VAN ELLE HOLDINGS PLC
ANNUAL REPORT AND ACCOUNTS 2018
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INDEPENDENT GEOTECHNICAL
VAN ELLE IS THE
UK’S LARGEST
ENGINEERING
CONTRACTOR
We utilise leading‑edge plant and technologies,
involving over 580 staff to deliver innovative,
first‑class solutions to clients throughout the UK,
across all sectors, from seven UK locations.
Highlights
FINANCIAL HIGHLIGHTS 2018
OPERATIONAL HIGHLIGHTS
REVENUE (£m)
£103.9m +10.4%
2018
2017
2016
103.9
94.1
84.2
UNDERLYING OPERATING PROFIT* (£m)
£11.1m -4.0%
2018
2017
2016
OPERATING PROFIT (£m)
£9.7m +0%
2018
2017
2016
% of
turnover
10.7%
12.3%
13.1%
% of
turnover
9.3%
10.3%
13.1%
11.1
11.6
11.1
9.7
9.7
11.1
FLEET SIZE
+10.8%
RAIL REVENUES (£M)
+£4.2m
SCOTLAND SALES
+6.8m
RETURN ON CAPITAL EMPLOYED
UNDERLYING
23.5% (30.6%)
REPORTED
20.5% (25.7%)
– Delivered record turnover of £103.9m
– Grew service offering in Scotland, with revenue up 534%
– Sales up 22% in new housing and 12% in infrastructure
– Rail revenues increased by 37% on prior year
– Increased fleet from 111 to 123 rigs
– Larger rigs in General Piling strengthened breadth of offering
* Underlying measures exclude exceptional costs, Carillion bad
debt write-off and share-based payment expenses (Note 7).
P14 See how we use KPIs to measure our performance
Stay up to date with the latest news
and announcements on our website:
WWW.VAN-ELLE.CO.UK
Corporate governance
34 Board of Directors and
Executive Committee
36 Corporate governance statement
38 Audit Committee report
41 Nomination Committee report
42 Remuneration Committee report
44 Directors’ remuneration policy
48 Annual report on remuneration
50 Directors’ report
52 Statement of Directors’ responsibilities
53 Independent auditor’s report
Financial statements
58 Consolidated statement of comprehensive income
59 Consolidated statement of financial position
60 Consolidated statement of cash flows
61 Consolidated statement of changes in equity
62 Notes to the consolidated financial statements
80 Parent company statement of financial position
81 Parent company statement of changes in equity
82 Notes to the parent company financial statements
85 Shareholder information
85 Corporate information
01
Strategic report
01 Highlights
02 Van Elle at a glance
04 Chairman’s statement
06 Executive Directors’ review
08 Market overview
10 Business model
12 Strategic overview
13 Our strategy in action – post IPO
14 Key performance indicators
16 Risk management and principal risks
18 Corporate social responsibility
22 Operational review
22 General Piling
24 Specialist Piling
26 Ground Engineering Services
28 Ground Engineering Products
30 Financial review
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Van Elle at a glance
Continuing to build on our
solid foundations
We continue to build on our strong reputation in core ground engineering markets, a reputation
built on service, quality, technical expertise, innovation, safety and the successful delivery
of value-engineered solutions to our customers.
We have many long-standing relationships with major contractors, housebuilders and
property developers, enabling us to capitalise on a range of growth opportunities nationwide.
OUR SERVICE OFFERING
DELIVERED ACROSS OUR OPERATING DIVISIONS
PILING
Large diameter piling using
state-of-the-art continuous flight
auger (“CFA”), rotary and driven rigs.
RESTRICTED ACCESS
& SPECIALIST PILING
Bespoke rigs and innovative techniques
to deliver solutions to specialist sectors
and environments.
SITE INVESTIGATION,
TESTING & MONITORING
Testing of piles, soil nails and ground
anchors, as well as site investigation
and reporting.
DRILLING AND GROUTING
Consolidation of abandoned mine workings,
shafts, sewers and solution features.
EARTH SUPPORT
Design and installation of soil nails, ground
anchors and rock bolts and netting.
PRECAST CONCRETE PRODUCTS
Production of standard and bespoke
foundation solutions including Smartfoot®.
02
GENERAL PILING
Offering a variety of ground engineering
and foundation solutions on open sites.
P22 Read the operating review
REVENUE SHARE
41.5% 46+
45.6%
2017
SPECIALIST PILING
Providing a range of piling and geotechnical
solutions in operationally constrained environments.
P24 Read the operating review
REVENUE SHARE
28.8% 46+
32.0%
2017
GROUND ENGINEERING SERVICES
Offering a range of ground stabilisation,
earth support and geotechnical services.
P26 Read the operating review
REVENUE SHARE
16.8%
11.3%
2017
46+
GROUND ENGINEERING PRODUCTS
Designing, producing and installing modular foundation
systems and bespoke precast concrete products.
P28 Read the operating review
REVENUE SHARE
12.9%
11.3%
2017
46+
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT32
+
11
+
11
+
M
32
+
11
+
11
+
M
32
+
11
+
11
+
M
32
+
11
+
11
+
M
ACROSS END MARKETS
NEW HOUSING
REVENUE SHARE
49.9%
(+22.1%) GROWTH IN YEAR
INFRASTRUCTURE
REVENUE SHARE
31.1%
(+11.9%)
45.2%
2017
30.7%
2017
COMMERCIAL & INDUSTRIAL
REVENUE SHARE
15.7%
(-13.1%)
PUBLIC
REVENUE SHARE
2.1%
(-32.2%)
AGRICULTURE/OTHER
REVENUE SHARE
1.1%
(+63.2%)
20.0%
2017
3.4%
2017
0.7%
2017
Glasgow
Washington
Warrington
HEAD OFFICE
Pinxton
Kirkby-in-
Ashfield
Dereham
London
7
LOCATIONS
575
(2017: 529)
AVERAGE HEADCOUNT
P08 Read more about our end markets in the market review
P10 See our business model
03
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Chairman’s statement
Continuing to deliver strategic growth
from our diversified
operations
— Adrian Barden
Non-Executive Chairman
HIGHLIGHTS
– Delivered record turnover of £103.9m
– Continued expansion of service offering
and geographical footprint
– Selected new CEO to start mid-August
– Progressive dividend policy recommending
final dividend of 2.3p, total 3.7p for the financial year
Dear Shareholder,
I am pleased to announce, on behalf of the Board of
Van Elle Holdings plc, a positive set of results for the
year ended 30 April 2018.
Although the second half of the year was impacted
by the demise of Carillion with a bad debt write-off
of £1.0m, and the severe weather disruption experienced
in the first quarter of 2018, the team has worked hard
to continue to win work and deliver this effectively.
It is thanks to this hard work that we have delivered
record turnover again this year and we have solid
foundations to continue to grow our operation.
Highlights
Van Elle reported a 10.4% increase in revenue to £103.9m
(2017: £94.1m) and an underlying operating profit of
£11.1m (2017: £11.6m). Although 4% lower than prior year,
underlying operating profit represents a healthy 10.7%
underlying operating margin (2017: 12.3%). Reported
operating profit for the year was £9.7m (2017: £9.7m),
an operating margin of 9.3% (2017: 10.3%).
These results reflect our continuing investment 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
04
in the central belt of Scotland. We also 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.
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.
Dividend
The Board has adopted a progressive dividend policy
and, having paid an interim dividend of 1.4p, is
recommending a final dividend of 2.3p, making a
total of 3.7p for the financial year.
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 IPO process and the Company was listed on
AIM in October 2016. 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 the highest
standards of corporate governance and ensuring effective
communication with shareholders. We intend to apply the
Quoted Companies Alliance Corporate Governance Code,
from September 2018, complemented by applying other
suitable governance as far as it is appropriate for a
company of our size. Our corporate governance
statement is included on pages 36 and 37.
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT We continued to progress our
strategic initiatives and believe
that these position the Group
well for the future.”
People
Van Elle has an outstanding group of employees and
continues to place great importance on their engagement.
Our objective is to provide opportunities for development,
personal growth and successful careers with the Company.
Outlook
Market conditions were less supportive in the second
half of the financial year, with 2018 seeing uncertainty
and weak economic growth, causing construction activity
to stutter. This is expected to translate into a weak first
quarter to our new financial year. However, the housing
sector is proving robust, with a strong performance in
our second quarter expected. Against this backdrop,
we continue to progress our strategic initiatives and
believe that these position the Group well for the
future as confidence is restored in the sector.
I look forward to updating shareholders on our continuing
progress at the Annual General Meeting (“AGM”) on
18 September 2018.
Adrian Barden
Non-Executive Chairman
25 July 2018
WHY INVEST IN VAN ELLE?
– Broad and differentiated ground
engineering offering
– Flexible model focused on
operational efficiency
– Well positioned in attractive markets
– Attractive financial profile and consistent
record of delivering growth
– Well-invested, scalable platform capable
of supporting future growth
– Strong management team with
operational experience
P10 Read more in our business model
05
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Executive Directors’ review
Sustainable demand in our
end markets leading to
increased activity
Delivering the strategy
We have continued to grow the business by broadening
our range of products and services and extending our
geographical footprint into high-growth markets (see
pages 12 and 13, strategic overview). This is being
achieved organically but our strategy is to complement
this with bolt-on acquisitions.
Capital investment has been one of the drives of our
growth 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. Some of our
recent additions and innovations are detailed within the
strategic overview on page 12.
We continue to pursue acquisition opportunities where
appropriate.
Trading performance
I am pleased that we successfully grew revenues by 10.4%
in the year to £103.9m (2017: £94.1m), our fifth successive
year of double-digit revenue growth reflecting our view
that we continue to grow our market share. We also
maintained our record of profitable growth since 2010.
We report in detail on the financial performance of
Van Elle during the year on pages 30 to 33.
In terms of our performance in the end markets, sales
to the housebuilding sector were up 22.1% to £51.9m
(2017: £42.5m) and sales to the 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).
HIGHLIGHTS
– Record turnover of £103.9m, year-on-year
growth of 10.4%
– Grew turnover in Scotland by £6.8m
– New housing and infrastructure revenues grew
by 22% and 12% respectively
– Rail sales up 37%
– Increased fleet from 111 to 123 rigs
Dear Shareholder,
This has been a difficult year following a good overall
performance in the first half of the FY18 year. The second
half was significantly impacted by the liquidation of
Carillion in January 2018 and the disruption caused
by the severe weather experienced in the UK between
January and March 2018. That being said, 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.
Underlying operating profit was £11.1m (2017: £11.6m),
with an underlying operating margin of 10.7%
(2017: 12.3%). Reportable operating profit was £9.7m
(2017: £9.7m) at an operating margin of 9.3%
(2017: 10.3%). This year’s 10.7% was down on last year,
principally due to margin dilution from differing
commercial parameters on two rail contracts undertaken
in H1 and a loss-making contract in the Ground
Engineering Services division. Robust internal risk
controls have been introduced so that we identify and
understand all our risks starting in the bid appraisal
stage and apply rigorous management to monitor
contract performance to ensure that the circumstances
resulting in each of these situations do not occur again.
06
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT 123 rigs
RIG FLEET INCREASED BY 12
£45m
10.4%
CAPITAL INVESTMENT OVER
THE LAST FOUR YEARS
GROWTH IN REVENUES IN 2017/18
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, 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%), with the dilution down to the sales
mix between Smartfoot® beams and precast piles, both
of which have differing manufacturing gross margins.
Further details of the operational performance of
each division are included in the operating review
on pages 22 to 29 and in note 5 of the consolidated
financial statements.
Outlook
Trading in the new financial year has been reflective
of the stuttering activity seen across the construction
sector post Carillion’s liquidation; disruption caused by
the severe weather conditions experienced in the UK in
the first calendar quarter of 2018; and decreased market
confidence caused by Brexit uncertainty. Consequently,
we have experienced a weaker first quarter than
expected to the new financial year. However, we are
seeing opportunities increase for our second quarter
within each of our divisions, particularly the housebuilding
and infrastructure markets. We continue to actively
monitor conditions in our core markets and, whilst
mindful of the current conditions, we are cautiously
optimistic about the future prospects, being well
positioned to deliver further value to shareholders
in the medium term.
Executive Directors
25 July 2018
07
Our rig investment in the year added three new large
diameter piling rigs that have contributed to the increased
market share in housebuilding and infrastructure.
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.
Our rig fleet investment is largely complete for now
and provides a strong platform for our future growth.
Operating performance
For the fifth year in succession, our revenue has seen
double-digit growth to a record £103.9m (2017: £94.1m).
We saw a particularly strong 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. This 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. However, gross margin reported fell to 25.7%
(2017: 37.7%) due to a loss-making contract delivered in
the Ground Stabilisation operating unit during the year.
Sales were marginally lower in Specialist Piling at
£29.9m (2017: £30.1m). Gross margin delivered was
down on last year at 41.3% (2017: 43.8%). The Restricted
Access business performed strongly last year, which
included the delivery of its largest ever contract at
Eden Brows. There was no repeat contract of this size
in this year’s revenues. The reduction in gross margin
reflects dilution from differing commercial parameters
on two rail contracts undertaken in H1. However, a strong
second half by the rail operating unit mitigated some
of this dilution.
General Piling has seen modest sales growth in the
year, up 0.5% to £43.1m (2017: £42.9m), a result of the
healthy housebuilding sector offset by reduced demand
for industrial and commercial work. 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.
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Market overview
We align resources to markets with
higher growth potential
The key underlying construction markets for the Group are the
housebuilding, infrastructure, commercial and industrial sectors.
RM & I
£55.1bn (2017: £48.3bn)
NEW HOUSING
£39.4bn (2017: £31.7bn)
£156.4bn
TOTAL UK CONSTRUCTION
OUTPUT 2018
INFRASTRUCTURE
£20.3bn (2017: £17.0bn)
PUBLIC
£9.9bn (2017: £9.9bn)
COMMERCIAL & INDUSTRIAL
£31.6bn (2017: £30.3bn)
NEW HOUSING
INFRASTRUCTURE
Private housing output has risen in each of the last
five years and is expected to continue rising in 2018.
The Government’s “Help to Buy” scheme continues to
support new builds and still has targets of 300,000
net additional dwellings per year by the mid-2020s.
UK MARKET 2018*
VAN ELLE 2017/18
4.7%
22.1%
The key driver of growth in the markets remains in
infrastructure activity. New orders in 2017 rose by 35.2%,
skewed by the HS2 contract awards in Q3 and TransPennine
Express rail contracts in Q4. As a result, rail output is expected
to grow by 5% in 2018, then by 20% in both 2019 and 2020.
Also, Highways England investment is expected to increase
throughout the period 2018 to 2020.
UK MARKET 2018*
VAN ELLE 2017/18
6.4%
11.9%
CONSTRUCTION PRODUCTS ASSOCIATION’S GROWTH FORECASTS*
CONSTRUCTION PRODUCTS ASSOCIATION’S GROWTH FORECASTS*
2019
2020
0.5%
2.1%
2019
2020
13.1%
7.0%
08
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT UK construction market overview
The key underlying construction markets for the Group
are primarily the housebuilding, infrastructure, commercial
and industrial sectors.
Construction activity is expected to be flat in 2018, with
Q1 affected by the Carillion liquidation and poor weather.
However, growth is forecast in 2018 in housing (2.1%)
and infrastructure (6.4%) which will offset falls in
commercial, industrial and health sectors.
Van Elle’s revenue growth of 10.4% in the current year
compares favourably with the UK construction sector’s
underlying market growth in the calendar year 2017 of
5.1%* and reinforces the growth strategy being pursued
by the Directors as they seek to increase market share.
As new housing (+22% yoy) and infrastructure
(+12% yoy) continue to generate strong revenues,
our strategy is to direct our resources and investment
into these sectors.
This strategy highlights the Group’s ability to adapt to
changing conditions and align resources to markets
with a higher growth potential.
Our activities in the construction
market are across a broad range
of end markets but strategically
targeted at the growth areas of
housebuilding and infrastructure.”
Outlook
In April 2018, the Construction Products Association
(“CPA”) published its forecast of UK construction output,
which is shown opposite. Overall its opinion is that
construction activity is expected to remain flat in 2018
following the effects of the Carillion liquidation and
poor weather in Q1 2018 with market conditions
improving during the summer.
Growth is expected in private housing and infrastructure.
We have grown our combined revenues in new housing
and infrastructure to 81% of total turnover, from 76%
in 2017. We continue to focus on market share growth in
both these end markets whilst still tendering and
delivering work in all the other end markets.
* Source: Construction Product Association – Construction
Industry Forecasts 2018–2020, Spring 2018 Edition.
COMMERCIAL AND INDUSTRIAL
PUBLIC
Commercial activity over the period 2018 to 2020 is
forecast for a sharp fall following a contraction of 7.9%
in 2017. As a consequence, output is forecast for a fall
of 7.8% in 2018 and 0.8% in 2019. Retail construction
is forecast to fall by 10.0% in 2018 but rise by 5.0%
and 2.0% in 2019 and 2020 respectively.
Public sector construction is set to suffer from both
a lack of funding available and a reduction of projects
in the pipeline; however, the Priority School Building
Programme 2 is expected to deliver growth in 2019.
Activity is forecast to fall by 5.5% in 2018 but grow
2.5% in the following two years, but levels will be
lower than in 2017.
UK MARKET 2018*
VAN ELLE 2017/18
UK MARKET 2018*
VAN ELLE 2017/18
6.5%
13.1%
4.8%
32.2%
CONSTRUCTION PRODUCTS ASSOCIATION’S GROWTH FORECASTS*
CONSTRUCTION PRODUCTS ASSOCIATION’S GROWTH FORECASTS*
-0.5%
-0.9%
2019
2020
2019
2020
0.9%
1.5%
09
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Business model
A structured but simple approach to drive
growth and profitability
We offer a flexible model focused on operational efficiency, in areas
where we believe there are attractive, long-term growth opportunities.
In providing geotechnical solutions, Van Elle typically
operates in the early stages of a construction project.
We are often the first contractor on and off site;
consequently, working efficiently to minimise costs
and save time is critical for our customer. Whilst the
contractor relationships and construction processes
vary significantly from project to project, ensuring work
is completed efficiently is critical for our customers in
saving them money and providing a sound platform for
the remaining work on a project in terms of cost saving
and programme.
Working across the construction spectrum, the majority
of our projects are of short duration with an average value
in excess of £100,000.
Early engagement of Van Elle usually guarantees
efficiencies and savings are realised at the beginning
of a project, particularly so with the complex projects
in which we are regularly asked to participate in.
Depending on the nature of a project, Van Elle may
provide insights into design and other phases of the
construction process, but value is created and captured
principally from our groundwork activities. Our products
and services are not just about foundations for construction,
but are most commonly geotechnical solutions to complex
construction projects.
c.1,000
JOBS DELIVERED IN THE YEAR
3 WEEKS AVERAGE CONTRACT LENGTH
£102k
AVERAGE CONTRACT VALUE
OUR RESOURCES
Our people:
• leadership in health and safety
with compliance, training and
safety culture at the heart of
everything we do;
• high-quality project managers,
engineers and operators capable
of delivering innovatively
engineered solutions;
• strong local relationships with
customers providing an insight
into market developments allowing
us to drive for high-value solutions;
• specialists able to approach the
most complex problems and
ensure the customer achieves
the optimum outcome; and
• technical specialists in a wide
variety of geotechnical solutions.
Our market focus:
• targeting markets that value
geotechnical solutions; and
• focusing investment and directing
our resources into growth markets.
Our technology:
• state-of-the-art equipment to
enable us to undertake the widest
range of jobs in the shortest time;
• broad coverage for all geotechnical
solutions, providing resilience to
market changes and supporting
us to lead on innovation;
• Van Elle provides unique solutions
giving improved customer results
and Van Elle profitability;
• vertically integrated model ensures
supply chain best practice; and
• in-house transport fleet enables
us to respond to customer
requirements promptly and
enables high rig utilisation levels.
Our financial strength:
• strong balance sheet with low
level of gearing and excellent
cash conversion.
WHAT MAKES US DIFFERENT
A leading UK player:
• very successful track record
of targeted revenue growth,
delivered profitably;
• strong management team
and operating model; and
Differentiated offering:
• broad array of complex
techniques and operating
environments;
• value-engineered solutions
and products; and
• self-funded growth across
• diverse customer base with
the Group.
high levels of repeat business.
10
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT
Key performance indicators ensure we
are focused on what are our essential
measures to continue delivering success.”
OUR RESOURCES
HOW WE ADD VALUE
OUR VALUE CREATION
SUSTAINABLE REINVESTMENT
S
E
I
R
I
U
Q
N
E
1
MARKETING
• Bid support
• Design and estimating
• Early client engagement
• Value engineering
2
PLANNING
• Procurement
• Timely mobilisation
• Flexibility
• Dynamic contract
scheduling
QUOTE
ORDER
3
EXECUTION
• Optimal utilisation
• Improved efficiency
• Delivery to programme
T
I
F
O
R
P
ON SITE
DELIVERY
Our customers:
• provision of innovative, cost-effective
geotechnical solutions to complex
problems on time and within budget;
• quality products and exceptional
service; and
• enhanced credentials as a recognised
leader in health and safety, which is
a priority for us and our customers.
Our shareholders:
• delivering profitable growth with
good cash conversion;
• progressive dividend policy;
• strong balance sheet with reinvestment
in the business to support our strategy
for growth; and
• operational flexibility leading to
high asset utilisation and return
on capital employed.
Our people:
• attracting and developing excellent
people to create a vibrant, diverse
and flexible workforce; and
• interesting and challenging careers
in a growth business that provides
the opportunity to develop and
reach their potential.
Attractive markets:
• able to operate in a diverse
range of UK-focused markets;
Strong financial profile:
• a fifth year of record turnover;
• profitability across a range
• housebuilding, road and rail
of contract sizes; and
infrastructure; and
• proprietary manufactured
precast foundation products.
• track record of converting
profit into cash.
Well-invested platform:
• c.£45m invested in facilities, rigs
and specialist equipment in the
last four years;
• in-house support functions; and
Clear strategy for growth:
• target market share gains;
• new products, services and
geographic locations; and
• accelerate growth with targeted
• highly skilled incentivised
bolt-on acquisitions.
workforce.
11
WHAT MAKES US DIFFERENT
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Strategic overview
Progressing our strategy,
now and into the future
3 COMPLEMENTARY
ACQUISITIONS
Bolt-on opportunities that can
access new services and products
• Businesses that can benefit from
being part of Van Elle.
• Accelerate overall growth strategy.
