TIDMVANL
RNS Number : 4914G
Van Elle Holdings PLC
24 July 2019
Van Elle Holdings plc
For Immediate Release 24 July 2019
A Year of Transition
Preliminary Results for the year ended 30 April 2019
Van Elle Holdings plc (the "Group"), the UK's largest
independent ground engineering contractor, announces its
preliminary results for the year ended 30 April 2019 ("FY19").
Financial Highlights
Year ended Year ended % change
30 April 30 April 2018
2019
------------------------------------ ----------- --------------- ---------
Revenue (GBPm) 88.5 103.9 (14.8)
Underlying* Operating Profit
(GBPm) 5.2 11.1 (53.2)
Reported Operating Profit (GBPm) 4.6 9.7 (52.6)
Underlying* profit before taxation
(GBPm) 4.7 10.6 (55.7)
Reported profit before taxation
(GBPm) 4.0 9.2 (56.5)
Underlying* earnings per share
(p) 4.7 10.6 (55.7)
Reported earnings per share
(p) 4.0 9.2 (56.5)
Dividend per share (p) 2.00 3.70 (45.9)
Operating cash conversion (%) 106.3% 85.9%
Return on capital employed
(%) 9.90% 20.5%
Net debt (GBPm) 4.2 5.9
------------------------------------ ----------- --------------- ---------
*Underlying measures exclude exceptional costs (note 6) and
share based payment expenses.
Strategic & operational highlights
-- Disappointing performance in FY19, with results impacted by
challenging end-market conditions and operational weaknesses in
Q3
-- Despite weaker trading, good capital discipline resulted in a
strong cash performance with net debt further reduced to GBP4.2m
(2018: GBP5.9m)
-- Management implementing a strategy to improve operational
performance and establish a platform for long term, sustainable
growth
-- Progress being made under the transition plan, including:
o Strengthened leadership team
o Streamlined divisional structure and associated overhead
improvements
o Consolidation of operations into a single site
o Improving engagement with strategic customers
o Improving business development focus and bidding success,
evidenced by good contract win momentum
o Strengthened performance review and commercial processes
-- Improved commercial focus and strategic engagement gaining
traction, with success in securing positions on attractive, long
term contracts resulting in an orderbook of GBP32m, materially
ahead of last year
-- The Board is recommending a final dividend of 1p per share (total dividend of 2p per share)
Mark Cutler, Chief Executive, commented:
"This has been a year of transition for the business, having
taken action to strengthen the leadership team, refine the Group's
commercial approach, streamline operations and re-focus on our
customers.
"Whilst it is disappointing to report that performance across
the year has been impacted by a combination of widely-reported
market uncertainties and previously highlighted operational
weaknesses, we are seeing tangible signs of operational improvement
as a result of the transition plan we are implementing. Our
strengthened commercial approach is gaining traction as evidenced
by recent contract wins and an encouraging orderbook.
"Nevertheless, the Group is continuing to experience customer
uncertainty as well as some heightened competitive pressure,
resulting in a quiet start to the current year in some segments and
increased volatility in month on month performance. Whilst the
improved customer focused approach and positive order book
development underpins the Board's confidence in the prospects for
the Group in the medium term, the Board is mindful that challenging
market conditions and the resultant volatility is persisting into
the current financial year and impacting visibility.
"Whilst the benefits of our self-help initiatives should drive
improved performance in the business, the ability to make overall
progress in FY20 will require supportive market conditions as we
progress through the year.
"Van Elle fundamentally remains a market-leading business with a
clear strategy. Having seen the positive impact of the initial
actions undertaken as part of phase one of the transition plan, we
are confident that these steps, as well as the further commercial
and operational initiatives that will be deployed in the current
year, will leave us well placed to capture significant
opportunities across our target markets today and into the
future."
Enquiries:
Instinctif Partners (Financial Public Tel: 020 7457 2020
Relations)
Mark Garraway
James Gray
Rosie Driscoll
Peel Hunt LLP (Nominated Adviser and Tel: 020 7418 8900
corporate broker)
Charles Batten
Mike Bell
Chairman's Statement
Overview
This has been a year of transition for Van Elle as we seek to
transform business performance and set the platform for future
growth under our new CEO, Mark Cutler, and a strengthened
leadership team.
Disappointingly, current year performance has been impacted by a
combination of uncertainty which has affected a number of our most
significant markets and, as previously highlighted, we experienced
operational weaknesses in the General Piling division in Q3.
Since joining Van Elle, Mark Cutler has undertaken a thorough
review of operations and is implementing a three-phase transition
plan with the aim of improving operational performance and
establishing a platform for growth.
Significant progress has already been made under phase one of
the transition plan, supported by an enhanced and strengthened
leadership team, including streamlining the divisional structure,
improving engagement with strategic customers, fostering an
improved commercial and business development focus, and
strengthening performance review and commercial processes across
the business. In addition, a high level of focus is being applied
to staff engagement and retention.
Notwithstanding current market uncertainty, the Group remains a
leader in the UK geotechnical engineering services market where
significant opportunities exist across our target markets of
Housing, Infrastructure and Commercial & Industrial, much of
which remain well-funded and/or are underpinned by long-term
structural growth dynamics. The Group finished the year with a
strong order book, with particular focus on longer-term
partnerships and building on existing client relationships.
Capital allocation
The Group's capital structure is kept under constant review,
taking account of the need for, and the availability and cost of,
various sources of finance. The Group's objective is to deliver
long-term value to its shareholders whilst maintaining a balance
sheet structure that safeguards the Group's financial position
through economic cycles.
Given the current wider market uncertainties, the priority focus
continues to be strong management of working capital and net debt
reduction. Investment over recent years has positioned the Group
strongly, with a large, modern rig fleet, capable of delivering a
broad range of services efficiently. In the short term, capital
expenditure on rig fleet expansion will continue to be considered
on a selective basis where a compelling investment case exists.
Bolt-on acquisitions are not currently a key priority for the
Group, but we remain watchful for opportunistic situations that
might arise from the current uncertain market conditions.
Cost reduction programmes are ahead of previous targets and
ongoing, benefiting from the co-location of all operations to our
main site in Kirkby.
Dividend
In light of the Group's performance and reflecting the
importance of prudent management of cash reserves, the Board is
recommending a final dividend of 1.0p (2018: 2.3p), making a total
of 2.0p (2018: 3.7p). If approved, the final dividend is payable on
27 September 2019 to shareholders registered on 6 September
2019.
Board and governance
In August 2018, our new CEO Mark Cutler joined the Board
following the retirement of Jon Fenton in May 2018 (and the
intervening period with Steve Prendergast as interim CEO). Mark
brings significant sector and leadership experience to the role,
with a clear strategy to stabilise the business and build a
platform to pursue sustainable profitable growth.
In May 2019, Paul Pearson resigned from his role as Chief
Financial Officer and Director of the Company and so will leave the
Company in November 2019. On behalf of the Board, I would like to
reiterate our thanks to Paul for his many years' service, which
included the successful IPO of Van Elle in 2016. The Company is
progressing the process of finding a successor to Paul.
As a Board, we are committed to promoting the highest standards
of corporate governance and ensuring effective communication with
shareholders. We are committed to applying the Quoted Companies
Alliance for Corporate Governance Code, complemented with other
suitable governance measures appropriate for a company of its
size.
People
During a year of significant transition, the senior leadership
team has been strengthened to ensure we have the optimal mix of
experience and capability as we build a platform from which to grow
the business.
In the year, Peter Handley and Malcolm O'Sullivan joined the
leadership team in key roles, both bringing significant industry
experience to the business. On behalf of the Board I would like to
welcome Peter, Malcolm and all new employees to the Group.
As a Company, we have worked hard to bring together a team that
has the right combination of sector knowledge and corporate
experience to enable us to deliver on our vision and strategy.
Van Elle remains a market-leading business with an outstanding
group of employees. I would like to thank all employees for their
hard work and ongoing contribution to the business.
Outlook
Despite the uncertain market conditions and impact on investment
decisions due to the protracted Brexit negotiations, and a general
slowdown in contract deployment, the improved customer focused
approach and positive order book development underpins the Board's
confidence in the prospects for the Group in the coming years.
As a Board, we are mindful that market uncertainty and the
resultant volatility may persist further into the current financial
year.
Van Elle fundamentally remains a market-leading business with a
clear strategy. The Board is confident that with the benefits of
our implementation plan, we are well placed to capture significant
opportunities across our target markets today and into the
future.
