Van Elle weathers tougher second half, appoints Balfour's Cutler as next CEO

Geotechnical contractor Van Elle updated the market on its trading for the year ended 30 April on Thursday, reporting that following a good overall performance in the first half, adverse weather contributed to more challenging market conditions since January.

The AIM-traded firm said that it still expected to show modest year-on-year revenue growth in the second half, against a strong comparative period in the prior year.

Additionally, since the collapse of Carillion in January, Van Elle said it had been “actively engaged” with Carillion's advisers to determine the status and intentions regarding existing and anticipated projects where Carillion was acting as contractor, and on which the group was or was expected to be engaged as sub-contractor.

The board said it was able to agree “satisfactory terms” to recommence work on some Carillion contracts during the fourth quarter, although that was only expected to have a limited financial benefit in the year to 30 April.

Notwithstanding the Carillion situation, Van Elle said the rail operating unit enjoyed a strong second half, continuing to win work and delivering a better operating performance.

Combined with a solid performance from the restricted access unit, that led to an encouraging performance in the specialist piling division in the second half, the board explained.

“Having reported a very strong first half performance, revenues and margins in the general piling division have been lower in the second half reflecting the slightly slower market,” it added.

The ground engineering services division had a challenging second half, which Van Elle said was reflective of lost productive time and contract delays resulting from severe weather affecting its Scottish operations in January and February, as well as the effects felt more recently in March, together with a loss-making contract in the ground stabilisation business unit.

Its first half performance had been impacted by a legacy contract issue for which a final account settlement was still to be concluded, although the board's anticipated outcome was reflected in its full year expectations.

Moving into the new financial year, the board said it believes the division was in a more stable position with a healthy order book, particularly in Scotland.

In ground engineering products, the Group's proprietary ‘’Smartfoot’ foundation system continued to gain share in the market and delivered encouraging year-on-year growth in the second half, in spite of some weather disruption.

“The group now anticipates reporting a lower than previously expected exceptional bad debt charge of approximately £1m, rather than £1.6m,” the board said.

“Despite the bad debt charge and the poor performance of ground engineering Services in the second half, cash generation across the group in general has continued to be strong and provides an ongoing platform to support Van Elle's strategic initiatives.”

Van Elle said it currently expected to report overall adjusted profit before taxation for the year ended 30 April of around £10.5m.

“Whilst mindful of recent commentary as to the outlook for the UK construction market more generally, the board remains positive about the opportunities it can see for the group.”

Also on Thursday, Van Elle announced that following a “detailed process”, Mark Cutler would join the board and succeed Jon Fenton as chief executive officer no later than October 2018 - though it hoped “somewhat earlier” if prior agreement could be reached.

Mark Cutler, aged 49, would join Van Elle from Balfour Beatty, where he was previously managing director of the UK regional construction and engineering businesses, and recently managing director of the Balfour Beatty VINCI joint venture, with responsibility for the High Speed 2 programme.

From 2010 to 2014, Cutler was chief executive at Barhale Construction, one of the UK's largest privately-owned infrastructure specialists working across the water, transport and energy sectors.

He joined Barhale from Morgan Est - the infrastructure arm of Morgan Sindall Group - where he was managing director.

Mark's early career was at the Tarmac/Carillion Group.

As Van Elle announced on 22 November last year, Jon Fenton had informed the board that due to a serious medical matter within his close family, he wished to step down and would be leaving the company on 18 May.

In order to help support Van Elle ahead of Cutler’s arrival, the board said it had engaged Stephen Prendergast, who it described as a “highly experienced” interim manager, in the role of acting CEO.

Prendergast had been undertaking interim management roles for the last 13 years, including assignments for ISG, Balfour Beatty, Amey and Network Rail.

Van Elle said he had “significant” sector experience, having also previously held executive roles at Costain and Amec.

Fenton had agreed to remain available to Prendergast and the company as a consultant, to help ensure a smooth transition period.

“We wish Jon and his family well for the future, and thank him for his contribution to the company over the past eight years, including the successful IPO in 2016,” said Van Elle chairman Adrian Barden.

“We are delighted that Mark is joining Van Elle.

“He is highly regarded across the industry and will be bringing with him a wealth of valuable experience across all our major sectors, especially in rail and housing where we have many opportunities to build on our already strong market positions.”

Barden said ensuring a smooth leadership transition process had been a key focus of the board, and it was “pleased” that Prendergast would be able to step in to support the management team over the next few months.

“Whilst market conditions have been less supportive in the second half, the team has worked hard to continue to win work and deliver this effectively.

“We continue to progress our strategic initiatives and believe that these have positioned the group well for the future.”