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Van Elle HoldingsPLC (VANL)

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Wednesday 25 July, 2018

Van Elle HoldingsPLC

Final Results

RNS Number : 6539V
Van Elle Holdings PLC
25 July 2018
 

Van Elle Holdings plc

 

For Immediate Release

25 July 2018

 

Preliminary Results for the year ended 30 April 2018

 

Van Elle Holdings plc (the "Group"), the AIM listed geotechnical contractor offering a wide range of ground engineering techniques and services to customers in a variety of UK construction end markets, announces its preliminary results for the year ended 30 April 2018.

 

Highlights

 

Year ended  30 April 2018

Year ended 30 April 2017

Growth %

Revenue (£m)

103.9

94.1

10.4

Underlying* Operating Profit (£m)

11.1

11.6

(4.0)

Reported Operating Profit (£m)

9.7

9.7

-

Underlying* profit before taxation (£m)

10.6

11.1

(4.5)

Reported profit before taxation (£m)

9.2

9.3

(1.2)

Underlying* earnings per share (p)

10.6

12.1

(12.4)

Reported earnings per share (p)

9.2

9.8

(6.1)

Dividend per share (p)

3.70

2.60

42.3

Operating cash conversion (%)

85.9%

91.9%

 

Return on capital employed (%)

20.5%

25.7%

 

* before share-based payment expenses, Carillion bad debt and exceptional costs

Strategic and operational highlights

·     Group revenue increased by 10.4% to £103.9m (2017: £94.1m), driven by activity in new housing and infrastructure sectors

·     Underlying operating profit was down 4% to £11.1m (2017: £11.6m), reflecting contract specific issues in the rail and ground stabilisation units together with challenging market conditions in H2

·      Completed major new rig investment programme with fleet increasing from 111 to 123 rigs

·      Strong balance sheet with net debt at 30 April 2018 of £5.9m (2017: £1.5m), representing 0.4x EBITDA

·      CEO succession process complete, with Mark Cutler to start in August 2018

·   The Board is recommending a final dividend of 2.3p per share (total dividend of 3.7p per share) reflecting its confidence in the long-term prospects of the Group

 

 

Adrian Barden, Chairman, commented:

 

"Following the challenging conditions experienced at the start of 2018, recovery has been slow in a number of our end markets which has resulted in a relatively quiet first quarter for the Group as a whole. 

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

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

 

 

For further information please contact:

 

Instinctif Parters (Financial Public Relations)

Tel: 020 7457 2020

Mark Garraway

James Gray

Rosie Driscoll

 

 

 

Peel Hunt LLP (Nominated Adviser and corporate broker)

Tel: 020 7418 8900

Charles Batten

Mike Bell

Justin Jones

 

 

 

Chairman's statement

 

Following a good overall performance in the first half of the year, the second half was significantly impacted by a number of factors including the liquidation of Carillion in January 2018, the disruption caused by the severe weather experienced in the UK between January and March 2018 and the delay of a small number of important contracts in Q4. In spite of this, the Group delivered record turnover for the fifth consecutive year, with year on year growth of 10.4% to £103.9m. This is testament to the robustness of our diversified business model, targeted at growth markets where there is sustainable demand for our services and the housebuilding and infrastructure revenues support this strategy. 

Gross profit in the year grew by 2.2% to £34.4m (2017: £33.4m) with the margin reducing by approximately 2 percentage points to 33.1% (2017: 35.5%). This margin reduction was principally due to the adverse impact of two rail contracts undertaken in H1 and a loss-making contract in the Ground Engineering Services division. Additional, robust internal risk controls have been introduced so that we identify and understand all our risk starting at the bidding stage and applying rigorous management and monitoring of contract performance to ensure that the circumstances resulting in each of these situations do not occur again. Underlying operating profit reduced slightly to £11.1m (2017: £11.6m), with reported operating profit for the year flat at £9.7m (2017: £9.7m). Whilst underlying operating margins remained reasonable at 10.7%, this was below prior year (12.3%) and largely reflects the lower gross margin as well as the impact of the weaker than expected second half revenue.