How we performed
• We have considered a few potential acquisition
targets during the year but ultimately they have
not met our expectations for enhancing
earnings and complementing what we do.
Future outlook
• We still have a pipeline of potential targets
but we do not simply want to buy turnover. As
the strategy stipulates, we want acquisitions to
provide bolt-on opportunities and accelerate
market share gains and an expanded offering
to the markets.
The Group’s declared corporate objective is to grow and develop
a sustainable business for the benefit of all our stakeholders.
As part of this strategy we intend to focus on increasing market share,
expanding our services and product offering and enhancing earnings
and accelerating our growth through complementary acquisitions:
STRATEGIC PRIORITIES
1 MARKET
SHARE GAINS
Leverage market position
across all four divisions
How we performed
• With the exception of Specialist Piling,
revenues increased year on year. Last year
Specialist Piling delivered the Group’s
largest single contract of £5.4m with this
year’s revenue 0.8% down on prior year.
Future outlook
• All four divisions are targeting further
market share gains, particularly in the
new housing and infrastructure sectors.
Increase existing fleet, focusing
on specialist rigs and high-growth
markets
How we performed
• The rig fleet has been increased to 123 rigs
during the year, expanding on the breadth
of techniques that can be provided.
Future outlook
• Recent rig acquisitions in General Piling are
targeting increased revenues from larger
diameter piling work on larger civils contracts.
• The Ground Engineering Services division
has also broadened its service proposition
into the rail and road markets, most notably
with a specialist road–rail vehicle that can
undertake site investigation work on-track.
• Our rig fleet investment is largely complete
and provides a strong platform for our
future growth.
Increase manufacturing
capacity to drive internal
growth and Smartfoot® sales
• Revenues from internally manufactured
precast products increased 40.5% in the
year, with total Ground Engineering Products
turnover growing 27.9% on prior year.
2 EXPAND SERVICE AND
PRODUCT OFFERING
Broaden ground engineering
range to include new
techniques and services
How we performed
• Expanded the use of our Elemex technique
into rail electrification piling work and
developed a screw pile for use in track-bed
stabilisation, directly with Network Rail.
Future outlook
• We continue to provide our customers
with industry-leading unique solutions.
Increase presence in
under-represented markets
How we performed
• Scotland has been a resounding success
after establishing an office and production
facility near Glasgow, in 2017.
Future outlook
• In February 2018 we opened an office in
London and have recruited three new Business
Development Managers to cover London/South
East, South West/Wales and the North East.
Continue to develop the precast
concrete product range into
new markets
How we performed
• During the year we have manufactured
bespoke concrete bases for use in rail,
providing foundations for gantries and signals.
Future outlook
• We will continue to manufacture for internal
use and pursue any opportunities to develop
products for external sales.
12
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Our strategy in action – post IPO
Focus on techniques
and innovation
STATE-OF-THE-ART RIGS
• Investment in new rigs to
increase service proposition
and productivity: large
diameter CFA/rotary rigs; RRV
cranes for lifting structures on
rail network; large driven rigs
for housebuilding
SR95
TRAINING CENTRE
P160
ELEMEX (EDEN BROWS)
• Specialist Elemex technique
delivered largest single
contract in 2017
IPO
OCTOBER 2016
SCOTLAND PRODUCTION FACILITY
KIRKBY PRODUCTION FACILITY
SR75
INNOVATIVE PILE SOLUTIONS
• Innovative in-house design to provide solution
to Network Rail for track-bed stabilisation
PRECAST PILES + RAIL BASES
• Self-sufficient for precast driven piles used
internally by general and specialist piling
SMARTFOOT®
INVESTMENT IN HGVS
• Production facility expansion to meet
market demand, increasing market share
RRV
• Increasing rig sizes and numbers has
seen a continuous investment in lorries
– Van Elle now owns a fleet of 28 HGVs
• Rail market penetration commenced
in 2013 with investment in road/rail
vehicles – Van Elle now owns 18
Focus on
growing markets
£
7
3
.
6
m
E
U
N
E
V
E
R
0.1%
5.3%
32.3%
28.5%
33.8%
£
8
4
.
2
m
0.1%
3.2%
26.9%
29.2%
40.6%
£
1
0
3
.
9
m
1.1%
2.1%
15.7%
31.1%
49.9%
3.4%
20.0%
0.7% £
9
4
.
1
m
30.7%
45.2%
2015
2016
2017
2018
Key
NEW HOUSING
INFRASTRUCTURE
COMMERCIAL & INDUSTRIAL
PUBLIC
AGRICULTURE/OTHER
13
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Key performance indicators
Delivering growth and
driving returns
The key performance indicators (“KPIs”) we utilise are a fundamental
instrument in measuring and ensuring performance financially.
These are cascaded and measured monthly from an operational level
and are reviewed annually against our strategic outlook.
REVENUE
(£m)
£103.9m +10.4%
REPORTED OPERATING PROFIT
(£m)
£9.7m +0%
UNDERLYING OPERATING PROFIT
(£m)
£11.1m -4.0%
2018
2017
2016
2015
103.9
94.1
84.2
73.6
2018
2017
2016
2015
9.7
9.7
11.1
2018
2017
2016
2015
7.4
11.1
11.6
11.1
7.4
UNDERLYING EARNINGS PER SHARE
OPERATING CASH CONVERSION
UNDERLYING RETURN ON CAPITAL
(“EPS”) (p)
10.6p -12.4%
2018
2017
2016
2015
10.6
12.1
12.1
7.8
(%)
2018
2017
2016
2015
85.9% -6.1%
EMPLOYED (“ROCE”) (%)
23.5% -23.2%
85.9
91.9
79.6
110.9
2018
2017
2016
2015
23.5
30.6
38.0
39.4
Description
Revenue and revenue growth track our
performance against our strategic aim
to grow the business.
Description
Reported operating profit is the basis for
calculating other reported KPIs and is
after all categories of exceptional costs.
Performance
Strong revenue growth of 10.4% in the
year delivered the highest turnover ever
for the Group. The compound annual
growth rate (“CAGR”) over the last three
years is 12.2% p.a., which reflects our
investment in both our facilities and
specialist equipment and techniques
for delivering targeted growth in
end markets.
Performance
Reported operating profit has remained
flat in 2018 at £9.7m. In particular, the
2017 reported profit was after IPO costs
of £1.8m and in 2018 is stated after the
Carillion bad debt write-off of £1.0m.
Description
Tracking our underlying profitability
ensures that the focus remains on
delivering profitable outcomes on
our contracts. It is a measure of pure
operating performance including
depreciation and amortisation charges
but excluding financing and tax.
Performance
Underlying operating profit is down
4.0% in the year; the underlying
operating margin is 10.7%, down on
last year’s 12.3%. This was primarily
due to two rail electrification contracts
delivered in H1 at lower than normal
gross margins, coupled with a loss-making
contract in Ground Stabilisation delivered
in H2. These three individual contracts
have been thoroughly investigated and,
although isolated issues, to ensure there
is no repeat, robust controls have been
introduced so that we identify and
understand all our risks starting in
the bid appraisal stage and applying
rigorous management and monitoring
contract performance throughout
the life of a contract.
14
Description
Description
Description
This KPI measures our after-tax earnings
By looking at cash generation at the
This measure indicates the rate
relative to the weighted average number
operational level the quality of our
of return per Pound invested in the
of shares in issue and provides a monitor
profits can be tracked. This measure
operating assets of the business.
on how we are increasing shareholder
takes cash generated from operations
Capital employed is taken to be net
value. Underlying EPS is stated before
as a percentage of EBITDA.
assets excluding net debt and earnings
is taken as underlying operating profit.
exceptional items and share-based
payment charges.
Performance
Performance
Performance
The underlying EPS of 10.6p is down
Healthy operating cash conversion
The ROCE of 23.5% represents a good
12% on the prior year’s 12.1p, reflecting
of 85.1% in the year gives comfort that
return on funds invested for the year.
the lower underlying profits after tax
working capital is well managed and that
It is, however, a reduction from earlier
delivered in the year.
operating profits convert into cash either
years, which reflects the significant
for reinvestment in the business or
investment incurred over the last three
distribution to shareholders. This was
years. During this growth phase of
after the exceptional bad debt charge
significant capital investment, the
relating to the liquidation of Carillion
ROCE can become diluted until assets
in January 2018.
are fully operational and contributing
for the whole 12 month period. This
investment programme is largely complete.
REPORTED EARNINGS PER SHARE
9.2p -6.1%
(p)
2018
2017
2016
2015
9.2
9.8
7.8
12.1
REPORTED RETURN ON CAPITAL
EMPLOYED (%)
20.5% -20.2%
2018
2017
2016
2015
20.5
25.7
38.0
39.4
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Driving growth and profitability through
our people, by utilising our technology to
service our diversified revenue streams.”
REVENUE
(£m)
2018
2017
2016
2015
REPORTED OPERATING PROFIT
UNDERLYING OPERATING PROFIT
(£m)
£103.9m +10.4%
£9.7m +0%
£11.1m -4.0%
103.9
94.1
84.2
73.6
2018
2017
2016
2015
7.4
7.4
11.1
11.6
11.1
(£m)
2018
2017
2016
2015
9.7
9.7
11.1
UNDERLYING EARNINGS PER SHARE
(“EPS”) (p)
10.6p -12.4%
OPERATING CASH CONVERSION
(%)
85.9% -6.1%
UNDERLYING RETURN ON CAPITAL
EMPLOYED (“ROCE”) (%)
23.5% -23.2%
2018
2017
2016
2015
10.6
12.1
12.1
2018
2017
2016
2015
7.8
85.9
91.9
79.6
110.9
2018
2017
2016
2015
23.5
30.6
38.0
39.4
Description
Description
Description
Revenue and revenue growth track our
Reported operating profit is the basis for
Tracking our underlying profitability
performance against our strategic aim
calculating other reported KPIs and is
ensures that the focus remains on
to grow the business.
after all categories of exceptional costs.
delivering profitable outcomes on
Performance
Performance
Performance
Strong revenue growth of 10.4% in the
Reported operating profit has remained
Underlying operating profit is down
year delivered the highest turnover ever
flat in 2018 at £9.7m. In particular, the
4.0% in the year; the underlying
for the Group. The compound annual
2017 reported profit was after IPO costs
operating margin is 10.7%, down on
growth rate (“CAGR”) over the last three
of £1.8m and in 2018 is stated after the
last year’s 12.3%. This was primarily
years is 12.2% p.a., which reflects our
Carillion bad debt write-off of £1.0m.
due to two rail electrification contracts
investment in both our facilities and
specialist equipment and techniques
for delivering targeted growth in
end markets.
our contracts. It is a measure of pure
operating performance including
depreciation and amortisation charges
but excluding financing and tax.
delivered in H1 at lower than normal
gross margins, coupled with a loss-making
contract in Ground Stabilisation delivered
in H2. These three individual contracts
have been thoroughly investigated and,
although isolated issues, to ensure there
is no repeat, robust controls have been
introduced so that we identify and
understand all our risks starting in
the bid appraisal stage and applying
rigorous management and monitoring
contract performance throughout
the life of a contract.
Description
This KPI measures our after-tax earnings
relative to the weighted average number
of shares in issue and provides a monitor
on how we are increasing shareholder
value. Underlying EPS is stated before
exceptional items and share-based
payment charges.
Performance
The underlying EPS of 10.6p is down
12% on the prior year’s 12.1p, reflecting
the lower underlying profits after tax
delivered in the year.
REPORTED EARNINGS PER SHARE
(p)
9.2p -6.1%
2018
2017
2016
2015
9.2
9.8
7.8
12.1
Description
By looking at cash generation at the
operational level the quality of our
profits can be tracked. This measure
takes cash generated from operations
as a percentage of EBITDA.
Description
This measure indicates the rate
of return per Pound invested in the
operating assets of the business.
Capital employed is taken to be net
assets excluding net debt and earnings
is taken as underlying operating profit.
Performance
Healthy operating cash conversion
of 85.1% in the year gives comfort that
working capital is well managed and that
operating profits convert into cash either
for reinvestment in the business or
distribution to shareholders. This was
after the exceptional bad debt charge
relating to the liquidation of Carillion
in January 2018.
Performance
The ROCE of 23.5% represents a good
return on funds invested for the year.
It is, however, a reduction from earlier
years, which reflects the significant
investment incurred over the last three
years. During this growth phase of
significant capital investment, the
ROCE can become diluted until assets
are fully operational and contributing
for the whole 12 month period. This
investment programme is largely complete.
REPORTED RETURN ON CAPITAL
EMPLOYED (%)
20.5% -20.2%
2018
2017
2016
2015
20.5
25.7
38.0
39.4
15
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Risk management and principal risks
Increasing shareholder value by
managing risks to deliver our
success and growth
INCREASE
NO CHANGE
DECREASE
Change in risk
Risk description
MARKET RISK
A RAPID DOWNTURN IN OUR MARKETS
Inability to maintain a sustainable level of
financial performance throughout the
construction industry market cycle, which
grows more than many other industries
during periods of economic expansion and
falls harder than many other industries when
the economy contracts.
Link to strategy
1 MARKET SHARE GAINS
2
3
EXPAND SERVICE & PRODUCT OFFERING
COMPLEMENTARY ACQUISITIONS
Potential impact
Mitigation
Link to
strategy
Failure to continue in operation
or to meet our liabilities.
Diversification of our markets, both in terms
of geography and market segment.
1
3
Failure of a key client resulting in
market volatility, eg. Carillion.
Having strong local businesses to address
geographic markets and techniques.
The Brexit negotiations could impact
public spending in infrastructure,
slowing and cancelling the award
of new programmes of work.
All revenues arise in the UK.
STRATEGIC RISKS
FAILURE TO PROCURE NEW CONTRACTS
A failure to continue to win and retain
contracts on satisfactory terms and
conditions in our existing and new target
markets if competition increases, customer
requirements change or demand reduces
due to general adverse economic conditions.
LOSING OUR MARKET SHARE
Inability to achieve sustainable growth,
whether through acquisition, new products,
new geographies or industry-specific solutions.
Failure to achieve targets for
revenue, profit and earnings.
Continually analysing our existing and target
markets to ensure we understand the
opportunities that they offer.
1
Structured bid review process in operation
throughout the Group with well-defined selectivity
criteria that are designed to ensure we take on
contracts only where we understand and can
manage the risks involved.
Failure to achieve targets for
revenue, profits and earnings.
Continually seeking to differentiate our
offering through service quality, value
for money and innovation.
2
1
3
A business development team focusing on our
customers’ requirements and understanding
our competitors.
Minimising the risk of acquisitions, through due
diligence and structured and carefully managed
integration plans.
Implementing annual efficiency and improvement
programmes to help us remain competitive.
NON-COMPLIANCE WITH OUR CODE OF BUSINESS CONDUCT
Not maintaining high standards of ethics
and compliance in conducting our business
or failing to meet local or regulatory
requirements.
Losing the trust of our customers,
suppliers and other stakeholders
with consequent adverse effects
on our ability to deliver against our
strategy and business objectives.
Substantial damage to our brand
and/or large financial penalties.
Having clear policies and procedures in respect
of ethics, integrity, regulatory requirements and
contract management.
1
2
Maintaining training programmes to ensure
our people fully understand these policies
and requirements.
Operating and encouraging the use of
a whistleblowing facility.
16
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Risk description
Potential impact
Mitigation
Link to
strategy
OPERATIONAL RISKS
PRODUCT AND/OR SOLUTION FAILURE
Failure of our product
and/or solution to achieve
the required standard.
Financial loss and consequent
damage to our brand reputation.
Continuing to enhance our technological and operational
capabilities through investment in our product teams, project
managers and engineering capabilities.
1
2
INEFFECTIVE MANAGEMENT OF OUR CONTRACTS
Failure to manage our contracts
to ensure that they are delivered
on time and to budget.
Failure to achieve the margins,
profits and cash flows we expect
from contracts.
We ensure we always undertake credit checks on potential customers.
1
2
We have a diversified customer base with no single customer
accounting for >10% of total turnover.
The £1m Carillion bad debt, although significant, was not
business critical.
Ensuring we understand all our risks through the bid appraisal
process and applying rigorous policies and processes to manage
and monitor contract performance.
Ensuring we have high-quality people delivering projects.
2
1
3
1
2
2
1
3
A FAILURE TO COMPLY WITH HEALTH AND SAFETY AND ENVIRONMENTAL LEGISLATION
Causing a fatality or serious
injury to an employee or member
of the public through a failure to
maintain high standards of safety
and quality.
Damage to employee morale leading
to an increase in employee turnover
rates, loss of customer, supplier and
partner confidence, and damage to
our brand reputation in an area that
we regard as a top priority.
A Board-led commitment to achieve zero accidents.
Visible management commitment with safety tours,
safety audits and safety action groups.
Implementing management systems that conform to
Occupational Health and Safety Assessment Systems
(ISO 9001, ISO 14001 and OHSAS 18001).
Extensive mandatory employee training programmes.
NOT HAVING THE RIGHT SKILLS TO DELIVER
Inability to attract and develop
excellent people to create a
high-quality, vibrant, diverse
and flexible workforce.
Failure to maintain satisfactory
performance in respect of our
current contracts and failure to
deliver our strategy and business
targets for growth.
FINANCIAL RISK
INABILITY TO FINANCE OUR BUSINESS
Losing access to the financing
facilities necessary to fund
the business.
Breach of banking covenants or
failure to continue in business
or to meet our liabilities.
Risk management framework
The Board is responsible for setting the Group’s risk appetite
and ensuring that appropriate risk management systems
are in place. The Board reviews the Group’s principal risks
throughout the year as part of its normal agenda, adopting
an integrated approach to risk management by regularly
discussing our principal risks. In addition, once a year
the Board formally assesses the Group’s principal risks,
taking the strength of the Group’s control systems and
its appetite for risk into account.
Continuing to develop and implement leadership, personal
development and employee engagement programmes that
encourage and support all our people to achieve their
full potential.
Procedure to monitor the effective management of cash and
debt, including weekly cash reports and regular cash forecasting.
How we identify risk
Our risk management process has been built to identify,
evaluate, analyse and mitigate significant risks to the
achievement of our strategy. Our risk identification
processes seek to identify risks from both a top-down
strategic perspective and a bottom-up local operating
company perspective.
The principal risks and uncertainties identified by
management and how they are being managed are
set out opposite. These risks are not intended to be
an extensive analysis of all risks that may arise in
the ordinary course of business or otherwise.
P74 See the principal financial risks disclosed in note 21
17
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Corporate social responsibility
Conducting business with
fairness, honesty & integrity
Corporate responsibility, awareness and mitigation of adverse impacts
on the environment, and positive engagement with our employees
and the local community have long been core values of Van Elle.
Approach
The Company is committed to conducting business with
fairness, honesty and integrity. The Board recognises its
responsibility for establishing high ethical standards of
behaviour and corporate governance, and the Group has
several established policies in place including, but not
limited to: anti-bribery and corruption; health and safety;
environmental protection; sustainable development;
quality assurance; equal opportunities; equality and
diversity; training and development; whistleblowing; and
modern slavery, supporting our approach to conducting
business in an open and transparent manner.
The Company expects its employees to conduct
themselves in a manner which reflects the highest
ethical standards, and comply with all applicable laws
and regulations. Employees are judged not only on the
results they achieve, but also on how they achieve them.
Furthermore, the Company has a zero-tolerance policy
towards any form of bribery or corruption and has training
and an appropriate procedure in place whereby any
concerns in relation to malpractice can be raised in
an appropriate forum.
It is our policy to ensure that the highest possible
standards are achieved and maintained throughout the
Company and that we strive for continual improvement.
We therefore operate an integrated business management
system in accordance with the requirements of ISO 9001,
ISO 14001 and OHSAS 18001.
Safety
At Van Elle the health, safety and well being of our staff
is paramount and every precaution is taken to protect
them and fellow contractors on site. As the largest
independent geotechnical engineering contractor in
the UK, it is our duty and priority to ensure the safety
of our employees; anyone we collaborate with; and
the general public at large. Whilst we work.
Our dedicated safety team undertakes regular
internal audits of our procedures to ensure they are
as comprehensive as possible, highlighting any areas
for improvement. As members of all the industry’s key
recognised certification and qualification schemes, our
systems are under constant review by external bodies
promoting best practice. We are Network Rail Plant
Operations Scheme (“POS”) providers and are active
members of the Federation of Piling Specialists (“FPS”)
and the British Drilling Association (“BDA”).
To us, health and safety is about striving for continuous
improvement in our performance.
This trend can falter and in 2016 we suffered several
lost time accidents over the second half of the year.
However, through identification of causes and briefings
to refocus the business, we have seen the incident rate
return to levels below the industry average (compared
to the Federation of Piling Specialists), as can be seen
in the graph below.
ANNUAL INCIDENT RATE PER 1000 EMPLOYEES – COMPARISON OF VAN ELLE TO THE FEDERATION OF PILING SPECIALISTS 2015–2017
18
16
14
12
10
8
6
4
2
S
E
E
Y
O
L
P
M
E
0
0
0
1
R
E
P
S
T
N
E
D
I
C
C
A
E
L
B
A
T
R
O
P
E
R
0
JAN 15
18
APR 15
JUL 15
OCT 15
JAN 16
APR 16
JUL 16
OCT 16
JAN 17
APR 17
JUL 17
OCT 17
JAN 18
FPS
VAN ELLE
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT
To us, health and safety is about
striving for continuous improvement
in our performance.”
We have launched a Van Elle App that is used for reporting
of accidents and incidents, near misses and also extends
to plant inspections and safety talks (toolbox talks).
Van Elle is an accredited CITB training provider, delivering
health and safety awareness, site supervisor safety training
schemes and site management safety training scheme
courses. We are also a CSCS platinum award holder.
Rolling out from April 2018 we have also introduced
a mental health awareness campaign.
People
Investing in our workforce
At the heart of Van Elle lies the belief that our people are
our greatest asset. We recognise that their behaviours
and choices are crucial to performance. Fundamental to
our approach is the knowledge, competence and skills
of our workforce gained through awareness and structured
training, and this is recognised externally where we hold
an Investors in People silver accreditation.
We invest heavily in our workforce, dedicating time and
resources so that they can develop career paths within
the Company.
Our commitment to learning and development is
continuous and it is our intention to maximise the
Apprenticeship Levy scheme in order to offer both
existing staff and new entrants to the business the
opportunity, skills and qualifications that they need in
order to allow the individuals to develop their careers
and future.
