TOTAL FOUNDATION SOLUTIONS Van Elle Holdings plc Annual report and accounts 2023 Strategic report About us The UK’s largest ground engineering contractor Right across the UK, communities are living, learning and working within buildings and travelling on infrastructure whose foundation solutions were developed and safely installed by Van Elle. OUR VISION OUR MISSION To be the leading, most trusted provider of total foundation solutions. To achieve perfect delivery on our projects. OUR VALUES Safety Integrity Teamwork Excellence Always put health and safety first. Open, honest and straightforward, delivering on our promises. A “can do” approach, working together to exceed customer expectations. Keen to impress our customers, always do a great job and keep improving what we do. Contents Strategic report IFC About us 1 Highlights 2 Our business at a glance Investment case 4 6 Our year in brief Chair’s statement 8 10 Market overview 12 Business model 14 Chief Executive Officer’s review 19 Strategic direction 22 Operational review 22 General Piling 23 Specialist Piling and Rail 25 Ground Engineering Services 26 Sustainability 37 Section 172/engaging with our stakeholders 40 Risk management and principal risks 44 Key performance indicators 46 Chief Financial Officer’s statement Corporate governance 51 Board of Directors 52 Corporate governance statement 55 Audit and Risk Committee report 58 Nomination Committee report 59 Remuneration Committee report 61 Directors’ remuneration policy Annual report on remuneration 64 66 Directors’ report 67 Statement of Directors’ responsibilities 68 Independent auditor’s report Financial statements 75 Consolidated statement of comprehensive income 76 Consolidated statement of financial position 77 Consolidated statement of cash flows 78 Consolidated statement of changes in equity 79 Notes to the consolidated financial statements 105 Parent company statement of financial position 106 Parent company statement of changes in equity 107 Notes to the parent company financial statements 110 Shareholder information IBC Corporate information Highlights OPERATIONAL HIGHLIGHTS n Record revenues and improved operating margins and return on capital n The Group’s diversity of end markets and broad range of capabilities has enabled growth despite economic uncertainties and project delays in some market sectors n Further strategic progress in enhancing the resilience of the Group with a growing presence in UK energy transmission and distribution infrastructure market, expansion of Housing sector foundation services, and diversification of Rail capability into Canada FINANCIAL HIGHLIGHTS Revenue (£m) £148.7m +19.1% Operating profit (£m) £5.9m +34.0% n The Group has been successful in managing materials and wages inflation and increased customer credit risk n Capital investment of £6.2m including spend on new rigs and the Group’s HGV fleet n Strong balance sheet with £1.3m hire purchase debt remaining at 30 April 2023, and an undrawn bank facility of up to £11m n Improved net funds position of £7.5m (excluding IFRS 16 lease liabilities) at 30 April 2023 n Final dividend of 0.8p per share recommended taking total dividend for the year to 1.2p Operating profit margin (%) 3.9% 2023 2022 2021 2020 148.7 2023 5.9 2023 124.9 84.4 84.4 2022 2021 (0.8) 2020 (1.6) 4.4 2022 2021 2020 (0.7) (0.3) 3.9 3.5 Net funds* (£m) £7.5m +27.6% Return on capital employed (%) 12.2% 2023 2022 2021 2020 5.9 3.7 7.5 2023 2022 2021 (1.8) 4.8 2020 (3.6) 12.2 9.4 * Net funds excluding IFRS 16 property and vehicle lease liabilities. NON-FINANCIAL HIGHLIGHTS Headcount (Number) 648 2023 2022 2021 2020 Apprentices and trainees (Number) Employee engagement score (%) 34 648 2023 601 514 517 2022 2021 2020 73% 34 2023 36 2022 30 2021 35 2020 73 75 73 69 Van Elle Holdings plc Annual report and accounts 2023 1 STRATEGIC REPORT Our business at a glance Van Elle’s integrated capabilities Our reputation in delivery of total foundation solutions is underpinned by our technical expertise, innovation and value-engineered solutions, which we strive to deliver safely for our customers and the communities we serve. WE WORK ACROSS THREE KEY MARKETS RESIDENTIAL INFRASTRUCTURE REGIONAL CONSTRUCTION Full range of services for housebuilders including ground investigation, ground improvement and ground stabilisation alongside driven and continuous flight auger (“CFA”) piles complemented by Smartfoot precast modular beam foundations. A full range of geotechnical services to the highways, rail, power and utility sectors including market-leading on-track capabilities. Foundation solutions for the commercial and industrial building markets including city centre specialisms and ground improvement and piling capabilities to the logistics sector. Revenue £56.9m +6.7% growth in year Revenue £62.6m +44% growth in year Revenue £28.9m +3.8% growth in year Revenue share 38+ 38+ Revenue share 38+ 20% 42% 38% Revenue share 2 Van Elle Holdings plc Annual report and accounts 2023 + 42 + 20 P + 42 + + 20 + + P + 42 + + 20 + + P COMPREHENSIVE SERVICE OFFERING Our service offering is delivered by our experienced specialist divisions and includes: n General piling n Ground investigation and testing n Retaining walls and basements n Rail geotechnical and ground engineering n Ground stabilisation and improvement n Specialist piling n Modular foundation systems n Construction and geotechnical training WE REPORT ACROSS THREE SEGMENTS GENERAL PILING SPECIALIST PILING AND RAIL GROUND ENGINEERING SERVICES Offering a variety of ground engineering and foundation solutions on open sites. Providing a range of piling and geotechnical solutions in operationally challenging environments. Offering a range of ground investigation expertise and modular foundation solutions. Revenue £54.8m +41% growth in year Revenue £46.6m +2% growth in year Revenue £47.1m +18% growth in year Revenue share 37+ 37+ Revenue share 37+ 37% 32% 31% Revenue share Van Elle Holdings plc Annual report and accounts 2023 3 STRATEGIC REPORT+ 31 + + 32 + + P + 31 + + 32 + + P + 31 + + 32 + + P Investment case Six reasons to invest in Van Elle 1 DIFFERENTIATED OFFERING n Full lifecycle capability, from ground investigation to design to construction to testing and monitoring n An integrated, in-house approach to complex projects, with expertise across 25 specialist techniques offering customers value-engineered solutions tailored to optimal project outcomes n Highly innovative, offering several unique capabilities n Leading track record in off-site, modular foundation systems in both precast concrete and steel n Significant expertise in highly regulated operating environments such as rail, power and highways n Diverse customer base with high levels of repeat business A LEADING UK PLAYER n The UK’s largest and most diverse ground engineering contractor n Experienced Board and senior management team n Low-risk, diverse operating model n Strong regional presence across the UK 2 ATTRACTIVE MARKETS n Delivering first-class ground engineering services across over 1,000 projects a year to a wide variety of customers and end markets n Balanced exposure across UK infrastructure, housing and construction markets n Buoyant market conditions post-pandemic are aligned to our capabilities n Strong customer relationships and high levels of repeat business 3 4 Van Elle Holdings plc Annual report and accounts 2023 WELL INVESTED AND RESOURCED n The UK’s largest and best invested rig fleet (circa £57m invested over the last eight years) n Over 25 specialist ground engineering techniques n The UK’s largest directly employed workforce within ground engineering, with over 600 employees n Over 5% of employees undergoing an apprenticeship, trainee or professional development route 4 5 STRONG FINANCIAL POSITION n Strong balance sheet, with low levels of debt and a track record of high levels of cash conversion n Stable institutional shareholder support n Platform for sustainable, accretive bolt-on acquisitions n Access to £11m facility to support future growth n Valuation underpinned by 130+ rig assets n Progressive and well covered dividend CLEAR STRATEGY FOR GROWTH n Our vision: to be the leading and most trusted provider of total foundation solutions n Our goals: developing trusted partnerships; deploying the best people and assets; and perfect delivery of our projects n Completed phases 1 and 2 of transformation plan n Delivering against medium-term financial targets of 5–10% annual revenue growth, 6–7% operating profit and 15–20% ROCE n Organic growth supported by targeted bolt-on acquisitions 6 Van Elle Holdings plc Annual report and accounts 2023 5 STRATEGIC REPORT Our year in brief MAY JUNE JULY n Our Rail division received a Bronze award in Network Rail’s “Route to Gold” scheme n We celebrated International Women in Engineering Day by highlighting the accomplishments of women throughout our business n We were appointed to the Piling framework for the West of Leeds section of the TransPennine Route Upgrade (TRU) programme n The Leadership Development programme was launched, aimed at developing and retaining the next generation of leadership talent n We were awarded a major piling project for enfinium’s Kelvin waste-to-energy facility in Sandwell n We announced our participation as primary providers of piling and retaining structures in the Smart Motorways Programme Alliance Framework n During Mental Health Awareness Week, our teams engaged in activities and shared stories and resources to address loneliness AUGUST n We announced our financial results for the year ending 30 April 2022, reporting record revenues of £124.9m and a strong return to profit after two years impacted by COVID-19 n ScrewFast began installation of helical piles and grillages for multiple substation structures at Sellingde for Murphy’s n We were honoured to receive the Bronze accolade from the Ministry of Defence Employer Recognition Scheme following the signing of the Armed Forces Covenant in early July 2 2 0 2 3 2 0 2 JANUARY FEBRUARY n Major piling works at enfinium’s Kelvin waste-to-energy n The Specialist Piling division completed the final phase at facility were completed n We committed to the Science Based Targets initiative (SBTi) as part of our strategy to reduce our environmental impact n Our Strata team was honoured with a Safety Coin by AECOM for its safe work practices n Our Strata team successfully completed ground investigation works in Thorpe Hesley, Rotherham, supporting The Coal Authority’s efforts to design a mine water treatment scheme and safeguard the River Don and River Dearne Dawlish Station for Bam Nuttall where we have been working for almost 2 years n Six additional Van Elle employees became certified Mental Health First Aiders, bringing our total to 32 individuals n Our Rail division successfully completed ground engineering works on the Southeastern line, mitigating landslip risks and contributing to a £3m improvement project 6 Van Elle Holdings plc Annual report and accounts 2023 SEPTEMBER OCTOBER NOVEMBER DECEMBER n Completion of the Group’s 200th rail station upgrade project at Theale Station n Our Ground Improvement team began the installation of over 16,000 vibro stone columns for Crown’s largest beverage can manufacturing facility in Europe n Our Rail division took delivery of the UK’s first excavator-mounted telescopic auger drive attachment n Our Piling division n Piling works on the n During our annual People Awards, received two consecutive “Subcontractor of the Month” acknowledgements based on our safety and quality performance from Wates Construction n We proudly donated £17,000 to Cancer Research UK, our chosen charity of the year, thanks to fundraising efforts by Van Elle employees n During National Inclusion Week, our employees shared personal pledges and commitments to drive inclusion beyond the campaign significant North London Heat and Power Project for Acciona commenced n We completed essential ground engineering work to prevent landslips and enhance reliability on the Axminster to Pinhoe maintenance project n Strata Geotechnics commenced ground investigation works for the A46 Newark Bypass, ahead of major improvement works for National Highways n We unveiled Prostate Cancer UK as our charity of the year for 2022–2023 we recognised outstanding individuals and flagship projects, with 23 recipients receiving trophies and 53 receiving special recognition out of 458 nominations n Our Rail and Specialist Piling divisions successfully completed essential work ahead of programme on Birmingham New Street Commissioning Works, Neville Hill West Junction (Leeds TRU East), and Core Valley Lines Electrification – Treherbert n We supported the Salvation Army’s Christmas Present Appeal by delivering over 150 donated presents from our employees MARCH APRIL n Van Elle Canada Inc was incorporated ahead of major rail infrastructure and electrification opportunities in Ontario n We showcased our innovative foundation solutions at NHBC’s Building for Tomorrow 2023 exhibition n Piling works at Level Road London and HS2 Mandeville Road were successfully completed n To expand our range of efficient foundation systems, we launched Smartdeck, an innovative piled raft foundation solution, which integrates piling and foundations to floor slab level. The system complements our Smartfoot precast foundation beam system, providing housebuilders with a comprehensive solution n ScrewFast completed significant works on the M6 junction 21A to 26 smart motorway scheme for Costain n Work on the Smart Motorway Alliance emergency refuge areas commenced Image owned by National Highways Van Elle Holdings plc Annual report and accounts 2023 7 STRATEGIC REPORT Chair’s statement Successful strategic progress I am pleased to report that the Group has made further progress against its strategic targets, delivering another year of record revenues with growth in all divisions. A strong recovery was achieved in the prior year, and this momentum has been sustained throughout FY2023. The Group delivered full year revenue of £148.7m, and an increase of 19% on the preceding year. Profit before tax increased by 49% over FY2022 to £5.4m. The balance sheet remains strong, with net funds (excluding IFRS 16 lease liabilities) increasing from £5.9m to £7.5m in the year. The Group also has an undrawn borrowing facility of up to £11m. The Group was impacted by supply chain disruption during the year, through both a lack of availability of raw materials and significant input price inflation. Towards the end of the financial year, these challenges eased, with improved stability of prices and availability. Inflationary pressures, including wage increases, also impacted the Group’s cost base and we continue to mitigate this as far as possible through contract pricing mechanisms. Labour shortages have remained challenging throughout the year, which has been managed successfully through focusing on employee recruitment and retention strategies. We have made good progress on delivery of the Group’s strategic plan and are developing stronger relationships with key customers, which has resulted in several significant contract and framework awards in the year. This provides increased visibility and reliability of future workload. Despite more challenging market conditions expected in the short term, the Group’s core markets are attractive, and the Board remain confident in achieving the medium-term strategic targets. Capital structure and allocation The capital structure of the Group is reviewed regularly by the Board, taking into account the need, availability and cost of sources of funding. The Group’s objective is to maximise shareholder value whilst maintaining a balance sheet structure that safeguards the Group’s financial position through normal economic and sector- specific cycles and supports investment in medium-term growth strategies including expected increases in working capital. The Group has a borrowing facility of up to £11m on a revolving basis, secured against receivables and certain tangible assets. The facility was undrawn at the end of the financial year. The arrangement matures in October 2024 and negotiations have commenced regarding extending the facility. The Group had hire purchase debt of £1.3m remaining at the year end, with £1.1m being repaid during the first quarter of FY2024. Capital expenditure was £6.2m, an increase over the previous three years as a result of prudent cash management during the pandemic, and was focused on upgrading or replacing ageing rigs, investing in new rigs to meet growth opportunities and renewal of the Group’s HGV fleet. FRANK NELSON Non-Executive Chair HIGHLIGHTS n Further strategic progress with another year of record revenues and growth in all divisions n Several significant contract and framework awards in the year n Easing of supply chain disruption and successful management of cost inflation during the year n Increased investment in the Groups rig and HGV fleet during the year n Interim dividend of 0.4p per share paid in the year and final dividend of 0.8p per share recommended The Group has made further progress against its strategic targets, delivering another year of record revenues.” 