 

Delivering the strategy

We continue to invest in the strategic development of the Group, driven by our focus on growth markets and enabled by targeted investment in specialist rigs, further expansion of our precast concrete manufacturing capabilities and establishing ourselves as the dominant ground engineering company in the central belt of Scotland.  We opened a sales office in London during the year and have increased the coverage of our business development team with new roles covering London, the South East and also the South West of England, complementing our existing coverage across the UK. Capital investment has been central to this development with a further £13.2m spent in the current year bringing the total to £45.1m over the last four years. Our rig fleet now stands at 123 rigs (2017: 111 rigs) and we believe that Van Elle has the broadest and most modern range of specialist piling rigs in the market. Our rig fleet expansion investment is largely complete for now and provides a strong platform for our future growth.

We have continued to grow the business by broadening our range of products and services and extending our geographical footprint into high-growth markets. This is being achieved organically but our strategy is to complement this with bolt-on acquisitions. We retain a strong balance sheet and will continue to pursue acquisition opportunities where appropriate.

Operating performance

General Piling has seen modest sales growth in the year, up 0.5% to £43.1m (2017: £42.9m), a result of good demand in the housebuilding sector offset by reduced demand for industrial and commercial work.  In addition, the Division successfully delivered several infrastructure contracts using the three new, large diameter piling rigs which have provided a further competitive advantage to the Group. Divisional gross margin remained strong at 35.1% (2017: 33.1%), reflecting the Group's ability to deliver a large number of contracts across a broad range of end markets, achieving good returns through its long-standing and effective operational model. 

Sales were marginally lower in Specialist Piling at £29.9m (2017: £30.1m). The restricted access business had a very strong second half to the last financial year, including the delivery of its largest ever contract at Eden Brows, and with a small number of important contracts being delayed in the fourth quarter it was unable to replicate that performance this year. The rail business was significantly impacted by the collapse of Carillion and although satisfactory terms were agreed to recommence some of the halted contracts this only had a limited benefit in the second half. Outside of work with Carillion, the rail business had a relatively successful second half including the commencement of a track bed stabilisation contract. Gross margin delivered was down on last year at 41.3% (2017: 43.8%), largely reflecting the impact of the two rail contracts in the first half of the year with operating margins further effected by the weaker turnover performance in the second half.

We saw a particularly strong revenue performance in Ground Engineering Services, up 64.8% to £17.5m (2017: £10.6m). This has been driven by our investment in servicing the burgeoning local Scottish market which has established Van Elle as the dominant ground engineering company in the central belt of Scotland and demonstrates our ability to penetrate new markets with our leading service offering.  In addition, the Geotechnical business has been re-branded as Strata to differentiate site investigation work from the Group's other services which the Board believes will open up further growth opportunities with consultants, developers and competitors.  Despite the strong turnover performance, gross margins fell to 25.7% (2017: 37.7%) due to a loss-making contract delivered in the Ground Stabilisation operating unit during the year. Actions have been taken to ensure the issues that caused this do not repeat.

Ground Engineering Products has increased its sales by 27.9% to £13.4m (2017: £10.4m), boosted by our increased manufacturing capabilities through the addition of the Scottish facility and coupled with strong demand for our Smartfoot® modular beam foundation system from the housebuilding sector.  Gross margin was delivered at 25.4% (2017: 26.2%), the dilution down to the sales mix between Smartfoot® beams and pre-cast piles for internal use, each of which have different manufacturing gross margins.

In terms of our performance in the Group's key end markets, sales to the housebuilding sector were up 22.1% to £51.9m (2017: £42.5m) and infrastructure sector were up 11.9% to £32.3m (2017: £28.9m). Sales to the commercial and industrial sector fell by 13.1% to £16.4m (2017: £18.8m). Our flexibility to redirect resources to reflect short-term trends in our markets is a key strength of the business, mitigating the impact of a slowdown in any one sector.