This year we intend to recruit a minimum of five higher
level apprentices, to be enrolled on a civil engineering
degree course at Derby University. For the individual
apprentices it will mean that they are in full time
employment, learning and gaining experience whilst
working towards their degree qualification.
For our site-based staff we will also be offering and
delivering Trailblazer Apprenticeships, along with
providing in house all of the health and safety training
and plant operator’s training and assessment in our own
training centre.
This way we will ensure that we continue to maintain
and control our high standard of training and provide
flexibility in succession planning.
We are also offering training to external candidates.
OUR NEW TRAINING CENTRE
Communication
We appreciate the mutual benefits of keeping employees
informed and take appropriate steps to ensure that they are
kept aware of matters of concern and factors that affect
the performance of the Company. We value the views
of our employees and consult with them when making
decisions which affect their interests.
We maintain communication channels with our staff
using a combination of regular weekly face-to-face
meetings, our intranet and website and newsletters,
together with a Works Committee comprising colleagues
from all levels of the organisation.
Recruitment and retention
An important part of our HR strategy is to attract
talented individuals who can demonstrate and live
by our values and behaviours whilst delivering business
results. This has been achieved by continuously improving
our recruitment process, including creating strong
partnerships with our prime recruitment agencies. We
have also put career structures in place and identified
successors for key roles, so that people can see how
they can develop within the Group.
19
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Corporate social responsibility continued
People continued
Diversity and equality
The Group maintains an equality and diversity policy,
selecting and promoting employees based on their
aptitudes and abilities. The Group is committed to
providing equal opportunities to all current and future
employees and values the difference that a diverse
workforce can contribute to the organisation.
The Group recognises its obligations towards employment
of disabled people and gives full and fair consideration
to suitable applicants, having regard to individuals’
aptitudes and abilities. The Company is committed to
ensuring that everyone is treated equally regardless of
disability or any other condition which cannot be shown
to be relevant to their performance. The Company is
committed to ensuring that any individual who becomes
disabled during their employment remains in their own
role where possible, or is employed in another suitable
position. Training, career development and promotion of
disabled employees will be, as far as possible, identical
to that of other employees.
New regulations came into force requiring any company
with 250 or more employees on 5 April 2017 to publish
specific details on gender pay and bonus gaps.
Gender pay gap reporting is not about equal pay although
our policy is to pay employees equally for the same or
equivalent work, regardless of their gender. The gender
pay gap represents the difference in the average
earnings between men and women in a company.
In general, females have been under-represented in the
traditionally, male-dominated construction and engineering
sector, primarily through fewer women choosing our sector
for a career.
At Van Elle our staff are our greatest asset – we are
a proud Investor in People and our policies address
equal opportunities and diversity.
It is in the interests of the company and its employees
to utilise the skills of the total workforce and any
appointments and promotions are based on suitability,
capability and qualifications.
Environment and sustainability
In a sector where the use of steel and concrete is
inevitable, Van Elle considers this subject very seriously
and reviews waste reduction and the use of recycled
products and alternative materials at every opportunity.
Our vision includes:
• the use of competitive local suppliers;
• working with our supply chain to propose the most
environmentally friendly materials for each project;
• working with our suppliers to develop new, more
sustainable materials with a higher recycled content,
producing less waste product and requiring less
water usage;
• reducing and avoiding the production of waste
when on site; and
• producing engineered, bespoke solutions in
house to address several industry requirements
including sustainability.
Having increased our manufacturing capabilities
over recent years we have this year purchased a
cage-welding machine which has enabled the company
to reduce welding fumes, vibration and CO2 emissions
as identified during our last ISO 14001 and 18001
certification audits.
We always engage with the communities local to projects
with which we are involved, welcoming feedback based
on our interaction with the community, the impact of our
services, our responsibility and actions taken.
Some ways in which we minimise the impact of our
services upon the environment include:
• the use of recycled steel tube, formerly used
in the oil industry, to form steel piles;
• the use of biodegradable oils in our rigs;
• the use of pulverised fuel ash (“PFA”), a waste product
from coal-fired power stations, in our grout products
to reduce non-sustainable product usage;
• recycling schemes within all offices and yards;
• an in-house design team allowing us to optimise our
solutions to minimise material content by reducing
the number, depth and steel content of all products.
We will often propose more sustainable,
value-engineered options as well as pricing the
client’s required solutions; and
• dedicated in-house research and development of new
products and techniques such as Smartfoot® precast
modular foundations.
20
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Supporting local communities and charities
Although it is a requirement of many tenders and
frameworks, Van Elle recognises the importance and
advantages in engaging with the communities in which
we work and we take every opportunity to do just that.
We have a wealth of skills and experience within the
business which are regularly utilised to provide a
long-lasting, positive legacy to the areas surrounding
the projects with which we are involved.
Not only do we support businesses across the UK in
developing their knowledge of modern and innovative
ground engineering solutions through our CPD programme,
but we regularly engage with universities, colleges and
schools to build awareness, interest and enthusiasm
around the construction, manufacturing and engineering
industries. As part of this process, one of our Directors sits
on the board of one of the UK’s largest specialist colleges.
High Speed 2 offers great potential for the entire
industry over the coming years and we were keen to
show our support, particularly in the education of young
people training to work on the project. We recently
provided rail-lifting services to the National High-Speed
Rail Colleges at Birmingham and Doncaster using our
new rail cranes. We are now one of their chosen
industry partners.
Every year we support a chosen charity with donations
made by employees direct from salary and matched by
the Company. Last year our chosen charity was NSPCC’s
Childline and this year our chosen charities for 2018
are “Epilepsy Action” and “Mind”, details of which are
shown opposite.
SUPPORTING CHARITIES AND LOCAL COMMUNITIES
2017 CHARITY SUPPORT
In 2017, Van Elle raised more than £22,000 for the
NSPCC’s Childline through a number of events held
in the charity’s honour. Above, former CEO,
Jon Fenton, can be seen handing over the
cheque to two of the charity’s representatives.
2018 CHOSEN CHARITY – EPILEPSY ACTION
Epilepsy affects the lives of a number of our
employees and their families so supporting this
charity was an obvious choice for us. Epilepsy
Action provides support, information and advice
for people with epilepsy across the UK.
2018 CHOSEN CHARITY – MIND
Mind supports people across the UK suffering
from a wide range of mental health problems;
a focus of both Van Elle, many of our clients
and the wider industry.
21
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Operational review
The largest fleet in the Group:
General Piling
WHAT WE DO
Van Elle delivers outstanding results for its customers
on civil, construction, building and infrastructure projects
anywhere throughout the UK.
In doing so, we offer design and construction solutions
as well as provide value-engineered, partnering and
construct-only services.
We take pride in having built quality foundations
for many of the country’s iconic schemes.
Once a project is completed, the foundations we have built
can neither be seen nor inspected, yet they are required to
perform throughout their design lives. This is a measure
of our clients’ faith in the reliable, quality assured work
we deliver. Our impressive range of state-of-the-art
piling rigs, tools and hammers is complemented by an
extensive fleet of ancillary equipment. This capacity
allows us to meet a range of foundation problems
with solutions tailored to each project’s unique
combination of loads and soil conditions.
22
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT OUR YEAR IN REVIEW
The General Piling division has the largest fleet within
the Group and offers a variety of ground engineering
solutions for open-site construction projects.
Revenue growth has been modest at 0.5% with strong
housebuilding and infrastructure revenues being
partially offset by reduced public and commercial
and industrial activity.
The division’s focus on rig utilisation and operational
execution of its contracts improved operating performance.
Management believes that there is an opportunity
to broaden the range of techniques and services it can
offer. By broadening the offering, the division will be
able to capture additional revenue from larger and
more complex construction projects and increase
market share.
DIVISION HIGHLIGHTS
REVENUE (£m)
£43.1m +0.5%
2018
2017
2016
REVENUE SHARE (%)
42% (46%)
OPERATING PROFIT (£m)
£5.7m +21.5%
2018
2017
2016
2018 RIG INCREASE
3
43.1
42.9
42.1
5.7
4.7
4.7
23
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Operational review continued
Solutions for constrained environments:
Specialist Piling
WHAT WE DO
Specialist piling delivers outstanding results for
its customers on civil, construction, building and
infrastructure projects anywhere throughout the UK.
With over 30 years of restricted access piling experience,
both in the UK and overseas, we have developed a
reputation for delivering quality-value engineered
solutions and offering a range of services and techniques
unrivalled within the industry.
Our ability to deliver technically challenging projects
safely, on programme and within budget has been
recognised many times throughout the years by the
industry. Most recently, we have been awarded the
2016 NCE100 “Technical Trailblazer” Award.
In 2015 we won two Offshore Excellence Awards for
“Best Global Piling and Ground Engineering Contractor”
and “Best in Class for Commitment to Excellence”,
were named “Contractor of the Year” in the Ground
Engineering Awards, and also took the title of “Specialist
Contractor of the Year” in the Construction News awards.
The impressive range of state-of-the-art rigs
is complemented by an extensive fleet of ancillary
equipment and some of the most experienced
operatives and management in their field.
This capacity and expertise enabled us to address
a range of stabilisation problems with solutions
tailored to each project’s unique characteristics.
24
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT OUR YEAR IN REVIEW
The Specialist Piling division provides a range of
piling and other geotechnical solutions in operationally
constrained environments such as inside existing buildings,
under bridges and in tunnels and basements, as in well as
on-track rail environments.
Revenue was relatively flat year on year, with the prior
year reflecting a strong performance in Restricted Access
from delivering Van Elle’s largest ever contract at Eden
Brows. The reduction in gross margin reflects dilution
from differing commercial parameters on two rail contracts
undertaken in H1. However, a strong second half by the
rail operating unit mitigated some of this dilution and
with a solid performance from Restricted Access
resulted in encouraging financial results for H2.
The Directors believe that the Group’s competitive
position within the restricted access piling market is
particularly strong due to the high technical barriers
to entry.
The Directors believe that the rail sector presents
a particularly significant growth opportunity for the
Group over the medium term. Revenues from the division’s
on-track services have grown from zero in 2013 to over
£15.5m in 2018 and the Directors believe that the
Group is well positioned to win additional work.
DIVISION HIGHLIGHTS
REVENUE (£m)
£29.9m -0.8%
2018
2017
2016
REVENUE SHARE (%)
29% (32%)
OPERATING PROFIT (£m)
£4.1m -23.9%
2018
2017
2016
2018 RIG INCREASE
4
29.9
30.1
25.8
4.1
5.4
5.9
25
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Operational review continued
Coverage over a broad range of markets:
Ground Engineering
Services
WHAT WE DO
The Ground Engineering Services division offers a range
of ground stabilisation and geotechnical services on
construction projects across a broad range of end
markets. Ground stabilisation services are frequently
required for large civil engineering projects, such as
motorway expansion and embankment cutting, as
well as new-build residential schemes. The division’s
Geotechnical Services operating unit provides a range of
technically complex, critical services including ground
investigation, pile testing and geothermal boreholes.
26
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Our extensive experience gained over many years of
working across the UK for the Coal Authority, private
companies, developers, individual landowners, the
Highways Agency, Network Rail and local authorities
gives clients confidence that they are employing a
reputable, professional specialist to undertake their
ground stabilisation requirements.
Our range of ground stabilisation products/services includes:
• Mine working investigation
• Soil nails
• Mine shaft treatment and capping
• Adit treatment and consolidation
• Compaction grouting
• Permeation grouting
• Sewer grouting
• Pressure grouting
• ODEX drilling techniques
• Water/air or air mist
drilling techniques
• Ground anchors
• Strand
• Solid bar
• DCP
• Hollow bar
• Self drilling
• Solid bar
• Bulk infill
• Bulk/silos
• Underground tanks
• Drilling and grouting
• Coal workings
• Shale workings
• Salt mine workings
• Pier and harbour
remediation works
OUR YEAR IN REVIEW
Revenues have increased by 64.8% but gross margin
has fallen to 25.7% (2017: 37.7%), due to contract
losses experienced in the Ground Stabilisation
operating unit during the year.
The opportunities in Ground Stabilisation will be
reviewed to ensure that a sustainable, profitable
business can be achieved in future years.
The division has invested to establish a new dedicated
Scottish office, which commenced operations in
January 2017.
Given the large addressable market for geotechnical and
ground stabilisation services, the Directors believe that
there is scope to increase the division’s market share by
capitalising on the Group’s established brand and reputation.
The Directors believe that the Group’s strong relationships
with customers in the infrastructure and civil engineering
sectors position the division to bid for additional work on
projects such as the smart motorway initiative.
In addition, the division can leverage the Group’s strong
position in the rail market by providing its range of
geotechnical services on-track. There is an opportunity
to provide site investigation services to rail customers
and the division has commissioned a bespoke Unimog
mounted RRV rig capable of delivering this service.
DIVISION HIGHLIGHTS
REVENUE (£m)
£17.5m +64.8%
2018
2017
2016
17.5
10.6
10.2
REVENUE SHARE (%)
17% (11%)
OPERATING PROFIT (£m)
£0.3m -60.4%
2018
2017
2016
0.3
0.8
0.5
2018 RIG INCREASE
5
27
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Operational review continued
Specialist concrete products:
Ground Engineering
Products
28
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT WHAT WE DO
The division provides a modular precast beam
foundation system (Smartfoot®) to the housebuilding
market as well as manufacturing precast piles and
products for internal use by other divisions.
What is Smartfoot®?
The installation of a series of bespoke, precast modular
concrete beams, which are post-tensioned on site to create
a rigid, homogenous foundation for a variety of structures.
The benefits of Smartfoot®
• Package includes the full design, manufacture and installation
• Unlike competitors’ systems, every beam is designed
bespoke for that location, on that plot and on that site
• Manufactured under strict quality controlled conditions
• Cost effective – value driven
• Rapid on-site construction (up to 600lm per gang, per day)
• Design to installation on site can take as little as seven days
• Once tensioned, it acts as a single unit
• Minimal site preparation
• Can be installed with or without piles
• Sustainable and environmentally friendly
• Less material
• Significantly fewer site deliveries
• Excavations and offsite landfill taxes significantly reduced
• Strong, durable and versatile
• “Just-in-time” delivery – no on-site storage issues
• Can be destressed and retensioned in new locations
for temporary builds
• Non-weather dependency – completely dry installation
• Ideally suited to modular structures
OUR YEAR IN REVIEW
The Ground Engineering Products division designs,
manufactures and installs modular foundation systems
and other specialist precast concrete products. In addition,
the division manufactures precast concrete piles for
internal use.
Revenues are up 27.9%, driven by strong demand for
Smartfoot® products and precast piles used internally
by the General and Specialist Piling divisions. The
gross margin has fallen year on year by 1%, reflecting
the sales mix between beams and piles which are
manufactured at different gross margins due to material
content. Operating profit has increased by £0.2m to £1.0m.
The Directors believe that long-term structural shortages
in UK housing provide a clear opportunity to continue
to grow Smartfoot® market share.
DIVISION HIGHLIGHTS
REVENUE (£m)
£13.4m +27.9%
2018
2017
2016
13.4
10.4
6.1
REVENUE SHARE (%)
13% (11%)
OPERATING PROFIT (£m)
£1.0m +36.5%
2018
2017
2016
0.8
OPERATING PROFIT WAS £0 (£NIL) IN 2016
1.0
2018 INCREASE NUMBER OF GANGS
2
29
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Financial review
Delivering on
our strategy
— Paul Pearson
Chief Financial Officer
HIGHLIGHTS
– Strong revenue growth of 10.4% to £103.9m
– Underlying operating profit of £11.1m, 10.7% return
– Reported operating profit of £9.7m, 9.3% return
– Excellent operating cash conversion at 85%
– Strong balance sheet with low levels of net debt
and gearing
– Year-end cash balance stands at £10.9m
Revenue
The Group continued its strong revenue growth during
the year. Revenue for the year ended 30 April 2018 was
£103.9m (2017: £94.1m), which represented an
increase of 10.4%.
H1
H2
2018
£’000
2017
£’000
Change
%
52,642 43,126
51,230 50,967
22.1
0.5
2018
%
50.7
49.3
2017
%
45.8
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. Last year
the seasonal weighting was impacted by a strong Q3
that saw delivery of the Eden Brows contract for £5.4m,
alongside an active rail sector.
30
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:
Housebuilding
Infrastructure
Commercial
and industrial
Public sector
Other
2018
£’000
2017
£’000
Change
%
51,884 42,504
32,343 28,906
22.1
11.9
16,357 18,814
3,171
698
2,149
1,139
(13.1)
(32.2)
63.2
2018
%
49.9
31.1
15.7
2.1
1.1
2017
%
45.2
30.7
20.0
3.4
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.
The mix of revenue by our divisions is shown below:
2018
£’000
2017
£’000
Change
%
2018
%
41.5
28.8
2017
%
45.6
32.0
0.5
(0.8)
43,124 42,905
General Piling
Specialist Piling 29,887 30,126
Ground
Engineering
Services
Ground
Engineering
Products
17,502 10,621
13,359 10,441
64.8
16.8
11.3
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.
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT REVENUE (£’000)
FY18
FY17
0
0
0
0
,
0
1
0
0
0
,
0
2
0
0
0
,
0
3
0
0
0
,
0
4
0
0
0
,
0
5
0
0
0
,
0
6
0
0
0
,
0
7
0
0
0
,
0
8
0
0
0
,
0
9
0
0
0
,
0
0
1
0
0
0
,
0
1
1
GENERAL PILING
SPECIALIST PILING
GROUND ENGINEERING SERVICES
GROUND ENGINEERING PRODUCTS
5.693
4.685
4.073
5.355
OPERATING PROFIT (%)
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
0.306
0.772
1.025
0.751
GENERAL PILING
SPECIALIST PILING
GROUND ENGINEERING SERVICES
GROUND ENGINEERING PRODUCTS
Gross profit
The gross margin of the Group has reduced to 33.1%
(2017: 35.5%), reflecting lost productive time and
contract delays resulting from the severe weather during
January, February and March, together with a loss-making
contract in the Ground Engineering Services division.
Operating profit
The revenue performance has translated into operating
profit for the year ended 30 April 2018 of £9.7m
(2017: £9.7m).
Operating profit
2018
£’000
2017
£’000
Change
%
9,710
9,705
—
Underlying operating margin
Operating margin
10.7% 12.3%
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, give 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.
Our underlying operating margin has decreased due to
the severe weather in Q1 of 2018 and the loss-making
contract in Ground Engineering Services.
31
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Financial review continued
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 7 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). Reported earnings per
share was 9.2p (2017: 9.8p). 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
7,437
Net working capital
5,337
(5,905) (1,458)
Net debt
(1,992) (1,998)
Taxation and provisions
Net assets
41,366 36,321
The Group has increased net assets by £4.8m to £41.4m
(2017: £36.3m) during the year.
The Group continued to invest in specialist rigs to drive
growth in its chosen markets, as well as continuing to
invest in its 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 acquisition of rigs utilised a combination of both
cash and finance leases. During the year, the net
position for finance leases increased by £2.7m.
The ROCE has decreased in the period to 23.5% at
30 April 2018 (2017: 30.6%), reflecting the additional
capital expenditure investment during the year.
32
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT Analysis of net debt
Bank loans
Other loans
Finance leases
Total borrowings
Cash and cash equivalents
Net debt
2018
£’000
2017
£’000
(1,125) (1,275)
(205)
(15,551)(12,836)
(109)
(16,785)(14,316)
10,880 12,858
(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
ROCE has reduced year on year from 30.6% to 23.5%,
diluted until the £13.2m of this year’s capital investment
contributes fully for a whole 12 month period. Capital
expenditure over the short term is forecast to reduce
significantly as our investment programme is nearing
completion, which should bring an improvement in
ROCE in due course.
Cash flow summary
Operating cash flows before
working capital
Working capital movements
Cash generated from operations
Net interest paid
Income tax paid
Net cash generated from
operating activities
Investing activities
Financing activities
Net increase in cash and
cash equivalents
2018
£’000
2017
£’000
15,417 14,380
(2,173) (1,251)
13,244 13,129
(422)
(1,768) (2,281)
(536)
10,940 10,426
(4,732) (5,495)
(8,186) 4,326
(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
33
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018STRATEGIC REPORT CORPORATE GOVERNANCE
Board of Directors and Executive Committee
CHAIRMAN’S INTRODUCTION TO GOVERNANCE
BOARD OF DIRECTORS
The Board is committed to
building the future success
of the Group from a strong
governance framework.”
Dear Shareholder,
The Board recognises our responsibility for good
governance which is fundamental to effectively
managing the business and delivering to you,
long‑term shareholder value.
The Board is committed to building the future success of
the Group from a strong governance framework operated
throughout the Group, recognising the importance of
leading by example to guide our people’s behaviour
and, by doing so, ensuring we demonstrate and deliver
the right values across the Group.
The corporate governance statement on page 36 sets
out the Board’s approach to delivering this strong framework
and sets out the governance structure, including the roles
and responsibilities of the three Non‑Executive Directors
and details of the three Committees, Audit, Nomination
and Remuneration, all of which assist the Board in
performing its governance function efficiently and correctly.
Shareholders will be aware that we strengthened the
composition of the Board during the year with the addition
of David Hurcomb as a new Non‑Executive Director in
November 2017.
Also, the Chief Executive Officer role has been filled
following the resignation of Jon Fenton who left the
business in May 2018. Mark Cutler is due to start
in mid‑August.
Having implemented these changes during the year, the
focus of the Board will be directed to continuing the growth
and efficient operational performance of the Group, thus
ensuring the delivery of long‑term shareholder value.
Adrian Barden
Non-Executive Chairman
25 July 2018
Chief Executive Officer
Position to be filled by October 2018
Jon Fenton resigned as CEO on 18 May 2018. His replacement
will join the Board no later than October 2018.
34
Adrian Barden
Non-Executive Chairman
Mr Barden has worked in the
construction materials industry for
over 40 years across Europe, and was
previously chairman of the Construction
Products Association and chief business
development officer of Wolseley plc,
as well as a board member of Sanitec
Corporation Sweden and Volution
Group PLC. Mr Barden is currently
non‑executive Chairman of Quinn
Building Products Ltd Ireland. Mr Barden
is Chair of the Nomination Committee
and a member of the Remuneration
and Audit Committees.
EXECUTIVE COMMITTEE
Michael Mason
Group Director
Mr Mason joined the Company in
1995, starting as a grouting operative.
He became the Group safety officer
in 1997 and was promoted to Group
Director in charge of health and safety,
personnel, quality and training in 2002.
Mr Mason is a qualified chartered
safety professional.