8 Van Elle Holdings plc Annual report and accounts 2023 Developing stronger relationships with key customers, which has resulted in several significant contract and framework awards in the year.” The Board continues to review and appraise acquisition opportunities, in line with its disciplined criteria and approach. The Board will look to supplement organic growth with earnings accretive, bolt-on acquisitions of established businesses which can augment and strengthen the Group’s offering. Dividend The Group reinstated the payment of dividends following the recovery of our core markets, and an improved financial performance in the prior year. A final dividend of 1.0p per share was paid on 7 October 2022. With a stronger performance in FY2023, the Board is pleased to recommend the payment of a final dividend of 0.8p per share to be paid on 13 October 2023 to shareholders on the register as at the close of business on 29 September 2023. The shares will be marked ex-dividend on 28 September 2023. An interim dividend of 0.4p (interim dividend FY2022: nil) was paid on 17 March 2023. The total dividend payable for FY2023 will therefore be 1.2p (FY2022: 1.0p). People I would like to thank all our employees for their hard work and commitment over the past year. The Group has delivered significant growth, with some difficult market conditions, and I am proud that our people have responded positively to these challenges. We recognise the importance of attracting and retaining the highest-quality workforce and accordingly take steps to understand the views of all employees. Our annual employment survey allows the Group to gather feedback from all employees and to develop action plans which support and improve employee engagement. Through our dedicated Training division, we are highly focused on developing our people. We ensure that all our workforce hold valid industry certifications and we offer training opportunities across the workforce. The Board recognises the cost-of-living crisis that is being experienced in the UK. Employee pay has been reviewed on a more regular basis and higher salary increases have been targeted for lower paid employees. Board and governance There have been no changes to the Board during the current year. Van Elle remains committed to promoting the highest standards of corporate governance and ensuring effective communication with shareholders. The Group adopts and complies with the Quoted Companies Alliance Corporate Governance Code, complemented with other suitable governance measures appropriate for a company of its size. I wish to thank my Board colleagues and the management team for their commitment over the past year as the Group has achieved significant growth and navigated some challenging market conditions. Outlook The Board anticipates that the current market uncertainty will continue over the coming year, particularly in the housebuilding sector. Notwithstanding these market challenges, activity levels in the first quarter of FY2024 have sustained and are broadly consistent with trading volumes throughout FY2023. The Group’s core markets have a positive outlook in the medium to long term and there are some good opportunities for growth including the high voltage power sector and geographical expansion of our rail capability. There is also a strong pipeline of opportunities across all divisions. The Board remains confident of achieving its medium-term financial targets of 5–10% annual revenue growth, 6–7% operating profit margin and 15–20% ROCE Frank Nelson Non-Executive Chair 25 July 2023 Van Elle Holdings plc Annual report and accounts 2023 9 STRATEGIC REPORT Market overview Short-term construction industry decline with return to growth in 2025 Our unique spread of activity across all construction sectors provides resilience in a challenging market. UK construction market overview Following a period of strong recovery and growth following the COVID-19 pandemic, the UK construction sector is expected to decline in 2023 and 2024, with 2023 showing the greatest decline. Overall, construction output early in 2023 remained higher than pre-pandemic levels. There are radical variations across a range of different construction sectors, in addition it is difficult to see overall output not falling significantly this year. Whilst supply chain issues have eased significantly, there are still many headwinds to overcome, notably high inflation impacting negatively on interest rates and continued uncertainty in the energy and food sectors as a result of the Russian invasion of Ukraine. Total UK construction output The government is delaying many large infrastructure projects and cancelling others altogether as it deals with the pressure on the country’s finances following the pandemic. Government funding direction is also changing as a result of the Ukraine invasion; security of energy supply is now a main priority and expected to grow within the infrastructure sector by 4% in 2023 and 7% in 2024. Improvements to water supply and security and waste water disposal are another considerable focus. Outlook The spring Construction Industry Forecasts 2023 to 2025 published by the CPA estimates a reduction in construction output in 2023 of 6.4%, with a forecast for 2024 of 1.1% increase in output. This is largely driven by the housing sector (a forecast decline of 17% in 2023), but also influenced by a fairly flat infrastructure output over the same period. Infrastructure is seeing a very real shift in spend from renewals to maintenance and repairs across the sector in all budget announcements. Industrial output is also of concern, whilst rising by a relatively small 1.1% in 2023, this is contrasted by a forecast decline of 14.8% in 2024. 2025 8.6 2024 8.5 2023 8.5 2022 8.6 2021 9.5 Key 70.2 27.1 28.8 44.1 £178.8bn 68.3 67.3 26.7 27.5 28.3 28.0 39.7 £171.5bn 38.4 £169.7bn 70.2 28.5 27.8 46.1 £181.2bn 64.2 26.7 27.9 42.3 £170.6bn Public Repair and maintenance Commercial and industrial Infrastructure Residential Source: Construction Products Association – Construction Industry Forecasts 2023–2025, Spring 2023 Edition. 10 Van Elle Holdings plc Annual report and accounts 2023 RESIDENTIAL Currently, the residential sector provides a business challenge, with most homebuilders announcing plans to reduce completions this year by up to 25% to 30% against previous forecasts. Interest rate rises and the associated affordability issues that customers are facing are cooling demand in the short term. Contrasting the market challenges have been the changes to Part L Building Regulations, with a deadline of mid- June this year, these regulations set the standard for the energy performance of the building, and the changes are expected to lead to increased build costs. This has resulted in a rush for housebuilders to make a meaningful start on buildings. This saw the house foundation sector extremely busy in the first half of this year with activity levels expected to dip in the first half of FY2024. Our response Our balanced customer base between private and social and affordable housing, the latter of which are less impacted by macroeconomic challenges and building regulation changes, provides some protection against volatility in activity levels. Further changes to Part L regulations in 2025 are also expected to build momentum ahead of the change. The introduction of our Smartdeck system will provide resilience in our offering whilst targeting specific geographical areas suited to the system, such as south east, an area where we have historically had a much lower market share. Our modular Smartfoot system continues to be the dominant MMC foundation solution in the market, although this is facing strong competition from traditional footings as the demand slows and installation programmes are under less pressure. UK market 2022 +9.0% Van Elle 2022/23 +6.7% CPA growth forecast 2023 2024 2025 (16.7)% 3.4% 11.1% INFRASTRUCTURE Highways work has been volatile, particularly in the second half of the year due to a change in government spending strategy and political pressures around the safety of smart motorways. This has resulted in a significant reduction in scale of the SMPA framework. and is budgeted in the region of £50bn. Pressure on the industry from government to both improve water quality and security of supply is significant; additionally public pressure related to water treatment and the discharge of waste water into rivers and seas will be substantial. National Highways investment period RIS 2 runs through to March 2025. We are currently awaiting spending budgets for RIS 3. It is clear that the RDP framework for NH has not performed as hoped, and there are currently proposals and consultations ongoing for a new framework, LDF. The LDF framework is not anticipated to be operational until 2026 at the earliest, potentially resulting in a lull in highways schemes coming online at the start of RIS 3. In the rail sector we are currently in year 5 of control period 6 (“CP6”), and performing well due to undertaking a number of embankment stabilisation works. A reduction in workload is still expected into FY2024 until CP7 starts to gain momentum. CP7 is expected to be challenging at the outset, as enhancement works are currently being deferred or descoped due to funding issues. However, there is greater emphasis on the maintenance of existing assets, especially embankment and cuttings, which presents an opportunity for our geotechnical solutions such as soil nailing, king post walls, etc. The TransPennine Route Upgrade (“TRU”) West is an additional fast up and down line between Manchester and Leeds, and one of the largest infrastructure schemes currently being progressed on site. Totalling a currently forecasted budget of £15bn, it is the single largest rail upgrade opportunity in the UK. Government spend on sectors where we are not traditionally strong is growing; of particular note, Water and Energy sectors. The next spending period in Water (“AMP8”) is due to commence in 2025 Given the recent events in Ukraine, energy security has become a more urgent objective. The connection of off-shore wind power to the grid to fully utilise its potential has resulted in a near £10bn roll-out of HV distribution, announced to be completed in the next seven to eight years. Within this, the 600km length of new overhead HV line is of particular interest, with towers requiring our highly specialist foundation solutions every 400m. Our response Whilst there have been cancellations of new smart motorways initiatives, our secured position on the SMPA framework allows us access to a large work bank of retrofit emergency areas required to serve the existing smart motorway network. This retrofit work has commenced on site, and whilst we are expecting a dip in the second half of this year, the programme gains considerable momentum at the start of 2024, towards the end of our FY2024. Other major opportunities in the highways sector include our ECI framework appointment for the A12 to A120 widening scheme for Costain, along with various local authority and RDP schemes. We are one of three geotechnical contractors on the TRU framework, and we are currently working across many structures in terms of ECI, with a work bank value of around £10m. We expect the majority of the workload to be delivered in 2024, end of FY2024 into FY2025. Work is across most of our divisions and disciplines, from sheet piles installed through our Rail division to bulk infill drilling and grouting, restricted access and precast piling. REGIONAL CONSTRUCTION The long-term shift towards an e-commerce economy was accelerated by the pandemic. Logistics and distribution has been a key area of growth in 2022, and continues to provide strong growth into 2023; however, as consumer spending wanes and the economic climate remains very challenging, it is expected that warehouse new builds will drop as we move into 2024 and 2025. The number, type and location of new office buildings have been impacted by the effects of the pandemic due to the shift in working habits, which has accelerated the move to remote working. This has enabled companies to significantly reduce the amount of office space required. Coupled with this, an enhanced focus on sustainability with a particular emphasis on carbon footprint is expected to result in an increase in renovation and upgrade as opposed to demolition and rebuild. An estimated 8% reduction in offices in 2023 is having a significant impact in this sector. This is expected, however, to return to a growth of 2% in 2024 and 4% in 2025. Our response Our highly specialist design and installation of rigid inclusions continues to grow in scale and has quickly established itself as one of the two market leaders in the sector. We have developed relationships with a number of repeat customers, and the scale of projects is steadily growing as the industry embraces this innovative solution. The addition of ground improvement techniques such as rigid inclusions and vibro stone columns to piled foundations means that we are able to offer the most economic solutions for our customers. We are regularly engaged in ECI agreements in order to drive innovative best-value options for the scheme. UK market 2022 -0.4% Van Elle 2022/23 +44.3% CPA growth forecast 0.7% 1.1% 2023 2024 2025 1.8% UK market 2022 +6.7% Van Elle 2022/23 +3.8% CPA growth forecast 2023 2024 2025 (3.5)% (2.9)% 1.5% Van Elle Holdings plc Annual report and accounts 2023 11 STRATEGIC REPORT Business model A focus on partnerships, people and perfect delivery OUR VISION HOW WE WORK To be the leading, most trusted provider of total foundation solutions Innovative We are constantly innovating and invest up to 10% of our expenditure into developing new techniques and applications Expert We provide more than 25 geotechnical, ground improvement and piling techniques across the Group Market leading We are one of the UK market leaders in the deployment of modular foundations to the housing sector OUR DIFFERENTIATED OFFER OUR VALUES We aim to provide customers with a differentiated and highly professional service Integrated capability We provide an end-to-end service, from initial ground investigation through to the largest types of foundation engineering UK’s largest rig fleet We have 132 rigs in our fleet, with £57m capital investment in 2015–2023 Dedicated team We deploy a directly employed workforce of more than 400 highly trained operatives Safety Always put health and safety first Integrity Be open, honest and straightforward and deliver on our promises Teamwork A “can-do” approach, working together to exceed