.

The prior period opening deferred tax liability has been restated for the recognition of tax losses which were previously not recognised as deferred tax assets. The impact of this restatement is a reduction in prior period net deferred tax liabilities of £592,000 and an increase in prior period retained earnings of £592,000. This prior period restatement has no impact on profits or cashflow in the current financial year.

Net funds

Net debt decreased during the year. The Group has moved to a net funds position of £0.1m as at 30 April 2022.

Debt acquired on the acquisition of ScrewFast Foundations Limited of £1.2m was repaid in full during the year and existing hire purchase debt finance was reduced further. Capital investments in the year were funded from cash resources. As a result, the balance of outstanding hire purchase debt as at 30 April 2022 is now £1.1m, of which £0.9m will be repaid in FY2023 as the majority of remaining hire purchase contracts reach their term. Hire purchase agreements are typically at fixed rates of interest and over a five-year term.

Lease liabilities includes £5.8m of IFRS 16 property and vehicle lease liabilities. The increase in IFRS16 property and vehicle lease liabilities in FY2022 reflects the renewal of the Group's van fleet, the roll out of which commenced in Q4 of FY2021 and is on a long-term hire basis over a maximum period of 4 years.

In October 2020, the Group secured up to £11m of asset backed lending facilities on a revolving basis over 4 years secured against the Group's receivables and certain tangible assets. There are no financial covenants associated with the facilities and they remain available and undrawn to date.

Cash flow

Operating cash flows of £9.8m have primarily been used to repay outstanding debt and fund capital expenditure, all of which has been paid from cash resources in the year. Working capital increased in the year, primarily due to the increased trading levels.

Graeme Campbell

Chief Financial Officer

2 August 2022

Consolidated statement of comprehensive income

For the year ended 30 April 2022

All amounts relate to continuing operations. There was no other comprehensive income in either the current or preceding year.

Share-based payments are no longer classified as non-underlying. Comparative information for 2021 has been restated to reflect this, with no impact on the total comprehensive loss for the year.

Consolidated statement of financial position

As at 30 April 2022

A third Group statement of financial position as at 1 May 2020 has been shown above to show the effect of the prior year restatement of deferred tax.

Consolidated statement of cash flows

For the year ended 30 April 2022

Consolidated statement of changes in equity

For the year ended 30 April 2022

NOTES:

1.   Basis of preparation

The consolidated financial statements and announcement of Van Elle Holdings plc for the year ended 30 April 2022 were authorised for issue by the Board of Directors on 2 August 2022.

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 2022 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 2022 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 2021

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;

·      IAS 16 Property, Plant and Equipment;

·      IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and

·      Annual Improvements to IFRSs (2018-2020 Cycle): IFRS 1; IFRS 9; Illustrative Examples Accompanying IFRS 16; and 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);

·      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; and

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

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 2022

Operating segments - 30 April 2021

There are no individual customers accounting for more than 10% of Group revenue in the current or preceding year. All revenue is generated in the UK.

3.   Revenue from contracts with customers

Disaggregation of revenue - 30 April 2022

Head office revenue relates to revenue generated from the provision of training services.

Disaggregation of revenue - 30 April 2021

4.   Other non-underlying items

The Group's non-underlying items in FY2022 include a credit of £362,000 relating to the reduction in the deferred consideration due in respect of the acquisition of ScrewFast and a charge of £350,000 relating to two warranty claims arising in the year. The total net value of £12,000 is recognised within administration expenses and forms part of underlying operating profits.

Prior year exceptional costs relate to the acquisition costs for the purchase of ScrewFast Foundations Limited on 1 April 2021.

5.   Income tax expense

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

During the year ended 30 April 2022, corporation tax has been calculated at 19% of estimated assessable profit for the year (2021: 19%).

The March 2021 Budget announced a further increase to the main rate of corporation tax to 25% from 1 April 2023. This rate was substantively enacted on 24 May 2021, as a result, deferred tax balances as at 30 April 2022 are measured at 25% resulting in a deferred tax charge of £1,072,000 in the year.

6.   Earnings per share

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

*The adjusted earnings per share is based on profit/(loss) for the year adjusted for non-underlying items of £Nil (2021: £95,000) and corporation tax rate changes amounting to £1,072,000 (2021: £Nil) (refer to note 5). This tax rate change is a one-off deferred tax charge relating to future corporation tax rate changes enacted during the year. Share based payment changes have been reclassified from non-underlying profits to underlying profits in the current year and the prior year earnings per share has been restated to reflect this reclassification. The Directors consider this measure provides an additional indicator of the underlying performance of the Group.

There is no dilutive effect of the share options, as in the previous year the performance conditions remain unsatisfied, or the share price was below the exercise price.

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders and on 106,666,650 ordinary shares (2021: 106,666,650), being the weighted average number of ordinary shares.

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

Cash flows in respect of lease liabilities include interest paid on leases of £608,000 (2021: £553,000) and principal paid of £3,637,000 (2021: £3,930,000).

Non-cash flows in respect of lease liabilities includes the purchase of £1,074,000 of fixed assets on long term hire and interest expense of £608,000 (2021: £553,000).