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Paul Pearson
Chief Financial Officer
Mr Pearson is an FCCA qualified
accountant with over 30 years’
experience within finance. Mr Pearson
joined the Group in 2013, having
previously held senior finance roles
with Yorkshire Electricity Group plc
and May Gurney Limited. Since 2013
Mr Pearson has overseen the financing
of capital expenditure of £45m in
the last four years. He is ultimately
responsible for leading the financial
management of the Group’s activities.
Robin Williams
Senior Independent Director
Mr Williams is an engineering graduate
and qualified chartered accountant
with over 30 years’ experience
in listed companies, initially as an
adviser and then as a senior executive
in two FTSE 250 companies, including
Hepworth plc, the building materials
business. Mr Williams is chairman
of FTSE‑listed Xaar plc and other
companies on AIM. Mr Williams is
Chair of the Audit Committee and
a member of the Remuneration
and Nomination Committees.
David Hurcomb
Independent Non-Executive Director
Mr Hurcomb, aged 53, is the chief executive
of NG Bailey Group Ltd and has previously
enjoyed a successful career across the
UK’s construction sector, holding executive
positions with companies including
Carillion Plc, Balfour Beatty Plc and
Mansell Plc. Mr Hurcomb is Chair of the
Remuneration Committee and a member
of the Audit and Nomination Committees.
Ian Jones
Operations Director
Mr Jones joined the Company in 1987,
starting as a piling operative. He has
held several roles during his 30 years
of service with the Company and is now
Operations Director with responsibility
for ensuring the effective and efficient
delivery of resources and compliance
with internal standards and processes.
David Warner
Construction Director
Mr Warner is a qualified chartered civil
engineer with extensive experience
gained in the construction sector.
He joined the Company in 2001 as a
contracts manager before becoming
divisional Director for the restricted
access piling team. Mr Warner is now the
Construction Director with responsibility
for the oversight of large projects and
key customer and primary contractor
relationships. Prior to joining Van Elle,
he held various project engineering and
management roles in the engineering
sector worldwide.
35
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Corporate governance statement
The Group’s structure has clear
lines of responsibility
— Paul Pearson
Acting Company Secretary
Introduction
Under AIM rules, the Group is not required
to adopt the full Corporate Governance Code
2016 so, by September 2018, the Board will
be adopting the Quoted Companies Alliance
(“QCA”) Corporate Governance Code
complemented by applying any additional
aspects of corporate governance considered
appropriate for a company of its size and nature.
Board composition and operation
The Board comprises two Executive and three
Non‑Executive Directors, of which one is Chairman.
The names of the Directors together with their roles
and biographical details are set out on pages 34 and 35.
The roles of Chairman and Chief Executive are separated,
clearly understood and have been agreed by the Board.
The Chairman is responsible for the management of
the Board and the Chief Executive is responsible for
the operating performance of the Group.
BOARD COMPOSITION
1
CHAIRMAN
EXECUTIVE DIRECTORS20+
2
2 NON-EXECUTIVE DIRECTORS
A formal schedule of matters requiring Group Board
approval is maintained and regularly reviewed, covering
such areas as strategy, approval of budgets, financial
results, Board appointments and dividend policy. The
Board met nine times during the year. The meetings are
conducted to a set agenda with comprehensive briefing
papers sent to all Directors prior to each scheduled
Board meeting. Directors are able, if necessary, to take
independent professional advice in the furtherance
of their duties at the Company’s expense.
The Board intends to regularly conduct an appraisal
of its own performance and that of each Director
consisting of individual assessments using prescribed
questionnaires to be completed by all Directors.
The results will be reviewed, and individual feedback
given, by an independent Non‑Executive Director in
respect of assessments of each of the other Directors
and of the Board.
Audit Committee
The Audit Committee comprises all Non‑Executive
Directors and is chaired by Robin Williams. The Audit
Committee has primary responsibility for monitoring the
quality of internal controls, ensuring that the financial
performance of the Group is properly measured and
reported and reviewing reports from the Group’s auditor.
Board meetings
Audit Committee
Nomination Committee
Remuneration Committee
No. of meetings
9
6
2
2
36
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE40
+
40
+
M
The Audit Committee met on six occasions during the
year with the Chair also meeting with the auditor on two
occasions without a company representative present.
The operations of the Audit Committee are set out in the
separate Audit Committee report on pages 38 to 40.
Nomination Committee
The Nomination Committee comprises all three
Non‑Executive Directors and is chaired by Adrian Barden.
The purpose of the Committee is to establish a formal,
rigorous and transparent procedure for the appointment
of new Directors to the Board. The Nomination Committee
met on two occasions during the year and instigated the
search for the new CEO following Jon Fenton’s resignation.
The operations of the Nomination Committee are set out
in the separate Nomination Committee report on page 41.
Remuneration Committee
The Remuneration Committee comprises all
Non‑Executive Directors and is chaired by David Hurcomb.
The Remuneration Committee is responsible for reviewing
the performance of Executive Directors and determining
their terms and conditions of service, including their
remuneration and the grant of options. The Remuneration
Committee met on two occasions during the year.
The Remuneration Committee report is set out on
pages 42 and 43.
Directors
Each of the Directors is subject to election by the
shareholders at the first annual general meeting
after their appointment. Thereafter, all Directors are
subject to retirement by rotation in accordance with
the Articles of Association. The service contracts of
Executive Directors require six months’ notice.
The Non‑Executive Directors have received appointment
letters setting out their terms of appointment.
All Non‑Executive Directors are appointed for an initial
period of three years, continuing thereafter subject
to not less than three months’ notice.
The appointment of new Non‑Executive Directors
to the Board is considered by the whole Board.
Internal controls
The Board has overall responsibility for ensuring that
the Group maintains a system of internal control, to
provide it with reasonable assurance regarding the
reliability of financial information that is used within
the business, and for external publication and the
safeguarding of assets. There are inherent limitations
in any system of internal control and accordingly
even the most cost‑effective system can provide
only reasonable, and not absolute, assurance
against material misstatement or loss.
The Group’s organisation structure has clear lines
of responsibility with operational and financial
responsibility for operating segments delegated
to operational directors.
The Group’s risk management programme, which
assesses key risks and the required internal controls
that are delegated to Directors and managers within
the Group, is reviewed regularly to ensure that it
continues to meet the Board’s requirements.
Shareholder relationships
The Chairman and Non‑Executive Directors will always
make themselves available to meet with shareholders.
Each AGM is an opportunity for this. Normal relationships
with shareholders are maintained by the Executive
Directors, who brief the Board on shareholder issues
and relate the views of the Group’s advisers to the
Board. The Board believes that the disclosures set out
on pages 4 to 33 of the annual report provide the
information necessary for shareholders to assess the
Company’s performance, business model and strategy.
Going concern basis
The Group’s business activities, together with the
key factors likely to affect its future development,
performance and position, are set out in the Group
financial review. The financial position of the Group,
its cash flows, liquidity position and borrowing facilities
are also described in the Group financial review. In addition,
note 21 of the consolidated financial statements
includes the Group’s objectives, policies and processes
for managing its capital, financial risk and management
objectives. This also details financial instruments and
exposure to price, interest rate, credit and liquidity risk.
Accordingly, the Directors have a reasonable expectation
that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable
future based on the following factors:
• the Group has prepared financial projections to
30 April 2021 which forecast positive earnings
and cash generation;
• positive cash balance at 30 April 2018 and
undrawn overdraft facilities of £3.0m;
• low levels of gearing and net debt (£5.9m at
30 April 2018); and
• high levels of interest cover (18 times at 30 April 2018).
Based on the above, the Directors continue to adopt
the going concern basis of accounting in preparing the
annual financial statements.
Forward-looking statements
The annual report and accounts includes certain statements
that are forward‑looking statements. These statements
appear in several places throughout the strategic report
and include statements regarding the Group’s intentions,
beliefs or current expectations and those of its officers,
Directors and employees concerning, amongst other
things, the results of operations, financial condition,
liquidity, prospects, growth and strategies of the Group.
By their nature, these statements involve uncertainty
since future events and circumstances can cause
results and developments to differ materially from
those anticipated.
Approval
The Board approved the corporate governance report
on 25 July 2018.
By order of the Board
Paul Pearson
Acting Company Secretary
25 July 2018
37
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Audit Committee report
— Robin Williams
Chairman of the Audit Committee
Dear Shareholder,
I am pleased to present the report on the
activities of the Audit Committee for the
year and to be able to confirm on behalf
of the Board that the annual report and
accounts taken as a whole is fair,
balanced and understandable.
38
Roles and responsibilities
The primary function of the Committee is to assist
the Board in fulfilling its responsibilities regarding the
integrity of financial reporting, audit, risk management
and internal controls. This comprises:
• monitoring and reviewing the Group’s accounting
policies, practices and significant accounting
judgements; and
• reviewing the annual and interim financial statements
and any public financial announcements and advising
the Board on whether the annual report and accounts
is fair, balanced and understandable.
In relation to the external audit:
• approving the appointment and recommending the
reappointment of the external auditor and its terms
of engagement and fees;
• considering the scope of work to be undertaken
by the external auditor and reviewing the results
of that work;
• reviewing and monitoring the independence of
the external auditor and approving its provision
of non‑audit services;
• monitoring and reviewing the effectiveness of the
external auditor;
• overseeing the Group’s procedures for its employees
to raise concerns through its whistleblowing policy;
• monitoring and reviewing the adequacy and
effectiveness of the risk management systems
and processes; and
• assessing and advising the Board on the internal
financial, operational and compliance controls.
Membership and attendance
The Code recommends that all members of an audit
committee be non‑executive directors, independent in
character and judgement and free from any relationship
or circumstances which may, could or would be likely to,
or appear to, affect their judgement and that one such
member has recent and relevant financial experience.
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Accordingly, the Committee comprises all three
Non‑Executive Directors, with the Chairman having
recent and relevant financial and accounting experience.
Regular Audit Committee meetings are also normally
attended by the Chief Executive Officer, the Chief Financial
Officer, the external auditor and the Company Secretary,
who acts as secretary to the Committee. Other members
of management are invited to attend depending on
the matters under discussion. The Committee meets
regularly with the external auditor with no members
of management present. The Committee has met six times
during the year with all Non‑Executive members having
been present.
Activities during the year
The following matters were considered at the
Committee meetings held during the year:
Financial statements and reports:
• reviewed the preliminary results announcements,
annual report and accounts, interim results
announcement, trading update and received reports
from the external auditor; and in 2018 the impact
of the liquidation of Carillion was reviewed and
quantified in respect of the bad debt charge
for reporting and disclosure requirements;
• reviewed the effectiveness of the Group’s internal
controls and disclosures made in the annual report
and accounts;
• reviewed management representation letters,
going concern reviews and significant areas of
accounting estimates and judgements (including
exceptional items, intangible assets and share‑based
payments); and
• reported to the Board on the appropriateness
of accounting policies and practices.
Risk management:
• considered the Group risk register, which identified,
evaluated and set out mitigation of risks, and
reviewed the principal risks and uncertainties
disclosed in the annual report and accounts.
External audit and non-audit work:
• reviewed the relationship with the external
auditor including its independence, objectivity
and effectiveness and, based on that review,
recommended to the Board its reappointment
at the forthcoming Annual General Meeting;
• reviewed, considered and agreed the scope and
methodology of the audit work to be undertaken
by the external auditor;
• agreed the terms of engagement and fees to be
paid to the external auditor; and
• reviewed and approved the Group policy on non‑audit
services and reviewed any non‑audit fees.
Compliance:
• met with the external auditor without executive
management being present; and
• reviewed the Committee terms of reference and
confirmed its intention to evaluate its performance.
External audit
The Audit Committee also approves the appointment
and remuneration of the Group’s external auditor
and satisfies itself that it maintains its independence
regardless of any non‑audit work performed by it.
The Group adopts the following policy governing the
performance of non‑audit work by the auditor. The
auditor is permitted to provide non‑audit services
which are not, and are not perceived to be, in conflict
with auditor independence, providing it has the skill,
competence and integrity to carry out the work and it
is the most appropriate adviser to undertake such work
in the best interests of the Group. All assignments are
monitored by the Committee. Details of services
provided by, and fees payable to, the auditor are shown
in note 8 of the consolidated financial statements.
Whilst the Audit Committee has not adopted a formal
policy in respect of rotation of the external auditor, one
of its principal duties is to make recommendations to
the Board in relation to the appointment of the external
auditor. Various factors are considered by the Committee
in this respect including the quality of the reports
provided to the Committee, the level of service provided
and the level of understanding of the Group’s business.
BDO LLP has been the Company’s external auditor
for six years. The Audit Committee considers that the
relationship with the auditor is working well and remains
satisfied with its effectiveness and independence.
Accordingly, it has not considered it necessary to date
to require the firm to re‑tender for the audit work. The
auditor is required to rotate the audit partner responsible
for the Group and subsidiary audits every five years.
The current audit partner is in his second year of his
term as audit partner.
Internal audit
The Group does not have a formal internal audit
function but intends to perform targeted reviews
and visits to operations by the head office team
and occasionally professional advisers. The results of
these reviews will be communicated back to the Audit
Committee. This approach is considered appropriate
and proportionate given the size of the business and
the extensive work performed by the external auditor;
however, the need to establish a separate independent
internal audit function is kept under constant review.
Internal controls and risk management
The Board is responsible for the effectiveness of the
Group’s system of internal control, which has been
designed and implemented to meet the requirements
of the Group and the risks to which it is exposed.
The Group has a robust risk management process that
follows a sequence of risk identification, assessment of
probability and impact, and assigns an owner to manage
mitigation activities. Throughout the year, the Group risk
register and the methodology applied was the subject
of review by senior management and updated to reflect
new and developing areas which might impact business
strategy. The Committee reviews the Group risk register
each year to assess the actions being taken by senior
management to monitor and mitigate the risks. The
Group’s principal risks and uncertainties are described
on pages 16 and 17.
39
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Audit Committee report continued
Internal controls and risk management continued
The following key elements comprise the internal
control environment which has been designed to
identify, evaluate and manage, rather than eliminate,
the risks faced by the Group in seeking to achieve its
business objectives and ensure accurate and timely
reporting of financial data for the Company and
the Group:
• an appropriate organisational structure with clear
lines of responsibility;
• an experienced and qualified finance function, which
regularly assesses the risks facing the Group;
• a comprehensive annual strategic and business
planning process;
• systems of control procedures and delegated
authorities, which operate within defined guidelines,
and approval limits for capital and operating
expenditure and other key business transactions
and decisions;
• a robust financial control, budgeting and rolling forecast
system, which includes regular monitoring, variance
analysis and key performance indicator reviews;
• procedures by which the consolidated financial
statements are prepared, which are monitored
and maintained using internal control frameworks
addressing key financial reporting risks arising from
changes in the business or accounting standards; and
• established policies and procedures setting out
expected standards of integrity and ethical standards
which reinforce the need for all employees to adhere
to all legal and regulatory requirements.
Going concern
Financial projections covering a period of not less than
two years are prepared to support the review of going
concern. Sensitivities are calculated to ensure that
headroom exists in both financial resources and
covenants, both of which are sufficient.
Significant accounting matters
The Audit Committee assesses whether suitable
accounting policies have been adopted and whether
management has made appropriate estimates and
judgements. The Committee reviews accounting papers
prepared by management which provides details on the
main financial reporting judgements. The Committee
also reviews reports by the external auditor on the interim
and full year results which highlight any issues arising
from the work undertaken. The specific areas of audit
and accounting risk reviewed by the Committee were:
• Revenue recognition – the revenue recognised
in the accounts requires the use of estimates and
judgements when assessing the percentage of work
completed at the balance sheet date on contracts,
the costs of the work required to complete the
contract and the outcomes of claims and variations
raised against the group by customers or third parties
(see Note 4 on page 66). The Committee has reviewed
the estimates and judgements applied by management
and is satisfied with management’s conclusions.
• The carrying value of trade receivables (including
construction work in progress) – the Group holds
material trade receivable balances, and the
calculations of provisions for impairment are
estimates of future events and therefore uncertain.
The Committee has reviewed the current year
provisions against trade receivables, including an
assessment of the adequacy of the prior year
provisions, and is satisfied with management’s
conclusions that the provisioning levels are appropriate.
• Presentation of financial statements – the Committee
has considered the presentation of the Group
financial statements, and the presentation of
exceptional items, the Carillion bad debt write‑off and
the items included within such categories. The
Committee has discussed these items with
management and agreed that the presentation is
consistent with the Group’s accounting policy and
provides more meaningful information to
shareholders about the underlying performance of
the Group.
I look forward to meeting with shareholders at the
Annual General Meeting in September to answer any
questions on the work of the Committee.
Robin Williams
Chairman of the Audit Committee
25 July 2018
40
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Nomination Committee report
— Adrian Barden
Chairman of the Nomination Committee
Dear Shareholder,
As Chairman of the Nomination Committee, I present
our report detailing the role and responsibilities of
the Committee and its activities during the year.
Roles and responsibilities
The key responsibilities of the Committee are:
• assessing whether the size, structure and composition
of the Board (including its skills, knowledge,
experience, independence and diversity, including
gender diversity) continue to meet the Group’s
business and strategic needs;
• examining succession planning for Directors and
other senior executives and for the key roles of
Chairman of the Board and Chief Executive Officer; and
• identifying and nominating, for approval by the Board,
candidates to fill Board vacancies as and when they arise,
together with leading the process for such appointments.
Membership and attendance
The Code recommends that the members of a
nomination committee should be independent
non‑executive directors. As the Committee comprises
Robin Williams, David Hurcomb and myself, the
Company complies with this Code recommendation.
By invitation, the meetings of the Committee may be
attended by the Chief Executive Officer and the Chief
Financial Officer. The Chairman of the Board normally
chairs the Committee except where it is dealing with his
own reappointment or replacement. The Company
Secretary acts as the Secretary to the Committee.
The Committee met twice during the year.
Activities during the year
The following matters were considered at the
Committee meetings held during the year:
• evaluated the balance of skills, experience,
independence, diversity and knowledge on the Board;
• completed a process to appoint David Hurcomb
as a Non Executive Director;
• completed a process for the replacement of
John Fenton as CEO;
• reviewed succession planning for the Executive Directors
and the senior management team;
• reviewed and approved the recommendations to be
made to shareholders for the election of Directors
at the Annual General Meeting; and
• reviewed the Committee’s report in the annual report
and accounts and recommended approval to the Board.
Election of Directors
On the recommendation of the Committee and in line
with the Company’s Articles of Association all four Directors
will stand for re‑election at the Annual General Meeting.
The biographical details of the Directors can be found
on pages 34 and 35. The Committee considers that the
performance of each of the Directors standing for election
at the Annual General Meeting continues to be effective
and each demonstrates commitment to their role.
Board changes
On 1 November 2017, David Hurcomb was appointed
as a Independent Non‑Executive Director to the Board,
taking on the role of Remuneration Committee Chair, and
membership of the Audit and Nomination Comittees.
Also, on 22 November 2017, Jon Fenton, Chief Executive
Officer announced that he would be stepping down from
his role, which he left on 18 May 2018. The Nomination
Committee conducted a comprehensive and objective
search process to replace Jon and Mark Cutler has
been appointed and will join the Board mid‑August 2018.
I look forward to meeting with shareholders at the
Annual General Meeting in September to answer
any questions on the work of the Committee.
Adrian Barden
Chairman of the Nomination Committee
25 July 2018
41
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Remuneration Committee report
— David Hurcomb
Chairman of the Remuneration Committee
Dear Shareholder,
On behalf of the Remuneration Committee,
I am pleased to present the Remuneration
Committee report for the year ended
30 April 2018.
42
Roles and responsibilities
The role of the Committee is to recommend to the Board
a strategy and framework for remuneration for Executive
Directors and the senior management team to attract
and retain leaders who are focused and incentivised
to deliver the Company’s strategic business priorities,
within a remuneration framework which is aligned with
the interests of our shareholders and thus designed
to promote the long‑term success of the Company.
The Committee’s main responsibilities are:
• establishing and maintaining formal and transparent
procedures for developing policy on executive
remuneration and for fixing the remuneration
packages of individual Directors, and monitoring
and reporting on them;
• determining the remuneration, including pension
arrangements, of the Executive Directors;
• monitoring and making recommendations in respect
of remuneration for the tier of senior management
one level below that of the Board;
• approving annual long‑term incentive arrangements
together with their targets and levels of awards;
• determining the level of fees for the Chairman of
the Board; and
• selecting and appointing the external advisers to
the Committee.
Membership and attendance
The Committee comprises the three independent
Non‑Executive Directors. By invitation, the meetings of
the Committee may be attended by the Chief Executive
Officer and the Chief Financial Officer. The Company
Secretary acts as the Secretary to the Committee.
The Committee met twice during the year. The Committee
plans to meet formally at least twice a year and at
such other times as the Board or the Committee
Chairman requires.
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Remuneration report
As an AIM‑listed entity, the Company is not required to
fully apply the Listing Rules of the Financial Conduct
Authority or the BIS Directors’ Remuneration Reporting
Regulations and hence is not required to present a
Board report on remuneration in accordance with those
rules. Nevertheless, the Board considers it appropriate
for the Company to provide shareholders with
information in respect of executive remuneration that
follows the “spirit” of the Regulations and will include
some details of the Directors’ remuneration policy and
the annual report on remuneration, which together form
the Directors’ remuneration report.
I look forward to meeting with shareholders at the
Annual General Meeting in September to answer
any questions on the work of the Committee.
David Hurcomb
Chairman of the Remuneration Committee
25 July 2018
Activities during the year
Matters considered and decisions reached by the
Committee during the year included:
• reviewed and approved the remuneration policy
for 2017/18;
• reviewed and approved the parameters of the Annual
Bonus Plan, including performance measures and
targets for 2017/18 for the Executive Directors and
senior management team;
• considered and approved the LTIP awards to the
Executive Directors and senior management;
• reviewed and approved remuneration package for
the new CEO;
• reviewed market trends and developments in
executive remuneration in advance of considering
Executive Director and senior management team
proposals for 2018/19;
• reviewed and approved Executive Director and senior
management team salaries for 2018/19;
• reviewed performance measures for 2018/19 for the
Executive Directors and senior management team; and
• reviewed the Committee’s terms of reference.
Performance and outcomes 2017/18
For 2017/18, the performance achieved against
financial and operational targets resulted in no
annual bonus being paid to the Executive Directors.
There were no LTIP or CSOP awards vested during the year.