customer expectations Excellence Keen to impress our customers; always do a great job and learn from our mistakes 12 Van Elle Holdings plc Annual report and accounts 2023 Link to strategy Improved business performance Foundations for growth Market leadership Read more about our strategy on pages 19 to 21 HOW WE ADD VALUE 1. Trusted partnerships n Long-term customer focus n End-to-end, integrated capabilities n Best-value, innovative technical solutions n Appropriate risk profile n Collaborative approach and early involvement n Conscious of our impact on communities and the environment THE VALUE WE CREATE Our customers n A focus on long-term strategic relationships n Provision of innovative, value-adding, cost-effective geotechnical solutions n A broad range of geotechnical solutions including modern methods of construction with off-site and modular products 2. The best people and assets n Engaged employees n 5% trainees and apprentices n Visible leadership n Well-trained, directly employed workforce n Optimised utilisation of well-maintained, extensive rig fleet n Responsive logistical support 3. Perfect delivery n Zero harm n Right first time n On time and on budget n Continuously improving n Satisfied customers Our shareholders n Delivering profitable growth with good cash conversion on track to achieve the Group’s medium-term financial targets Our people n Attracting and developing excellent people to create a vibrant, diverse and flexible workforce n Robust balance sheet with low gearing and reinvestment in the business to support our growth strategy n Operational flexibility leading to improving asset utilisation and return on capital employed n 100% direct labour model and a culture where employees feel valued and empowered to make informed decisions n Interesting and challenging careers in a diverse business that provides people with the opportunity to develop and reach their potential Recurring revenues Total recommended dividend Apprentices and trainees 68% 1.2p 34 Link to strategy Link to strategy Link to strategy Read more about stakeholder engagement on pages 37 to 39 Van Elle Holdings plc Annual report and accounts 2023 13 STRATEGIC REPORT Chief Executive Officer’s review Market and capability diversification driving growth Overview The Group made excellent progress against its strategy in FY2023, delivering record revenues with strong trading momentum in all divisions throughout the majority of the financial year. Building on the strong growth achieved in the previous year, full year revenue increased to £148.7m, 19% higher than the prior year (FY2022: £124.9m). Each of the Group’s three segments reported revenue growth in the year. General Piling revenue increased by 41% on the prior year, with a strong brought forward order book and several large contracts won and delivered in the year. Revenue growth was primarily from high activity levels on major energy and logistics projects. Specialist Piling and Rail revenue was 2% higher when compared to the prior year. The Specialist Piling division experienced softer market conditions in the second half of the year, primarily as a result of delays to highways projects, although in the medium- term opportunities for the division remain positive. The Rail division performed very well, despite some disruption caused by rail strikes in the first quarter of the financial year. The division experienced a strong workload from closer customer partnerships formed during CP6 ahead of the transition to CP7 in 2024. Large electrification projects provided a solid baseline of work throughout the year, particularly on the Midland Mainline and Core Valley Lines projects and numerous stations, slopes and embankment schemes across the UK. Ground Engineering Services revenue increased by 32%. The housebuilding market into which the Group delivers a range of services, including its Smartfoot ground beam system, experienced high demand throughout the year. Softer market conditions are expected in FY2024, but the division delivers a range of services with a diverse customer base, which is expected to mitigate some of the wider market impacts ahead of improved conditions expected in FY2025. The supply chain disruption which impacted the Group’s results over recent reporting periods, has eased, with improved stability of input prices and more reliable availability. However, inflationary pressures adversely affected the Group’s cost base, particularly through wage, utilities and fuel cost increases. These cost increases are mitigated through contract price mechanisms as far as possible; however, in some cases there is a lag in recovery. Group overheads have been unavoidably impacted by wage growth, as retention of key skills remains a priority to deliver our strategy. Despite some challenges due to wider economic uncertainty and some softer market conditions in certain segments, the Group reported a materially improved profit before tax of £5.4m (FY2022: £3.6m), operating margins improving to 3.9% (FY2022: 3.5%), progressing towards our target range of 6–7% margins. Basic earnings per share increased by 159% to 4.4p (FY2022: 1.7p). Return on capital employed improved to 12.2%, demonstrating good progress towards achieving the Group’s strategic target range of 15–20%. MARK CUTLER Chief Executive Officer HIGHLIGHTS n Record revenues and improved operating margins and return on capital following further progress in delivery of strategic plan n The Group’s diversity of end markets and broad range of capabilities has enabled growth despite economic uncertainties and project delays in some market sectors n Further strategic progress in enhancing the resilience of the Group with a growing presence in UK energy transmission and distribution infrastructure market, expansion of Housing sector foundation services, and diversification of Rail capability into Canada n Capital investment of £6.2m including spend on new rigs and the Group’s HGV fleet n Strong balance sheet with £1.3m hire purchase debt remaining at 30 April 2023, and an undrawn bank facility of up to £11m 14 Van Elle Holdings plc Annual report and accounts 2023 The Group has limited its Scope 2 emissions through a new electricity purchase agreement, which is from 100% renewable sources (certified under the Renewable Energy Guarantees of Origin scheme). In addition, we are ESOS phase 2 compliant, and are in the process of achieving ISO 50001 Energy Management certification. A key pillar of the Group’s Sustainability Strategy is engagement with our supply chain and joint participation in innovation projects (as pictured below at the Sustainability Open Day). We are trialling battery-powered electric tools and are involved in the trial of low carbon cement in our precast factory operations. Our near-term roadmap to 2030 includes trials of hybrid machinery and fleet such as hydrogen/diesel, where technology is available. Record revenues with strong trading momentum in all divisions throughout the majority of the year.” The safety and wellbeing of all employees is Van Elle’s first priority. Greater investment in resources and systems has been delivered in FY2023, including the launch of an upgraded Integrated Management System involving an overhaul of all operational processes to embed best practices and improved consistency. The Group’s headcount increased to an average of 648 (FY2022: 601), but pleasingly the number of safety incidents reduced, with three RIDDOR reportable accidents in FY2023 compared to four in FY2022. Accordingly the Group’s Accident Frequency Rate reduced to 0.19 (FY2022: 0.28). Net funds, excluding IFRS 16 property and vehicle lease liabilities, increased to £7.5m at 30 April 2023 (30 April 2022: £5.9m). Working capital increased by £1.9m, primarily due to the impact of higher trading activity. Net capital expenditure of £5.6m (FY2022: £4.6m) primarily represents increased investment in rigs and the Group’s HGV transport fleet. The Group maintains a strong balance sheet with a healthy cash balance and significant liquidity headroom against its £11.0m funding facility. An additional £1.5m of new hire purchase finance was arranged during the year on a variable interest rate basis, with no early repayment charges. Total hire purchase finance at the end of the year was £1.3m, of which £1.1m has been repaid in Q1 FY2024. Group debt remains well within the target leverage threshold of less than 1.5 times EBITDA. ESG The Group launched its Sustainability Strategy in FY2021, which is aligned with the UN Sustainable Development Goals that are most applicable to our business operations. Our strategic plan includes goals, targets and performance indicator measures and allocates business leaders to manage actions. We aim to measure our strategy against the indicators annually to monitor our performance and identify continuous improvement measures. Our long-term “Net Zero by 2050” commitment is supported in the medium term by a roadmap to 2030, which provides a clear strategic pathway to a 30% reduction in our greenhouse gas emissions from a 2020 baseline. We have committed to developing Science Based Targets to allow us to set achievable emissions reduction targets against a representative base year to achieve Net Zero by 2050. We are actively engaging with our supply partners to understand the greenhouse gas emissions arising from the materials and services with which they provide us. The use of fuel is the main contributor to our Scope 1 emissions, and we are looking at transitional solutions to reduce emissions whilst new technologies are developed. We expanded our company car scheme offering to include hybrid and electric vehicles and these have been taken up by several employees. At head office we have installed electric chargers for employee and visitor use. Van Elle Holdings plc Annual report and accounts 2023 15 STRATEGIC REPORT Chief Executive Officer’s review continued To expand its range of foundation systems, the Group launched Smartdeck, an innovative piled raft foundation solution that integrates piling and foundations to floor slab level. The system complements the Company’s Smartfoot precast foundation beam system. Discussions are ongoing with key customers, and the Company expects to deploy Smartdeck on projects commencing in Q2 FY2024. Industry forecasts predict weaker market conditions in the segment throughout FY2024. The Group has experienced some slowdown in new-build housing starts during the second half of the financial year, although general activity levels have remained strong as housebuilders have been active in advance of the new Part L Building Regulation changes, which were effective from June 2023. The Group is closely involved with several national housebuilders to help develop efficient foundation solutions ahead of further Building Regulations changes planned for 2025. The impact of increasing interest rates is likely to slow new-build starts further, and this is being reflected in recent housebuilder forecasts. A reduction in sector activity levels during FY2024 is therefore expected and the divisional cost base will be reduced to mitigate the financial impact as far as possible. The Group operates across a diverse range of customers, tenures and geographies in the housebuilding sector, and this is expected to provide some protection against reduced volumes experienced by private housebuilders. The recent challenges faced by certain modular housebuilders will not have a significant impact on Group performance. Offsite/modular housing is still at early stage lifecycle development, and although several projects have been delivered, revenues on such projects have, to date, not been material and due to its credit control processes the Group had no financial exposure. Strategy The business has continued to make solid progress against its strategy, with a clear focus on Phase 3 of the plan, launched in 2019, to deliver market-leading performance. The medium-term financial KPIs (annual revenue growth of 5–10%, underlying operating margins of 6–7%, ROCE of 15–20% and leverage of less than 1.5 times EBITDA) first announced in 2020 remain the Group’s objectives. The results for FY2023 are positive steps towards delivery of those targets. Strategic highlights in the year include: n A stronger focus on major project and framework opportunities, now led by a dedicated director. The Smart Motorways Programme Alliance and the TransPennine Route Upgrade programme are two of the major frameworks that present growth opportunities for the Group in FY2024 and beyond, both progressing through design phases during FY2023 n Launch of our Canadian rail subsidiary and commencement of operations in Canada, with initial framework contracts expected to be awarded in H1 FY2024 n An increased focus on the UK energy market, with excellent progress made in FY2023 on delivery of high voltage infrastructure projects with our preferred customers. The award of a major new framework is expected in H1 FY2024 and others are at preferred bidder stage. Several customer partnerships are being developed ahead of strong growth in investment driven by the UK Government’s and the regulator’s energy security strategy n The launch of the Group’s Smartdeck housing foundation solution providing an alternative to Smartfoot where appropriate. Initial projects are expected to be awarded in Q2 FY2024 n Further expansion of the Group’s ground improvement capability, reaching £10m turnover in these specialised techniques in FY2023 n Increased rig fleet investment following a restricted level of capital expenditure during the pandemic. This is to support a long-term replacement and renewal strategy and enable expansion in key strategic growth areas such as rail, ground improvement and sheet piling n The launch of the Van Elle leadership development programme in FY2023, aimed at developing and retaining the next generation of leadership talent. An initial cohort of 14 managers will be followed by a second group in FY2024 n Expansion and refurbishment of the Group’s premises at Kirkby in Ashfield and nearby Pinxton to provide additional capacity and expanded in-house training services to meet the needs of growth in the Group’s headcount. Markets The Group operates in three market segments: n Residential constituted 38% of Group revenues in the year (down from 43% in FY2022). Divisional teams deliver integrated piling and foundation systems for national and regional housebuilders, retirement homes and multi-storey residential properties Following the severe impact on the segment during the pandemic there was a strong recovery in workloads, which resulted in significant revenue growth in FY2022. This high level of demand was sustained throughout the majority of FY2023, with 7% revenue growth, building on the strong prior year sector performance. 