Dividend

The Board has adopted a progressive dividend policy and, having paid an interim dividend of 1.40p, is recommending a final dividend of 2.30p (2017: 1.75p), making a total of 3.70p (2017: 2.60p) for the financial year and reflects the Board's continued confidence in the long term prospects for the Group.  If approved, the final dividend will be paid on 28 September 2018 to those shareholders on the register as at 6 September 2018.   

Board and governance

On behalf of the Board, I would like to express our thanks to Jon Fenton who, due to a serious medical matter within his close family, stepped down as CEO and left the Company on 18 May 2018.  Jon steered the Company through a successful period of growth, culminating in the IPO in October 2016, and we wish him well for the future. 

I am very pleased to announce that, following a detailed process, Mark Cutler is joining the Board to succeed Jon as Chief Executive Officer during August 2018.  Mark has considerable sector experience at CEO level, and we look forward to him bringing this experience to Van Elle.

Also in the year we welcomed David Hurcomb as Non-Executive Director.  David started on 1 November 2017 and he is Chair of the Remuneration Committee.

As a board, we are committed to promoting highest standards of corporate governance and ensuring effective communication with shareholders.  We intend to apply the Quoted Companies Alliance Corporate Governance Code, complemented by applying other suitable governance as far as it is appropriate for a company of its size.

People

Van Elle has an outstanding group of employees and we continue to place great importance on their engagement.  Our objective is to provide opportunities for development, personal growth and successful careers with the Company.

Outlook

Following the challenging conditions experienced at the start of 2018, recovery has been slow in a number of our end markets which has resulted in a relatively quiet first quarter for the Group as a whole. 

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

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

Mark and I look forward to updating shareholders on our continuing progress at the Annual General Meeting on 18 September 2018.

Adrian Barden

Non-Executive Chairman

25 July 2018

 

Financial Review

 

Revenue

Revenue for the year ended 30 April 2018 was £103.9m (2017: £94.1m), which represented an increase of 10.4%. 

 

2018

£'000

2017

£'000

Change

%

2018

%

2017

%

H1

52,642

43,126

22.1

50.7

45.8

H2

51,230

50,967

0.5

49.3

54.2

Revenue

103,872

94,093

10.4

100.0

100.0

 

 

 

 

 

 

Group results are usually seasonally weighted to H2 due to work patterns over the Christmas and Easter holiday periods, particularly in the infrastructure sector.  However, this year the H1 performance was marginally ahead of H2, with H2 being impacted by the demise of Carillion and subsequent delays in recommencing work on contracts that were being delivered at the time of the company's liquidation.  Additionally, there was lost productive time and contract delays resulting from the severe weather disruption during January, February and March and the delay of a small number of important contracts in Q4. Furthermore, the prior year's seasonal weighting reflected a very strong Q3 that saw delivery of the Eden Brows contract for £5.4m, alongside an active rail sector.

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:

 

2018

£'000

2017

£'000

Change

%

2018

%

2017

%

Housebuilding

51,884

42,504

22.1

49.9

45.2

Infrastructure

32,343

28,906

11.9

31.1

30.7

Commercial and industrial

16,357

18,814

(13.1)

15.7

20.0

Public sector

2,149

3,171

(32.2)

2.1

3.4

Other

1,139

698

63.2

1.1

0.7

Revenue

103,872

94,093

10.4

100.0

100.0

 

 

 

 

 

 

New housing and infrastructure continued to generate growth with strong revenues in this year's sales mix buoyed by the healthy housing market and the Government's investment in the country's infrastructure networks.   The commercial and industrial revenues fell year on year which the Board believes is reflective of more difficult conditions in those markets generally. 

The mix of revenue by our divisions is shown below:

 

2018

£'000

2017

£'000

Change

%

2018

%

2017

%

General Piling

43,124

42,905

0.5

41.5

45.6

Specialist Piling

29,887

30,126

(0.8)

28.8

32.0

Ground Eng'ing Services

17,502

10,621

64.8

16.8

11.3

Ground Eng'ing Products

13,359

10,441

27.9

12.9

11.1

Revenue

103,872

94,093

10.4

100.0

100.0

 

 

 

 

 

 

The changing mix reflects our focus on growth markets as well as our ability to focus resources where we feel the best opportunities lie.  We have targeted investment into several specialist rigs and equipment during the year.