Remuneration decisions for 2018/19
The Committee has recently undertaken a review
of the remuneration arrangements for our Executive
Directors. We believe that the framework remains
broadly fit for purpose and so we are not proposing
any significant changes.
Following the review, it was determined that the annual
bonus maximum levels and the performance measures
continue to be appropriate. The Committee will continue
its policy of setting stretching annual bonus targets
which take into account several internal and external
factors and disclose performance against targets and
associated payouts unless the Committee considers
them to be commercially sensitive.
43
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Performance measures and targets
The Committee selected the performance conditions
because these are central to the Company’s overall
strategy and are key metrics used by the Executive
Directors to oversee the operation of the business.
The performance targets are determined annually by
the Committee following consultation with the Audit
Committee and are typically set at a level that is above
the level of the Company’s forecasts.
The Committee believes the performance targets for the
annual bonus are commercially sensitive in respect of
the Company and that it would be detrimental to the
interests of the Company to disclose them before the
start of the financial year. The targets will be disclosed
after the end of the relevant financial year in that year’s
remuneration report.
Differences in remuneration policy for
all employees
All employees of the Company are entitled to base
salary, benefits, a pension and an annual bonus.
The maximum opportunity available is based on
the seniority and responsibility of the role.
The Committee has regard to pay structures across
the wider Group when setting the remuneration policy
for Executive Directors. The Committee considers the
general basic salary increase for the broader workforce
when determining the annual salary review for the
Executive Directors.
Overall, the remuneration policy for the Executive Directors
is more heavily weighted towards performance‑related
pay than for other employees. The level of performance‑
related pay varies within the Group by grade of employee
and is calculated by reference to the specific responsibilities
of each role as appropriate.
Statement of consideration of employment
conditions elsewhere in the Group
The Committee invites the Chief Executive Officer to
present at its meeting in March on the proposals for
salary increases for the employee population generally
and on any other changes to remuneration policy within
the Company. The Committee limits any salary increase
for the Executive Directors to the inflationary increase
available to employees unless there has been a change
in role or alignment to market levels.
The Chief Executive consults with the Committee on
the KPIs for Executive Directors’ bonuses and the extent
to which these should be cascaded to other employees.
The Committee approves the overall annual bonus
cost to the Company each year. The Committee has
oversight over the grant of all LTIP and CSOP awards
across the Company.
Directors’ remuneration policy
Introduction
The policy described below is intended to apply for
three years to 2018/19. However, the Committee will
consider the remuneration policy annually to ensure
that it remains aligned with the business’ needs and
is appropriately positioned relative to the market
but there is no intention to revise the policy more
frequently than every three years. We use target
performance to estimate the total potential reward and
benchmark it against reward packages paid by Van Elle’s
competitors (to the extent that they can be identified).
Principles adopted
The principles adopted, taken from the Association
of British Insurers (“ABI”), are as follows:
• remuneration structures should be appropriate to the
specific business, efficient and cost effective in delivery;
• complexity is discouraged in favour of simple and
understandable remuneration structures;
• remuneration structures should seek to align Executive
and shareholder interests including through a
meaningful level of personal shareholding;
• remuneration structures should promote long‑term
focus through features such as deferral and measuring
performance over the long term;
• structures should include performance adjustments
(malus) and/or clawback provisions;
• pay should be aligned to long‑term sustainable
success and the desired corporate culture throughout
the organisation; and
• the Remuneration Committee ensures that rewards
properly reflect business performance.
Balancing short and long-term remuneration
Based on our view of current market practice, and
the principles of our remuneration policy, we have
established the remuneration policy set out in this
report. Fixed annual elements, including salary,
pension and benefits, are to recognise the status
of our Executives and to ensure current and future
market competitiveness. The short and long‑term
incentives are to motivate and reward them for making
Van Elle Holdings plc successful on a sustainable basis.
The shareholding linkage cements the relationship
between the Executive Directors’ personal returns
and those of Company investors. Long‑term incentives, in
the form of conditional share awards, are granted annually
and Executive Directors are expected to retain vested
shares (after they have paid income tax and National
Insurance contributions in respect of the awards) until
they have met their shareholding requirement.
The Committee reserves discretion to flex the weighting
of annual bonus KPIs from year to year to ensure that the
Executive Directors are incentivised to drive performance
through the Company’s core strategic objectives.
44
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Future policy table
The individual elements of the future remuneration policy are summarised below:
How the element supports
our strategic objectives
BASE SALARY
To recognise status and
responsibility to deliver strategy
BENEFITS
To provide benefits consistent
with the role
ANNUAL BONUS
To ensure a market‑competitive
package and link total cash
reward to achievement of
Company business objectives
Operation of the element
Maximum potential value
and payment at threshold
Performance metrics
used, weighting and
time period applicable
Base salary is paid in 12 equal
monthly instalments during
the year.
Salaries are reviewed annually and
any changes are effective from
1 June in the financial year.
None.
Increases only for inflation and in
line with other employees unless
there is a change in role or
responsibility or alignment
required to market levels.
The Company pays the cost of
providing the benefits monthly or
as required for one‑off events
such as receiving financial advice.
Cost of independent financial
advice, car allowance and medical
insurance and other benefits from
time to time.
None.
Annual bonuses are paid three
months after the end of the
financial year end to which
they relate.
A clawback facility will apply
under which part or all of the
cash and deferred bonus can
be recovered if there is a
restatement of the financial
accounts or the individual is
terminated for misconduct.
Maximum bonus potential:
Reported operating profit.
100% of salary for the CEO
and 80% for the CFO.
Performance is measured over
the financial year.
60% of salary for other
Executive Directors.
There is no minimum payment
at threshold performance.
The Committee has discretion
to vary the weighting of these
metrics over the life of this
remuneration policy.
PENSION
To provide funding for retirement Defined contribution scheme.
5–10 % of salary.
None.
Monthly contributions.
LONG TERM INCENTIVE PLAN (“LTIP”)
To augment shareholder alignment
by providing Executive Directors
with longer‑term interests in shares
Annual grants of conditional
share awards based on the
achievement of profit targets.
A clawback facility is in operation
under which parts or the whole of
the LTIP award can be recovered
if there is a restatement of the
financial statements or the
individual is dismissed for cause.
Maximum grant permitted
is 100% of salary.
Grant size is determined by
reference to achievement of
profit targets (50% based on
TSR and 50% based on EPS).
Vesting is dependent on service
and performance conditions.
25% vests at threshold
performance.
Service and performance
conditions must be met
over a three year period.
25% vesting if TSR ranked at
median within comparator group.
100% vesting if TSR ranked
in upper quartile.
25% vesting if EPS exceeds
RPI CAGR plus 8%.
100% vesting if EPS exceeds
RPI CAGR plus 15%.
The Committee has discretion
to vary the weighting of
performance metrics over the
life of this remuneration policy.
45
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Directors’ remuneration policy continued
Approach to recruitment remuneration
The Committee will aim to set a new Executive Directors’
remuneration package in line with the remuneration
policy approved by shareholders.
In arriving at a total package and in considering value for
each element of the package, the Committee will consider
the skills and experience of a candidate and the market
value for a candidate of that experience, as well as the
importance of securing the preferred candidate.
Where it is necessary to “buy out” an individual’s awards
from a previous employer, the Committee will seek to
match the expected value of the awards by granting
awards that vest over a timeframe like those given up,
with a commensurate reduction in quantum where the
new awards will be subject to performance conditions
that are not as stretching as those on the awards given up.
Policy on Directors leaving the Group
The Committee must satisfy any contractual obligations
agreed with the Executive Director. This is dependent on
the contractual obligations not being in contradiction with
the remuneration policy set out in this report.
If an Executive Director’s employment is terminated, in the
absence of a breach of service agreement by the Director,
the Company may, although it is not obliged to, terminate
the Director’s employment immediately by payment of an
amount equal to base salary and the specified benefits
(including pension scheme contributions) in lieu of the
whole or the remaining part of the notice period. Payments
in lieu of notice may be paid in monthly instalments over
the length of the notice period. The Executive Directors
are obliged to seek alternative income during the notice
period and to notify the Company of any income so
received. The Company would then reduce the monthly
instalments to reflect such alternative income.
Discretionary bonus payments will not form part of any
payments made in lieu of notice. An annual bonus may be
payable, at the Committee’s discretion, with respect to the
period of the financial year served, although it would be
paid in cash and normally pro‑rated for time and paid at
the normal payment date.
Any share‑based entitlements granted to an Executive
Director under the Company’s share plans will be
determined based on relevant plan rules.
The default treatment under the LTIP is that any
outstanding awards lapse when the individual leaves
the Group. However, in certain prescribed circumstances,
such as death, ill health, injury or disability, transfer of
the employing entity outside of the Group or in other
circumstances at the discretion of the Committee (except
where the Director is summarily dismissed), “good leaver”
status may be applied.
For good leavers, awards will normally vest to the extent
that the Committee determines, taking into account the
satisfaction of the relevant performance conditions and,
unless the Committee determines otherwise, the period
that has elapsed between the grant and the date of
leaving. Awards will normally vest at the original vesting
date, unless the Committee decides that awards should
vest at the time of leaving.
Service agreements and letters of appointment
Each of the Executive Directors’ service agreements is for a
rolling term and may be terminated by the Company or the
Executive Director by giving not less than six months’ prior
written notice.
The Chairman and each of the Non‑Executive Directors of
the Company do not have service contracts. Each of these
Directors has a letter of appointment which has an initial
three year term which is renewable and is terminable
by the Company or the individual on three months’
written notice.
Non‑Executive Directors are not eligible to participate
in cash or share incentive arrangements and their service
does not qualify them for a pension or other benefits.
No element of their fee is performance related.
Director
Executive Directors
Jon Fenton
Paul Pearson
Non-Executive Directors
Adrian Barden
Robin Williams
David Hurcomb
Date of service contract/letter of
appointment
21 September 2016
21 September 2016
25 July 2016
15 July 2016
1 November 2017
46
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Maximum potential value
and payment at threshold
Current fee levels are shown
in the annual report.
Performance metrics
used, weighting and
time period applicable
Non‑Executive Directors are
not eligible to participate in
any performance‑related
arrangements.
Non-Executive Directors’ fees policy
How the element supports
our strategic objectives
To attract Non‑Executive
Directors who have a broad
range of experience and skills
to oversee the implementation
of our strategy
Operation of the element
Non‑Executive Directors’ fees are
set by the Board. The Chairman’s
fees are set by the Committee.
Annual fees are paid in 12
equal monthly instalments
during the year.
Fees are regularly reviewed
against those for Non‑Executive
Directors in companies of similar
scale and complexity.
Non‑Executive Directors are not
eligible to receive benefits and
do not participate in incentive
or pension plans.
Consideration of shareholder views
We take an active interest in shareholder views on our executive remuneration policy. The Committee is also committed to maintaining
an ongoing dialogue with major shareholders and shareholder representative bodies whenever material changes are under consideration.
47
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Annual report on remuneration
Single total figure of remuneration (audited)
The audited table below sets out the total remuneration for the Directors in the year ended 30 April 2018 with comparative
figures for the year ended 30 April 2017.
Executive Directors
Jon Fenton
Paul Pearson
Non-Executive Directors
Adrian Barden
Robin Williams
David Hurcomb
Aggregate emoluments
Salary/fees
£’000
Benefits
£’000
Bonus
£’000
LTIP
£’000
Pension
£’000
268
141
97
50
23
579
17
14
—
—
—
31
—
—
—
—
—
—
—
—
—
—
—
—
13
7
—
—
—
20
2018
Total
£’000
298
162
97
50
23
630
2017
Total
£’000
281
91
43
28
—
443
Benefits comprise the provision of independent financial advice, car allowance and private medical insurance, valued at the
taxable value.
The LTIP relates to the value of long‑term awards whose performance period ends in the year under review. The first long‑term
incentive awards granted post‑listing have a performance period that ends on 26 October 2019. As a result, this column has a
zero figure.
Annual Bonus Plan (audited)
Bonuses are earned by reference to the financial year and paid in June following the end of the financial year. There is no bonus
accruing to the Executive Directors in respect of the year ended 30 April 2018.
Aggregate Directors’ emoluments
Salaries
Taxable benefits
Bonus
Pension allowances
Subtotal
Employers NI
Total
Payments for loss of office (audited)
There were no payments for loss of office in the year.
Payments to past Directors (audited)
There were no payments to past Directors in the year.
2018
£’000
579
31
—
20
630
78
708
2017
£’000
753
55
—
18
826
154
980
Share awards granted during the year (audited)
Conditional share awards were granted on 26 October 2016, the date that the Company was admitted to AIM, to all Executive
Directors and other senior executives. In accordance with the scheme rules, the maximum award (calculated at the date of the
grant) cannot exceed 100% of base salary at the date of grant of the proposed award.
48
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE
The awards to Executive Directors are shown below:
Directors
Jon Fenton
Paul Pearson
Scheme Basis of award
LTIP
LTIP
100% of
salary
Face value
£’000
% vesting at
threshold
Number of
shares
Vesting date
260
125
25
25
260,000
125,000
26/10/19
26/10/19
The face value of the awards is calculated using the share price at the date of grant, 26 October 2016, which was £1.00 per share.
The performance conditions in respect of the awards granted in the year are shown below:
Performance measure
Weighting
Target 25% vesting
Maximum 100% vesting
Total shareholder return ranking*
Compound annual growth in earnings per share
50%
50%
Median, ranked 8th or higher Upper quartile, ranked 4th or higher
15% over RPI
8% over RPI
* Measured against a comparator group of 14 companies (i.e. 15 including Van Elle Holdings plc).
It is expected that the next award under the LTIP scheme
will be announced shortly after the publication of the
Company’s annual results. Awards are limited to 100%
of basic salary.
The fees for the Non‑Executive Directors, Adrian Barden,
Robin Williams and David Hurcomb, are £85,000, £50,000,
and £45,000 respectively.
Approval
The Directors’ remuneration policy and the annual report
on remuneration, together comprising the Directors’
remuneration report, were approved by the Board of
Directors on 17 July 2018 and signed on its behalf by
the Remuneration Committee Chairman.
David Hurcomb
Chairman of the Remuneration Committee
25 July 2018
Statement of Directors’ shareholding
and share interests (audited)
We believe that Executive Directors should have
shareholdings in the Company to ensure that they are
as closely aligned as possible with shareholder interests.
Those Directors serving at the end of the year and their
immediate families had interests in the share capital of
the Company at 30 April 2018 as follows:
Executive Directors
Jon Fenton
Paul Pearson
Non-Executive Directors
Adrian Barden
Robin Williams
David Hurcomb
Ordinary
shares held at
30 April 2018
Number
Options
held at
30 April 2018
Number
5,614,165
260,000
— 125,000
107,920
10,000
—
—
—
—
Statement of implementation of remuneration
policy – year to 30 April 2019
The new CEO’s basic salary and benefits package has
been agreed and approved by the Committee. The basic
salary of Paul Pearson had a 9% increase during the
year to £150,000. The level of increase for Paul Pearson
reflects his increased level of responsibility as CFO
of an AIM‑listed company.
49
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Directors’ report
Introduction
The Directors present their annual report and the
Group audited financial statements for the year ended
30 April 2018. The strategic report on pages 4 to 33,
the corporate governance report on pages 36 to 49
and certain notes to the financial statements are also
incorporated into this report by reference.
Business review and future developments
A review of the performance of the Group during the
year, including principal risks and uncertainties, key
performance indicators and comments on future
developments, is given in the strategic report on
pages 4 to 33.
Results and dividend
The Group’s result for the year is shown in the consolidated
statement of comprehensive income on page 58.
An interim dividend of 1.4p per share was paid to
shareholders on 7 March 2018 and the Directors
are recommending a final dividend in respect of the
financial year ended 30 April 2018 of 2.3p per share.
If approved, the final dividend will be paid on
28 September 2018 to shareholders on the register
on 7 September 2018. The total dividend paid and
proposed for the year amounts to 3.7p per share.
Financial risk management
Information relating to the principal risks and uncertainties
of the Group has been included within the strategic
report. Further information relating to the financial risks
of the Group has been included within note 21 of the
consolidated financial statements.
Directors
The Directors of the Company who held office during
the year are:
• A Barden
• J Fenton (resigned 18 May 2018)
• P Pearson
• R Williams
• D Hurcomb (appointed 1 November 2017)
The biographies of the Directors in office at the end
of the year are detailed on pages 34 and 35. Their interests
in the ordinary shares of the Company are shown in the
Directors’ remuneration report on page 49. In addition
to the interests in ordinary shares, the Group operates
a performance share plan (“LTIP”) for senior executives,
under which certain Directors have been granted
conditional share awards. Details of the share options
granted are detailed in the Directors’ remuneration
report on page 49.
Directors may be appointed by ordinary resolution of
the Company or by the Board. In addition to any powers
of removal conferred by the Companies Act 2006, the
Company may by special resolution remove any Director
before the expiration of their period of office.
Directors’ indemnities
The Articles of Association of the Company permit
it to indemnify the Directors of the Company against
liabilities arising from the execution of their duties
or powers to the extent permitted by law.
The Company has directors’ and officers’ indemnity
insurance in place in respect of each of the Directors.
The Company has entered into a qualifying third party
indemnity (the terms of which are in accordance with
the Companies Act 2006) with each of the Directors.
Neither the indemnity nor insurance provide cover if a
Director or officer is proved to have acted fraudulently.
Employees
The Group systematically provides employees with
information on matters of concern to them, consulting
them or their representatives regularly, so that their
views can be considered when making decisions that
are likely to affect their interest. Employee involvement
in the Group is encouraged, as achieving a common
awareness on the part of all employees of the financial
and economic factors affecting the Group plays a major
role in its performance.
The Group recognises its responsibility to employ
disabled persons in suitable employment and gives full
and fair consideration to such persons, including any
employee who becomes disabled, having regard to their
aptitudes and abilities. Where practicable, disabled
employees are treated equally with all other employees
in respect of their eligibility for training, career
development and promotion.
Further details regarding employees are detailed in
the corporate social responsibility statement on
pages 18 to 21.
Share capital
The Company has only one class of equity share, namely
2p ordinary shares. The shares have equal voting rights
and there are no special rights or restrictions attaching
to any of them or their transfer to other persons.
As at 30 April 2018 the issued share capital of the
Company was 80,000,000 ordinary shares of 2p each.
Details of the share capital as at 30 April 2018 is shown
in note 24 of the consolidated financial statements.
The market price of the Company’s shares at the end
of the financial year was £0.84 and the range of market
prices during the year was between £0.79 and £1.07.
50
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Substantial shareholdings
As at the date of this report, the Company had been
notified of the following interests representing 3% or
more of the voting rights in the issued share capital of
the Company.
Name of holder
Ruffer
Mr Michael Ellis
Close Asset Management
Miton Asset Management
Otus Capital Management
Mr Michael Mason
Mrs Joan Ellis
Mrs Suzanne Lindup
Mr Colin Winkworth
Total
holding
of shares
% of total
voting
rights
11,148,448
7,498,527
5,362,023
4,542,397
4,463,667
4,186,961
4,061,764
3,006,773
2,470,701
13.94
9.37
6.70
5.68
5.58
5.23
5.08
3.76
3.09
Corporate governance
The Group’s statement on corporate governance
is incorporated by reference and forms part of this
Directors’ report.
Going concern
The statement regarding going concern forms part of the
corporate governance report and is set out on page 37.
Annual General Meeting
The Annual General Meeting will be held at 10 a.m.
on 18 September 2018 at One Wood Street, London,
EC2V 7WS. The notice of Annual General Meeting, with
explanatory notes, accompanies these financial statements.
Disclosure of information to the auditor
Each Director confirms that, so far as they are aware,
there is no relevant audit information of which the
Group’s auditor is unaware, and that each Director has
taken all the steps that they ought to have taken as a
Director to make themselves aware of any relevant
audit information, and to establish that the Group’s
auditor is aware of that information.
Independent auditor
BDO LLP has expressed its willingness to continue in
office and a resolution to reappoint it will be proposed
at the forthcoming Annual General Meeting.
Approved by the Board of Directors and signed on its
behalf by:
Paul Pearson
Acting Company Secretary
25 July 2018
Registered office: Kirkby Lane, Pinxton,
Nottinghamshire, NG16 6JA.
Company number: 04720018
51
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Statement of Directors’ responsibilities
The Directors are responsible for ensuring the annual
report and the financial statements are made available
on the Company’s website. Financial statements are
published on the Company’s website in accordance
with legislation in the United Kingdom governing the
preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company’s
website is the responsibility of the Directors. The
Directors’ responsibility also extends to the ongoing
integrity of the financial statements contained therein.
Approved by the Board of Directors and signed on its
behalf by:
Paul Pearson
Acting Company Secretary
25 July 2018
The Directors are responsible for preparing the annual
report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have elected to prepare the Group and
Company financial statements in accordance with
International Financial Reporting Standards (“IFRS”) as
adopted by the European Union. Under company law
the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and of the profit
or loss of the Group for that period. The Directors are
also required to prepare financial statements in
accordance with the rules of the London Stock Exchange
for companies trading securities on AIM.
In preparing these financial statements, the Directors
are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether they have been prepared in accordance
with IFRS as adopted by the European Union, subject
to any material departures disclosed and explained in
the financial statements; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the
financial statements comply with the requirements of
the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and
detection of fraud and other irregularities.
52
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Independent auditor’s report
To the members of Van Elle Holdings plc
Opinion
We have audited the financial statements of Van Elle
Holdings plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 30 April 2018 which
comprise the consolidated statement of comprehensive
income, the consolidated statement of financial position,
the consolidated statement of cash flows, the consolidated
statement of changes in equity, the company statement
of financial position, the company statement of changes
in equity and notes to the financial statements, including
a summary of significant accounting policies.
The financial reporting framework that has been applied in
the preparation of the financial statements is applicable law
and International Financial Reporting Standards (IFRSs) as
adopted by the European Union and, as regards the parent
company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
In our opinion:
• the financial statements give a true and fair view of
the state of the group’s and of the parent company’s
affairs as at 30 April 2018 and of the group’s profit
for the year then ended;
• the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
• the parent company financial statements have been
properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance
with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are
independent of the group and the parent company in
accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us
to report to you where:
• the Directors’ use of the going concern basis of
accounting in the preparation of the financial
statements is not appropriate; or
• the Directors have not disclosed in the financial
statements any identified material uncertainties
that may cast significant doubt about the group’s or
the parent company’s ability to continue to adopt the
going concern basis of accounting for a period of at
least twelve months from the date when the financial
statements are authorised for issue.