16 Van Elle Holdings plc Annual report and accounts 2023 Van Elle Canada Inc was incorporated in March 2023 ahead of major rail infrastructure and electrification opportunities in Ontario.” Notwithstanding the short-term challenges in the housebuilding sector, medium and longer-term opportunities remain compelling as the government drives its agenda to deliver 300,000 net additional dwellings per annum. n Infrastructure constituted 42% of Group revenues in the year (up from 35% in FY2022). The segment includes specialist ground engineering services to the rail, highways, coastal and flooding, energy and utility sectors. Infrastructure saw the largest absolute, and relative, growth in the year of 44% over FY2022, despite experiencing major delays or cancellations to certain major projects in the highways sector, which it previously expected to deliver or commence delivery during the year. Work continued to be delivered under both local authority and National Highways frameworks, but the government’s pause, and subsequent cancellation, of all new smart motorways impacted the pipeline of work in this programme. Design work for the ten-year National Highways Smart Motorway Programme Alliance has continued for important additional safety measures on the existing network, including new emergency refuge areas, being planned for delivery in H2 FY2024 onwards. Activity levels increased in the Rail sector, with ongoing electrification programmes in South Wales and the East Midlands and strong revenues as CP6 entered the final year before CP7 commences in 2024. The Group also delivered several high profile and complex schemes at stations and to stabilise slopes, embankments and cuttings including the Dawlish seafront (pictured on page 24) where we have been working for almost two years. The Group has been appointed as a framework partner to the TransPennine Route Upgrade (TRU) programme, with the first revenues expected to be delivered in H2 FY2024. In order to widen the opportunities available for our specialist rail engineering capabilities and provide some protection against the cyclical nature of UK rail investment, a Canadian subsidiary has been established, based in Toronto. The first framework delivery contracts are expected to commence in Q2 FY2024. Although participation in Phase 1 (London to Birmingham) to date has been modest, HS2 continues to offer medium-term opportunities to parts of the Group, primarily on Phase 2 north of Birmingham, where customer partnerships are being established at an early stage. There is, a rapidly growing pipeline of opportunities in the energy sector reflecting the increased investment in distribution and transmission infrastructure for which the Group is well-placed due to its range of capabilities, and in particular the ScrewFast solution. During FY2023, several substation, switch room and power line schemes were delivered. Further major transmission line schemes and frameworks are in negotiation. n Regional Construction constituted 20% of Group revenues (down from 22% in FY2022). The Group delivers a full range of piling and ground improvement services to the commercial and industrial sectors, from private and public sector building and developer-led markets across the UK. Revenue has remained robust in the regional construction segment, increasing by 4% in FY2023, supported by industrial and logistics warehouse projects for private customers across the UK, and larger commercial projects in central London, delivered substantially by the General Piling division. Growth of our ground improvement capabilities (vibro and rigid inclusion techniques) has assisted in accessing a wider range of attractive projects in the industrial sector. The regional construction market remained strong in the year, but has continued to be relatively competitive and, as a result, price sensitive. Van Elle Holdings plc Annual report and accounts 2023 17 STRATEGIC REPORT Chief Executive Officer’s review continued Operating structure Van Elle’s operational Group structure has remained consistent and is reported in three segments: n General Piling: open site; larger projects; key techniques being large diameter rotary, CFA piling, precast driven piling, rigid inclusions and vibro stone columns n Specialist Piling and Rail: restricted access and low headroom piling; extensive rail-mounted capability; helical piling and steel modular foundations (ScrewFast); sheet piling, soil nails and anchors, mini-piling and ground stabilisation projects n Ground Engineering Services: driven and CFA piling for housebuilders, precast concrete modular foundations (Smartfoot and Smartdeck); ground investigation and geotechnical services (Strata Geotechnics) Rig fleet Capital expenditure increased to £6.2m in the year (FY2022: £4.9m), but was lower than expected due to long lead times on certain capital purchases, which will not be delivered until FY2024. With positive cash generation, investment was increased to both sustain the existing rig fleet as well as invest for growth in key strategic growth areas. The Group invested £2.8m of capital spend in the Rail division, which included the continued rolling programme of mid-life overhauls of the rig fleet, where major parts of the rigs are replaced and are expected to extend the rig life for at least another seven years. In addition, two new RRV rigs were acquired (along with ancillary attachments) to continue to expand the division’s capacity and capabilities. The HGV fleet has commenced a full renewal after relatively low investment during the pandemic. This refresh of the fleet will be completed in FY2024. The total rig fleet size at the year end was 132, up from 122 last year. Summary and outlook Activity levels in the first quarter of FY2024 have continued to be strong with a healthy pipeline of opportunities across all divisions. All of the Group’s core markets show a positive outlook in the medium to long term, despite some short-term challenges in certain sectors. Higher interest rates, high inflation and the cost-of-living crisis are contributing to greater market uncertainty, particularly in the housebuilding sector, which is expected to deliver lower volumes during FY2024. Several projects in the infrastructure sector have also been cancelled or delayed. However, our other core markets are showing resilience, and we continue to focus on growth sectors, including an increasing presence in the high-voltage power sector and expanding our rail capabilities geographically. The Group is also benefitting from improved future work visibility, primarily due to being appointed to several framework agreements, which are expected to deliver consistent future workloads. Inflationary pressures on the Group’s cost base have continued and are likely to persist in the short term; however, the Group continues to largely offset cost increases through contract pricing mechanisms. Despite a more challenging macroeconomic environment currently impacting some of our divisions, the diversity of our range of activities and operating segments, a focus on growth sectors and continued delivery of the strategy results in a positive outlook in line with the medium-term targets previously announced. Mark Cutler Chief Executive Officer 25 July 2023 18 Van Elle Holdings plc Annual report and accounts 2023 Strategic direction Delivering strategic actions The Group’s objective is to grow and develop a sustainable business for the benefit of all our stakeholders. In FY2019 the business launched its three-phase strategy of improving business performance, developing foundations for growth and establishing a market leadership position. The business has continued to make solid progress against the Group’s strategy, with a clear focus on phase 3 of the plan. Success on delivery of the strategic actions means the business is on track to deliver the medium-term financial targets of revenue growth of 5–10% per annum, underlying operating margins of 6–7%, and return on capital employed of 15–20%. IMPROVED BUSINESS PERFORMANCE Strategic priorities n Simplified structure, improved leadership capability, strengthening of management team, employee engagement and development n Operational performance improvement and increased asset utilisation n Strengthened commercial approach, improved compliance and governance n Overhead and cost efficiencies, debt reduction and strong cash position Progress to date n Launch of the Van Elle leadership development programme, aimed at developing and retaining the next generation of leadership talent n Co-location completed, leadership team finalised and employee engagement improving n Operational performance and rig utilisation improving n Strengthened commercial activities and improved governance and risk management with key appointments n Cost reduction and cash preservation actions embedded n Strengthening of the health and safety team with experienced safety professionals aligned to each division n Full review of employee remuneration and benefits, with improvement to terms targeted at employee engagement and retention Links to KPIs 1 2 3 4 6 8 Read more about our KPIs on pages 44 and 45 Links to risks 4 5 6 7 8 9 Read more about our risks on pages 40 to 43 Growth in ground improvement techniques We achieved an ongoing expansion in constructing industrial and logistics warehouses throughout the UK, successfully completing multiple projects this year. Our growth has been augmented by the development of ground improvement services, including vibro stone columns and rigid inclusions, which are often specified alongside driven and continuous flight auger (“CFA”) piling for larger warehouse schemes. Examples include the installation of over 16,000 vibro stone columns at a 625,000 sq. ft project located in Peterborough, which supported Crown’s largest manufacturing facility for beverage cans in Europe. We also supported the 544,000 sq. ft Farington Park industrial project in Leyland. During the 14- week programme, foundations to support the new storage, industrial and distribution complex included the installation of 10,957 320mm diameter rigid inclusions to depths ranging from 5m to 14m. The rigs used on these projects were low emission, part of our commitment to limiting our environmental impact. Van Elle Holdings plc Annual report and accounts 2023 19 STRATEGIC REPORT Launch of Smartdeck foundation system In April 2023, we announced the launch of Smartdeck, expanding our range of efficient foundation systems. The innovative piled raft foundation system integrates a range of piling techniques delivering a finished foundation to the structural slab level. The system complements our Smartfoot precast foundation beam system and can be used alongside it on the same project to deliver the most cost-effective solution for our clients. Our Smartdeck product has been well received by the market and we expect to be commencing our first projects in H1 FY2024. Strategic direction continued FOUNDATIONS FOR GROWTH Strategic priorities n Develop leading market position in key sub-sectors – housing, highways, rail and industrial n Raised brand profile and key customer development n Early involvement, improved bidding capability and total foundations offering n Innovation focus, diversified specialist services and selective capital investment n Bolt-on acquisitions to strengthen end-to-end service offering Progress to date n Launch of the Smartdeck housing foundation solution providing an alternative to Smartfoot n Refurbishment of the owned and previously sub-let Pinxton premises to provide additional depot capacity n Refocused business development team and improved brand awareness n ScrewFast complementary acquisition focused on specialist higher margin offering now fully integrated into the Specialist Piling division with aligned management and operational teams n National roll-out and continuous innovation of the Smartfoot product offering n R&D expenditure circa 10% of cost base n Diversification of capabilities including rail ground investigation, rigid inclusions, vibro stone columns and ancillary civils in rail n Strong balance sheet with low gearing and asset-based lending facility of up to £11m to support growth n Significant rig fleet investment to support expansion in key strategic growth areas such as rail, ground improvement and sheet piling n Expanded suite of in-house training services and facilities at the Kirkby training centre to meet the needs of the growth in the Group’s headcount Links to KPIs 1 2 3 6 7 8 Read more about our KPIs on pages 44 and 45 Links to risks 1 2 3 6 9 10 11 Read more about our risks on pages 40 to 43 20 Van Elle Holdings plc Annual report and accounts 2023 MARKET LEADERSHIP Strategic priorities n Become a trusted partner for key customers; increasingly involved in longer-term collaborative projects n Deploying the best people and assets n Delivering operational excellence on over 1,000 projects a year n Continuous innovation to improve our performance and broaden our integrated capabilities n Reduce our environmental and carbon impact to Net Zero by 2050 n Delivery of our medium-term financial KPIs Progress to date n Appointment of Pre-construction Director with a dedicated focus on repeat working and early involvement with key customers on longer term project opportunities n Appointment to the ten-year Smart Motorways Programme Alliance n Appointment to the piling frameworks for electrification of the Core Valley Lines and the TransPennine Route Upgrade n Further diversification of capabilities in ground improvement, rail and specialist piling strengthens our end-to-end offering n Investment in the next generation, UK designed-and-built road-rail piling rigs n ScrewFast acquisition broadens our product offering in off-site, modern methods of foundation solutions n Launch of our Canadian rail subsidiary and commencement of operations in Canada n An increased focus on the UK energy market with delivery of high voltage infrastructure projects Links to KPIs 1 2 3 4 5 6 7 8 Read more about our KPIs on pages 44 and 45 Links to risks 1 2 3 6 8 11 Read more about our risks on pages 40 to 43 Risks 1 A rapid downturn in our markets 2 3 Failure to procure new contracts Loss of market share Incorporation of Van Elle Canada Inc In March 2023, we announced the incorporation of Van Elle Canada Inc in Ontario, Canada. This strategic move positions us within the Canadian market ahead of major rail infrastructure and electrification opportunities in Ontario. These are due to commence during FY2024, and represent a significant long- term infrastructure spend. This will support growth and increased resilience against UK rail investment uncertainty, leveraging our market- leading capabilities in foundations for electrification, earthworks resilience, structures and track bed stabilisation. KPIs 1 Revenue 2 Operating profit 3 Operating margin 4 Non-compliance with our Code of Business Conduct 5 Product and/or solution failure 4 Operating cash conversion 5 Earnings per share (“EPS”) 6 7 Ineffective management of our contracts 6 Net funds Failure to comply with health and safety and environmental legislation 7 Return on capital employed 8 Not having the right skills to deliver 9 Insufficient resources to deliver contracts 10 Cyber attack 11 Inability to finance our business 8 Leverage Van Elle Holdings plc Annual report and accounts 2023 21 STRATEGIC REPORT Strategic report Operational review General Piling What we do General Piling offers design and construction solutions for our larger rotary, CFA and driven piling projects that don’t require restricted access specialist techniques, typically involving deeper and larger diameter piles and complex major project requirements. Year in review Revenue increased by 41% in the year to £54.8m (FY2022: £39.0m), representing 37% of Group revenues. The General Piling division operates across each of the Group’s three market segments. Market conditions remained competitive throughout the year, with price-sensitive tendering continuing to be a key factor in winning work. However, the division made further progress in developing strong customer relationships and delivered high-quality contract works utilising its broad and significant technical capabilities. Performance in the residential and regional construction segments was robust, assisted by the completion of several major projects across the UK, using the Group’s rotary, CFA, precast driven sheet piling and rigid inclusion capabilities. Strong revenue growth was also delivered in the infrastructure segment, with activity on two major energy contracts (total value of approximately £26m) in the year. The first of these contracts was completed in January 2023, and the second contract is now expected to complete in Q2 FY2024. Inflationary pressures have remained challenging for the division (particularly fuel, raw materials and wages), but the increased activity levels resulted in significantly improved profitability in FY2023. Underlying