Our investment in our production capabilities has increased our capacity to meet demand from the housebuilders for Smartfoot® modular beams and internal demand for precast piles, the latter reducing our reliance on the supply chain.  The returns can be seen in our growth in Ground Engineering Products revenues.

 

Operating profit

The revenue performance has translated into operating profit for the year ended 30 April 2018 of £9.7m (2017: £9.7m). 

 

2018

£'000

2017

£'000

Change

%

Operating profit

9,710

9,705

0.0

 

 

 

 

Underlying operating margin

12.3%

 

Operating margin

9.3%

10.3%

 

 

 

 

 

The Board believes that the underlying performance measures for operating profit and EPS, stated before the deduction of exceptional items, the Carillion bad debt charge and share-based payment expenses, gives a clearer indication of the actual performance of the business in terms of comparable year on year operational delivery.

 

During the year, exceptional items of £283,000 were incurred in respect of: legal and other professional costs associated with the EGM held on 15 December 2017 and an aborted acquisition

 

Net finance costs

Net finance costs were £536,000 (2017: £422,000) and interest was covered 18.1 times (2017: 23.0 times).  The increase in costs reflects the targeted capital investment expenditure over the last couple of years funded by hire purchase lease contracts.  The hire purchase contracts are at fixed rates of interest and normally for a five-year term.

 

Taxation

The effective tax rate for the year was 18.9% (2017: 19.9%). 

The Group paid £1,768,000 (2017: £2,281,000) of corporation tax during the year.

Dividends

The Board has adopted a progressive dividend policy.  On 7 March 2018, the Company paid an interim dividend of 1.4p per share.  The Board is now recommending a final dividend of 2.3p per share making a total dividend of 3.7p per share for the financial year. 

Subject to approval at our Annual General Meeting of shareholders on 18 September 2018, the recommended final dividend will be paid on 28 September 2018 to shareholders who are on the register on 6 September 2018.

Earnings per share

The underlying basic earnings per share was 10.6p (2017: 12.1p), based on underlying earnings of £8,516,000 (2017: £9,125,000).  Underlying earnings are stated after adding back £283,000 of exceptional costs, Carillion bad debt write-off of £956,000, and £148,000 of share-based payment expenses.

 

Capital structure and 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.  In this context, the Board has established clear priorities for the use of capital.  In order of priority these are:

·      to fund profitable organic growth opportunities;

·      to finance bolt-on acquisitions that meet the Group's investment criteria;

·      to pay ordinary dividends at a level which allows dividend growth through the cycle; and

·      where the balance sheet allows, to deploy funds for the benefit of shareholders in the most appropriate manner.

 

Balance sheet summary

 

2018

£'000

2017

£'000

Fixed assets (including intangible assets)

41,826

34,440

Net working capital

7,437

5,337

Net debt

(5,905)

(1,458)

Taxation and provisions

(1,992)

(1,998)

Net assets

41,366

36,321

 

 

 

The Group has increased net assets by £4.8m to £41.1m (2017: £36.3m) during the year.  This increase is partly due to the issue of shares on IPO, raising net funds of £8.8m to finance future acquisitions, and the balance is retained profit from robust underlying trading for the year.

The Group continued to invest in specialist rigs to drive growth in our chosen markets, as well as continuing to invest in our facilities with capital expenditure of £13.2m (2017: £11.8m) in the year and a corresponding annual depreciation charge of £5.7m (2017: 4.7m). The Group also continues to invest in the maintenance of its fleet to ensure rigs function well over the long term. As a result, residual values on second hand sales have been higher than those implied by the Group's depreciation policy and the Board will review this in the coming year.

The ROCE has decreased in the period to 23.5% at 30 April 2018 (2017: 30.6%).

