Engineering and geotechnical contractor Van Elle Holdings Plc (LON:VANL) have seen their share price dip sharply as they book a sharp profit dive for the first half, which has forced the company to revise its gull-year financial outlook.
Full-year expectations hampered by difficult H1
The firm reported a 55% slump in first half profits, which has caused Van Elle to have to downgrade its expectations for the full year, as the company state project delays and high overheads will cause them to miss their targets.
The latest company statement revealed that for the six months through December 2018, pre-tax profit had dropped to £2.4 million, which came as a result of revenue falling 18% to £42.9 million. Following these results, the company announced that it was to reduce its interim dividend by 29% to 1p per share. Also, that in the third quarter, contract margin performance in the general piling division had been weaker than expected and that several projects had been delayed.
Chief Eexcutive, Mark Cutler, said, “As a result and despite good momentum being carried in from the first half, we don’t believe we will be able to deliver the significant step up in performance during the second half that we anticipated at the time of our trading statement in December 2018,”
“These challenges have been frustrating, but it is pleasing to see outlook for the final quarter remaining robust and with a strong pipeline of target projects providing good forward visibility.”
“Whilst we are mindful of the wider market environment, we are confident that the initiatives we are taking will develop a strong platform for future strong, profitable growth.”
A period of transition
Since its listing on the AIM in 2016, Van Elle has gone through a series of difficult events. With the departure of its founder – who later returned to try and stage a coup within the board of directors – and the reduced workload following the collapse of Carillion (LON:CLLN), the firm were already facing a difficult H1. This has only been compounded with the arrival of a new Chief Executive, among other more recent senior management changes, and the £300,000 restructuring charge this ensued.
“This is a transitional year for the business and since my arrival in August 2018, I have been undertaking a full review of the business,” Mark Cutler said. “As part of this process I have been taking action to refine the group’s commercial approach, streamline operations, strengthen the leadership team and re-focus on our key customers. This is already creating a strong platform from which to pursue our growth strategy.
“The third quarter has been more challenging than we anticipated, with a disappointing performance in general piling and several project delays. As a result and despite good momentum being carried in from the first half, we don’t believe we will be able to deliver the significant step up in performance during the second half that we anticipated at the time of our trading statement in December 2018.
“These challenges have been frustrating, but it is pleasing to see outlook for the final quarter remaining robust and with a strong pipeline of target projects providing good forward visibility.
“Whilst we are mindful of the wider market environment, we are confident that the initiatives we are taking will develop a strong platform for future strong, profitable growth.”
Van Elle as it stands
The company’s shares are currently trading at 64.06p, down 19.42% or 15.44p since markets opened 16/01/19 14:53 GMT. Analysts from Peel Hunt have downgraded their stance on Van Elle stock, from ‘Buy’ to ‘Hold’.