Adrian Barden
Non-Executive Chairman
24 July 2019
Chief Executive's Statement
Overview
This year has been a challenging year amidst a general slowdown
in construction activity and uncertainties around investment
decisions and project starts. The first half continued to see
market uncertainty as a result of the liquidation of Carillion in
January 2018 and delayed contract decisions arising from Brexit
uncertainty.
Reflecting these more challenging market conditions and the need
for internal performance and efficiency improvements, the business
is in a transition period during which efficiencies are being
delivered, improved processes are being implemented and enhanced
capability is assembled. In parallel a strategic review of markets
and customers has been undertaken to enable the actions for
sustainable growth and margin enhancement to be delivered over
time. As a key element in ensuring strong, long-term performance,
the Group is now far more focussed on closer customer relationships
in its core sectors.
Part of the streamlining of the Group has seen the number of
operating divisions reduced from eight to five and the integration
of all staff previously spread across four separate offices into a
single co-located office in Kirkby during Q4. In addition, the size
of the total rig fleet has been reduced while future capex is more
selectively considered, although Van Elle continues to hold the
broadest and most modern range of specialist piling rigs in the
market. In parallel, efficiencies to the overhead have been
delivered in excess of GBP1.0m on an annualised basis, part of
which has been reinvested in key hires, and further opportunities
continue to be delivered, including the benefits of co-location on
a single site.
Notwithstanding the difficult backdrop, the business continues
to innovate and develop new products and services to ensure we
remain competitive and diversified, as well as to meet
opportunities in its core sectors. During the year new rigs have
been built in-house for Vibro stone columns (VSC) in support of the
Housing sector, a unique award-wining, road-rail geotechnical
investigation vehicle, the VEmog has been commissioned and
excellent progress has been made with our patented track bed
stabilisation (TBS) system applicable to the Rail sector. FY19 has
also seen the effective deployment of the three large rotary rigs
procured in FY18 on several important case study projects.
Our diversified business model continues to be focussed on
mid-sized projects (once again delivering circa 1000 projects in
the year) across three core sectors where we believe there is
sustainable demand for our services. In addition, our commercial
risk remains relatively low as we complete projects quickly after
typically short lead-times and this approach rarely leads to
commercial disputes. Progress is indicated by our improved cash
conversion of 106% (FY18 86%) which has supported our year-end
net-debt reduction to GBP4.2m (FY19 GBP5.9m).
Significant focus has been put into staff engagement and
retention, particularly during the challenging times described
above and while streamlining and cost reduction programmes are
being delivered. These initiatives include strengthened internal
communications, priority training and development programmes and
recognition programmes. Our first company awards event will be held
in December 2019.
Strategic Approach
Since joining Van Elle in August 2018, I have undertaken a
thorough review of the business and identified a range of
opportunities to enhance the performance of the Group both in terms
of operational performance and commercial development.
The Group remains a leader in the UK geotechnical engineering
services market and our strategy is predicated on
simultaneously:
1. Enhancing the performance and profitability of the business
through a range of business improvement activities; and
2. Accelerating growth by increasing our market share in our
targeted sectors, maximising our integrated solutions offering,
broadening our range of products and services and extending our
geographical footprint into high growth markets across the UK.
At the half year we described the three phases of our transition
plan (below). The phase one activities commenced in FY2019 and will
continue throughout FY2020. Progress is measured against medium
term key performance indicators and supported by annual objectives
across the leadership team, which are cascaded through the business
via individual personal appraisals and linked to individual
incentive arrangements.
Phase 1 Business review and performance stabilisation
Phase 2 Predictable performance and margin
improvement
----------------------------------------------
Phase 3 Sustainable annual growth
----------------------------------------------
At the half year we reported on a range of immediate actions to
help deliver improvements under phase one. For the year as a whole,
significant progress has been made with actions undertaken
including:
-- 'Back to basics' operational improvement programme and
introduction of strengthened commercial processes;
-- Significantly strengthened leadership team;
-- Streamlining and simplifying the Group's operational structure;
-- Consolidation of the Group's operations into a single site at Kirkby;
-- Increasing engagement with strategic customers;
-- Re-focused work winning approach;
-- Initiatives to improve asset (rig) utilisation; and,
-- Improved employee engagement
The Group is beginning to generate a stronger pipeline of
opportunities, particularly larger projects with an increasingly
strategic customer base which integrate several of its specialist
capabilities and enable early involvement.
Strengthened commercial processes are expected to support
consistent contract margin delivery, tighter risk management at bid
stage and improved cashflows. The streamlined divisional structure
has already reduced unnecessary complexity in the Group as well as
reducing overhead costs, including anticipated annualised cost
savings of over GBP1.0m for FY2020.
The co-location of all personnel formerly dispersed across four
offices in Pinxton and Kirkby has further improved internal
collaboration and efficiency. This will be further enhanced when
all plant and maintenance operations are also co-located at the
same site later in FY2020.
Target markets
As a Group we operate a diversified business model, targeted at
growth markets where there is sustainable demand for our services.
We see significant continued opportunity across our core target
markets, being Housebuilding, Infrastructure and Industrial &
Commercial, which are supported by favourable long-term trends and
where Van Elle's range of services are of critical importance.
Across each of these markets our work mix is carefully monitored to
ensure we retain the essential regional strength of the business
across mid-sized projects but blended with carefully selected
larger schemes that deliver greater utilisation and margin
certainty and meet our cashflow and risk management criteria.
-- Housebuilding remains the most important end market for Van
Elle, making up the majority of the Group's revenues and continues
to be a key target market. As widely reported, the UK has a
structural under supply of new-build housing with cross-party
support to increase housing output. With strong levels of demand,
Van Elle expects to see increasing opportunities to support the
delivery of homes quickly and efficiently, particularly with
growing pressure to build on brownfield and marginal land.
-- Infrastructure investment in the UK continues to grow as
major spending plans are underpinned by national demand and
essential maintenance requirements. Van Elle is well-positioned
having delivered numerous case study projects across all major
infrastructure segments and is able to meet the increasingly
complex and technical requirements of these projects.
-- Industrial & Commercial is supported by the Government's
industrial strategy to increase productivity across the country.
The market is seeing significant growth, particularly in
distribution and logistics, as an increasing amount of industrial
and warehouse space is needed to support demand from online
retailers to sort and distribute orders efficiently. Large-scale
projects have increasingly complex and technical requirements.
Operating performance
As previously reported, during FY19 the business experienced
operational weaknesses in General Piling which were addressed by
operational review and management changes in late 2018. The 'back
to basics' imperative that emerged from this review is applicable
to all divisions and has been a continuous feature of leadership
focus through FY19 and into FY20. The introduction of our Perfect
Delivery performance model, incorporating eight simple and
transparent measures is intended to consistently ensure the highest
standards are achieved on every project in the Group.
In terms of FY19 performance, revenue reduced by 15% to GBP88.5m
compared to FY18 (GBP103.9m) against a backdrop of challenging
market conditions. Underlying operating margins reduced from 10.7%
to 5.9% and reported operating margin from 9.3% to 5.2% from a
combination of lower contribution to overhead from reduced sales
and weaker operational performance from some divisions.
Markets
In our end markets we saw a broadly balanced exposure to our
core sectors. Performance across our markets has been impacted by a
combination of lower customer confidence, delayed decision making
and in turn, increased competition and pricing pressures.
The Rail market is currently experiencing a lull in activity
following the completion of electrification schemes and reduced
spend towards the end of the current funding period CP5, and ahead
of the start of CP6.
Highways remains a buoyant market, where the Group continues to
have significant bid success, but which has also been impacted by
delays to project start dates.
In Commercial & Industrial, the period saw a notable
slowdown in London, which has driven competition further afield
outside the capital. However, the Industrial market presents a
significant growth opportunity with the wide-spread development of
'big shed' logistics capacity which the Group's Vibro techniques
will help us to capture.
The reduced proportion of sales to the housing sector is
explained primarily by fewer large projects in General Piling to
multi-story developments. However, we have seen notable continued
success with our integrated piling and Smartfoot foundations
offering.
The Group is developing a more strategic approach to work
winning, focussed on longer term customer partnerships. This focus
has resulted in the Group securing positions on attractive, long
term contracts which underpin a portion of FY20 performance whilst
setting firm foundations for future growth across our markets.
Fleet and operating structure
Rig investment in the year has been modest with no new rigs
procured but instead the business has concentrated on actions
required to improve utilisation, reliability and self-build of new
VSC rigs, the benefits of which will be seen in FY20. We have also
disposed of nine rigs, with a net reduction to our total feel size
from 123 to 115. The Group continues to benefit from a
well-invested and modern fleet with significant flexibility to
redirect resources to reflect short-term trends in our markets; a
key strength of the business.