 

Analysis of net debt

 

2018

£'000

2017

£'000

Bank loans

(1,125)

(1,275)

Other loans

(109)

(205)

Finance leases

(15,551)

(12,836)

Total borrowings

(16,785)

(14,316)

Cash and cash equivalents

10,880

12,858

Net debt

(5,905)

(1,458)

 

 

 

Net debt has increased by £4.4m to £5.9m at 30 April 2018, reflecting the net cash outflow from the impact of the liquidation of Carillion on cash collections and the movement in hire purchase obligations in support of 2018 capital investment.

 

Return on capital employed

Underlying ROCE has reduced year on year from 30.6% to 23.5%, largely reflecting the additional £13.2m capital expenditure investment during the year which did not contribute to earnings for the whole 12 month period.  Capital expenditure over the short term is forecast to reduce significantly as our expansion investment programme is nearing completion, which should bring an improvement in ROCE in due course.

 

Cash flow summary

 

2018

£'000

2017

£'000

Operating cash flows before working capital

15,417

14,380

Working capital movements

(2,173)

(1,251)

Cash generated from operations

13,244

13,129

Net interest paid

(536)

(422)

Income tax paid

(1,768)

(2,281)

Net cash generated from operating activities

10,758

10,426

Capital expenditure

(4,732)

(5,495)

Financing activities

(8,186)

4,326

Net increase in cash and cash equivalents

(1,978)

9,257

 

The Group has always placed a high priority on cash generation and the active management of working capital. Cash generated from operations was £13.2m (2017: £13.1m), representing an operating cash conversion of 86% (2017: 92%).

 

 

Paul Pearson

Chief Financial Officer

25 July 2018

 

Consolidated statement of comprehensive income

For the year ended 30 April 2018

 

 

 

2018

£'000

2017

£'000

Revenue

 

103,872

94,093

Cost of sales

 

(69,480)

(60,712)

Gross profit

 

34,392

33,381

Administrative expenses

 

(23,295)

(22,018)

Other operating income

 

-

200

Operating profit before exceptional costs and share-based payment expense

 

11,097

11,563

Share-based payment expense

 

(148)

(77)

Carillion Bad Debt Write-off

 

(956)

-

Exceptional costs

 

(283)

(1,781)

Operating profit

 

9,710

9,705

Finance expense

 

(561)

(436)

Finance income

 

25

14

Profit before tax

 

9,174

9,283

Income tax expense

 

(1,835)

(1,930)

Total comprehensive income for the year

 

7,339

7,353

Earnings per share (pence)

 

 

 

Basic

 

9.2

9.8

Diluted

 

9.2

9.8

 

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 2018

 

 

 

2018

£'000

2017

£'000

Non-current assets

 

 

 

Property, plant and equipment

 

39,502

32,110

Intangible assets

 

2,324

2,330

 

 

41,826

34,440

Current assets

 

 

 

Inventories

 

2,565

2,423

Trade and other receivables

 

22,225

18,796

Cash and cash equivalents

 

10,880

12,858

 

 

35,670

34,077

Total assets

 

77,496

68,517

Current liabilities

 

 

 

Trade and other payables

 

17,353

15,882

Loans and borrowings

 

5,580

4,461

Corporation tax payable

 

753

878

 

 

23,686

21,221

Non-current liabilities

 

 

 

Loans and borrowings

 

11,205

9,855

Provisions

 

270

342

Deferred tax

 

969

778

 

 

12,444

10,975

Total liabilities

 

36,130

32,196

Net assets

 

41,366

36,321

Equity

 

 

 

Share capital

 

1,600

1,600

Share premium

 

8,633

8,633

Retained earnings

 

31,115

26,070

Non-controlling interest

 

18

18

Total equity

 

41,366

36,321

 

 

 

Consolidated statement of cash flows

For the year ended 30 April 2018

 

 

 

2018

£'000

2017

£'000

Cash flows from operating activities

 

 

 

Cash generated from operations

 

13,244

13,129

Interest received

 

25

14

Interest paid

 

(561)

(436)

Income tax paid

 

(1,768)

(2,281)

Net cash generated from operating activities

 

10,940

10,426

Cash flows from investing activities

 

 

 

Purchases of property, plant and equipment

 

(5,053)

(5,562)

Disposal of property, plant and equipment

 