operating profit for the division was £3.4m (FY2022: £1.8m). KEY PROJECTS IN FY2023 n Enfinium’s Kelvin waste-to-energy facility in Sandwell for Acciona, supported by 2,124 piles across 19 structures using CFA and rotary bored techniques n The Skanska, Costain and STRABAG (SCS) joint venture saw the installation of piles using the rotary bored technique at Mandeville Road Ventilation Shaft and Headhouse n CFA piling for Wates’ industrial development in the North East, with 2,422 bearing piles up to 14 meters in length Revenue (£m) £54.8m +41% 2023 2022 2021 2020 Operating profit (£m) £3.4m +89% Projects 187 54.8 2023 3.4 39.0 27.3 29.3 2022 2021 2020 1.8 0.3 (2.0) 22 Van Elle Holdings plc Annual report and accounts 2023 Specialist Piling and Rail What we do The Specialist Piling and Rail segment comprises the Specialist Piling and Rail divisions, which have closely aligned capabilities. Specialist Piling 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 well as off-track rail environments. Additionally, we offer nails and anchors, drilling and grouting techniques and sheet piling for ground stabilisation projects required for large civil engineering and new-build residential schemes. The division also provides helical pile and steel and modular foundation solutions under the ScrewFast brand. The Rail division specialises in on-track geotechnical operations across the UK’s rail network. Year in review Revenue increased by 2% in the year to £46.6m (FY2022: £45.8m), representing 31% of Group revenues. Specialist Piling experienced very high levels of demand in the first half of the financial year as a result of the division expanding its operational capability by investing in new rigs for growth and increasing the number of site gangs. Key contracts included the Group’s 200th rail station project, the start of the M6 Smart Motorway scheme, several high-voltage substations and several major ground stabilisation contracts for housebuilders. Softer market conditions were experienced in the second half of the year, primarily because of delays to major infrastructure work on highways and a short-term decrease in demand for drill and grout activity. The medium-term outlook for the division’s work in the infrastructure sector remains very positive, with work on existing Smart Motorways safety measures, including new emergency refuge areas, expected to commence during FY2024. KEY PROJECTS IN FY2023 n Successful completion of several high-profile and complex schemes at stations, stabilising slopes, embankments, and cuttings including Dawlish Station for Bam Nuttall following nearly two years of work n Completion of the Group’s 200th rail station upgrade project at Theale Station n Installation of bored piles for a retaining wall at Balcombe Emergency Slope Stabilisation scheme for Bam Nuttall n Involvement in the Integrated Rail Plan projects, Midland Mainline and TransPennine Route Upgrade (TRU) Revenue (£m) £46.6m +2% 2023 2022 2021 2020 29.3 25.4 Operating profit (£m) £2.2m 46.6 45.8 -27% 2023 2022 2021 2020 1.0 0.3 Projects 406 2.2 3.0 Van Elle Holdings plc Annual report and accounts 2023 23 STRATEGIC REPORT Operational review continued Specialist Piling and Rail continued Year in review continued The Specialist Piling division is also developing a growing presence in the high-voltage power sector, primarily due to the attractive capabilities of the ScrewFast solution. There is a strong pipeline of prospects in the sector and the division has already completed several contracts on substation and other infrastructure projects across the National Grid and regional distribution networks. The Rail division performed strongly throughout the year, despite some early challenges due to the impact of rail strikes in the first quarter. In FY2023 we delivered our 200th rail station upgrade project and delivered several high profile slope and embankment stabilisation schemes. Piling works continued for the decarbonisation and electrification of the Core Valley Lines rail network in South Wales and ongoing works on the Midland Mainline. The division has a strong reputation and has embedded relationships with several key customers. Activity levels were positively impacted as CP6 entered the final year before CP7 commences in 2024. We were appointed to the piling framework for the TRU programme between Manchester and Leeds, and work is expected to commence in FY2024, involving both the Specialist Piling and Rail divisions for up to three years. Rail activities are impacted by the cyclical nature of the rail activity programme. A Canadian subsidiary has been established, where there are numerous opportunities to offer the specialist skills of our UK rail team. A rolling programme of upgrade work on our road/rail (“RRV”) piling rigs has continued and will be largely concluded by the end of FY2024. Underlying operating profit for the division decreased to £2.2m (FY2022: £3.0m). The result was primarily impacted by short-term reduced activity volumes in Highways and some challenging contracts in the Specialist Piling division, which have been closed out in the financial year. Both Rail and Specialist Piling divisions were also impacted by inflationary factors across their cost base. 24 Van Elle Holdings plc Annual report and accounts 2023 Ground Engineering Services What we do Ground Engineering Services comprises the Strata Geotechnics and Housing divisions. Strata has expertise in drilling, sampling, analysing and reporting ground information to support follow-on design and construction activities. The Housing division undertakes driven and CFA piling and precast modular foundations (Smartfoot and Smartdeck) for housebuilders. Year in review Revenue increased by 18% in the year to £47.1m (FY2022: £40.0m), representing 32% of Group revenues. Activity levels in the Housing division were high throughout the year, with further revenue growth building on an already strong prior year performance. Normal production capacity was consistently exceeded, with precast production being partially outsourced to meet the demand of site works. Geographical expansion was a focus during the year, with new contracts being won and delivered in the South of England. The division has been heavily focused on maximising operational efficiency, which has delivered further improvements to reported contract margins. Housing revenues have continued to be strong as housebuilders have been active in advance of the new Part L Building Regulation changes, which were effective from June 2023. However, softer market conditions as a result of interest rate rises and build cost inflation are expected later in the year, as reflected in industry forecasts. Strata Geotechnics also reported increased revenue in the year. Further progress in infrastructure work has increased activity levels, particularly in the highways sector (including under the Highways England ground investigation framework) and on rail ground investigation projects. KEY PROJECTS IN FY2023 n Ground investigations at Thorpe Hesley for a mine water treatment scheme for the Coal Authority Underlying operating profit for the division increased to £3.6m (FY2022: £2.1m). n Ground investigations on the A46 Newark Bypass using various techniques for National Highways n The Housing division installed 960 driven piles, a mixture of steel tube and precast concrete sections and over 3200m of Smartfoot beam in Kingswinford for Keepmoat n Installed foundations for a storage complex at Farington Park with 10,957 diameter rigid inclusions to depths ranging from 5m to 14m Revenue (£m) £47.1m +18% 2023 2022 2021 2020 Operating profit (£m) £3.6m +71% Projects 429 47.1 2023 3.6 40.0 27.6 29.6 2022 2021 2020 0.2 0.2 2.1 Van Elle Holdings plc Annual report and accounts 2023 25 STRATEGIC REPORT Sustainability Embedding our sustainability strategy We are committed to acting in a safe, sustainable and responsible manner and recognise this is key to the success and growth of the business. In FY2021, we launched our sustainability strategy. This work is beginning to yield benefits in terms of employee engagement, delivery of social value projects and reduced carbon design and delivery innovations. POLICIES The Board recognises its responsibility for establishing responsible and sustainable business practices, ensuring the safeguarding of both the environment and stakeholders. We have several established policies in place that underpin our operations to support our sustainable and responsible approach. These include anti-bribery and corruption, health and safety, environmental protection, sustainable development, quality assurance, anti-fraud and tax evasion, equality, diversity and inclusion, training and development, whistleblowing, and modern slavery. Regular training on key policies is conducted by all employees to support compliance with high standards of business conduct. HEALTH, SAFETY AND WELLBEING The health, safety and wellbeing of our staff is of paramount importance, and every precaution is taken to protect them, fellow contractors and visitors on site. Our Head of Health and Safety is driving an operations-led safety culture within the business and improved safety reporting, which is having a positive effect on the health and safety of our employees with all KPIs improving during the year. Our dedicated health, safety, quality and environment team continues to undertake regular internal audits of our procedures, operations, tasks and activities 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 an active member of the Federation of Piling Specialists (“FPS”) and the British Drilling Association (“BDA”). MARK CUTLER Chief Executive Officer 26 Van Elle Holdings plc Annual report and accounts 2023 We aim to identify risks through proactive hazard identification and reporting along with timely planning, careful risk assessment and method statements. We measure and monitor a balance of reactive and proactive KPIs. All health and safety incidents are recorded and reviewed at a senior level, and extensive safety alerts toolbox talks, training and employee briefings are held to refocus the business and continually address, reflect on lessons learnt and improve performance, understanding and behaviours. We are an accredited CITB training provider, delivering health and safety awareness, site supervisor safety training and site management safety training courses to our employees and our contractors as and when required. We are proud members of the Armed Forces Employee Recognition Scheme and are committed to the Armed Forces Covenant. As an employer, we recognise the importance of mental health awareness and providing easy access to support when it is needed. We have employees who deliver mental health awareness courses and have trained mental health first aid staff in the offices and on site. We have set an objective to achieve a trained mental health first aid staff to employee ratio, in accordance with Mental Health First Aid England guidelines. In March 2023, we appointed an Occupational Health and Wellbeing Manager to continue our focus on providing and promoting the help available for our employees and partners on critical issues such as mental health. We also operate an Employee Assistance Programme, through which employees and their immediate families can access confidential support services 24 hours a day, seven days a week. HEALTH AND SAFETY KPIs Category Headcount Hazard identification reports Environmental incidents Minor injuries <7-day lost time injuries >7-day lost time injuries (RIDDOR reportable) Specified injury (RIDDOR reportable) Dangerous occurrence Fatal CASE STUDY INTRODUCTION OF ELECTRIC VEHICLE CHARGING POINTS To help support our goal to be a Net Zero business by 2050, we are pleased to see charging bays for electric vehicles (“EV”) introduced at our Kirkby office. Four 22Kw charging points have been installed, with each charge point being a double socket unit serving two parking spaces, and enabling up to eight vehicles to be charged at the same time. The charging points will be powered in full by renewable energy. This follows our switch to 100% renewable energy, meaning our electricity will now come from renewable sources such as wind, solar, hydro, biomass and geothermal. FY2021 FY2022 FY2023 514 1,718 1 29 5 4 2 1 1 601 1,812 648 1,948 — 37 4 2 2 — — 2 27 5 2 1 — — 0.19 RIDDOR accident frequency rate (“AFR”)/100,000 hours 0.32 0.28 Van Elle Holdings plc Annual report and accounts 2023 27 STRATEGIC REPORT Sustainability continued OUR SAFETY GOLDEN RULES PEOPLE Always Make sure you are fit for work. STOP if anything changes. Ensure exclusion zones are in place around all plant machinery. Have a daily briefing and diligently follow the method statement, lifting plan or permit. Never Use plant or equipment that is unfit for purpose. Stand in a position of potential danger. Walk by and ignore a hazard or unsafe act. Undertake a task for which you are not trained or competent. 1 2 3 4 1 2 3 4 Engagement Attracting and retaining an expert workforce remains vital to us. The results of the annual employee engagement survey conducted during the year resulted in a positive 73% engagement result. Employees are provided opportunities to work on key projects and work in different functions, divisions and geographies, as we believe talented and engaged employees committed to upholding our values enable us to deliver. Knowledgeable and engaged employees ensure we win, and expertly deliver some of the most exciting projects whilst continuing to build a great place to work. Voluntary attrition in FY2023 averaged 18%, similar to FY2022, but was more acute in H1 as the recruitment of skilled resources to join High Speed 2 continued. During the year additional measures were taken to improve the retention of our personnel and the effects of this were seen during H2 with much reduced attrition levels of below 10% on a rolling basis. Our dedicated training and assessment team ensures all our workforce hold valid industry certifications, as well as the ability to ensure we develop our staff to our high standards. This way we will ensure that we continue to maintain our high standard of training and provide flexibility in succession planning. We have successfully increased our internal training by 44% in FY2023 with total training days increasing from 2,040 in FY2022 to 2,941 in FY2023. Building a skilled, diverse and inclusive workforce Talent is a key focus for us as our people are at the heart of everything we do and achieve. Having the right people with the right skills, at the right time is a priority. During FY2023 we launched our Leadership Development Programme, with a focus on ensuring that we have the right capabilities for the future and a strong, diverse succession pipeline across leadership positions. In FY2023, we continued with our ongoing commitment to creating lifelong careers with our membership of The 5% Club, an employer-led organisation committed to “earn and learn” opportunities for employees, being renewed. In April 2023, 3% of our workforce comprised apprentices, graduates and sponsored students in /”earn and learn” positions, with an additional intake planned for September 2023. We are committed to ensuring that we have a supportive, diverse and inclusive culture and working environment where all colleagues feel they belong, with diverse representation across all levels. Our Equality, Diversity and Inclusion (“EDI”) working group continues its good work by translating the vision and strategic action plan into delivery by overseeing delivery and reporting on progress. We are deeply committed to, and are pleased to see, progress being made. We have continued to embed training and develop skills, ensuring that leading teams are free from harassment and discrimination by working in respectful ways through our Code of Conduct, our people policies and various training modules. 