This year we report our operating performance in three segments
rather than the previous four. This better reflects our streamlined
divisional structure. The three segments, all on a national basis,
are as follows:
-- General Piling: open site, larger projects; key techniques
being large diameter rotary and CFA piling as well as larger
precast driven piling
-- Specialist Piling: restricted access, rail, smaller rigs and
engineering techniques; including soil nails and anchors and drill
and grout projects
-- Ground Engineering Services: modular foundation solutions
(e.g. Smartfoot) and geotechnical services (trading as Strata)
The former Ground Engineering Products segment has been
discontinued as a standalone reporting segment as the in-house
production of pre-cast piles and Smartfoot beams are now considered
as a cost centre in support of the above three segments as
required; catering solely for our internal needs. Our production
facilities continue to operate from three sites in Glasgow, Kirkby
and Dereham, supplemented by external supply as necessary to meet
peaks in demand.
General Piling
The General Piling division has the largest fleet within the
Group and offers a wide variety of ground engineering solutions for
open-site construction projects.
Revenue contracted by 15.6% in the year to GBP37.2m (2018:
GBP44.1m), suffering from the uncertainties in the markets for the
reasons described above.
The subdued markets resulted in low utilisation of our large
diameter rotary and CFA piling rigs that not only supressed
revenue, but also impacted on margin mix as these techniques
command higher gross margins. Weaker than anticipated operational
execution of contracts, particularly in Q3, further compounded
gross margin performance, resulting in a reduction in operating
profit to GBP1.2m (2018: GBP5.4m).
The causes for the poor operational delivery were identified and
actions taken in November 2018 to resolve the issues, which
included a change of divisional leadership with the appointment of
Malcolm O'Sullivan, former managing director of Balfour Beatty
Ground Engineering, as the new General Piling director just after
year-end.
Specialist Piling
Revenue was approximately 24.9% lower at GBP28.6m (2018:
GBP38.1m). Approximately GBP4.5m, or 45%, of this reduction
reflects the decision to cease exposure to lump sum drill &
grout activities following poor margins from works delivered in
2018. The remaining reduction in revenue, as with General Piling,
reflects the impact of lower levels of confidence and demand in our
end markets, particularly in the infrastructure sector and the
non-repeat of a small number of very large projects in FY18.
Rail-specific revenues fell by 10.9% over the year, with major
electrification programmes coming to an end and reduced spend
towards the end of the current funding period CP5 and ahead of the
start of CP6, which is expected to see momentum in spend.
In the second half of the year, whilst Rail saw strong demand
for its services over the Christmas and Easter periods, other
Specialist Piling contracts had contract start dates delayed,
particularly on several highways projects that were due to start in
Q4 FY19.
As a consequence of the reduction in revenue, operating profit
fell to GBP2.7m (2018: GBP3.6m). However, a recovery in gross
margin performance enabled operating margins to be maintained
despite a lower contribution to overhead.
Ground Engineering Services
Revenues of GBP22.6m represented a 4.6% increase on the prior
year (2018: GBP21.6m).
Our integrated piling and Smartfoot foundation beam sales to the
housebuilders increased by GBP1.8m (9.8%). As the housing sector
moves increasingly to modern methods of construction the time and
resource savings of modular foundations are becoming better
appreciated. In parallel our relationships with national
housebuilders are maturing. As a Group; rigs and personnel have
been deployed effectively to meet the increased demand.
Our in-house pre-cast concrete pile and beam production
facilities at Kirkby are working to maximum capacity such that we
procured strategic supply chain partners to service the internal
demand for our concrete products.
Strata, our Geotechnical division, reported revenues of GBP4m;
GBP0.4m down on last year, primarily impacted by reduced pile
testing volumes as a result of the Piling division's lower revenues
and maturing external business development activity. We delivered
our first contract with our new, first in class VeMog, which
provides on-track site investigation capabilities to the rail
infrastructure.
Operating profit for the year was GBP1.3m, down from GBP2.1m due
to additional costs associated with scaling up operations to meet
the demand for Smartfoot-related sales.
Summary & outlook
This has been a year of transition for the business, having
taken action to strengthen the leadership team, refine the Group's
commercial approach, streamline operations and re-focus on our
customers.
Whilst it is disappointing to report that performance across the
year has been impacted by a combination of widely-reported market
uncertainties and previously highlighted operational weaknesses, we
are seeing tangible signs of operational improvement as a result of
the transition plan we are implementing. Our strengthened
commercial approach is gaining traction as evidenced by recent
contract wins and an encouraging orderbook.
Nevertheless, the Group is continuing to experience customer
uncertainty as well as some heightened competitive pressure,
resulting in a quiet start to the current year in some segments and
increased volatility in month on month performance. Whilst the
improved customer focused approach and positive order book
development underpins the Board's confidence in the prospects for
the Group in the medium term, the Board is mindful that challenging
market conditions and the resultant volatility is persisting into
the current financial year and impacting visibility.
Whilst the benefits of our self-help initiatives should drive
improved performance in the business, the ability to make overall
progress in FY20 will require supportive market conditions as we
progress through the year.
Van Elle fundamentally remains a market-leading business with a
clear strategy. Having seen the positive impact of the initial
actions undertaken as part of phase one of the transition plan, we
are confident that these steps, as well as the further commercial
and operational initiatives that will be deployed in the current
year, will leave us well placed to capture significant
opportunities across our target markets today and into the
future.
Mark Cutler
Chief Executive Officer
24 July 2019
Financial Review
Revenue
The Group saw a decline in revenue during the year, with
turnover falling to GBP88.5m (2018: GBP103.9m) against a backdrop
of a subdued market post Carillion's demise in January 2018 and a
nervousness to commence new contracts until Brexit arrangements
have been finalised.
2019 2018 Change 2019 2018
GBP'000 GBP'000 % % %
--------- --------- --------- ------- ------ ------
H1 42,921 52,642 (18.5) 48.5 50.7
H2 45,547 51,230 (11.1) 51.5 49.3
--------- --------- --------- ------- ------ ------
Revenue 88,468 103,872 (14.8) 100.0 100.0
--------- --------- --------- ------- ------ ------
Group results are traditionally seasonally weighted to H2 due to
work patterns over the Christmas and Easter holiday periods,
particularly in the infrastructure sector and this year reverted
back to this trend after last year when H1 performance was
marginally ahead of H2. Turnover in FY19 H1, and a quiet start to
the first quarter of FY19, were impacted by the demise of Carillion
and continuing Brexit uncertainty affecting investment decisions by
clients to defer commencement of larger projects. FY19 H2 turnover
saw revenue run rates increasing but despite encouraging progress
in work winning, some contract awards and start dates were delayed
by customers.
Our strategy is to direct our resources and investment into
growth markets and, by tracking enquiry levels by end market, this
acts as a barometer for identifying trends and targeting our
activities into the growth areas. The mix of revenue by end markets
is shown below:
2019 2018 Change 2019 2018
GBP'000 GBP'000 % % %
---------------- --------- --------- ------- ------ ------
Housebuilding 38,807 51,884 (25.2) 43.8 49.9
Infrastructure 27,670 32,343 (14.4) 31.3 31.1
Commercial and
industrial 20,532 16,357 25.5 23.2 15.7
Public sector 1,378 2,149 (35.9) 1.6 2.1
Other 81 1,139 (92.9) 0.1 1.1
---------------- --------- --------- ------- ------ ------
Revenue 88,468 103,872 (14.8) 100.0 100.0
---------------- --------- --------- ------- ------ ------
New housing and infrastructure continued to dominate revenues
this year although housebuilding has fallen to 43.8% of total
turnover, with a swing in sales mix reflecting a strong uptick in
commercial and industrial revenues to 23.2% of our total with
several significant hotel, retail and education contracts
delivered.
The mix of revenue by our divisions is shown below:
2019 2018 Change 2019 2018
GBP'000 GBP'000 % % %
------------------------- --------- --------- ------- ------ ------
General Piling 37,201 44,100 (15.6) 42.1 42.5
Specialist Piling 28,630 38,136 (24.9) 32.3 36.7
Ground Eng'ing Services 22,637 21,636 4.6 25.6 20.8
Revenue 88,468 103,872 (14.8) 100.0 100.0
------------------------- --------- --------- ------- ------ ------
The changing mix across divisions reflects the impacts on
General Piling and Specialist Piling of uncertainties around
investment decisions and project starts caused by the delays in
finalising Brexit.