321

138

Purchases of intangibles

 

0

(71)

Net cash absorbed in investing activities

 

(4,732)

(5,495)

Cash flows from financing activities

 

 

 

Proceeds from bank borrowings

 

-

-

Repayment of bank borrowings

 

(150)

(150)

Proceeds from Invest to Grow loan

 

-

260

Repayments of Invest to Grow loan

 

(95)

(55)

Issue of shares (net of issue costs)

 

-

8,833

 

 

 

 

Payments to finance lease creditors

 

(5,421)

(3,882)

Dividends paid

 

(2,520)

(680)

Net cash generated/(absorbed) in financing activities

 

(8,186)

4,326

Net increase in cash and cash equivalents

 

(1,978)

9,257

Cash and cash equivalents at beginning of year

 

12,858

3,601

Cash and cash equivalents at end of year

 

10,880

12,858

 

 

 

Consolidated statement of changes in equity

For the year ended 30 April 2018

 

 

Share

capital

£'000

Share

premium

£'000

Non-

controlling

interest

£'000

Retained

earnings

£'000

Total

equity

£'000

Balance at 1 May 2016

1,006

-

18

19,728

20,752

Total comprehensive income

-

-

-

7,353

7,353

Share redesignation

63

-

-

-

63

Issue of bonus shares

331

-

-

(331)

-

Issue of ordinary shares on IPO

200

9,800

-

-

10,000

Share issue costs

-

(1,167)

-

-

(1,167)

 

594

8,633

-

7,022

16,249

Dividends paid

-

-

-

(680)

(680)

Balance at 30 April 2017

1,600

8,633

18

26,070

36,321

Total comprehensive income

-

-

-

7,339

7,339

Share-based payment expense

-

-

-

225

225

 

-

-

-

7,564

7,564

Dividends paid

-

-

-

(2,520)

(2,520)

Balance at 30 April 2018

1,600

8,633

18

31,115

41,366

 

 

 

Notes to the preliminary results

For the year ended 30 April 2018

 

1. Basis of preparation

 

The consolidated financial statements and preliminary announcement of Van Elle Holdings plc for the year ended 30 April 2018 were authorised for issue by the Board of Directors on 25 July 2018.

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 2018 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 2018 will be posted to shareholders on 7 August 2018 and copies will be available from that date from the company secretary at the registered office of the Company, Kirkby Lane, Pinxton, Nottinghamshire, NG16 6JA.  The statutory accounts for the year ended 30 April 2018 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.  New standards and interpretations which came into force during the year did not have a significant impact on the Group's financial statements.

2. 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.

Revenue recognition

 

This year's revenue includes an estimate for a final account settlement that is still to be concluded but has been assessed by the Board on a prudent basis and the anticipated outcome is reflected in the full year turnover.

 

The Directors have taken legal and independent expert advice on the potential outcome to ensure that the estimate is as accurate as possible.  Consideration has been given by the Directors to contractual terms and the work performed when arriving at the value of the amount claimed, which is approximately £0.7m.

 

3.  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. All turnover and operations are based in the UK.

 

 

Operating segments - 30 April 2018

 

General

Piling

£'000

Specialist

Piling

£'000

Ground

Engineering

Services

£'000

Ground

Engineering

Products

£'000

Head

Office

£'000

Total

£'000

Revenue

 

 

 

 

 

 

Total revenue

46,066

30,299

18,677

16,384

-

111,426

Inter-segment revenue

(2,942)

(412)

(1,175)

(3,025)

-

(7,554)

Revenue

43,124

29,887

17,502

13,359

-

103,872

Operating profit

5,693

4,073

306

1,025

-

11,097

Underlying operating profit

 

 

 

 

 

 

Share-based payments

-

-

-

-

(148)

(148)

Exceptional item

-

(956)

-

-

(283)

(1,239)

Operating profit

5,693

3,117

306

1,025

(431)

9,710

Finance expense

-

-

-

-

(561)

(561)

Finance income

-

-

-

-

25

25

Profit before tax

5,693

3,117

306

1,025

(967)