28 Van Elle Holdings plc Annual report and accounts 2023 PEOPLE KPIs Average number of employees Voluntary attrition rate Total training days delivered Training days delivered for Van Elle employees Training days delivered to third party customers Number of apprentices and trainees Employee engagement survey response Employee engagement score FY2021 FY2022 FY2023 514 3% 1,398 1,006 392 30 52% 73% 601 18% 2,862 2,040 822 36 45% 75% 648 18% 4,014 2,941 1,073 21 49% 73% CASE STUDY DRIVING CHANGE IN OUR INDUSTRY Our Training Administrator Keeley Hutchinson recently completed her NPORS Plant Mover Training and was the first woman to drive our JCB Loading Shovel for the NPORS Plant Machinery Marshall testing. This means she is now able to support the training centre in putting more people through their courses and testing. We are committed to attracting, inspiring, supporting and developing women in our industry. We are proud to play our part in cutting through conceptions of gender bias, promoting diversity and empowering women to believe there are no barriers to achieving their ambitions and goals. CASE STUDY INSPIRING THE NEXT GENERATION OF WOMEN AND GIRLS IN GEOLOGY Shannon Wade joined the Strata division as an Assistant Geotechnical Engineer after gaining her degree in Applied Geology from the University of Plymouth. She is now working towards her MSc in Civil Engineering alongside her work, in the hope of gaining a greater understanding of how geotechnical engineering is applied. Since joining Strata, her role as Assistant Geotechnical Engineer has been really varied, providing her with challenges both inside and outside the office. In addition to supervising rigs and ground investigations, Shannon also performs post-works monitoring and then spends her time in the office processing and analysing the data. Shannon has played an excellent role in advocating and raising awareness of the often-underappreciated role women and girls play in STEM, and is regularly supporting campaigns to inspire others to pursue careers in geotechnical engineering. Van Elle Holdings plc Annual report and accounts 2023 29 STRATEGIC REPORT Sustainability continued SUPPORTING LOCAL COMMUNITIES We acknowledge the significance and benefits of engaging with the local communities in which we operate, recognising its importance, but also for creating social value and leaving a positive impact on the surrounding areas. We possess a wealth of expertise and experience, which we regularly utilise to provide a long-lasting, positive legacy to our communities. We actively support our employees and external organisations in enhancing their understanding of modern and innovative ground engineering solutions through our Continuing Professional Development (“CPD”) programme. We also collaborate with universities, colleges and schools to generate awareness, foster interest and inspire enthusiasm for the construction, manufacturing and engineering industries. Each year, we support our chosen “charity of the year”. This year, we selected Prostate Cancer UK, an organisation dedicated to prostate cancer research, awareness and support. In addition to salary sacrifices throughout the year, we encouraged our employees to participate in individual and company-wide fundraising campaigns, and we supported various initiatives throughout the year. In total, we raised over £10,000 for the charity. In addition to cash donations, we actively encourage employees to volunteer their time and engage in various activities such as litter picking, food bank donations and participating in community liaison events, all aimed at supporting the local community. CASE STUDY LITTER PICK Following on from our support with the BIG Ashfield Spring Clean campaign last year, which is a commitment to make Ashfield a cleaner and more pleasant place to live, work and visit, team members from divisions and departments across the Company joined forces to clean up litter in the vicinity of our Kirkby-in-Ashfield headquarters. The team successfully collected and disposed of multiple bags of rubbish, contributing to the ongoing efforts towards a cleaner and greener Ashfield. This was a wonderful opportunity to continue our CSR work, demonstrating our commitment to our local community. 30 Van Elle Holdings plc Annual report and accounts 2023 CASE STUDY OUR COMMITMENT TO THE LOCAL COMMUNITY DURING THE COST‑OF‑LIVING CRISIS Our donations are a crucial part of our commitment to serve and support the communities in which we operate. During the winter period, we collected and delivered over 100 essential food items to support Mansfield Soup Kitchen, which is a small group of volunteers that feed the town’s homeless community. We also donated ten boxes of cups to help support the services they provide. SUSTAINABILITY STRATEGY We recognise that our core operations rely on energy-intensive materials such as cement and steel. These industries are moving fast and making great progress in developing cleaner technology for their manufacturing and operational processes. It is our goal to be at the forefront of these developments. To aid us in this goal we have implemented a sustainability strategy aligned with the UN Sustainable Development Goals (“SDGs”) that are applicable to the business operations. We are aware that our manufacturing and on-site operations have an impact on the generation of greenhouse gas emissions, mainly due to the use of fossil fuels and highly intensive carbon materials. We understand we must act now to start reducing our GHG emissions, which will also bring opportunities for innovation and efficiency across the Group, hence we have shown commitment to Net Zero in order to build a strategic plan to decarbonise our operations. This strategic plan includes goals, targets, and performance indicators. We aim to measure our strategy against the indicators yearly so we can monitor our performance and identify improvement measures. Our long-term Net Zero by 2050 commitment is supported in the medium-term by a roadmap to 2030, which provides a clear strategic pathway to a 30% reduction in our greenhouse gas emissions from a 2020 baseline. The main footprint of our operations results from fuel consumption for our plant fleet..Within our Scope 1, our plant fuel consumption represents around 80% of our carbon emissions compared to our fleet-related emissions. Our Scope 2 emissions represent less than 3% of our carbon footprint. We recognise that Scope 3 emissions related to our business operations will be significantly higher than those currently reported within Scopes 1 and 2. We have also committed to developing our Science Based Targets (“SBT”) to allow us to set achievable emissions reduction targets against a representative base year to achieve Net Zero by 2050. We are actively engaging with our supply partners to understand the GHG emissions arising from the materials and services which they provide to us. Since 2022 we have implemented a strong focus on sustainable procurement practices by continuously monitoring suppliers against responsible sourcing standards. We have also implemented a new process to register suppliers, which includes a sustainability scoring system. Additionally, we are engaging with our suppliers and have provided lunch-and- learn sessions and open days to promote sustainable practices and technology that will benefit Group operations and support our ultimate Net Zero goal. Furthermore, we will implement the ISO 20400 for Sustainable Procurement across the business to ensure all our procurement practices are aligned to international standards. As fuel consumption is the main contributor to our Scope 1 emissions; there will be a strong focus on assessing transitional ways to reduce emissions while technology is developed to reach reduction targets. Our company car scheme now includes more hybrid and electric cars, which give employees options to choose from lower-emissions vehicles. In addition, at our head office at Kirkby-in-Ashfield we have installed electric chargers for employee use. Our Scope 2 emissions have been limited by a new purchase agreement for grid electricity from 100% renewable sources. The electricity supplied is certified under the Renewable Energy Guarantees of Origin (“REGO”) scheme, which provides transparency to consumers about the proportion of electricity that suppliers source from renewable generation. In addition, we are ESOS phase 2 compliant, and are in the process of achieving ISO 50001 Energy Management certification. Key to our sustainability strategy is engagement with and participation in innovation projects with stakeholders. We are trialling battery-powered electric tools as opposed to fuel-powered tools in the aim to include more sustainable equipment in our operations. We are also involved in the trial of low-carbon cement (i.e. graphene) in our precast operations. Our near-term roadmap to 2030 includes involvement in trials of hybrid machinery and fleet such as hydrogen/diesel or hydrogen alone where technology is available. CASE STUDY DELIVERING INTERACTIVE STEM SESSIONS Our commitment to providing value-added engineering services led us to conduct STEM sessions in schools throughout Leeds. Over 160 children were educated and entertained during these sessions, which were designed to encourage them to consider a future in construction. These STEM sessions were delivered in partnership with Keltbray as part of our joint efforts in community engagement in the area, where we are supporting the delivery of the M621 improvement scheme for National Highways. During the STEM sessions, children were introduced to the role of an engineer and the importance of engineering in our daily lives. They were also taught about various ground conditions and what’s best for building roads. Using jelly, sand and Lego, they participated in interactive play sessions that demonstrated these concepts. The children also learned about slope stability and the causes of slope failure. They discovered how to engineer a safer design using piles or soil nails to make a bridge secure. Van Elle Holdings plc Annual report and accounts 2023 31 STRATEGIC REPORT Sustainability continued CLIMATE RELATED FINANCIAL DISCLOSURES We are committed to compliance with the new climate related financial disclosure requirements, providing our stakeholders with transparent information on climate-related risks and opportunities that are relevant to our business. Our strategy focuses on improving our operations as well as the positive impact we can have on our clients, supply chain and the communities we work in to minimise our carbon footprint and promote more sustainable living. We have made some disclosures that are only partially consistent with the disclosure requirements. We will continue to draw upon technical guidance to further strengthen our disclosures in future years as our journey progresses. The following table summarises our disclosures: Governance Disclosure (a) Describe the board’s oversight of climate-related risks and opportunities. Our sustainability strategy was drafted in 2021 and is updated annually. Climate-related risks and opportunities are reviewed by the Board in annual strategy sessions. The Board has overall responsibility for strategic focus and oversight of the ESG strategy. The CEO has overall responsibility for the delivery of the ESG strategy and the CEO delegates matters relating to ESG and climate-related risks and opportunities to the sustainability working group (“SWG”). Disclosure level Full disclosure (b) Describe management’s role in assessing and managing climate-related risks and opportunities. The SWG was set up to deliver on our sustainability commitments. Drawn from all departments in the Group to represent a wide-ranging and enthusiastic demographic, and chaired by a member of the executive leadership team, the SWG is designed to deliver our sustainability values and maintain our position at the forefront of sustainability issues. The SWG meets quarterly to discuss ongoing sustainability topics, including current projects and future prospects, current risks and opportunities, and upcoming legislative and reporting requirements. The capture and recording of GHG emissions is discussed, alongside current trending values and ideas and solutions on how to reduce them and capture them more accurately going forward. Scope 1 and 2 emissions are currently tracked via emission calculators, with Scope 3 emissions monitored via consistent input from the wider industry and our supply chain. Future reduction solutions are being sought in collaboration with our supply and industry partners via initiatives such as our highly successful Sustainability Open Days. The outcomes of the SWG are minuted and risks are incorporated into the Group’s risk register, increasingly inclusive of ESG matters. The Board review the Group’s risk register annually. Routine risk assessments are carried out in all areas of Company operations, including project construction activities, manufacturing of construction products, facility and property management and investment, sustainable procurement of goods and services, and plant and fleet operations and investment. Sustainable procurement has been a key focus for us. Our supply chain has been streamlined to include only partners successful in the completion of a rigorous audit of their business, the key being their sustainability credentials. Full disclosure Reporting to our Executive Sustainability sponsor, and taking guidance from the SWG, our Sustainability and Environmental Manager oversees all aspects of sustainability and climate-related risks and opportunities, including tracking our Scope 1 and 2 emissions, and our commitments to current and future legislation. We have signed up to the Federation of Piling Specialists (“FPS”) sustainability charter established in 2023. The charter is a summary of the key actions the governing body has committed to on behalf of its members. Our Sustainability Manager attends the quarterly FPS sustainability working group and reports back to us via the SWG and Executive sponsor. FPS member audits are now based on this charter, and the results are collated and anonymously reported back to its members on an annual basis. Partnership in this initiative enables the Group to take direction on the speed of Scope 1, 2 and 3 emissions and other sustainability matters in our industry. We are active gold-level members of the Supply Chain Sustainability School, an extensive library of knowledge sharing across the industry, covering a wide range of topics all aimed at enabling a sustainable built environment. This comprehensive CPD package is accessible to all, empowering employees across the business to take ownership of sustainability matters. Weekly divisional meetings include a sustainability item on the agenda to allow for engagement with the workforce to promote climate-related opportunities and to raise business cases for review at the SWG. Our quarterly Town Hall meetings provide a forum for updating all staff and raising awareness of our sustainability strategy. An internal poster campaign displayed around our offices and sites allows employees to view our specific commitments and where we are on our sustainability journey via clear graphical representation. 