Ground Engineering Services grew revenues from increased
Smartfoot-related sales following expansion of our production
capabilities last year, to meet increasing demand for our modular
beams.
Gross profit
The gross margin of the Group has reduced to 31.9% (2018:
33.1%), primarily the result of operational weaknesses in
delivering contracts during Q3 of the year in General Piling
division as well as the adverse mix impacts described above.
Operating profit
The 14.8% reduction in revenues year on year and weaker
operational performance delivering lower contribution to overheads
which translated into operating profit for the year ended 30 April
2019 of GBP4.6m (2018: GBP9.7m)
2019 2018 Change
GBP'000 GBP'000 %
----------------------------- --------- --------- -------
Operating profit 4,562 9,710 (53.0)
----------------------------- --------- --------- -------
Underlying operating margin 5.9% 10.7%
Operating margin 5.2% 9.3%
----------------------------- --------- --------- -------
Our underlying operating margin has decreased to 5.9% (2018:
10.7%) and our reported operating margin to 5.2% (2018: 9.3%).
Estimates for plant and machinery depreciation rates and residual
values were changed reducing the change in the year by GBP1.1m.
Exceptional costs
Exceptional items, by their size, incidence or nature, are
disclosed separately to allow a better understanding of the
underlying performance of the Group. During the year, exceptional
items of GBP559,000 were incurred principally in respect of:
-- Restructuring including redundancy and related consultancy
costs as the Group was streamlined from eight to five
divisions;
-- Also included in the year is a one-off loss of GBP90,000
following a settlement the Company reached with a supplier relating
to non-compliant plant and machinery.
The Board believes that the underlying performance measures for
operating profit, PBT and EPS, stated before the deduction of
exceptional items and share-based payment charges, give a clearer
indication of the actual performance of the business.
Net finance costs
Net finance costs were GBP527,000 (2018: GBP536,000) and
interest was covered 8.7 times (2018: 18.1 times). The slight
reduction in costs reflects the low capital investment in the year
(requiring only one new financing agreement for the only new
addition to the rig fleet) and the reducing financial liabilities
as hire purchase contracts reach their term. HP agreements are at
fixed rates of interest and normally for a five-year term.
Taxation
The effective tax rate for the year was 18.0% (2018: 18.9%).
The Group paid GBP1,366,000 (2018: GBP1,768,000) of corporation
tax during the year.
Dividends
On 6 March 2019, the Company paid an interim dividend of 1.0p
per share.
In light of the Group's performance and ensuring a strong focus
on cash management in the short-term, the Board is recommending a
final dividend of 1.0p (2018: 2.3p), making a total of 2.0p (2018:
3.7p) and reflecting the Board's continued confidence in the
long-term prospects for the business.
Subject to approval at our Annual General Meeting of
shareholders on 12 September 2019, the recommended final dividend
will be paid on 27 September 2019 to shareholders who are on the
register on 6 September 2019.
The Board fully recognises the importance of dividends to
shareholders and the creation of shareholder value.
Earnings per share
The underlying basic earnings per share was 4.7p (2018: 10.6p),
based on underlying earnings of GBP3,788,000 (2018: GBP8,516,000).
Underlying earnings are stated after adding back GBP559,000 of
exceptional costs and GBP123,000 of share-based payment charges.
Reported basic earnings per share was 4.0p (2018:9.2p).
Balance sheet summary
2019 2018
GBP'000 GBP'000
------------------------------------ --------- ---------
Fixed assets (including intangible
assets) 40,775 41,826
Net working capital 7,052 7,437
Net debt (4,232) (5,905)
Taxation and provisions (1,534) (1,992)
------------------------------------ --------- ---------
Net assets 42,061 41,366
------------------------------------ --------- ---------
The Group has increased net assets by GBP0.7m to GBP42.1m (2018:
GBP41.4m) during the year.
The Group only invested in one specialist rig with capital
expenditure of only GBP3.6m (2018: GBP13.2m) in the year and a
corresponding annual depreciation charge of GBP4.3m (2018: 5.7m),
this fall in charges following the change in estimates for
depreciating plant and machinery (refer to notes to the accounts,
Property, plant and equipment for details).
The ROCE has decreased in the period to 9.9% at 30 April 2019
(2018: 20.5%), reflecting the impact of reduced operating
profits.
Analysis of net debt
2018 2018
GBP'000 GBP'000
--------------------------- --------- ---------
Bank loans (975) (1,125)
Other loans (15) (109)
Finance leases (11,239) (15,551)
--------------------------- --------- ---------
Total borrowings (12,229) (16,785)
Cash and cash equivalents 7,997 10,880
--------------------------- --------- ---------
Net debt (4,232) (5,905)
--------------------------- --------- ---------
Net debt has decreased by GBP1.7m to GBP4.2m at 30 April 2019,
reflecting the reduction in finance lease liabilities serviced in
the year and maximising the bank balance through robust working
capital management against the backdrop of the reduction in
operating profits.
Cash flow summary
2019 2018
GBP'000 GBP'000
------------------------------------------- --------- ---------
Operating cash flows before working
capital 8,995 15,417
Working capital movements 468 (2,173)
------------------------------------------- --------- ---------
Cash generated from operations 9,463 13,244
Net interest paid (527) (536)
Income tax paid (1,366) (1,768)
------------------------------------------- --------- ---------
Net cash generated from operating
activities 7,570 10,758
Capital expenditure (2,007) (4,732)
Financing activities (8,446) (8,186)
------------------------------------------- --------- ---------
Net increase in cash and cash equivalents (2,883) (1,978)
The Group has always placed a high priority on cash generation
and the active management of working capital. Cash generated from
operations was GBP9.5m (2018: GBP13.2m), representing an operating
cash conversion of 106.3% (2018: 85.9%).
Paul Pearson
Chief Financial Officer
24 July 2019
Consolidated statement of comprehensive income
For the year ended 30 April 2019
2019 2018
GBP'000 GBP'000
---------------------------------------------- -------- --------
Revenue 88,468 103,872
Cost of sales (60,281) (69,480)
------------------------------------------------ -------- --------
Gross profit 28,187 34,392
Administrative expenses (23,625) (24,682)
------------------------------------------------ -------- --------
Operating Profit 4,562 9,710
------------------------------------------------ -------- --------
Operating profit before share based payments,
Carillion bad-debt write-off and exceptional
costs 5,244 11,097
Share based payments (123) (148)
Carillion bad-debt write-off - (956)
Exceptional costs (559) (283)
------------------------------------------------ -------- --------
Operating profit 4,562 9,710
------------------------------------------------ -------- --------
Finance expense (579) (561)
Finance income 52 25
------------------------------------------------ -------- --------
Profit before tax 4,035 9,174
Income tax expense (823) (1,835)
------------------------------------------------ -------- --------
Total comprehensive income for the year 3,212 7,339
------------------------------------------------ -------- --------
Earnings per share (pence)
Basic 4.0 9.2
Diluted 4.0 9.2
------------------------------------------------ -------- --------
All amounts relate to continuing operations. There was no other
comprehensive income in either the current or preceding year.