9,174

Assets

 

 

 

 

 

 

Property, plant and equipment

13,513

10,218

4,163

2,913

8,695

39,502

Inventories

297

420

156

1,693

--

2,566

Reportable segment assets

13,810

10,638

4,319

4,606

8,695

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

13,810

10,638

4,319

4,606-

44,123

77,496

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

5,059

2,636

2,070

1,782

1,603

13,150

Depreciation/amortisation

2,002

2,114

685

242

662

5,705

 

There are no individual customers accounting for more than 10% of Group revenue in either the current or preceding year. Operating segments - 30 April 2017

 

 

General

Piling

£'000

Specialist

Piling

£'000

Ground

Engineering

Services

£'000

Ground

Engineering

Products

£'000

Head

Office

£'000

Total

£'000

Revenue

 

 

 

 

 

 

Total revenue

45,008

30,126

10,621

13,714

-

99,469

Inter-segment revenue

(2,103)

-

-

(3,273)

-

(5,376)

Revenue

42,905

30,126

10,621

10,441

-

94,093

Operating profit

 

 

 

 

-

 

Underlying operating profit

4,685

5,355

772

751

-

11,563

Share-based payments

-

-

-

-

(77)

(77)

Exceptional item

-

-

-

-

(1,781)

(1,781)

Operating profit

4,685

5,355

772

751

(1,858)

9,705

Finance expense

-

-

-

-

(436)

(436)

Finance income

-

-

-

-

14

14

Profit before tax

4,685

5,355

772

751

(2,280)

9,283

Assets

 

 

 

 

 

 

Property, plant and equipment

10,456

9,696

2,778

1,373

7,807

32,110

Inventories

414

370

179

1,460

-

2,423

Reportable segment assets

10,870

10,066

2,957

2,833

7,807

34,533

Intangible assets

-

-

-

-

2,330

2,330

Trade and other receivables

-

-

-

-

18,796

18,796

Cash and cash equivalents

-

-

-

-

12,858

12,858

Total assets

10,870

10,066

2,957

2,833

41,791

68,517

Liabilities

 

 

 

 

 

 

Loans and borrowings

-

-

-

-

14,316

14,316

Trade and other payables

-

-

-

-

16,760

16,760

Provisions

-

-

-

-

342

342

Deferred tax

-

-

-

-

778

778

Total liabilities

-

-

-

-

32,196

32,196

Other information

 

 

 

 

 

 

Capital expenditure

4,267

2,948

1,841

668

2,041

11,765

Depreciation/amortisation

1,918

1,848

622

299

-

4,687

 4. Other operating income

 

2018

£'000

2017

£'000

Recovery in respect of insurance excess

-

200

 

5. Exceptional costs

 

2018

£'000

2017

£'000

Initial Public Offering ("IPO")

-

1,452

Other exceptional costs

283

329

 

283

1,781

 

Initial Public Offering ("IPO")

The charge in the prior year represents fees and other costs arising because of the IPO which have not been treated as deductions against the share premium account. Of the exceptional charge of £1,452,000, approximately £104,000 is treated as tax deductible and the balance of £1,348,000 is treated as disallowed tax expenses in the tax computation

Other exceptional items

The current year other exceptional item relates to costs associated with an EGM held on 15 December 2017, and due diligence fees for an aborted acquisition.

The prior year other exceptional item relates to severance costs arising from the Board changes following the IPO and other legal matters arising as a consequence of the IPO. These are treated as fully tax deductible within the tax computation.

6. Income tax expense

 

2018

£'000

2017

£'000

Current tax expense

 

 

Current tax on profits for the year

1,647

2,060

Adjustment for (over)/under provision in the prior period

(3)

(196)

Total current tax

1,644

1,864

Deferred tax expense

 

 

Origination and reversal of temporary differences

188

103

Recognition of previously unrecognised deferred tax assets

3

3

Effect of decreased tax rate on opening balance

-

(40)

Total deferred tax

191

66

Income tax expense

1,835

1,930

 

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:

 

2018

£'000

2017

£'000

Profit before income taxes

9,174

9,283

Tax using the standard corporation tax rate of 19% (2017: 20%)

1,743

1,849

Adjustments for (over)/under provision in previous periods

-

(193)

Expenses not deductible for tax purposes

81

288

Non-qualifying depreciation

11

-

Short-term timing differences

-

(14)

Total income tax expense

1,835

1,930

 

During the year ended 30 April 2018, because of the reduction in the UK corporation tax rate from 20% to 19% from 1 April 2018, corporation tax has been calculated at 18.9% of estimated assessable profit for the year (2017: 19.9%).