53
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Independent auditor’s report continued
To the members of Van Elle Holdings plc
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
How our audit addressed the key audit matters
Key Audit Matter
Recognition of revenue and attributable profit (or losses)
on contracts:
Refer to page 40 Significant Accounting Matters of the
Audit Committee Report and notes 3 and 4 to the financial
statements for the Directors’ disclosures of the related
accounting policies, critical judgements and estimates.
Revenue is recognised on the stage of completion of
individual contracts as measured at the balance sheet date
by quantity surveyors. Attributable profit (or loss) is calculated
after deducting the costs incurred to date. If the contract is
expected to be loss making based on forecast costs and
contract revenues, forecast losses are recognised
immediately as an expense.
The extent of revenue and profit (or loss) to recognise on a
particular partially completed contract represents an area
of significant judgement within the financial statements,
which involves an assessment of both current and future
contract performance.
The potential outcomes for contracts can have an individual
or collectively material impact on the financial statements,
whether through error or management bias.
The extent of revenue and profit (or loss) to recognise on the
contract in dispute referred to on page 66 represents an area
of significant judgement within the financial statements,
which involves an assessment of management and expert
judgement involved.
Recoverability of amounts recoverable under
construction contracts:
Refer to page 40 Significant Accounting Matters of the
Audit Committee Report and notes 3 and 4 to the financial
statements for the Directors’ disclosures of the related
accounting policies, critical judgements and estimates.
This area was considered as a significant risk because
amounts recoverable under contracts is where significant
management judgement and estimates are involved in
assessing the recoverability of outstanding balances on
contracts including those that are under dispute.
Completeness and accuracy of the Disclosure of Carillion
bad debt:
Refer to page 40 Significant Accounting Matters of the Audit
Committee Report and note 4 to the financial statements
for the Directors’ disclosures of critical accounting estimates
and judgements.
This area was considered to be a significant risk because
of the significant impact Carillion’s liquidation had on the
reported results and inaccurate or incomplete disclosure of
the impact could materiality mislead users of the financial
statements when assessing performance of the Group.
How We Addressed the Key Audit Matter in the Audit
We selected contracts from each operating segment for testing
based on criteria that we considered increased the risk of
material misstatement in the revenue recognised on the
contract. This included contracts that were significant to a
particular operating segment; contracts that had unusually
high or low margins and disputed contracts.
• For each contract selected we obtained a copy of the
contract documentation and via the audit testing listed
below, critically assessed and challenged the recognition
of revenue from a review of the performance of the
contract as follows.
• We reconciled the revenue recognised in the year to
the contracts.
• We assessed the position adopted by management at the
year end as compared to quantity surveyor applications
or external evidence being customers’ certification of
work done.
• We met with contract managers to and enquired on current
progress on open contracts and final account negotiations
on completed contracts substantiating explanations to
supporting correspondence.
• For the individual contract referred to on page 66 which is in
dispute with the customer we reviewed all correspondence
on the matter to assess the range of potential outcomes.
This included independent experts’ reports instructed by
the Directors and assessing the scope of work of the expert
and their independence. Finally we considered the extent
of disclosure provided on the judgements taken.
We identified individual amounts recoverable under construction
contracts balances which we considered presented the greatest
risk of exposure either by size or by age.
Where amounts recoverable under contracts had not been
supported by external certifications we agreed the balance
to quantity surveyor applications at the year end and where
applicable, external expert quantification opinions.
In light of the evidence available to us, we challenged the
management’s judgement in respect of the recoverability of
the amounts recoverable on contracts with reference to our
own assessments.
In addition to the audit procedures we carried out for the key
audit matters on revenue recognition and attributable profit
(or losses) on contracts and amounts recoverable under
construction contracts, we assessed the latest position on
Carillion and related ongoing contracts by reviewing
correspondence with third parties including liquidators
and held discussions with contract managers.
We reviewed the disclosures made in the Annual Report,
including the strategic report to ensure they are appropriate
and not materially misstated.
54
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE An overview of the scope of our audit
The group manages its central operations from the
head office in Pinxton with regional offices at various
locations throughout the UK to support its subsidiary
day to day operations. As at the statement of financial
position date, the group consists of the group holding
company (‘the parent company’), one trading subsidiary
in the UK, and three dormant subsidiaries. The parent
company and the trading subsidiary, Van Elle Limited,
are considered significant components of the group.
The group engagement team carried out full scope
audits on these significant components of the group.
Our audit work on the trading component was executed
at a level of materiality applicable to the individual
entity, which was lower than group materiality.
Our application of materiality
We apply the concept of materiality in planning and
performing the audit, in evaluating the effect of identified
misstatements on the audit and forming our opinions.
The magnitude of an omission or misstatement that,
individually or in the aggregate, could reasonably be
expected to influence the economic decisions of
the users of the financial statements is material.
Misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account
of the nature of identified misstatements, and the
particular circumstances of their occurrence, when
evaluating their effect on the financial statements as
a whole. Materiality provides a basis for determining
the nature and extent of our audit procedures.
We determined materiality for the group to be £450,000
(2017: £800,000), which was based on 5% of profit before
tax this year whilst 2017 was based on 7.5% of profit
before tax. We believe that profit before tax represents
one of the principal key performance indicators for the
Group, and is a generally accepted auditing benchmark.
Financial statement materiality applied to the
trading component of the group was £425,000
(2017: £760,000) and to the parent company was
£120,000 (2017: £120,000). The parent company
materiality was based on 2% of the fixed assets
investment which has not changed from prior year.
Performance materiality was set at 75% (2017: 75%)
of the above materiality levels based on a low level
of expected misstatements.
We agreed with the Audit Committee that we would
report to them all uncorrected audit differences in
excess of £18,000 (2017: £40,000), which was set at 4%
(2017: 5%) of materiality, as well as differences below
that threshold that, in our view, warranted reporting on
qualitative grounds. We evaluated any uncorrected
misstatements against both quantitative measures of
materiality discussed above and in light of other relevant
qualitative considerations when forming our opinion.
55
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Independent auditor’s report continued
To the members of Van Elle Holdings plc
Other information
The Directors are responsible for the other information.
The other information comprises the information included
in the annual report other than the financial statements and
our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we
are required to determine whether there is a material
misstatement in the financial statements or a material
misstatement of the other information. If, based on the
work we have performed, we conclude that there is a
material misstatement of this other information, we are
required to report that fact. We have nothing to report
in this regard.
Opinions on other matters prescribed by
the Companies Act 2006
In our opinion, based on the work undertaken in the
course of the audit:
• the information given in the strategic report and the
Directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
• the strategic report and the Directors’ report
have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report
by exception
In the light of the knowledge and understanding of
the group and the parent company and its environment
obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the
Directors’ report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by
the parent company, or returns adequate for our audit
have not been received from branches not visited
by us; or
• the parent company financial statements are not
in agreement with the accounting records and
returns; or
• certain disclosures of Directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities
Statement, the Directors are responsible for the preparation
of the financial statements and for being satisfied that
they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable
the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors
are responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors
either intend to liquidate the group or the parent company
or to cease operations, or have no realistic alternative
but to do so.
56
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Auditor’s responsibilities for the audit of
the financial statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are
free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the parent company’s
members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has
been undertaken so that we might state to the parent
company’s members those matters we are required to
state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other
than the parent company and the parent company’s
members as a body, for our audit work, for this report,
or for the opinions we have formed.
Gareth Singleton
(Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Nottingham
25 July 2018
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
57
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018CORPORATE GOVERNANCE Consolidated statement of comprehensive income
For the year ended 30 April 2018
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating profit before exceptional costs and share-based payment expense
Share-based payment expense
Carillion bad debt write-off
Exceptional costs
Operating profit
Finance expense
Finance income
Profit before tax
Income tax expense
Total comprehensive income for the year
Earnings per share (pence)
Basic
Diluted
Note
5
6
25
7
8
10
10
11
13
13
2018
£’000
103,872
(69,480)
34,392
(23,295)
—
11,097
(148)
(956)
(283)
9,710
(561)
25
9,174
(1,835)
7,339
2017
£’000
94,093
(60,712)
33,381
(22,018)
200
11,563
(77)
—
(1,781)
9,705
(436)
14
9,283
(1,930)
7,353
9.2
9.2
9.8
9.8
All amounts relate to continuing operations. There was no other comprehensive income in either the current or preceding year.
The notes on pages 62 to 79 form part of these financial statements.
58
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Consolidated statement of financial position
As at 30 April 2018
Non-current assets
Property, plant and equipment
Intangible assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Loans and borrowings
Corporation tax payable
Non-current liabilities
Loans and borrowings
Provisions
Deferred tax
Total liabilities
Net assets
Equity
Share capital
Share premium
Retained earnings
Non-controlling interest
Total equity
Note
2018
£’000
2017
£’000
14
15
16
17
19
20
20
22
23
24
39,502
2,324
41,826
2,565
22,225
10,880
35,670
77,496
17,353
5,580
753
23,686
11,205
270
969
12,444
36,130
41,366
1,600
8,633
31,115
18
41,366
32,110
2,330
34,440
2,423
18,796
12,858
34,077
68,517
15,882
4,461
878
21,221
9,855
342
778
10,975
32,196
36,321
1,600
8,633
26,070
18
36,321
The financial statements were approved and authorised for issue by the Board of Directors on 25 July 2018 and were signed on its behalf by:
P Pearson
Chief Financial Officer
The notes on pages 62 to 79 form part of these financial statements.
59
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Consolidated statement of cash flows
For the year ended 30 April 2018
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Disposal of property, plant and equipment
Purchases of intangibles
Net cash absorbed in investing activities
Cash flows from financing activities
Proceeds from bank borrowings
Repayment of bank borrowings
Proceeds from Invest to Grow loan
Repayments of Invest to Grow loan
Issue of shares (net of issue costs)
Payments to finance lease creditors
Dividends paid
Net cash generated from/(absorbed in) financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Note
27
2018
£’000
2017
£’000
13,244
25
(561)
(1,768)
13,129
14
(436)
(2,281)
10,940
10,426
(5,053)
321
—
(5,562)
138
(71)
(4,732)
(5,495)
—
(150)
—
(95)
—
(5,421)
(2,520)
(8,186)
(1,978)
12,858
—
(150)
260
(55)
8,833
(3,882)
(680)
4,326
9,257
3,601
Cash and cash equivalents at end of year
28
10,880
12,858
The notes on pages 62 to 79 form part of these financial statements.
60
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Consolidated statement of changes in equity
For the year ended 30 April 2018
Balance at 1 May 2016
Total comprehensive income
Share redesignation
Issue of bonus shares
Issue of ordinary shares on IPO
Share issue costs
Dividends paid
Balance at 30 April 2017
Total comprehensive income
Share-based payment expense
Dividends paid
Balance at 30 April 2018
The notes on pages 62 to 79 form part of these financial statements.
Share
premium
£’000
Non-
controlling
interest
£’000
Share
capital
£’000
1,006
—
63
331
200
—
—
—
—
—
—
9,800
(1,167)
—
1,600
8,633
—
—
—
—
—
—
1,600
8,633
18
—
—
—
—
—
—
18
—
—
—
18
Retained
earnings
£’000
19,728
7,353
—
(331)
—
—
(680)
Total
equity
£’000
20,752
7,353
63
—
10,000
(1,167)
(680)
26,070
36,321
7,339
225
7,339
225
(2,520)
(2,520)
31,115
41,366
61
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Notes to the consolidated financial statements
For the year ended 30 April 2018
1. General information
The consolidated financial statements present the results of
Van Elle Holdings plc (the “Company”) and its subsidiaries (collectively
referred to as the “Group”) for the year ended 30 April 2018. A list
of subsidiaries and their countries of incorporation is presented in
note 5 of the parent company financial statements on page 83.
Van Elle Holdings plc is a public limited company incorporated and
domiciled in the UK under the Companies Act 2006. The principal
activity of the Group is a geotechnical contractor offering a wide
range of ground engineering techniques and services including site
investigation; driven, bored, drilled and augered piling; and ground
stabilisation services. The Group also develops, manufactures and
installs precast concrete products for use in specialist foundation
applications. Further information on the nature of the Group’s
operations and principal activities are set out in the strategic
report of the consolidated financial statements.
The address of the Company’s registered office is Van Elle Holdings plc,
Kirkby Lane, Pinxton, Nottinghamshire NG16 6JA. The Company
has its primary listing on AIM, part of the London Stock Exchange.
The Group’s financial statements were authorised for issue by
the Board of Directors on 25 July 2018.
2. Basis of preparation
Basis of accounting
The Group financial statements 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 preparation of financial statements in compliance with adopted
IFRS requires the use of certain critical accounting estimates, which
are outlined in the critical accounting estimates and judgements
section of the accounting policies disclosed in note 3.
The consolidated financial statements are presented in Sterling,
which is also the Group’s functional currency. Amounts are rounded
to the nearest thousand, unless otherwise stated.
Going concern
The Directors have a reasonable expectation that the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future. The Directors regard the foreseeable
future as no less than 12 months following publication of its annual
financial statement. The Directors have considered the Group’s working
capital forecasts and projections, taking account of reasonably possible
changes in trading performance and the current state of its operating
market, and are satisfied that the Group should be able to operate
within the level of its current facilities and in compliance with covenants
arising from those facilities. Accordingly, they have adopted the
going concern basis in preparing the financial information.
Underlying profit before tax and earnings
The Directors consider that underlying operating profit, underlying
earnings before depreciation and amortisation (“EBITDA”), underlying
profit before taxation and underlying earnings per share measures
referred to in these Group financial statements, provide useful
information for shareholders on underlying trends and performance.
Underlying measures reflect adjustments adding back the exceptional
costs, share-based payment charges and the taxation thereon where
relevant. A bad debt of £1.0m relating to the liquidation of Carillion
was charged in the comprehensive income statement in 2018.
The calculation of underlying basic and diluted underlying earnings
per share is shown in note 13.
Adoption of new and revised standards
New standards, interpretations and amendments effective from
1 May 2017
There were no new standards or interpretations effective for the
first time for periods beginning on or after 1 May 2017 that had
a significant effect on the Group’s financial statements, although
an amendment to IAS 7 Statement of Cash Flows has resulted in
a reconciliation of liabilities disclosed for the first time in note 28.
New standards, interpretations and amendments not yet effective
IFRS 15 Revenue from Contracts with Customers has been adopted
by the EU with an effective date of 1 January 2018. This standard
modifies the determination of how much revenue to recognise and
when, and provides a single, principles-based five-step model to be
applied to all contracts with customers. It replaces the separate models
for goods, services and construction contracts under current IFRS.
The Group has assessed the impact of the standard and does
not expect the standard to have a significant impact on the Group’s
results. The standard is only expected to impact those contracts
that are ongoing at the end of a reporting period and have multiple
performance obligations and/or contract modifications. With a
typical contract size of circa. £100,000 with short duration, for the
vast majority of contracts revenue will continue to be recognised in
the year. It is not possible to quantify the expected financial impact
on the results for the year ended 30 April 2019, the first applicable
year, as the application of the standard is dependent on the specific
details of contracts ongoing at 30 April 2019. For the limited number
of contracts that will be ongoing at the end of a reporting period and
have multiple performance obligations and/or contract modifications,
these will need to be considered on a contract-by-contract basis.
Given that the Group’s largest contract only contributed 5% of
revenue in the current year, any impact of the standard on the
Group’s reported revenue is likely to be limited.
For the position at 30 April 2018, the Group’s assessment has
concluded this impact to be immaterial.
IFRS 9 addresses the classification and measurement of financial
assets and will replace IAS 39. The standard also introduces a
forward-looking credit loss impairment model whereby entities will
need to consider and potentially recognise impairment triggers that
might occur in the future. The Directors have considered the potential
impact of this on financial assets and liabilities as set out in note 21
and do not consider that there would have been an impact if the
standard was adopted early. The standard is effective for accounting
periods commencing on or after 1 January 2018, as adopted by the
European Union. This standard has been considered by the Directors
and is not expected to have a material impact on the financial
statements of the Group for the year ended 30 April 2019.
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 Directors
have reviewed the impact of this standard and believe that as a result
of adopting this standard an asset for operating leases will be shown
in the balance sheet based on the discounted minimum future lease
payments as disclosed in note 29. More detailed analysis is being
carried out during this year which will be disclosed in the financial
statements for the year ended 30 April 2019 before its application
in the year ended 30 April 2020.
62
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS 3. Significant accounting policies
The principal accounting policies adopted in the preparation of the
consolidated financial statements are set out below. The policies
have been consistently applied to all the years presented, unless
otherwise stated.
Basis of consolidation
Where the Company has control over an investee, it is classified as
a subsidiary. The Company controls an investee if all three of the
following elements are present: power over the investee, exposure
to variable returns from the investee, and the ability of the investor
to use its power to affect those variable returns. Control is reassessed
whenever facts and circumstances indicate that there may be a
change in any of these elements of control.
The consolidated financial statements present the results of the
Company and its subsidiaries (the “Group”) as if they formed a
single entity. Intercompany transactions and balances between
Group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results
of business combinations using the acquisition method. In the
statement of financial position, the acquiree’s identifiable assets,
liabilities and contingent liabilities are initially recognised at their
fair values at the acquisition date. The results of acquired operations
are included in the consolidated statement of comprehensive
income from the date on which control is obtained. They are
deconsolidated from the date on which control ceases.
Any changes in ownership in minority interests is accounted for
as an equity transaction.
Revenue
Turnover represents the total amounts receivable by the Group for
goods supplied and services provided, excluding value added tax
and trade discounts. The Group’s turnover arises in the UK.
In the case of contracts, when the outcome can be assessed reliably,
contract revenue is recognised by reference to the stage of completion
of the contract activity at the statement of financial position date.
The stage of completion of the contract at the statement of financial
position date is assessed regarding the costs incurred to date as a
percentage of the total expected costs.
Margin on contracts is calculated in accordance with accounting
standards and industry practice. Industry practice is to assess the
estimated outcome of each contract and recognise the revenue and
margin based upon the stage of completion of the contract at the
statement of financial position date. The assessment of the outcome
of each contract is determined by regular review of the revenues
and costs to complete that contract. Consistent contract review
procedures are in place in respect of contract forecasting.
The gross amount receivable from customers for contract work is
presented as an asset for all contracts in progress for which costs
incurred, plus recognised profits (or less recognised losses),
exceed progress billings.
The gross amount repayable to or paid in advance by customers for
contract work is presented as a liability for all contracts in progress
for which progress billings exceed costs incurred plus recognised
profits (less recognised losses). Full provision is made for losses
on all contracts in the year in which the loss is first foreseen.
Margin associated with contract variations is only recognised when
the outcome of the contract negotiations can be reliably estimated.
Costs relating to contract variations are recognised as incurred.
Revenue is recognised up to the level of the costs which are
deemed to be recoverable under the contract.
Segment reporting
The operating segments are based on the components that the Board,
the Group’s principal decision-making body (the Chief Operating
Decision Maker), monitors in making decisions about operating
matters. Such components are identified based on information that
is provided internally in the form of monthly management account
reporting, budgets and forecasts to formulate allocation of resources
to segments and to assess performance. Revenue from reportable
segments is measured on a basis consistent with the income statement.
Revenue is generated from within the UK, the Group’s country of
domicile. Segment results show the contribution directly attributable
to each segment in arriving at the Group’s operating profit. Segment
assets and liabilities comprise those assets and liabilities directly
attributable to each segment. Group eliminations represent such
consolidation adjustments that are necessary to determine the
Group’s assets and liabilities.
Exceptional items
The Group’s income statement separately identifies exceptional
items. Such items are those that in the Directors’ judgement are
one off in nature or non-operating and need to be disclosed
separately by their size or incidence and may include, but are not
limited to, restructuring costs, acquisition-related costs and costs
associated with the IPO. In determining whether an item should be
disclosed as an exceptional item, the Directors consider quantitative
as well as qualitative factors such as frequency, predictability of
occurrence and significance. This is consistent with the way financial
performance is measured by management and reported to the
Board. Disclosing exceptional items separately provides an
additional understanding of the performance of the Group.
Taxation
The income tax expense represents the sum of current and deferred
income tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised
in other comprehensive income or directly in equity, respectively.
Current income tax is based on taxable profits for the year. Taxable
profit differs from profit as reported in the income statement because
it excludes items of income and expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The Group’s liability for current tax is calculated using
tax rates that have been enacted or substantively enacted by the
statement of financial position date.
Dividends
Equity dividends are recognised when they become legally payable.
Interim equity dividends are recognised when paid. Final equity
dividends are recognised when approved by the shareholders at
an annual general meeting.
Property, plant and equipment
Items of property, plant and equipment are stated at historical cost
less accumulated depreciation. Historical cost includes expenditure
that is directly related to the acquisition of the asset.
Subsequent costs are included in the asset’s carrying amount,
or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the asset
will flow to the Group, and the cost of the asset can be measured
reliably. All other repairs and maintenance expenditure is charged to
the statement of comprehensive income during the financial period
in which it is incurred.
63
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
For the year ended 30 April 2018
3. Significant accounting policies continued
Property, plant and equipment continued
Freehold land is not depreciated. Depreciation on assets under
construction does not commence until they are complete and available
for use. Depreciation is provided on all other items of property, plant
and equipment and is calculated, using the straight-line method, to
write off their carrying value over their expected useful economic
lives. It is provided at the following rates:
Freehold buildings
Plant and machinery
Office equipment
Motor vehicles
– 10%–20% per annum straight line
– 10%–20% per annum straight line
– 10%–25% per annum straight line
– 10%–25% per annum straight line
Residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date. An asset’s carrying amount
is written down immediately to its estimated recoverable amount
if the asset’s carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposal of assets are determined by comparing
the proceeds of disposal with the carrying value and are recognised
in the statement of comprehensive income.
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the
fair value of the Group’s share of the identifiable net assets of the
acquired entity at the date of acquisition. Goodwill is capitalised as
an intangible asset. Goodwill is tested annually for impairment and
carried at cost less accumulated impairment losses. Impairment
losses on goodwill are recognised immediately in the statement
of comprehensive income and are not subsequently reversed.
Goodwill is allocated to each of the Group’s cash generating units
for the purposes of the impairment testing. The allocation is made
to those cash generating units or groups of cash generating units
that are expected to benefit from the business combination in which
they arose, identified by operating segment.
Computer software
Costs incurred to acquire computer software and directly attributable
costs of bringing the software into use are capitalised within intangible
assets and amortised, on a straight-line basis, over the useful life of
the software. The estimated useful life and amortisation method are
reviewed at the end of each reporting period, with the effect of
any changes in estimate being accounted for on a prospective basis.