Consolidated statement of financial position
As at 30 April 2019
2019 2018
GBP'000 GBP'000
------------------------------ ---------- -------
Non-current assets
Property, plant and equipment 38,486 39,502
Intangible assets 2,289 2,324
-------------------------------- ---------- -------
40,775 41,826
------------------------------ ---------- -------
Current assets
Inventories 2,882 2,565
Trade and other receivables 20,558 22,225
Corporation tax receivable 118 -
Cash and cash equivalents 7,997 10,880
-------------------------------- ---------- -------
31,555 35,670
------------------------------ ---------- -------
Total assets 72,330 77,496
-------------------------------- ---------- -------
Current liabilities
Trade and other payables 16,506 17,353
Loans and borrowings 4,695 5,580
Provisions 236 5,580 270
Corporation tax payable - 753
-------------------------------- ---------- -------
21,437 23,956
------------------------------ ---------- -------
Non-current liabilities
Loans and borrowings 7,534 11,205
Deferred tax 1,298 969
-------------------------------- ---------- -------
8,832 12,174
------------------------------ ---------- -------
Total liabilities 30,269 36,130
-------------------------------- ---------- -------
Net assets 42,061 41,366
-------------------------------- ---------- -------
Equity
Share capital 1,600 1,600
Share premium 8,633 8,633
Retained earnings 31,810 31,115
Non-controlling interest 18 18
-------------------------------- ---------- -------
Total equity 42,061 41,366
-------------------------------- ---------- -------
Consolidated statement of cash flows
For the year ended 30 April 2019
2019 2018
GBP'000 GBP'000
----------------------------------------------- ------- -------
Cash flows from operating activities
Cash generated from operations 9,463 13,244
Interest received 52 25
Interest paid (579) (561)
Income tax paid (1,366) (1,768)
------------------------------------------------- ------- -------
Net cash generated from operating activities 7,570 10,940
------------------------------------------------- ------- -------
Cash flows from investing activities
Purchases of property, plant and equipment (2,390) (5,053)
Disposal of property, plant and equipment 393 321
Purchases of intangibles (10) -
------------------------------------------------- ------- -------
Net cash absorbed in investing activities (2,007) (4,732)
------------------------------------------------- ------- -------
Cash flows from financing activities
Repayment of bank borrowings (150) (150)
Repayments of Invest to Grow loan (95) (95)
Payments to finance lease creditors (5,561) (5,421)
Dividends paid (2,640) (2,520)
------------------------------------------------- ------- -------
Net cash absorbed in financing activities (8,446) (8,186)
------------------------------------------------- ------- -------
Net decrease in cash and cash equivalents (2,883) (1,978)
Cash and cash equivalents at beginning of year 10,880 12,858
------------------------------------------------- ------- -------
Cash and cash equivalents at end of year 7,997 10,880
------------------------------------------------- ------- -------
Consolidated statement of changes in equity
For the year ended 30 April 2019
Non-
Share Share controlling Retained Total
capital premium interest earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------- ------- ----------- -------- -------
Balance at 1 May 2017 1,600 8,633 18 26,070 36,321
---------------------------- ------- ------- ----------- -------- -------
Total comprehensive income - - - 7,339 7,339
Share-based payment expense - - - 225 225
---------------------------- ------- ------- ----------- -------- -------
Total changes in equity - - - 7,564 7,564
Dividends paid - - - (2,520) (2,520)
---------------------------- ------- ------- ----------- -------- -------
Balance at 30 April 2018 1,600 8,633 18 31,115 41,366
---------------------------- ------- ------- ----------- -------- -------
Total comprehensive income - - - 3,212 3,212
Share-based payment expense - - - 123 123
---------------------------- ------- ------- ----------- -------- -------
Total changes in equity - - - 3,335 3,335
Dividends paid - - - (2,640) (2,640)
---------------------------- ------- ------- ----------- -------- -------
Balance at 30 April 2019 1,600 8,633 18 31,810 42,061
---------------------------- ------- ------- ----------- -------- -------
1. Basis of preparation
The consolidated financial statements and preliminary
announcement of Van Elle Holdings plc for the year ended 30 April
2019 were authorised for issue by the Board of Directors on 24 July
2019.
The financial information included within this preliminary
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 2019 has been
extracted from the statutory accounts on which an unqualified audit
opinion has been issued.
The financial statements for the year ended 30 April 2019 will
be posted to shareholders on 8 August 2019 and copies will be
available from that date from the company secretary at the
registered office of the Company, Southwell Lane Industrial Estate,
Summit Close, Kirkby-in-Ashfield, Nottinghamshire, NG17 8GJ. The
statutory accounts for the year ended 30 April 2019 will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting.
The consolidated financial statements of Van Elle Holdings plc
and its subsidiaries have been prepared in accordance with
International Financial Reporting Standards as endorsed by the
European Union ("IFRS"), International Financial Reporting
Standards Interpretation Committee ("IFRS IC") interpretations and
those provisions of the Companies Act 2006 applicable to companies
reporting under IFRS. The Group financial statements have been
prepared on the going concern basis and adopting the historical
cost convention. The accounting policies adopted are consistent
with those of the previous financial year except as set out in note
2.
2. Adoption of new and revised standards
New standards, interpretations and amendments effective from 1
May 2018
IFRS 9 Financial Instruments
The Group has initially adopted IFRS 9 Financial Instruments
from 1 May 2018. IFRS 9 replaces IAS 39 Financial Instruments:
Recognition and Measurement and specifies how an entity should
classify and measure financial assets, financial liabilities, and
some contracts to buy or sell non-financial items.
The most significant area of change which potentially impacts
the Group's reported results is the introduction of an "expected
loss" model for impairment provisioning, which now also includes
contract assets recognised under the adoption of IFRS 15 Revenue
from Contracts with Customers.
Based on an assessment of historical credit losses and the
likelihood of the occurrence of future credit losses on existing
financial assets, the Directors consider that there are no further
material impairment losses to be recognised against the Group's
financial assets as a result of the transition to IFRS 9.
In line with the below amended accounting policy, the financial
assets and liabilities held by the Group at 30 April 2019 are
classified at amortised cost under IFRS 9 which is in line with
treatment under IAS 39. As the basis of measurement has not changed
there have been no changes to the carrying amount of the financial
instruments as a result of the transition from IAS 39 to IFRS 9. In
addition, there have been no modifications to loans that have to be
reconsidered as a result of adopting IFRS 9.
The details of the new significant accounting policies and the
nature of the changes to previous accounting policies in relation
to the Group's adoption of IFRS 9 Financial Instruments are set out
below:
Nature of change in
accounting
FY18 accounting policy Amended accounting policy policy
------------------------- ----------------------------------------------------------------- ------------------------
Financial assets On initial recognition, IFRS 9 removes the
The Group classifies its a financial asset is previous
financial assets into classified as measured IAS 39 categories for
one of the categories at amortised cost, fair financial assets of held
discussed below, value through other comprehensive to maturity and loans
depending income ("FVOCI") or fair and receivables and
on the purpose for which value through profit available
the asset was acquired. or loss ("FVTPL"). Financial for sale. These are
The Group has not liabilities are measured replaced
classified at amortised cost or by the categories noted
any of its financial FVTPL. in the amended
assets The classification of accounting
as held to maturity. financial assets is based policy for financial
The Group's accounting on the way a financial instruments.
policy for each category asset is managed and IFRS 9 retains the
is as follows: its contractual cash existing
Fair value through profit flow characteristics. requirements in IAS 39
or loss Financial assets are for the classification
The Group does not have measured at amortised and measurement of
any assets held for cost if both of the following financial
trading conditions are met and liabilities.
nor does it voluntarily the financial asset or
classify any financial liability is not designated
assets as being at fair as at FVTPL:
value through profit or * the financial asset is held with the objective of
loss. collecting or remitting contractual cash flows; and
Loans and receivables
These arise principally
through the provision * its contractual terms give rise on specified dates to
of goods and services cash flows that are solely payments of principal and
to customers (e.g. trade interest on the principal amount outstanding.
receivables), but also
incorporate other types
of contractual monetary A financial asset is
asset. They are initially measured at FVOCI if
recognised at fair value it meets both of the
plus transaction costs following conditions
that are directly and is not designated
attributable as at FVTPL:
to their acquisition or * the financial asset is held with the objectives of
issue and are collecting contractual cash flows and selling the
subsequently financial asset; and
carried at amortised cost
using the effective
interest * its contractual terms give rise on specified dates to
rate method, less cash flows that are solely payments of principal and
provision interest on the principal amount outstanding.
for impairment.
Impairment provisions
are recognised when there All financial assets
is objective evidence not classified as measured
(such as significant at amortised cost or
financial FVOCI as described above
difficulties on the part are measured at FVTPL.
of the customer or The Group's principal
default financial instruments
or significant delay in comprise cash and cash
payment) that the Group equivalents, trade receivables,
will be unable to collect trade payables and interest
all of the amounts due bearing borrowings. Based
under the terms on the way these financial
receivable instruments are managed
and for trade and their contractual
receivables, cash flow characteristics,
which are reported net, all the Group's financial
such provisions are instruments are measured
recorded at amortised cost using
in a separate allowance the effective interest
account with the loss method.
being recognised within The amortised cost of
administrative expenses financial assets is reduced
in the consolidated by impairment losses
statement as described below. Interest
of comprehensive income. income, foreign exchange
On confirmation that the gains and losses, impairments
trade receivable will and gains or losses on
not be collectable, the derecognition are recognised
gross carrying value of through the statement
the asset is written off of comprehensive income.
against the associated
provision.
The Group's loans and
receivables comprise
trade
and other receivables
and cash and cash
equivalents
in the consolidated
statement
of financial position.
Cash and cash equivalents
include cash in hand,
deposits held at call
with banks, and, for the
statement of cash flows,
bank overdrafts. Bank
overdrafts are shown
within
loans and borrowings in
current liabilities on
the consolidated
statement
of financial position.