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 2018 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 2018 has been calculated at 17%, reflecting the tax rate at which the deferred tax is expected to be utilised in future periods. 

 

7. Dividends

 

2018

£'000

2017

£'000

Final dividend - year ended 2017

 

 

1.75p per ordinary share paid during the year

1,400

-

Interim dividend - year ended 2018

 

 

0.85p per ordinary share paid during the year

1,120

680

 

2,520

680

 

The proposed final dividend for the year ended 30 April 2018 of 2.3p per share amounting to £1,840,000 and representing a total dividend of 3.7p per share for the full year, will be paid on 28 September 2018 to the shareholders on the register at the close of business on 6 September 2018. 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.

 

8. Earnings per share

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

 

2018

'000

2017

'000

Basic weighted average number of shares

80,000

75,123

Dilutive potential ordinary shares from share options

-

-

Diluted weighted average number of shares

80,000

75,123

 

 

£'000

£'000

Profit for the year

7,339

7,353

Add back/(deduct):

 

 

Share-based payments

148

77

Exceptional costs and Carillion bad debt

1,239

1,781

Tax effect of the above

(210)

(86)

Underlying profit for the year

8,516

9,125

 

 

Pence

Pence

Earnings per share

 

 

Basic

9.2

9.8

Diluted

9.2

9.8

Basic - excluding exceptional costs, Carillion bad debt and share-based payments

10.6

12.1

Diluted - excluding exceptional costs, Carillion bad debt and share-based payments

10.6

12.1

 

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders and on 80,000,000 ordinary shares (2017: 75,123,288) being the weighted average number of ordinary shares. In accordance with IAS 33, the weighted average number of shares in issue during the period has been retrospectively adjusted for the proportionate change in the number of the shares outstanding because of the bonus issue and share splits that occurred on admission to AIM.

The underlying earnings per share is based on profit adjusted for exceptional operating costs, Carillion bad debt and share-based payment charges, net of tax, and on the same weighted average number of shares used in the basic earnings per share calculation above. The Directors consider that this measure provides an additional indicator of the underlying performance of the Group.

There is no dilutive effect of the share options as performance conditions remain unsatisfied and the share price was below the exercise price.

9. Cash generated from operations

       

2018

£'000

2017

£'000

Operating profit

9,710

9,705

Adjustments for:

 

 

Depreciation of property, plant and equipment

5,705

4,655

Amortisation of intangible assets

44

32

Profit on disposal of property, plant and equipment

(267)

(89)

Share-based payment expense

225

77

Operating cash flows before movement in working capital

15,417

14,380

Increase in inventories

(142)

(812)

(Increase)/decrease in trade and other receivables

(3,429)

(1,950)

Increase/(decrease) in trade and other payables

1,470

1,544

Decrease in provisions

(72)

(33)

Cash generated from operations

13,244

13,129

 

 

 

 

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

 

 

 

 

 

2017

£000

Cash Flows

£000

Non-cash flows

£'000

2018

£000

Cash at bank

12,810

(1,978)

-

10,832

Cash in hand

48

-

-

48

Cash and cash equivalents

12,858

(1,978)

-

10,880

Bank loans secured

(1,275)

150

-

(1,125)

Other loans secured

(205)

95

-

(110)

Finance leases

(12,836)

-

(2,714)

(15,550)

Net debt

(1,458)

(1,733)

(2,714)

(5,905)

             

 

Significant non-cash transactions include the purchase of £8,135,057 (2017: £6,202,000) of fixed assets on hire purchase.


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