32 Van Elle Holdings plc Annual report and accounts 2023 Strategy Disclosure Disclosure level (a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term. Full disclosure Our sustainability strategy is updated annually, the basis of which relates back to the Sustainability Development Goals (SDGs) developed in 2015 by the UN members. Current risks and opportunities included in our sustainability strategy are: Risks n Lack of investor appetite for business without a clear ESG strategy n Increased focus on ESG by our customers could result in loss of market share if ESG is not prioritised n Acquisition of assets delivering carbon output reduction are likely to be more expensive n Delivering carbon reduction requires significant internal resources and higher spend n Business interruption due to increased chance of extreme climate events n Stagnation of product offerings and lack of innovation could result in lost market share Opportunities n Increased spend by our customers on infrastructure resilience to combat the effects of extreme climate events n Leading on ESG is likely to be attractive to investors and customers n Increased focus on efficiency and waste reduction in the business leading to cost savings n Investment in more efficiency and more advanced plant will make us more attractive to customers and provide higher returns n Our actions around climate-related matters enable us to uncover new solutions and innovations to enable us to be ahead of our competitors Our sustainability strategy is designed and developed to proactively anticipate the impact of sustainability including climate-related risk on our business. (b) Describe the impact of climate-related risks and opportunities on the organisation’s business, strategy, and financial planning. Identifying and reviewing climate-related risks and opportunities has encouraged our business to find ways to manage, mitigate and reduce the risks whilst capitalising on the opportunities. As a listed company, we have found institutional investors are seeking a stronger focus on ESG performance and climate change actions. As a result, each department within the business is championing and actively pursuing low-carbon solutions for our customers, supported by the SWG. The design and delivery of foundation solutions is increasingly focused on modern methods of construction with increased interest in lower-carbon footprint solutions such as vibro stone column and rigid inclusion foundation solutions, as well as low-carbon concrete alternatives such as GGBS cement replacement and graphene additives. Full disclosure Winning new work and sustaining/growing the business relies on providing customers with best-in-class performance and innovation for low-carbon solutions and against climate-related risks. Our business notes an increased demand for these products. A large part of our strategy focuses on educating clients in these areas and presenting these as alternatives to more traditional solutions. Current Early Contractor Involvement (“ECI”) on major infrastructure projects is driving efficiencies in the design and delivery of more sustainable solutions to help futureproof these major works and help meet the increasing demands of government-backed clients. Developing these client relationships through ECI helps us to reduce risks and increase our opportunities around sustainability and greenhouse gas emissions. As shown by feedback to the SWG and from our Sustainability Open Day, our employees are increasingly expecting us to be the leader in our field in terms of sustainability, and are actively seeking opportunities to become involved in related working groups and initiatives where they can make personal contributions. The introduction of electric vehicles to all grades of our company car scheme and the installation of charging points at numerous locations across the business have been particularly welcomed. Both short and long-term financial planning for the business includes the potential impacts of investing in carbon reduction initiatives. Investment in plant and facilities is increasingly focused on sustainable initiatives, low-emission solutions and reduced environmental impact. Business improvement ideas, all of which are driven by sustainability in one way or another, are encouraged from all areas of the business, and are channelled into a shortlist of the most impactful initiatives by our Business Improvement Manager. These are allocated to project leads and reviewed monthly. Van Elle Holdings plc Annual report and accounts 2023 33 STRATEGIC REPORT Sustainability continued CLIMATE RELATED FINANCIAL DISCLOSURES CONTINUED Strategy Disclosure Disclosure level (c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios including a 2°C or lower scenario. Whilst we haven’t yet carried out quantitative climate-related financial analysis based on a 2°C or lower scenario, we have started to engage with external advisers to support us with this aspect of compliance with the requirements. We expect to be compliant with a quantitative scenario analysis within the next two years. We have, however, identified a number of risks and opportunities stemming from a variety of climate related scenarios including a 2°C or lower scenario. Partial disclosure These include both acute and chronic risks and opportunities: Acute risk events include: hot and cold weather events, flooding, drought and storms, disruption to the power and communication networks, water shortages and quality issues, failure of infrastructure such as track buckling, structural integrity and subsidence. In addition to these climate-based disruptions we are also planning around other potential disruptions, such as industrial action and future pandemics. Opportunities exist around these acute risks, in particular failure of infrastructure; as track, road and power distribution renewals are already a large part of our business, the increased risk of damage to these assets will inevitably lead to an increased level of spend by our customers. Chronic risks stemming from climate-related scenarios include: shortage of resources, shortage of skilled workforce, increased cost of materials, fuel, water and other services, the expectation and cost of meeting/complying with more stringent regulations, the increased cost of providing suitable PPE, training and safety equipment to the workforce, and business adaptations to fundamental changes to our transportation process. These chronic risks can be mitigated in various ways. Firstly, ensuring staff retention, alongside the education and development of staff, reduces the risks posed by a shortage of skilled workers, and helps our teams to drive and embrace innovation. A short lead in time for the majority of our contracts enables us to factor peaks and troughs within the supply chain in to our pricing, passing the most severe price fluctuations onto our customers. Where we are engaging in longer-term projects, contractual arrangements are made in order to protect the business from price fluctuations whilst providing the latest innovative and flexible solutions to clients. An increased focus on our relationships with our supply partners also provides resilience during periods of reduced availability of materials or services, and sharp fluctuations in cost. Risk management Disclosure Disclosure level (a) Describe the organisation’s processes for identifying and assessing climate-related risks. The management of risk within the business is by way of top-down control from the Board via the Audit and Risk Committee, and bottom-up control via the operational delivery and business-as-usual teams. Risks identified as high-level are monitored by the Audit and Risk Committee. This reviews the effectiveness of our risk management and control systems and procedures. Consultation between the Audit and Risk Committee and the operational delivery and business-as-usual teams provides consistency across all business divisions. We employ a dedicated Environmental Manager, who is responsible for managing environmental risks and opportunities, and reports to the SWG. Full disclosure The specific climate-related risk identification process is led by the SWG, which includes subject matter experts from across the organisation. The SWG ensures a consistent approach to climate-related risks from all areas and levels of the business. External industry practice from bodies such as the FPS and key customers is fed into the Group via the SWG. Findings inform budget setting, capital investment and supply partner direction. We have recently embarked on a series of workshops with the relevant leaders across the business to discuss and identify climate-related risks and to inform our disclosures. These workshops will work towards identifying the key climate-related risks so that we can build robust strategies around mitigating and managing the risks. Our risk management processes form a robust and effective way to identify, prioritise and manage risks across the business. We operate a divisional structure for the execution of projects, supported by central support services covering areas. Each divisional or functional manager manages sustainability risks within their routine operations, using a similar process to safety or quality risks. Risks are documented in our integrated management system – using approved method statements, risk registers and ITPs, and subject to progress reviews. This process is supported by the Environmental Manager and the SWG and by the deployment of competent staff and supervision. Rather than a separate process, environmental risk management is included within our risk management strategy and is subject to review by the operational teams, supported by the SWG and the Environmental Manager. This way, risks identified by our sustainability strategy and the SWG, as well as specific project-related environmental risks, are built into our identification, assessment and management process. A formal review of the integrated management system is held annually to ensure compliance with our ISO accreditations. Audit points have been updated to include climate-related risks in our processes and policies. Partial disclosure Partial disclosure (b) Describe the organisation’s processes for managing climate-related risks. (c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management. 34 Van Elle Holdings plc Annual report and accounts 2023 Metrics Disclosure Disclosure level (a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process. Reduction in our Scope 1 and 2 emissions is targeted against a 2020 baseline, which we have used to forecast a roadmap to 2030, and aligns to reach Net Zero by 2050. Full disclosure CO2 reduction roadmap to 2030 2022 2025 2028 2030 Responsible procurement n Procurement management with sustainable approach Responsible procurement n Sustainable procurement GHG emissions n Monitoring of ISO 20400 certified Scope 3 emissions Lower carbon plant trials* n Hybrid plant/fleet (hydrogen-diesel) GHG emissions n Commitment to Science Based Targets initiative Energy efficiency n 100% LED lighting at Kirkby GHG emissions n Validated Science Based Targets n Value chain mapped (Scope 3) 0 2 0 2 e n i l e s a B n 100% grid electricity from renewables Efficient fleet n Fuel efficiency focus (FORS Sliver) n Fleet age limit n Fuel monitoring devices Lower-carbon fleet n Hybrid and electric company cars Research and innovation n Trials of battery-powered tools Energy efficiency n Energy Management certified ISO 50001 n Solar panels at Kirkby site n On-site renewable energy feasibility across all facilities Lower-carbon fleet n Lower-carbon fuel for smaller plant n Electric equipment and plant trials n Hybrid/EV van trials Research and Innovation n Trials of lower-carbon concrete and steel Design and manufacturing n Carbon footprint estimations for all projects at design stages n Lifecycle Assessment (“LCA”) for precast manufacturing Water efficiency n Rainwater harvesting at Kirkby facility and feasibility across sites Lower-carbon alternatives embedded n Hybrid/EV vans n Hybrid/Electric generators n Ultra low emissions engines Design and manufacturing n Use of low carbon materials based on Environment Product Declaration (“EPD”) n Low-carbon footprint project proposals Research and innovation n Stakeholder engagement to trial lower carbon materials and technology n Battery storage to power machinery GHG emissions** n GHG emissions against targets n Update of Decarbonisation Strategy with latest technology available Research and innovation n Active participation in trialling latest available low-carbon materials and technology across the value chain * Based on availability of technology. ** Emissions reduction target aligned to reach Net Zero by 2050. Van Elle Holdings plc Annual report and accounts 2023 35 STRATEGIC REPORT Sustainability continued CLIMATE RELATED FINANCIAL DISCLOSURES CONTINUED Metrics Disclosure level (b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (“GHG”) emissions and the related risks. Full disclosure Disclosure Greenhouse gas reporting We report our GHG emissions in accordance with UK regulations and the GHG Protocol Corporate Accounting and Reporting Standard methodology. Our reporting boundary is all material Scope 1 and Scope 2 emission sources within the boundaries of our consolidated financial statements. As part of our continuous improvement strategy on environment and sustainability, we have reviewed and updated our GHG emissions inventory in FY2023 to ensure we cover all our activities under our financial scope. Therefore, we have recalculated our previous GHG emissions for Scope 1 and 2 according to the GHG Protocol and restated our FY2022 emissions. We will aim to regularly review our emissions reporting and recalculation policy to ensure we are reporting the GHG emissions from our operations accordingly. Revenue in the year to 30 April 2023 was significantly ahead of the previous financial year, up 19% in total. This increased level of activity has meant an increase in the total tonnes of CO2e emissions compared with the previous year; however, the Group’s intensity measure, the absolute tonnes equivalent CO2e per million pounds of revenue, has decreased from 74 to 70 in FY2023 as the business continues to make progress on delivery of its sustainability strategy. GHG emissions from: Scope 1 – combustion of gas and fuel for transport and rig operation Scope 2 – purchase of electricity Total CO2e emissions Intensity measurement: Absolute tonnes equivalent CO2e per £m of revenue Energy usage from: Scope 1 Scope 2 Total MWh Tonnes of CO2e 2023 10,139 232 10,371 2023 70 2023 41,933 1,198 43,131 Tonnes of CO2e 2022 Restated 8,992 221 9,213 2022 74 2022 36,506 1,039 37,545 We do not currently record Scope 3 emissions; however, we are actively engaging with our supply partners to understand the GHG emissions from the materials and services which are supplied to us. We are committed to working with them to understand future innovations and whole lifecycle solutions that can be adopted and offered to our customers. Our strategy is focused on the development of low-carbon solutions and the education of customers to help them understand and embrace these technologies. Metrics Disclosure Disclosure level (a) Describe the targets used by the organisation to manage climate- related risks and opportunities and performance against targets. We signed up to the Science Based Target initiative (“SBTi”) at the end of 2022. We are currently in the process of developing our targets and metrics in line with this initiative, and within the next two years we will be at a point where they have been approved by the SBTi. We continue to monitor and record our Scope 1 and 2 emissions in line with recommendations (as above) and are actively pursuing solutions, including in collaboration with our supply partners, to minimise our Scope 3 emissions. We will record these in line with legislation as part of our commitment to SBTi and Net Zero by 2050. Partial disclosure In addition, we have mapped out our Net Zero journey. This is shared across the business via the intranet and notice boards in our offices. We will soon be updating the sustainability section of our website to include our map and how we are currently performing against our plan and commitments. We have aligned our vision with the United Nations Sustainable Development Goals, and these metrics inform our strategy towards this goal. 36 Van Elle Holdings plc Annual report and accounts 2023 Section 