----------------------------------------------------------------- ------------------------
Financial liabilities Trade receivables and Cash and cash equivalents,
The Group classifies its trade payables are held trade receivables, and
financial liabilities at their original invoiced retentions held by customers
into one of two categories, value, as the interest for contract work were
depending on the purpose that would be recognised previously classified
for which the liability from discounting future as loans and receivables
was acquired. cash flows over the short under IAS 39 and were
The Group's accounting credit period is not measured at amortised
policy for each category considered to be material. cost. Trade payables and
is as follows: Cash equivalents comprise interest bearing borrowings
Fair value through profit short-term highly liquid were previously classified
or loss investments that are as "other financial liabilities"
The Group does not have readily convertible into under IAS 39 and were
any liabilities held for known amounts of cash measured at amortised
trading nor has it designated and which are subject cost. These financial
any financial liabilities to an insignificant risk instruments are now classified
as being at fair value of changes in value. as financial assets and
through profit or loss. An investment with a liabilities at amortised
Other financial liabilities maturity of three months cost under IFRS 9.
Other financial liabilities or less is normally classified The adoption of IFRS 9
include the following as being short term. has therefore not had
items: Cash and cash equivalents any impact on the measurement
Bank borrowings are initially do not include other of the Group's financial
recognised at fair value financial assets. assets and liabilities.
net of any transaction Impairment losses against IFRS 9 replaces the incurred
costs directly attributable financial assets carried loss model in IAS 39 with
to the issue of the instrument. at amortised cost are the expected credit loss
Such interest bearing recognised by reference model, which requires
liabilities are subsequently to any expected credit that future events are
measured at amortised losses against those considered when calculating
cost using the effective assets. The simplified impairments to financial
interest rate method, approach for calculating assets.
which ensures that any impairment of financial Based on an assessment
interest expense over assets has been used. of historical credit losses
the period to repayment Lifetime expected credit on the Group's financial
is at a constant rate losses are calculated assets and the likelihood
on the balance of the by considering, on a of the occurrence of future
liability carried in the discounted basis, the credit losses on existing
consolidated statement cash shortfalls that financial assets, the
of financial position. would be incurred in Directors consider that
For the purposes of each various default scenarios any increase in impairment
financial liability, interest over the remaining lives provision to be recognised
expense includes initial of the assets and multiplying against the Group's financial
transaction costs and the shortfalls by the assets on transition to
any premium payable on probability of each scenario IFRS 9 is immaterial.
redemption, as well as occurring. The allowance
any interest or coupon is the sum of these probability
payable while the liability weighted outcomes.
is outstanding.
Trade payables and other
short-term monetary liabilities,
which are initially recognised
at fair value and subsequently
carried at amortised cost
using the effective interest
method.
IFRS 15 Revenue from Contracts with Customers
The Group has initially adopted IFRS 15 Revenue from Contracts
with Customers from 1 May 2018 and this has not been applied
retrospectively. The cumulative effect method has been used to
calculate any required adjustment as at 1 May 2018. The Group has
elected to apply IFRS 15 retrospectively only to contracts that are
not completed contracts at the date of initial application.
For all contract modifications that occur before the date of
initial application, the Group has applied the following
expedient:
-- for contracts that were modified before the beginning of the
earliest period presented, an entity need not retrospectively
restate the contract for those contract modifications in accordance
with IFRS 15 paragraphs 20-21. Instead, an entity shall reflect the
aggregate effect of all of the modifications that occur before the
beginning of the earliest period presented; and
-- for all reporting periods presented before the date of
initial application, the Group has not disclosed the amount of the
transaction price allocated to the remaining performance
obligations and an explanation of when the entity expects to
recognise that amount as revenue:
-- identifying the satisfied and unsatisfied performance obligations;
-- determining the transaction price; and
-- allocating the transaction price to the satisfied and unsatisfied performance obligations.
The only significant change in adopting IFRS 15 is that revenue
relating to mobilisation of rig equipment to the customer site is
now recognised over time. Under the previous accounting policy this
revenue was recognised at the time of mobilisation. Costs relating
to mobilisation under IFRS 15 are now capitalised and amortised
over time at the same rate as revenue is recognised. Management has
performed a detailed review of relevant contracts and calculated
the required adjustments and concluded that no material
transitional adjustment is required.
IFRS 15 provides a single, principles-based five-step model to
be applied to all sales contracts, based on the transfer of control
of goods and services to customers. It replaces the separate models
for goods, services and construction contracts previously included
in IAS 11 Construction Contracts.
The following details the amended accounting policy.
FY18 revenue accounting Amended revenue accounting Nature of change in accounting
policy policy policy
------------------------------- ----------------------------------- --------------------------------
Turnover represents the Revenue represents the The amended accounting
total amounts receivable total amounts receivable policy complies with the
by the Group for goods by the Group for goods "five-step" model required
supplied and services supplied and services by IFRS 15.
provided, excluding value provided, excluding value The Group's contracts
added tax and trade discounts. added tax and trade discounts. with customers as defined
The Group's turnover The Group's turnover arises under IFRS 15 correspond
arises in the UK. in the UK. in almost
In the case of contracts, In line with IFRS 15 Revenue all circumstances to
when the outcome can from Contracts with Customers construction contracts
be assessed reliably, the Group recognises revenue as previously defined
contract revenue is recognised based on the application under IAS 11 Construction
by reference to the stage of a principles-based Contracts.
of completion of the "five-step" model. Only The transaction price
contract activity at when the five steps are under the amended accounting
the statement of financial satisfied is revenue recognised. policy corresponds to
position date. General and Specialist the value of contract
The stage of completion Piling revenue as measured under
of the contract at the The performance obligations the previous accounting
statement of financial and transaction price policy.
position date is assessed are defined within signed The previous accounting
regarding the costs incurred contracts between the policy used a percentage
to date as a percentage customer and the Group. completion method, based
of the total expected Each performance obligation on cost. The new accounting
costs. represents a series of policy looks at the performance
distinct goods that are obligations within each
substantially the same contract type.
and that have the same Under the previous accounting
pattern of transfer to policy revenue relating
the customer. This is to mobilisation was recognised
classified as a series at the time of mobilisation.
as each distinct good Under IFRS 15 this is
in the series meets the not a separate performance
definition of a performance obligation. This revenue
obligation satisfied over is now split between the
time and the same method different performance
would be used to measure obligations and recognised
the entity's progress over time. This change
towards complete satisfaction has not resulted in any
of the performance obligation transitional adjustments.
as to transfer each good Under the previous accounting
to the customer. policy, where the outcome
Mobilisation (moving the of a construction contract
piling rig equipment to could be estimated reliably,
the customer site) does revenue and costs were
not represent a separate recognised by reference
performance obligation. to the stage of completion
Mobilisation revenue is of activity at the balance
included within the transaction sheet date. This was normally
price of the related performance measured by reference
obligation and recognised to the proportion of contract
over time. costs incurred for work
The revenue for each performance performed to date to the
obligation is recognised estimated total contract
over time because each costs (the "cost to cost"
pile enhances an asset input method).
that the customer controls. Where the outcome of a
Revenue is recognised construction contract
as progress towards complete could not be estimated
satisfaction of that performance reliably, contract revenue
obligation over time occurs was recognised to the
using the output method. extent of contract costs
Progress is determined incurred that it is probable
by completed pile logs. would be recoverable.
Due to the nature of the
Group's contracts there
is a direct correlation
between costs being incurred
and a series of performance
obligations being satisfied.
There is no financial
impact associated with
adopting the output method
to calculate progress
under IFRS 15.
----------------------------------- --------------------------------
Industry practice is Ground Engineering Services
to assess the estimated For the Strata business
outcome of each contract unit, the performance
and recognise the revenue obligations and transaction
and margin based upon price are defined within
the stage of completion signed contracts between
of the contract at the the customer and the Group.
statement of financial For performance obligations
position date. The assessment where the customer does
of the outcome of each not simultaneously receive
contract is determined and consume the benefits
by regular review of (e.g. interpretative reports
the revenues and costs and testing) the work
to complete that contract. performed by the Group
Consistent contract review does not create or enhance
procedures are in place an asset that the customer
in respect of contract controls. Revenue for
forecasting. Revenue these performance obligations
is recognised up to the is recognised at a point
level of the costs which in time (e.g. on delivery
are deemed to be recoverable of report). Costs relating
under the contract. to these performance obligations
The gross amount receivable are capitalised and fully
from customers for contract amortised at the point
work is presented as in time when the performance
an asset for all contracts obligation is fully satisfied.
in progress for which Contracts may also contain
costs incurred, plus a series of distinct goods
recognised profits (or or services that are substantially
less recognised losses), the same and that have
exceed progress billings. the same pattern of transfer
The gross amount repayable to the customer (e.g.
to or paid in advance bore hole drilling). This
by customers for contract is classified as a series
work is presented as as an asset is enhanced
a liability for all contracts that the customer controls,
in progress for which each distinct good in
progress billings exceed the series meets the definition
costs incurred plus recognised of a performance obligation
profits (less recognised satisfied over time and
losses). Full provision the same method would
is made for losses on be used to measure the
all contracts in the entity's progress towards
year in which the loss complete satisfaction
is first foreseen. of the performance obligation
Margin associated with as to transfer each good
contract variations is to the customer.
only recognised when The revenue for each performance
the outcome of the contract obligation is recognised
negotiations can be reliably over time because each
estimated. good enhances an asset
Costs relating to contract that the customer controls.
variations are recognised Revenue is recognised
as incurred. as progress towards complete
satisfaction of that performance
obligation over time using
the output method. Progress
is determined by completed
logs.