The estimated useful life for computer software is five years.
Impairment of non-financial assets
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets are subject to impairment
tests whenever events or changes in circumstances indicate that
their carrying amount may not be recoverable. Where the carrying
value of an asset exceeds its recoverable amount (i.e. the higher of
value in use and fair value less costs to sell), the asset is written
down accordingly.
Where it is not possible to estimate the recoverable amount of an
individual asset, the impairment test is carried out on the smallest
group of assets to which it belongs for which there are separately
identifiable cash flows – its cash generating units (“CGUs”).
Impairment charges are included in profit or loss, except to
the extent they reverse gains previously recognised in other
comprehensive income. An impairment loss recognised for goodwill
is not reversed.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Inventories are initially recognised at cost, and comprise raw materials
and consumables held in storage or on project sites and work in
progress. Cost comprises all costs of purchase, costs of conversion
and other costs incurred in bringing the inventories to their present
location and condition.
Net realisable value comprises the estimated selling price in the
ordinary course of business less applicable variable selling expenses.
Provision is made for obsolete, slow-moving or defective items
where appropriate.
Financial assets
The Group classifies its financial assets into one of the categories
discussed below, depending on the purpose for which the asset was
acquired. The Group has not classified any of its financial assets as
held to maturity.
The Group’s accounting policy for each category is as follows:
Fair value through profit or loss
The Group does not have any assets held for trading nor does it
voluntarily classify any financial assets as being at fair value through
profit or loss.
Loans and receivables
These arise principally through the provision of goods and services
to customers (e.g. trade receivables), but also incorporate other
types of contractual monetary asset. They are initially recognised at
fair value plus transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised cost
using the effective interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of the
customer or default or significant delay in payment) that the Group
will be unable to collect all of the amounts due under the terms
receivable and for trade receivables, which are reported net, such
provisions are recorded in a separate allowance account with
the loss being recognised within administrative expenses in the
consolidated statement of comprehensive income. On confirmation
that the trade receivable will not be collectable, the gross carrying
value of the asset is written off 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 includes 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
The Group classifies its financial liabilities into one of two categories,
depending on the purpose for which the liability was acquired.
The Group’s accounting policy for each category is as follows:
Fair value through profit or loss
The Group does not have any liabilities held for trading nor has it
designated any financial liabilities as being at fair value through
profit or loss.
64
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS 3. Significant accounting policies continued
Financial liabilities continued
Other financial liabilities
Other financial liabilities include the following items:
• Bank borrowings are initially recognised at fair value net of any
transaction costs directly attributable to the issue of the instrument.
Such interest bearing liabilities are subsequently measured at
amortised cost using the effective interest rate method, which
ensures that any interest expense over the period to repayment
is at a constant rate on the balance of the liability carried in the
consolidated statement of financial position. For the purposes of
each financial liability, interest expense includes initial transaction
costs and any premium payable on redemption, as well as any
interest or coupon payable while the liability 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.
Government grants
Government grants are recognised at their fair value in the statement
of financial position, within deferred income, when there is reasonable
assurance that the grant will be received and all attached conditions
will be complied with.
Government grants relating to revenue items are released to the
statement of comprehensive income and recognised within cost of
sales over the period necessary to match the grant on a systematic
basis to the costs that they are intended to compensate.
Government grants relating to capital items are recognised within
deferred income and released against the related depreciation
charge when the completion conditions of these assets are met.
Retirement benefit cost
The Group operates a defined contribution pension scheme for the
benefit of employees. The Group pays contributions to publicly or
privately administered pension insurance schemes on a mandatory,
contractual or voluntary basis. Contributions to defined contribution
pension schemes are charged to the consolidated statement of
comprehensive income in the year to which they relate.
Leased assets
Where substantially all the risks and rewards incidental to
ownership of a leased asset have been transferred to the Group
(a “finance lease”), the asset is treated as if it had been purchased
outright. The amount initially recognised as an asset is the lower
of the fair value of the leased asset and the present value of the
minimum lease payments payable over the term of the lease. The
corresponding lease commitment is shown as a liability. Lease
payments are analysed between capital and interest. The interest
element is charged to the consolidated statement of comprehensive
income over the period of the lease and is calculated so that it
represents a constant proportion of the lease liability. The capital
element reduces the balance owed to the lessor.
Where substantially all the risks and rewards incidental to
ownership are not transferred to the Group (an “operating lease”),
the total rentals payable under the lease are charged to the consolidated
statement of comprehensive income on a straight-line basis over the
lease term. The aggregate benefit of lease incentives is recognised
as a reduction of the rental expense over the lease term on a
straight-line basis.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation because of past events, it is probable that an
outflow of resources will be required to settle the obligation and the
amount has been reliably estimated. Provisions are not recognised
for future operating losses.
Provisions represent management’s best estimates of expenditure
required to settle a present obligation at the balance sheet date
after considering the risks and uncertainties that surround the
underlying event.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying
amount of an asset or liability in the consolidated statement of financial
position differs from its tax base, except for differences arising on:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which
is not a business combination and at the time of the transaction
affects neither accounting nor taxable profit; and
• investments in subsidiaries and jointly controlled entities where the
Group can control the timing of the reversal of the difference and it is
probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances
where it is probable that taxable profit will be available against
which the difference can be utilised.
The amount of the asset or liability is determined using tax rates
that have been enacted or substantively enacted by the reporting
date and are expected to apply when the deferred tax liabilities/
(assets) are settled/(recovered).
Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds of the issue.
Share-based payments
The Group operates two equity-settled share-based payment
plans, details of which can be found in note 25 to the consolidated
financial statements.
The fair value of share-based awards with non-market performance
conditions is determined at the date of the grant using a Black-Scholes
option pricing model. The fair value of share-based awards with
market-related performance conditions is determined at the date
of grant using a Monte-Carlo simulation. Share-based awards are
recognised as expenses based on the Company’s estimate of the
shares that will eventually vest, on a straight-line basis over the vesting
period, with a corresponding increase in the share option reserve.
At each statement of financial position date, the Company revises its
estimates of the number of options that are expected to vest based
on service and non-market performance conditions. The amount
expensed is adjusted over the vesting period for changes in the
estimate of the number of shares that will eventually vest. The impact
of the revision of the original estimates, if any, is recognised in the
statement of comprehensive income such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to equity
reserves. Options with market-related performance conditions will
vest based on total shareholder return against a selected group of
quoted market comparators. Following the initial valuation, no
adjustments are made in respect of market-based conditions at
the reporting date.
65
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
For the year ended 30 April 2018
4. 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 costs of the work required to complete
the contract in order to estimate the percentage of completion, and
the outcome of claims raised against the Group by customers or
third parties.
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.
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 and other reasonable factors.
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.
66
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS 5. 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 22 to 29. All turnover
and operations are based in the UK.
Operating segments – 30 April 2018
Revenue
Total revenue
Inter-segment revenue
Revenue
Operating profit
Underlying operating profit
Share-based payments
Exceptional item
Operating profit
Finance expense
Finance income
Profit before tax
Assets
Property, plant and equipment
Inventories
Reportable segment assets
Intangible assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Loans and borrowings
Trade and other payables
Provisions
Deferred tax
Total liabilities
Other information
Capital expenditure
Depreciation/amortisation
General
Piling
£’000
Specialist
Piling
£’000
Ground
Engineering
Services
£’000
Ground
Engineering
Products
£’000
Head
office
£’000
Total
£’000
46,066
(2,942)
30,299
(412)
18,677
(1,175)
16,384
(3,025)
— 111,426
(7,554)
—
43,124
29,887
17,502
13,359
— 103,872
5,693
—
—
5,693
—
—
5,693
13,513
297
13,810
—
—
—
4,073
—
(956)
3,117
—
—
3,117
10,218
420
10,638
—
—
—
13,810
10,638
—
—
—
—
—
—
—
—
—
—
306
—
—
306
—
—
306
4,163
156
4,319
—
—
—
4,319
—
—
—
—
—
1,025
—
—
1,025
—
—
1,025
2,913
1,693
4,606
—
—
—
4,606
—
—
—
—
—
—
(148)
(283)
(431)
(561)
25
(967)
8,695
—
8,695
2,324
22,225
10,880
11,097
(148)
(1,239)
9,710
(561)
25
9,174
39,502
2,566
42,068
2,324
22,225
10,880
44,124
77,496
16,785
18,106
270
969
16,785
18,106
270
969
36,130
36,130
5,059
2,002
2,636
2,114
2,070
685
1,782
242
1,603
662
13,150
5,705
There are no individual customers accounting for more than 10% of Group revenue in either the current or preceding year.
67
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 April 2018
5. Segment information continued
Operating segments – 30 April 2017
Revenue
Total revenue
Inter-segment revenue
Revenue
Operating profit
Underlying operating profit
Share-based payments
Exceptional item
Operating profit
Finance expense
Finance income
Profit before tax
Assets
Property, plant and equipment
Inventories
Reportable segment assets
Intangible assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Loans and borrowings
Trade and other payables
Provisions
Deferred tax
Total liabilities
Other information
Capital expenditure
Depreciation/amortisation
6. Other operating income
Recovery in respect of insurance excess
7. Exceptional costs
Initial Public Offering (“IPO”)
Other exceptional costs
General
Piling
£’000
Specialist
Piling
£’000
Ground
Engineering
Services
£’000
Ground
Engineering
Products
£’000
45,008
(2,103)
42,905
30,126
—
30,126
10,621
—
10,621
13,714
(3,273)
10,441
4,685
—
—
4,685
—
—
4,685
10,456
414
10,870
—
—
—
10,870
—
—
—
—
—
5,355
—
—
5,355
—
—
5,355
9,696
370
10,066
—
—
—
10,066
—
—
—
—
—
772
—
—
772
—
—
772
2,778
179
2,957
—
—
—
2,957
—
—
—
—
—
751
—
—
751
—
—
751
1,373
1,460
2,833
—
—
—
2,833
—
—
—
—
—
Head
office
£’000
—
—
—
—
(77)
(1,781)
(1,858)
(436)
14
(2,280)
7,807
—
7,807
2,330
18,796
12,858
41,791
14,316
16,760
342
778
32,196
Total
£’000
99,469
(5,376)
94,093
11,563
(77)
(1,781)
9,705
(436)
14
9,283
32,110
2,423
34,533
2,330
18,796
12,858
68,517
14,316
16,760
342
778
32,196
4,267
1,918
2,948
1,848
1,841
622
668
299
2,041
—
11,765
4,687
2018
£’000
—
2018
£’000
—
283
283
2017
£’000
200
2017
£’000
1,452
329
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 (see note 11).
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.
68
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS 8. Operating profit
Operating profit is stated after charging/(crediting):
Depreciation of property, plant and equipment
Amortisation of intangible assets
Government grants
Operating lease expense:
– Plant and machinery on short-term hire
– Other
Profit on disposal of property, plant and equipment
Fees payable to the Company’s auditor for the audit of the Group financial statements
Fees payable to the Company’s auditor for other services:
– Audit of financial statements of subsidiaries pursuant to legislation
– Taxation compliance
– Non-audit assurance services
Costs of service-based claims made against the Group
Insurance proceeds received in respect of service-based claims made against the Group
2018
£’000
5,705
44
(9)
3,666
158
(267)
15
37
10
16
—
—
2017
£’000
4,655
32
(5)
3,260
235
(89)
12
30
4
13
—
—
9. Staff costs
Staff costs, including Directors, are outlined below. Further details of Directors’ remuneration, including details of the highest paid Director,
share options, long-term incentive plans and Directors’ pension entitlements are disclosed in the remuneration report on page 48.
Employee benefits expenses (including Directors):
Wages and salaries
Social security contributions and similar taxes
Defined contribution pension cost
Share-based payments (note 25)
Directors and key management personnel:
Wages and salaries
Defined contribution pension cost
Share-based payments (note 25)
2018
£’000
2017
£’000
26,059
3,232
292
148
29,731
1,911
59
148
2,118
23,645
2,640
260
77
26,622
2,097
50
77
2,224
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
Group, including the Directors of the Company, the Chief Financial Officer and operating unit divisional directors.
The average number of employees, including Directors, during the year was as follows:
Administrative
Operative
10. Finance income and expense
Finance income
Interest received on bank deposits
Finance expense
Finance leases
Loan interest
2018
Number
2017
Number
173
402
575
164
365
529
2018
£’000
2017
£’000
25
527
34
561
14
394
42
436
69
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS
Notes to the consolidated financial statements continued
For the year ended 30 April 2018
11. Income tax expense
Current tax expense
Current tax on profits for the year
Adjustment for (over)/under provision in the prior period
Total current tax
Deferred tax expense
Origination and reversal of temporary differences
Recognition of previously unrecognised deferred tax assets
Effect of decreased tax rate on opening balance
Total deferred tax
Income tax expense
2018
£’000
2017
£’000
1,647
(3)
1,644
188
3
—
191
2,060
(196)
1,864
103
3
(40)
66
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:
Profit before income taxes
Tax using the standard corporation tax rate of 19% (2017: 20%)
Adjustments for (over)/under provision in previous periods
Expenses not deductible for tax purposes
Non-qualifying depreciation
Short-term timing differences
Total income tax expense
2018
£’000
9,174
1,743
—
81
11
—
1,835
2017
£’000
9,283
1,849
(193)
288
—
(14)
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 2017, 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 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 2018 has been calculated at 17%, reflecting the tax rate at which the deferred tax is expected to be utilised in future periods.
12. Dividends
Final dividend – year ended 2017
1.75p per ordinary share paid during the year
Interim dividend – year ended 2018
0.85p per ordinary share paid during the year
2018
£’000
1,400
1,120
2,520
2017
£’000
—
680
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 7 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.
70
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS 13. Earnings per share
The calculation of basic and diluted earnings per share is based on the following data:
Basic weighted average number of shares
Dilutive potential ordinary shares from share options
Diluted weighted average number of shares
Profit for the year
Add back/(deduct):
Share-based payments
Exceptional costs and Carillion bad debt
Tax effect of the above
Underlying profit for the year
Earnings per share
Basic
Diluted
Basic – excluding exceptional costs, Carillion bad debt and share-based payments
Diluted – excluding exceptional costs, Carillion bad debt and share-based payments
2017
’000
80,000
—
80,000
£’000
7,339
148
1,239
(210)
8,516
2016
’000
75,123
—
75,123
£’000
7,353
77
1,781
(86)
9,125
Pence
Pence
9.2
9.2
10.6
10.6
9.8
9.8
12.1
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 charge 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.
14. Property, plant and equipment
Cost
At 1 May 2016
Additions
Disposals
Transfers/adjustments*
At 1 May 2017
Additions
Disposals
At 30 April 2018
Accumulated depreciation
At 1 May 2016
Charge for the year
Disposals
Transfers/adjustments*
At 1 May 2017
Charge for the year
Disposals
At 30 April 2018
Net book value
At 30 April 2017
At 30 April 2018
Land and
buildings
£’000
Plant and
machinery
£’000
Motor
vehicles
£’000
Office
equipment
£’000
4,852
1,377
—
21
6,250
537
—
29,698
8,355
(155)
(4,451)
33,447
10,881
(1,047)
8,059
1,904
(243)
(2,409)
7,311
1,652
(208)
6,787
43,281
8,755
222
206
—
4
432
259
—
691
13,474
3,346
(139)
(4,538)
12,143
4,187
(1,044)
4,093
1,049
(210)
(2,452)
2,480
1,195
(158)
15,286
3,517
5,818
6,096
21,304
27,995
4,831
5,238
1,127
58
—
(829)
356
80
—
436
827
54
—
(682)
199
64
—
263
157
173
Total
£’000
43,736
11,694
(398)
(7,668)
47,364
13,150
(1,255)
59,259
18,616
4,655
(349)
(7,668)
15,254
5,705
(1,202)
19,757
32,110
39,502
* The adjustment in the prior year relates to the clean-up of the fixed asset register for legacy assets, in particular the removal of fully depreciated assets which
are no longer separately identifiable or considered to exist.
71
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
For the year ended 30 April 2018
14. Property, plant and equipment continued
The net carrying amount of property, plant and equipment includes the following amounts held under finance leases: plant and machinery
£20,246,000 (2017: £16,412,000) and motor vehicles £3,130,000 (2017: £2,218,000). The depreciation charges for these assets were
£2,848,000 and £402,000 (2017: £1,934,000 and £367,085) respectively.
Bank borrowings are secured on the Group’s freehold land and buildings.
Included within land and buildings are £nil (2017: £455,000) of assets in the course of construction.
15. Intangible assets
Cost
At 1 May 2016
Additions
At 1 May 2017
Additions
At 30 April 2018
Accumulated amortisation
At 1 May 2016
Charge for the year
At 1 May 2017
Charge for the year
Disposals
At 30 April 2018
Net book value
At 30 April 2017
At 30 April 2018
Goodwill
£’000
Software
£’000
Total
£’000
2,179
—
2,179
—
2,179
—
—
—
—
—
—
112
71
183
38
221
—
—
32
44
—
76
2,291
71
2,362
38
2,400
—
—
32
44
—
76
2,179
2,179
151
145
2,330
2,324
Goodwill
Goodwill acquired is allocated, at acquisition, to CGUs that are expected to benefit from that business combination. The carrying value of
goodwill is allocated as follows:
General Piling
Specialist Piling
Ground Engineering Services
Ground Engineering Products
2018
£’000
1,147
742
240
50
2,179
2017
£’000
1,147
742
240
50
2,179
The Group tests annually for impairment of goodwill. The recoverable amounts of CGUs are determined using value-in-use calculations.
The value-in-use calculations use pre-tax cash flow projections based on the Board-approved budget for the year ended 30 April 2019.
Subsequent cash flows are extrapolated using an estimated growth rate of 2%.
The rate used to discount the projected cash flows is a pre-tax risk-adjusted discount rate of 10.2% for all business segments. The same
discount rate has been used for each CGU as the principal risks associated with the Group, as highlighted on pages 16 and 17, would also
impact each CGU in a similar manner.
The value-in-use calculations described above, together with a sensitivity analysis using reasonable assumptions, indicate ample headroom
and therefore do not give rise to impairment concerns.
16. Inventories
Raw materials and consumables
Work in progress
2018
£’000
1,430
1,135
2,565
2017
£’000
1,423
1,000
2,423
There were no impairment losses relating to damaged or obsolete inventories in the current or previous periods. The costs of materials
recognised as an expense within cost of sales is £35,725,000 (2017: £31,337,000).
72
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS
17. Trade and other receivables
Trade receivables
Construction work in progress
Less: provision for impairment
Trade receivables – net
Receivables from related parties
Financial assets classified as loans and receivables
Prepayments
Other receivables
2018
£’000
17,411
1,693
—
19,104
—
19,104
3,111
10
22,225
2017
£’000
14,903
2,438
(135)
17,206
—
17,206
1,512
78
18,796
The carrying value of trade and other receivables classified as loans and receivables approximates fair value.
All amounts shown under receivables fall due within one year and trade receivables include amounts recoverable on contracts that have
been charged to customers and recorded within revenue.
As of 30 April 2018, trade receivables include the Carillion bad debt write off of £965,000. Further details are disclosed in the Key
Performance Indicators, the Executive Directors’ Review and the Financial Review.
As at 30 April 2018 trade receivables of £8,181,000 (2017: £7,230,000) were past due but not impaired. They relate to customers with no
default history. The ageing analysis of these receivables is as follows:
Up to 3 months
3 to 6 months
6 to 12 months
Over 12 months
Movements in the impairment allowance for trade receivables are as follows:
At 1 May
Increase during the year
Receivable written off during the year as uncollectable
Unused amounts reversed
At 30 April
2018
£’000
7,323
603
241
14
8,181
2018
£’000
135
821
(956)
—
—
2017
£’000
6,745
187
264
34
7,230
2017
£’000
25
135
—
(25)
135
The movement in the impairment allowance for trade receivables has been included in the administrative expenses line in the consolidated
statement of comprehensive income.
Other classes of financial assets included within trade and other receivables do not contain impaired assets.
18. Construction contracts
Construction contracts in progress at the balance sheet date:
Contract costs incurred plus recognised profits (less losses) to date
Retentions withheld by customers
Advances received
19. Trade and other payables
Trade payables
Other payables
Accruals
Financial liabilities measured at amortised cost
Tax and social security payments
2018
£’000
51,614
59
174
2018
£’000
15,846
295
459
16,600
753
17,353
2017
£’000
59,723
148
104
2017
£’000
14,084
326
901
15,311
571
15,882
The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.
73
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
For the year ended 30 April 2018
20. Loans and borrowings
Non-current
Bank loans secured
Other loans secured
Finance leases (note 29)
Current
Bank loans secured
Other loans secured
Finance leases (note 29)
Total loans and borrowings
Maturity of loans and borrowings
Due within one year
Between two and five years
After more than five years
2018
£’000
975
12
10,218
11,205
150
97
5,333
5,580
2017
£’000
1,125
108
8,622
9,855
150
97
4,214
4,461
16,785
14,316
5,580
11,205
—
4,461
9,855
—
16,785
14,316
The carrying value of loans and borrowings approximates to fair value.
The loans are secured against specific freehold land and buildings and interest is payable at LIBOR plus 2.25% per annum and the finance
leases are secured against the specific assets subject to the lease.
The Group has a £3m overdraft facility in place, currently unutilised, which is subject to annual review.
21. Financial instruments and risk management
The Group’s financial instruments comprise cash, fixed-rate loans, obligations under finance leases and various items such as receivables
and payables which arise from its operations.
The carrying amounts of all the Group’s financial instruments are measured at amortised cost in the financial statements.
Financial instruments by category
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Current financial liabilities
Trade and other payables
Secured loans
Finance lease obligations
Total current financial liabilities
Non-current financial liabilities
Secured loans
Finance lease obligations
Total non-current financial liabilities
Total financial liabilities
Loans and receivables
2018
£’000
2017
£’000
10,880
19,104
29,984
12,858
17,206
30,064
Amortised cost
2018
£’000
2017
£’000
16,600
247
5,333
22,180
987
10,218
11,205
15,311
247
4,214
19,772
1,233
8,622
9,855
33,385
29,627
Capital management
The Group’s capital structure is kept under constant review, taking account of the need for, availability and cost of various sources of finance.
The capital structure of the Group consists of net debt, as shown in note 28, and equity attributable to equity holders of the parent as shown
in the consolidated statement of financial position. The Group maintains a balance between certainty of funding and a flexible, cost-effective
financing structure with all main borrowings being from committed facilities. The Group’s policy continues to ensure that its capital structure
is appropriate to support this balance and the Group’s operations. In order to maintain or adjust the capital structure, the Group may adjust
the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
74
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS
21. Financial instruments and risk management continued
Financial risk management
The Group’s objectives when managing finance and capital are to safeguard the Group’s ability to continue as a going concern, to provide
returns to shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The
Group is not subject to any externally imposed capital requirements.
The main financial risks faced by the Group are liquidity risk, credit risk and market risk (which includes interest rate risk). Currently, the
Group only operates in the UK and only transacts in Sterling. It is therefore not exposed to any foreign currency exchange risk. The Board
regularly reviews and agrees policies for managing each of these risks.
Credit risk
The Group’s financial assets are trade and other receivables and bank and cash balances. These represent the Group’s maximum exposure
to credit risk in relation to financial assets.
Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations. It is Group policy to assess the
credit risk of all existing and new customers on a contract-by-contract basis before entering contracts. The Board has established a credit
policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery
terms and conditions are offered. The Group’s review includes external ratings, when available, and in some cases bank references. Total
contract limits are established for each customer, which represent the maximum exposure permissible without requiring approval from
the Board. The ageing of trade receivables that were past due but not impaired is shown in note 17.
The counterparty risk on bank and cash balances is managed by limiting the aggregate amount of exposure to any one institution by
reference to their credit rating and by regular review of these ratings. The Board regularly reviews the credit rating of the banks where
funds are deposited ensuring that only banks with a credit rating of B, or better, are utilised.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due and managing its working
capital, debt and cash balances.
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve
this aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements for a period of at least 90 days. The Group
also seeks to reduce liquidity risk by fixing interest rates (and hence cash flows) on its long-term borrowings. This is further discussed in the
“market risk” section below.
The Board receives rolling three month cash flow projections on a weekly basis. At the end of the financial year, these projections indicated
that the Group expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances and will not
need to draw down on its agreed £3,000,000 overdraft facility.
The following table sets out the undiscounted contractual payments and maturities (including future interest charges) of financial liabilities:
At 30 April 2018
Trade and other payables
Secured loans
Finance lease obligations (note 29)
At 30 April 2017
Trade and other payables
Secured loans
Finance lease obligations (note 29)
Carrying
value
£’000
16,600
1,234
15,551
Total
£’000
16,600
1,295
17,031
Due
less than
3 months
£’000
16,600
70
1,459
33,385
34,926
18,129
15,311
1,480
12,836
29,627
15,311
1,576
14,132
31,019
15,311
71
1,161
16,543
Due
between
3 and
12 months
£’000
Due within
1 to 5 years
£’000
—
207
4,377
4,584
—
210
3,484
3,694
—
1,018
11,195
12,213
—
1,295
9,487
10,782
Market risk – interest rate risk
It is currently Group policy that 100% of external Group finance lease borrowings are fixed rate borrowings. Short-term overdraft and
mortgage loans are at variable rates. Divisions are not permitted to borrow short term from external sources. At 30 April 2018, it is estimated
that a general increase of one percentage point in interest rates would have a negligible impact on reported profit. The vast majority of debt
on finance leases is on fixed rates.
75
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
For the year ended 30 April 2018
22. Provisions
At 1 May 2017
Utilised
Additional provision
Released unused
At 30 April 2018
Due within one year
Due after more than one year
Warranty
provision
£’000
Insurance
provision
£’000
75
—
—
(40)
35
—
35
35
267
—
—
(32)
235
19
216
235
Warranty provision relates to workmanship claims and is based on potential costs to make good defects and associated legal and
professional fees in contesting the claims, net of amounts covered by insurance.
Insurance provision comprises insurance policy excesses associated with insurance claims.
23. Deferred tax
At 1 May 2016
Charge to income statement
Charge/(credit) to equity
At 30 April 2017
Charge/(credit) to income statement
Charge/(credit) to equity
At 30 April 2018
Accelerated
capital
allowances
£’000
Short-term
timing Share-based
payments
£’000
differences
£’000
713
67
—
780
191
—
971
(1)
(1)
—
(2)
—
—
(2)
—
—
—
—
—
—
—
Total
£’000
342
—
—
(72)
270
19
251
270
Total
£’000
712
66
—
778
191
—
969
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 17% (2017: 17%) being the rate
at which deferred tax is expected to reverse in the future (see note 11).
There is a further deferred tax asset of £nil (2017: £45,320) in respect of capital losses that have not been recognised in the financial
statements, as it is not considered probable that there will be future capital profits in this entity.
24. Share capital
Authorised
Ordinary shares of 2p each
Total authorised share capital
Allotted, issued and fully paid
Ordinary shares of 2p each
Total allotted, issued and fully paid
2018
2017
’000
£’000
’000
£’000
80,000
80,000
80,000
80,000
1,600
1,600
1,600
1,600
80,000
80,000
80,000
80,000
1,600
1,600
1,600
1,600
Share options
The maximum total number of ordinary shares which may vest in the future, in respect of conditional performance share plan awards at
30 April 2018, amounted to 2,461,254 (2017: 2,743,060). These shares will only be issued subject to satisfying certain performance
criteria (note 25).
76
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS 25. Share-based payments
The Company operates two share-based incentive schemes for Directors and key employees known as the Van Elle Holdings plc
Long Term Incentive Plan (“LTIP”) and the Van Elle Holdings plc Company Share Option Plan (“CSOP”). Both schemes are United Kingdom
tax authority-approved schemes.
The Group recognised total expenses of £148,000 (2017: £77,000) in respect of equity-settled share-based payment transactions in the year.
Long Term Incentive Plan (“LTIP”)
The Group operates an LTIP for senior executives. Share options were granted on admission to the AIM market in October 2016. The exercise
price is 2p, being the nominal value of shares. The options will vest after three years assuming continuing employment with the Company.
The extent to which the options will vest is dependent upon the Company’s performance over the three year period set at the date of grant.
The vesting of 50% of the awards will be determined by the Company’s relative total shareholder return (“TSR”) performance and the other
50% by the Company’s absolute EPS performance.
Details of the maximum total number of ordinary shares, which may be issued in future periods in respect of conditional share awards at
30 April 2018, is shown below.
2018
Number
2017
Number
At 1 May
Granted in the year
Forfeited in the year
At 30 April
1,155,000
—
— 1,385,000
(230,000)
(125,000)
1,030,000
1,155,000
The weighted average exercise price for all options is £0.02. Of the total number of options outstanding at 30 April 2018, none had vested
or were exercisable.
The weighted average fair value of each option granted during the year was £0.93 (2017: £0.56). The weighted average remaining
contractual life for share options outstanding at the balance sheet date was 30 months (2017: 47 months). The following information
is relevant in the determination of the fair value of options granted during the year under the LTIP.
Option pricing model used
Weighted average share price at grant date
Exercise price
Expected life
Expected volatility
Dividend yield
Risk-free interest rate (zero-coupon bonds)
Fair value of option (weighted average)
2018
Monte-Carlo simulation/Black-Scholes
£1.00
£0.02
3 years
36%
1.7%
1.5%
£0.93
The expected volatility is based on historical volatility over the period since listing. The risk-free rate is the yield on zero-coupon
government bonds of a term consistent with the assumed option life.
Company Share Ownership Plan (“CSOP”)
The Group operates a CSOP scheme for certain long-serving employees of the Company. The exercise price is equal to the share price at the
date of grant and there are no performance conditions attaching to the award of options, other than to remain in employment with the business.
Details of the maximum total number of ordinary shares which may be issued in future periods in respect of conditional share awards at
30 April 2018 is shown below.
At 1 May
Granted – 26 October 2016
Granted – 20 January 2017
Forfeited in the year
At 30 April
2018
Number
2017
Number
1,588,060
—
— 1,420,000
— 168,060
(156,806)
—
1,431,254
1,588,060
The weighted average exercise price for all options is £1.02. The weighted average remaining contractual life for share options outstanding
at the balance sheet date for the combined grants was 44 months (2017: 67 months). Of the total number of options outstanding at
30 April 2018, none had vested or were exercisable.
77
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Notes to the consolidated financial statements continued
For the year ended 30 April 2018
25. Share-based payments continued
Company Share Ownership Plan (“CSOP”) continued
The weighted average fair value of each option granted during the year was £0.27 (2017: £0.23). The following information is relevant in the
determination of the fair value of options granted during the year under the CSOP.
Option pricing model used
Weighted average share price at grant date
Exercise price
Expected life
Expected volatility
Dividend yield
Risk-free interest rate (zero-coupon bonds)
Fair value of option
Grant
October
2016
Grant
January
2017
Black-Scholes Black-Scholes
£1.19
£1.19
3 years
36%
1.7%
1.5%
£0.27
£1.00
£1.00
3 years
36%
1.7%
1.5%
£0.23
26. Reserves
The following describes the nature and purpose of each reserve within equity:
Share premium
Non-controlling interest
Retained earnings
The amount of capital contributed in excess of the nominal value of each ordinary share.
The value of minority interests in dormant Group companies.
All other net gains and losses and transactions with owners not recognised elsewhere.
27. Cash generated from operations
Operating profit
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Profit on disposal of property, plant and equipment
Share-based payment expense
Operating cash flows before movement in working capital
Increase in inventories
Decrease in trade and other receivables
Increase in trade and other payables
Decrease in provisions
Cash generated from operations
28. Analysis of cash and cash equivalents and reconciliation to net debt
Cash at bank
Cash in hand
Cash and cash equivalents
Bank loans secured
Other loans secured
Finance leases
Net debt
2018
£’000
9,710
5,705
44
(267)
225
15,417
(142)
(3,429)
1,470
(72)
2017
£’000
9,705
4,655
32
(89)
77
14,380
(812)
(1,950)
1,544
(33)
13,244
13,129
2017
£’000
Cash Flows
£000
12,810
48
12,858
(1,275)
(205)
(12,836)
(1,458)
(1,978)
—
(1,978)
150
95
—
(1,733)
Non-cash
flows
£’000
—
—
—
—
—
(2,714)
2018
£’000
10,832
48
10,880
(1,125)
(110)
(15,550)
(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.
78
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS 29. Lease commitments
Finance leases
Future lease payments are due as follows:
30 April 2018
Not later than one year
Between one year and five years
Later than five years
At 30 April 2018
Current liabilities
Non-current liabilities
30 April 2017
Not later than one year
Between one year and five years
Later than five years
At 30 April 2017
Current liabilities
Non-current liabilities
Operating leases – lessee
The total value of minimum lease payments is due as follows:
Due within one year
Between one and five years
Later than five years
30. Capital commitments
Contracted but not provided for
Minimum
lease
payments
£’000
5,858
11,173
—
17,031
5,858
11,173
4,795
9,337
—
Interest
£’000
525
955
—
Present
value
£’000
5,333
10,218
—
1,480
15,551
525
955
581
715
—
5,333
10,218
4,214
8,622
—
14,132
1,296
12,836
4,795
9,337
581
715
4,214
8,622
2018
£’000
90
547
2,058
2,695
2018
£’000
1,268
2017
£’000
87
454
2,226
2,767
2017
£’000
3,294
31. Related party transactions
Details of Directors’ remuneration and key management personnel remuneration are given in note 9.
Other related party transactions are as follows:
Related party transaction
Directors
Companies in which Directors
have a significant controlling interest
Dividends paid to key management personnel
Type of transaction
Director loans
Rent
Purchase of property
Transaction amount
Balance owed
2018
£’000
—
—
—
428
2017
£’000
(213)
—
—
115
2018
£’000
2017
£’000
—
—
—
—
—
—
—
—
The Group has not made any allowance for bad or doubtful debts in respect of related party debtors nor has any guarantee been given or
received during 2018 or 2017 regarding related party debtors.
79
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Parent company statement of financial position
As at 30 April 2018
Non-current assets
Investments
Current assets
Trade and other receivables
Total assets
Current liabilities
Trade and other payables
Net assets
Equity
Share capital
Share premium
Retained earnings
Total equity
Note
5
6
7
9
2018
£’000
6,276
6,276
6,675
6,675
2017
£’000
6,051
6,051
9,195
9,195
12,951
15,246
31
31
31
31
12,920
15,215
1,600
8,633
2,687
1,600
8,633
4,982
12,920
15,215
The Company has not presented its own profit and loss account as permitted by Section 408 of the Companies Act 2006. The Company’s
profit after taxation for the year amounted to £nil (2017: £4,549,000).
The financial statements were approved and authorised for issue by the Board of Directors on 25 July 2018 and were signed on its behalf by:
Paul Pearson
Director
The notes on pages 82 to 84 form part of these financial statements.
80
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Parent company statement of changes in equity
For the year ended 30 April 2018
Balance at 1 May 2016
Total comprehensive income for the year
Share redesignation
Issue of bonus shares
Issue of ordinary shares on IPO
Share issue costs
Dividend paid
Balance at 30 April 2017
Total comprehensive income for the year
Share-based payment expenses
Dividends paid
Balance at 30 April 2018
The notes on pages 82 to 84 form part of these financial statements.
Share
capital
£’000
1,006
—
63
331
200
—
—
1,600
—
—
—
Share
premium
£’000
Retained
earnings
£’000
—
—
—
—
9,800
(1,167)
—
8,633
—
—
1,399
4,594
—
(331)
—
—
(680)
4,982
—
225
Total
equity
£’000
2,405
4,594
63
—
10,000
(1,167)
(680)
15,215
—
225
—
(2,520)
(2,520)
1,600
8,633
2,687
12,920
81
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Notes to the parent company financial statements
For the year ended 30 April 2018
1. General information
These financial statements were approved and authorised for issue by the Board of Directors on 25 July 2018.
Van Elle Holdings plc is a public limited company incorporated and domiciled in the UK under the Companies Act 2006. The address of the
Company’s registered office is Van Elle Holdings plc, Kirkby Lane, Pinxton, Nottinghamshire NG16 6JA. The Company has its primary listing
on AIM, part of the London Stock Exchange.
2. Basis of preparation
The financial statements of Van Elle Holdings plc (the “Company”) are presented as required by the Companies Act 2006. The financial
statements 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 Company financial statements have been prepared on the going concern basis and
adopting the historical cost convention.
The Company financial statements are presented in Sterling, which is also the Company’s functional currency. Amounts are rounded to the
nearest thousand, unless otherwise stated.
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act and not presented an income
statement or a statement of comprehensive income for the Company. The profit for the year is disclosed in the statement of changes in
equity. The Company has no direct employees and all personnel costs are borne by the subsidiary company, Van Elle Limited.
The parent company does not maintain a separate bank account and all cash flows are transacted by subsidiary undertakings; and therefore,
a statement of cash flows is not presented.
The parent company does not employ any staff.
The assessment of going concern and the adoption of new accounting standards are consistent with those set out in note 2 of the
consolidated financial statements.
3. Significant accounting policies
The policies adopted by the Company are consistent with those set out in note 3 to the consolidated financial statements. The following
additional policies are also relevant to the Company financial statements.
Investments
Investments in subsidiary undertakings are valued at cost, being the fair value of the consideration given and including directly attributable
transaction costs. The carrying value is reviewed for impairment if events or changes in circumstances indicate the carrying value may not
be recoverable.
Dividends received
Revenue is recognised when the Company’s right to receive the payment is established, which is generally when the shareholders approve
the dividend.
4. Critical accounting estimates and judgements
The preparation of the Company financial statements requires the use of certain judgements, estimates and assumptions that affect the
reported amount of assets, liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will seldom equal the actual
results. The estimates and assumptions relevant to the financial statements are embedded within the relevant notes in the consolidated
financial statements.
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 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 assessing the value of
the estimate, for which the impact on revenue could be in the range of £0.2m to £0.7m.
Carrying value of investments
The key source of estimation uncertainty at the reporting date that has a significant risk of causing a material adjustment to the parent
company financial statements is the recoverability of the investments set out in note 5.
The recoverability is estimated based on the expected performance and value of the investments factoring in the potential expected
future net cash flow to be generated from the investment. The Company based its estimation on information available when these financial
statements were prepared. Existing circumstances and assumptions about future developments may change due to market changes or
circumstances arising beyond the control of the Company. Such changes are reflected when they occur.
82
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Open-site piling, ground stabilisation, restricted access micro
piling, site investigation and subsidence repair in the construction/
civil engineering sector
5. Investments
Cost
At 30 April
The undertakings in which the Company’s has an interest in at the year end are as follows:
Subsidiary undertakings
Van Elle Limited
Class of share
capital held
Proportion
of share
capital held
Ordinary
100%
Subsidiary undertakings of Van Elle Ltd
A & G (Steavenson) Limited
Dram Investments Limited
Van Elle 15 Limited
Ordinary
Ordinary
Ordinary
75%
100%
100%
The registered office of all subsidiary undertakings is Kirkby Lane, Pinxton, Nottinghamshire NG16 6JA.
6. Trade and other receivables
Receivables from related parties
Receivables from Group undertakings
Financial assets classified as loans and receivables
Prepayments
Other receivables
7. Trade and other payables
Other payables
Accruals
Amounts owed to Group undertakings
Financial liabilities measured at amortised cost
Tax and social security payments
Deferred income
2018
£’000
2017
£’000
6,276
6,051
Nature of business
Dormant
Dormant
Dormant
2018
£’000
—
6,675
6,675
—
—
6,675
2017
£’000
—
9,195
9,195
—
—
9,195
2018
£’000
2017
£’000
31
—
—
31
—
—
31
31
—
—
31
—
—
31
8. Financial instruments and risk management
The Company’s financial instruments comprise receivables and payables, which arise from its operations. The carrying amounts of all the
Company’s financial instruments are measured at amortised cost in the financial statements.
Financial instruments by category
Financial assets
Trade and other receivables
Total financial assets
Loans and receivables
2018
£’000
6,675
6,675
2017
£’000
9,195
9,195
83
VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS
Notes to the parent company financial statements continued
For the year ended 30 April 2018
8. Financial instruments and risk management continued
Financial instruments by category continued
Current financial liabilities
Trade and other payables
Total financial liabilities
Amortised cost
2018
£’000
2017
£’000
31
31
31
31
Financial risk management
The Company’s objectives when managing finance and capital are detailed in note 21 of the consolidated financial statements.
9. Share capital
Authorised
Ordinary shares of 2p each
Total authorised share capital
Allotted, issued and fully paid
Ordinary shares of 2p each
Total allotted, issued and fully paid
2018
2017
’000
£’000
’000
£’000
80,000
80,000
80,000
80,000
1,600
1,600
1,600
1,600
80,000
80,000
80,000
80,000
1,600
1,600
1,600
1,600
The details of the movements in share capital are disclosed in note 24 of the consolidated financial statements.
10. Share-based payments
For detailed disclosures of share-based payments granted to employees refer to note 25 of the consolidated financial statements.
11. Reserves
The nature and purpose of each reserve is provided in note 26 of the consolidated financial statements.
12. Related parties
Related party income and expenditure comprise dividends receivable from its subsidiary undertaking, Van Elle Limited, and adjustments for
group relief. No other income or expenditure is recognised in the Company accounts and any costs incidental to its operation are borne by
Van Elle Limited. The remuneration of the Board, who are the key management personnel of the Company and therefore related parties of
the Group, is set out in the remuneration report on page 48.
The Company does not maintain a separate bank account and instead maintains an intercompany balance with its subsidiary undertaking
in respect of internal funding. The amount outstanding from Van Elle Limited at 30 April 2018 was £6,675,000 (2017: owed to Van Elle Limited
£9,195,000).
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VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS
Electronic communications
You can elect to receive shareholder communications electronically
by signing up to Link Asset Services’ portfolio service. This will save
on printing and distribution costs, creating environmental benefits.
When you register, you will be sent a notification to say when
shareholder communications are available on our website and
you will be provided with a link to that information.
Enquiries on shareholdings
Any administrative enquiries relating to shareholdings in Van Elle
Holdings plc, such as dividend payment instructions or a change
of address, should be notified direct to the registrar, Link Asset
Services, at The Registry, 34 Beckenham Road, Beckenham, Kent,
BR3 4TU. Your correspondence should state Van Elle Holdings plc
and the registered name and address of the shareholder.
Shareholder information
Annual General Meeting
The Annual General Meeting (“AGM”) will be held on 18 September 2018
at One Wood Street, London, EC2V 7WS.
Shareholders will be asked to approve the Directors’ remuneration
report and the re-election of all the Directors. Shareholders will also
be asked to receive and adopt the accounts of the Company for the
year ended 30 April 2018, together with the reports of the Directors
and of the auditor thereon, to reappoint the auditor of the Company
(and authorise the Directors to approve the remuneration of the
auditor) and to declare a final dividend for the year.
Other resolutions will include proposals to renew, for a further
year, the Directors’ general authority to allot shares in the Company,
to allot a limited number of shares for cash on a non-pre-emptive
basis and to buy back the Company’s own shares.
Share price information/performance
Latest share price is available at www.van-elle.co.uk/investors.
By selecting share price information under the investor information
section, shareholders can check the value of their shareholding
online or review share charts illustrating annual share price
performance trends.
Shareholders can download copies of our annual report and accounts
from www.van-elle.co.uk/investors.
Corporate information
Registered office and advisers
Directors
Adrian Barden (Non-Executive Chairman)
Jon Fenton (Chief Executive Officer)
(resigned 18 May 2018)
Paul Pearson (Chief Financial Officer)
Robin Williams (Senior Independent Director)
David Hurcomb (Non-Executive Director)
(appointed 1 November 2017)
Group Company Secretary
Paul Pearson (acting)
Registered office
Kirkby Lane
Pinxton
Nottinghamshire
NG16 6JA
Company registered number
04720018
Nominated adviser and broker
Peel Hunt LLP
Moor House
120 London Wall
London
EC2Y 5ET
Solicitors
Eversheds Sutherland (International) LLP
Eversheds House
70 Great Bridgewater Street
Manchester
M1 5ES
Registered auditor
BDO LLP Nottingham
Regent House
Clinton Avenue
Nottingham
NG5 1AZ
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Banker
Lloyds Bank PLC
33 Park Row
Butt Dyke House
Nottingham
NG1 6GY
Financial PR
Instinctif Partners
65 Gresham Road
London
EC2V 7NQ
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VAN ELLE HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2018FINANCIAL STATEMENTS Van Elle Holdings plc
Kirkby Lane
Pinxton
Nottinghamshire
NG16 6JA
+44 (0) 1773 580580
info@van-elle.co.uk
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