----------------------------------- --------------------------------
For the provision of services
to house-builders each
performance obligation
represents a series of
distinct goods that are
substantially the same
and that have the same
pattern of transfer to
the customer.
Mobilisation (moving the
piling rig equipment to
the customer site) does
not represent a separate
performance obligation.
Mobilisation revenue is
included within the transaction
price of the related performance
obligation and recognised
over time.
The revenue for each performance
obligation is recognised
over time because each
pile enhances an asset
that the customer controls.
Revenue is recognised
as progress towards complete
satisfaction of that performance
obligation over time using
the output method. Progress
is determined by completed
pile logs.
Variable consideration
The following types of
income are variable consideration
and are only recognised
when management determines
them to be highly probable.
Highly probable represents
amounts the client has
approved or the Company
has detailed evidence
supporting the amounts
recognised.
Liquidated damages ("LADs")
These are included in
the contract for both
parties.
The customer can reduce
the amount paid to the
Group if it is deemed
the Group has caused unnecessary
delays or additional work.
The Group is also able
to claim LADs where it
can be proved that the
customer has caused unnecessary
delays or disruption.
The method for claiming
this revenue is to include
it within the application
to the customer, or for
the customer to include Under IAS 37 variable
or exclude in the application consideration was recognised
certificate returned to when probable. Under IFRS
the Group. 15 the requirement is
At the point of making for revenue to be highly
an application for LADs probable. For the Group
the additional revenue the move from probable
or the reduction in revenue to highly probable does
is only recognised when not create a material
it is highly probable change in the timing of
that it will occur. revenue recognition.
---------------------------------- ------------------------------
Standing time
Within the contracts a
penalty charge can be
made where work is delayed,
and the Group assets must
stand idle. These charges
can be disputed by the
customer where blame may
not be clear. The revenue
for these charges is not
recognised until it is
highly probable that it
will be received.
Adjustments to invoiced
variable consideration
Where revenue relating
to variable consideration
is invoiced to the customer,
revenue is adjusted to
remove revenue that is
not highly probable. This
is subsequently recognised
only once it becomes highly
probable.
Trade receivables The amended accounting
Trade receivables includes policy reflects the requirement
applications to the extent under IFRS 15 to recognise
that there is an unconditional all contract balances
right to payment and the as contract assets or
amount has been certified contract liabilities,
by the customer. other than any unconditional
Contract assets rights to consideration
The recoverable amount which are presented as
of applications that have receivables. Consequently,
not been certified and this has led to the creation
other amounts that have of a new category of asset
not been applied for but ("contract assets") within
represent the recoverable trade and other receivables
value of work carried and a new category of
out at the balance sheet liability ("contract liabilities")
date are recognised as within trade and other
contract assets within payables, which includes
trade and other receivables amounts previously held
on the balance sheet. as trade receivables or
Contract liabilities payables. Both new categories
Any payments received include amounts previously
in advance of completing held as trade receivables
the work are recognised or payables on the balance
within contract liabilities. sheet.
------------------------------- ------------------------------------
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 16 Leases (effective 1 January 2019)
-- Annual Improvements to IFRSs (2015-2017 Cycle) (effective 1 January 2019)
-- IFRIC 23 Uncertainty over Income Tax Treatments (effective 1 January 2019)
-- Amendments to IFRS 9: Prepayment Features with Negative
Compensation (effective 1 January 2019)
-- Amendments to IAS 28: Long-term interests in Associates and
Joint Ventures (effective 1 January 2019)
-- Amendments to IAS 19: Plan Amendment, Curtailment or Settlement (effective 1 January 2019)
-- Amendments to References to the Conceptual Framework in IFRS
Standards (effective 1 January 2020)
-- Amendments to IFRS 3 Business Combinations - Definition of a
Business (effective 1 January 2020)
-- Definition of Material - Amendments to IAS 1 and IAS 8 (effective 1 January 2020)
Adoption of IFRS 16 will result in the Group recognising right
of use assets and lease liabilities for all contracts that are, or
contain, a lease. For leases currently classified as operating
leases, under current accounting requirements the Group does not
recognise related assets or liabilities, and instead spreads the
lease payments on a straight-line basis over the lease term,
disclosing in its annual financial statements the total
commitment.
The standard is effective for accounting periods beginning on or
after 1 January 2019, as adopted by the European Union.
The Board has decided it will apply the modified retrospective
adoption method in IFRS 16, and, therefore, will only recognise
leases on balance sheet as at 1 May 2019. In addition, it has
decided to measure right-of-use assets by reference to the
measurement of the lease liability on that date. This will ensure
there is no immediate impact to net assets on that date. At 30
April 2019 operating lease commitments amounted to GBP9,313,000,
which is not expected to be materially different to the anticipated
position on 30 April 2020 or the amount which is expected to be
disclosed at 30 April 2020. Assuming the Group's lease commitments
remain at this level, the effect of discounting those commitments
is anticipated to result in right-of-use assets and lease
liabilities of approximately GBP4,348,116 being recognised on 1 May
2019.
Instead of recognising an operating expense for its operating
lease payments, the Group will instead recognise interest on its
lease liabilities and amortisation on its right-of-use assets. This
will increase reported EBITDA by the amount of its current
operating lease cost, which for the year ended 30 April 2019 was
approximately GBP197,050.
3. Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
Contracts
The Group's approach to key estimates and judgements relating to
construction contracts is set out in the revenue recognition policy
above. The main factors considered when making those estimates and
judgements include the assessment of variable income, the estimate
of the recoverable value of work carried out at the balance sheet
date shown under contract assets and the outcome of claims raised
against the Group by customers or third parties.
In addition to the aforementioned, the Group recognises
impairment provisions in respect of bad and doubtful trade debtors.
The judgements and estimates necessary to calculate these
provisions are based on historical experience. The simplified
approach for calculating impairment of financial assets has been
used. Lifetime expected credit losses are calculated by
considering, on a discounted basis, the cash shortfalls that would
be incurred in various default scenarios over the remaining lives
of the assets and multiplying the shortfalls by the probability of
each scenario occurring. The allowance is the sum of these
probability weighted outcomes.
Useful lives of property, plant and equipment
Property, plant and equipment are depreciated over their
estimated useful economic lives based on management's estimates of
the period that the assets will generate revenue, which are
periodically reviewed for appropriateness. During the year, plant
and machinery estimates have been reviewed and depreciation has
been rebased from five to ten years with nil residual value, to
five to twelve years with 10% residual value, on a straight-line
basis.
4. 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. 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. Loans and
borrowings, insurances and head office central services costs are
allocated to the segments based on levels of turnover. Details of
the types of products and services for each segment are given in
the operational review on pages 26 to 31. All turnover and
operations are based in the UK.
Operating segments - 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
------------------------------ ------- ---------- ----------- ------- -------
Operating segments - 30 April 2018 (restated)
Ground
General Specialist Engineering Head
Piling Piling Services office Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------- ---------- ----------- ------- -------
Revenue 44,100 38,136 21,636 - 103,872
------------------------------ ------- ---------- ----------- ------- -------
Underlying operating profit 5,361 3,612 2,124 - 11,097
Share-based payments - - - (148) (148)
Exceptional item - (956) - (283) (1,239)
------------------------------ ------- ---------- ----------- ------- -------
Operating profit 5,361 2,656 2,124 (431) 9,710
Finance expense - - - (561) (561)
Finance income - - - 25 25
------------------------------ ------- ---------- ----------- ------- -------
Profit before tax 5,361 2,656 2,124 (967) 9,174
------------------------------ ------- ---------- ----------- ------- -------
Assets
Property, plant and equipment 11,278 13,577 4,990 9,657 39,502
Inventories 1,482 520 553 11 2,566
------------------------------ ------- ---------- ----------- ------- -------
Reportable segment assets 12,760 14,097 5,543 9,668 42,068
Intangible assets - - - 2,324 2,324
Trade and other receivables - - - 22,225 22,225
Cash and cash equivalents - - - 10,880 10,880
------------------------------ ------- ---------- ----------- ------- -------
Total assets 12,760 14,097 5,543 45,097 77,497
------------------------------ ------- ---------- ----------- ------- -------
Liabilities
Loans and borrowings - - - 16,785 16,785
Trade and other payables - - - 18,106 18,106
Provisions - - - 270 270
Deferred tax - - - 969 969
------------------------------ ------- ---------- ----------- ------- -------
Total liabilities - - - 36,130 36,130
------------------------------ ------- ---------- ----------- ------- -------
Other information
Capital expenditure 4,731 3,910 2,882 1,627 13,150
Depreciation/amortisation 1,536 2,555 806 852 5,749
------------------------------ ------- ---------- ----------- ------- -------
The business was streamlined during the year by merging eight
operating units into five within three operating divisions, General
Piling, Specialist Piling and Ground Engineering Services.
Segmental results for the prior year have been restated to reflect
this change.
There are no individual customers accounting for more than 10%
of Group revenue in either the current or preceding year.
5. Revenue from contracts with customers
Disaggregation of revenue - 30 April 2019
Ground
General Specialist Engineering
Piling Piling Services Total
End market GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------- ---------- ----------- -------
New housing 16,076 2,687 20,044 38,807
Infrastructure 5,549 20,576 1,545 27,670
Commercial and industrial 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
-------------------------- ------- ---------- ----------- -------
Disaggregation of revenue - 30 April 2018
Ground
General Specialist Engineering
Piling Piling Services Total
End market GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------- ---------- ----------- -------
New housing 26,768 6,774 18,342 51,884
Infrastructure 5,227 25,459 1,657 32,343
Commercial and industrial 9,565 5,668 1,124 16,357
Public 1,863 235 51 2,149
Other 677 - 462 1,139
-------------------------- ------- ---------- ----------- -------
Total 44,100 38,136 21,636 103,872
-------------------------- ------- ---------- ----------- -------
6. Exceptional costs
2019 2018
GBP'000 GBP'000
----------------------------- ------- -------
Carillion bad debt write-off - 956
Exceptional costs 559 283
----------------------------- ------- -------
559 1,239
----------------------------- ------- -------
Exceptional costs
Current year exceptional costs primarily relate to restructuring
including redundancy and related consultancy costs as the Group was
streamlined from eight to five divisions.
Also included in the year is a one-off loss of GBP90,000
following a settlement the Company reached with a supplier relating
to non-compliant plant and machinery.
The prior year exceptional item relates to costs associated with
an EGM held on 15 December 2017, and due diligence fees for an
aborted acquisition.
7. Income tax expense
2019 2018
GBP'000 GBP'000
----------------------------------------------------------- ------- -------
Current tax expense
Current tax on profits for the year 537 1,647
Adjustment for (over)/under provision in the prior period (43) (3)
----------------------------------------------------------- ------- -------
Total current tax 494 1,644
----------------------------------------------------------- ------- -------
Deferred tax expense
Origination and reversal of temporary differences 329 188
Recognition of previously unrecognised deferred tax assets - 3
Effect of decreased tax rate on opening balance - -
----------------------------------------------------------- ------- -------
Total deferred tax 329 191
----------------------------------------------------------- ------- -------
Income tax expense 823 1,835
----------------------------------------------------------- ------- -------
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 profits for the year are as follows:
2019 2018
GBP'000 GBP'000
----------------------------------------------------------- ------- -------
Profit before income taxes 4,085 9,174
----------------------------------------------------------- ------- -------
Tax using the standard corporation tax rate of 19% (2018:
19%) 767 1,743
Adjustments for (over)/under provision in previous periods (43) -
Expenses not deductible for tax purposes 94 81
Non-qualifying depreciation 5 11
Short-term timing differences - -
----------------------------------------------------------- ------- -------
Total income tax expense 823 1,835
----------------------------------------------------------- ------- -------
During the year ended 30 April 2019, corporation tax has been
calculated at 18.0% of estimated assessable profit for the year
(2018: 18.9%).
The Finance (No 2) Act 2015, which provides for reductions in
the main rate of corporation tax from 20% to 19% effective from 1
April 2017 and to 18% effective from 1 April 2020, was
substantively enacted on 26 October 2015. Subsequently, the Finance
Act 2016, which provides for a further reduction in the main rate
of corporation tax to 17% effective from 1 April 2020, was
substantively enacted on 6 September 2016. These rate reductions
have been reflected in the calculation of the deferred tax at the
statement of financial position date. The closing deferred tax
liability at 30 April 2019 has been calculated at 17%, reflecting
the tax rate at which the deferred tax is expected to be utilised
in future periods.
8. Dividends
2019 2018
GBP'000 GBP'000
----------------------------------------------------------- ------- -------
Final dividend - year ended 2018
2.3p per ordinary share paid during the year (2018: 1.75p) 1,840 1,400
Interim dividend - year ended 2019
1.0p per ordinary share paid during the year (2018: 1.40p) 800 1,120
----------------------------------------------------------- ------- -------
2,640 2,520
----------------------------------------------------------- ------- -------
The proposed final dividend for the year ended 30 April 2019 of
1.0p per share amounting to GBP800,000 and representing a total
dividend of 2.0p per share for the full year will be paid on 27
September 2019 to the shareholders on the register at the close of
business on 6 September 2019. The proposed final dividend is
subject to approval by shareholders at the Annual General Meeting
and has not been included as a liability in these financial
statements.
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.
9. Earnings per share
The calculation of basic and diluted earnings per share is based
on the following data:
2019 2018
'000 '000
---------------------------------------- ------ ------
Basic weighted average number of shares 80,000 80,000
---------------------------------------- ------ ------
There is no dilutive effect of the share options as performance
conditions remain unsatisfied or the share price was below the
exercise price or the dilution effect is less than 0.1p.
GBP'000 GBP'000
------------------------------- ------- -------
Profit for the year 3,212 7,339
------------------------------- ------- -------
Add back/(deduct):
Share-based payments 123 148
Exceptional costs 559 1,239
Tax effect of the above (106) (210)
------------------------------- ------- -------
Underlying profit for the year 3,788 8,516
------------------------------- ------- -------
Pence Pence
--------------------------------------------------------------- ----- -----
Earnings per share
Basic 4.0 9.2
Diluted 4.0 9.2
Basic - excluding exceptional costs and share-based payments 4.7 10.6
Diluted - excluding exceptional costs and share-based payments 4.7 10.6
--------------------------------------------------------------- ----- -----
The calculation of the basic earnings per share is based on the
earnings attributable to ordinary shareholders and on 80,000,000
ordinary shares (2018: 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.
10. Cash generated from operations
2019 2018
GBP'000 GBP'000
-------------------------------------------------------- ------- -------
Operating profit 4,562 9,710
Adjustments for:
Depreciation of property, plant and equipment 4,291 5,705
Amortisation of intangible assets 45 44
Profit on disposal of property, plant and equipment (26) (267)
Share-based payment expense 123 225
-------------------------------------------------------- ------- -------
Operating cash flows before movement in working capital 8,995 15,417
Increase in inventories (317) (142)
Decrease/(increase) in trade and other receivables 1,666 (3,429)
(Decrease)/increase in trade and other payables (847) 1,470
Decrease in provisions (34) (72)
-------------------------------------------------------- ------- -------
Cash generated from operations 9,463 13,244
-------------------------------------------------------- ------- -------
11. Analysis of cash and cash equivalents and reconciliation to
net debt
Non-cash
Cash
2018 flows flows 2019
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- ------- -------- --------
Cash at bank 10,832 (2,879) - 7,953
Cash in hand 48 (4) - 44
-------------------------- -------- ------- -------- --------
Cash and cash equivalents 10,880 (2,883) - 7,997
Bank loans secured (1,125) 150 - (975)
Other loans secured (110) 95 - (15)
Finance leases (15,550) 5,561 (1,250) (11,239)
-------------------------- -------- ------- -------- --------
Net debt (5,905) 2,923 (1,250) (4,232)
-------------------------- -------- ------- -------- --------
Significant non-cash transactions include the purchase of
GBP1,250,181 (2018: GBP8,135,057) of fixed assets on hire
purchase.
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.
END
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