172/engaging with our stakeholders How we engage with our stakeholders In performing their duty under S172(1) of the Companies Act 2006, the Board ensures that the impact on our stakeholders is carefully considered by management when formulating all proposals requiring Board approval. Our approach to stakeholder engagement Stakeholder Key concerns Engagement Shareholders n Group performance n A comprehensive investor relations programme ensures regular meetings n Strategic objectives n Corporate governance n Environmental, social and governance performance n Share price Employees n Health and safety n Engagement and development n Diversity n Leadership are held between major shareholders and the Executive Directors n Investor roadshows are held at the time of interim and final results n Presentation of the interim and final results, as well as other significant events, are held via Investor Meet Company for potential institutional and retail investors n Regular trading updates, including updates for significant events are made throughout the year n The Annual General Meeting provides an opportunity for shareholders to meet with the Board and ask questions n The Board receives and reviews monthly health and safety performance reports n Annual performance appraisals, which include a personal development review, are undertaken for all staff during the year n We operate a leadership development programme with a structured programme of development for the cohort of employees with potential to be future business leaders n Our leadership team conducts periodic Group-wide briefings to share key information with employees n A monthly Company newsletter, “Grounded”, is issued to keep employees well informed n An annual employee engagement survey is used to collate employee views and drive change n Regular senior manager site visits are conducted to understand the experience of on-site operational staff n All whistleblowing reports and grievances are investigated, and appropriate changes implemented to help prevent reoccurrence Customers n Customer engagement n Regular meetings are held between senior management and key n Quality and service level n Innovative contract delivery customers to develop long-term relationships n Managers undertake site visits regularly to manage quality and service levels on ongoing contracts n Customer experience scores are reported internally and used as part of lessons learned sessions to drive continual improvement n Teams work collaboratively with customers to develop design solutions that enable customers’ aspirations to be fulfilled Suppliers n Strong supplier relationships n Regular review meetings are held between senior management and key n Continuity of supply n Financial strength and stability suppliers to discuss relevant topics, such as pricing, supply continuity and service levels n Focus is placed on developing key strategic supplier partnerships n Our funding structure and balance sheet strength are kept under constant review to ensure suppliers are paid in accordance with agreed terms and to ensure sufficient working capital management throughout the supply chain Van Elle Holdings plc Annual report and accounts 2023 37 STRATEGIC REPORT Section 172/engaging with our stakeholders continued Our approach to stakeholder engagement continued Stakeholder Key concerns Engagement Community n Health and safety n Contribution to the community n Sustainability n A significant apprenticeship scheme is embedded within the organisation as we aim to have 5% of our total staff employed as graduates, apprentices or trainees n We aim to recruit locally, retain a skilled local workforce and build relationships with local community organisations n We support a different local charity each year based on employee nominations n Employees engage in various community events including litter picking, delivering STEM sessions in schools and donating goods to local community groups Government and Regulatory/ Industry Bodies n Compliance with laws n We adopt the Quoted Companies Alliance Corporate Governance Code and regulations (the “QCA code”) and operate policies to ensure compliance with the code n Upholding appropriate corporate governance n Clear and effective policies are in place to help prevent wrongdoing, including whistleblowing, anti-bribery and corruption, anti-fraud and tax evasion, financial crime and modern slavery, with training provided where appropriate n Regular meetings are held with tax advisers to discuss tax compliance, HMRC correspondence and other relevant issues pertinent to our finances and tax position n We are a member of several relevant sector associations including the Federation of Piling Specialists, which provide forums to understand changes in relevant legislation and standards Directors’ s172 statement The Board of Directors considers that it both individually and collectively, has acted in a way that would be most likely to promote the success of the Company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in S172(1)(a-f) of the Act) in the decisions it has taken during the year ended 30 April 2023. In making this statement, the Directors, having regard for longer-term considerations of shareholders and the environment, have taken into account the following: (a) the likely consequences of any decisions in the long term; (b) the interests of the Company’s employees; (c) the need to foster the Company’s business relationships with suppliers, customers and others; (d) the impact of the Company’s operations on the community and the environment; (e) the desirability of the Company maintaining a reputation for high standards of business conduct; and (f) the need to act fairly as between members of the Company. Shareholder engagement events Date May 2022 June 2022 July 2022 August 2022 Event Date Event Trading update for FY2022 November 2022 Announcement of TRU award Rail sector update Investor Meet Company presentation FY2022 annual report and final results announcement with investor roadshow and Investor Meet Company presentation January 2023 Presentation at the MelloLondon investor conference Trading update for FY2023 H1 FY2022 interim results investor roadshow and Investor Meet Company presentation February 2023 Online presentation for MelloMonday investor conference September 2022 October 2022 Annual General Meeting and trading update Announcement of strategic contract award April 2023 July 2023 Trading update for FY2023 FY2023 annual report and final results announcement with investor roadshow and Investor Meet Company presentation 38 Van Elle Holdings plc Annual report and accounts 2023 KEY DECISIONS Board and Committee activities are organised throughout the year to address the matters reserved for the Board. An overview of the Board’s principal decisions during the year, including how the Board has considered the factors set out in section 172 of the Companies Act 2006 (the “Act”), is set out below. Decision 1 SETTING THE ANNUAL GROUP BUDGET AND SUBSEQUENT FORECASTS Decision 3 ASSESSMENT OF CYBER-ATTACK RISK MITIGATION Actions taken n Reviewed and approved Group budgets for FY2024 and high-level profit and cash forecasts for the following 12 months Key stakeholder groups considered n In reviewing the budget and subsequent forecasts, the Board considered the impact on all stakeholders n Setting the budget identified key areas of focus for the Group, providing development opportunities for employees n In setting the budget the Board also gave consideration to customers and identified opportunities to develop customer relationships and improve service delivery and efficiency n In setting the budget, consideration was given to suppliers around payments ensuring that there was clarity around when payments would be made to allow suppliers to effectively manage working capital Decision 2 UPDATING THE STRATEGIC PLAN AND PRIORITIES Actions taken n Reviewed and approved updates to the strategic plan including key milestones and financial targets Key stakeholder groups considered n In updating the strategic plan, consideration was given to market developments and the alignment of strategic priorities and financial resources to growth areas to maximise opportunities and deliver enhanced shareholder value n Updating the strategic plan identified key areas of focus for the Group, providing development opportunities for employees n Consideration was given to the achievement of sustainability targets, in particular the reduction of carbon with strategic plans incorporating moves to alternative raw materials and electric rigs n In updating the strategic plan, the Board also considered customers and identified opportunities to develop customer relationships and improve service delivery and efficiency Actions taken n The Board has reviewed the cyber-attack risk mitigation activities and concluded on additional mitigations and controls required to reduce the risks associated with a cyber attack to an appropriate level. Additional mitigations and controls include cyber insurance, multi-factor authentication, additional cyber accreditations and removal of external storage devices Key stakeholder groups considered n In considering the level of risk to which the Group is exposed, the Board has sought to protect shareholder interest with the introduction of additional risk mitigation procedures n Employees have been engaged in the developments in cyber security with regular email communications, including guidance on identifying malicious communications and the roll-out of an ongoing cyber security training programme for all employees n Consideration has been given to protection of customer, supplier and employee data, as well as minimising the level of disruption in the event of a cyber attack to maintain service levels throughout the supply chain, including payments to suppliers and employees Decision 4 REVIEW OF STRATEGIC GROWTH OPPORTUNITIES VIA MERGER OR ACQUISITION Actions taken n The Board has considered several opportunities for transformational growth and bolt on acquisitions throughout the year Key stakeholder groups considered n In reviewing opportunities for growth, the Board has considered the need to deliver enhanced shareholder value with a focus on those opportunities that are low risk, complementary to the existing business and value enhancing n The impact of growth opportunities on employees, including enhanced development opportunities, has been considered. Where appropriate, management input has been sought on review of opportunities n Consideration has been given to improving customer experience by offering a more diversified product offering Van Elle Holdings plc Annual report and accounts 2023 39 STRATEGIC REPORT Risk management and principal risks Mitigating risk to deliver increasing shareholder value 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 our 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 our principal risks, taking the strength of our control systems and our appetite for risk into account. 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 exhaustive analysis of all risks that may arise in the ordinary course of business or otherwise. Reviewing our risk register The risk registers of each division, together with the Group risk register, are updated and reported to the Audit and Risk Committee to ensure that adequate information in relation to risk management matters is available to the Board and to allow Board members the opportunity to challenge and review the risks identified and to consider in detail the various impacts of the risks and the mitigations in place. Risks 1 2 3 A rapid downturn in our markets Failure to procure new contracts Loss of market share 4 Non-compliance with our Code of Business Conduct 5 6 7 Product and/or solution failure Ineffective management of our contracts Failure to comply with health and safety and environmental legislation 8 Not having the right skills to deliver 9 Insufficient resources to deliver contracts 10 Cyber attack 11 Inability to finance our business RISK MANAGEMENT FRAMEWORK THE BOARD THE AUDIT AND RISK COMMITTEE EXECUTIVE DIRECTORS NON-EXECUTIVE DIRECTORS EXECUTIVE COMMITTEE DIVISIONAL DIRECTORS OPERATIONAL MANAGERS COMMERCIAL MANAGERS RISK HEATMAP d o o h i l e k i L 5 3 2 8 1 9 4 7 11 10 6 Impact 40 Van Elle Holdings plc Annual report and accounts 2023 PRINCIPAL RISKS Risk description Market risk Potential impact Mitigation Change Link to strategy 1 A rapid downturn in our markets Failure to continue in operation or to meet our liabilities. Diversification of our markets, both in terms of geography, including Rail expansion into Canada and market segment. 2 3 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. Failure of a key client resulting in market volatility. Strategic risks 2 Failure to procure new contracts 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. Failure to achieve targets for revenue, profit and return on capital employed. 3 Loss of market share Inability to achieve sustainable growth, whether through acquisitions, new products, new geographies or industry-specific solutions. Failure to achieve targets for revenue, profits and return on capital employed. Focus on longer-term partnerships and building on existing client relationships. Debt facility of up to £11m provides headroom for us to withstand a downturn in markets. Regular review of market conditions and forward indicators to assess whether any action is required to flex the cost base. Continually analysing our existing and target markets to ensure we understand the opportunities that they offer. Focused customer engagement earlier in the design process to ensure our solutions are embedded into the design. Review of potential bolt-on acquisitions to expand the product offering and differentiate ourselves further from competitors. Structured bid review process throughout the Group with well-defined selectivity criteria, designed to ensure we take on contracts only where we understand and can manage the risks involved. Continually seeking to differentiate our offering through service quality, value for money and innovation. A business development team focusing on our customers’ requirements and understanding our competitors. Reviewing acquisition opportunities where they may be favoured over organic growth. Implementing annual efficiency and improvement programmes to help us remain competitive. Focused on refining strategic client relationships in all sectors. 4 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. Loss of 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. Maintaining training programmes to ensure our people fully understand these policies and requirements. Operating and encouraging the use of anti-bribery and corruption and whistleblowing policies. Clear communication of our values. Van Elle Holdings plc Annual report and accounts 2023 41 2 3 2 3 1 3 STRATEGIC REPORT Risk management and principal risks continued PRINCIPAL RISKS CONTINUED Risk description Potential impact Mitigation Change Link to strategy Operational risks 5 Product and/or solution failure Failure of our product and/or solution to achieve the required standard. Financial loss (including warranty claims) 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. 6 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 maintain comprehensive insurance cover including adequate PI cover and clear terms of business with customers and suppliers. We manufacture our products in an ISO 1101 quality environment, and all have CE approval. Ensuring we understand all our risks through the bid appraisal process, application of clear contractual terms and robust policies and processes to manage and monitor contract performance. Ensuring we have high-quality people delivering projects. Our Perfect Delivery Concept establishes the criteria to achieve effective first-class solutions and service for our clients. Clear delegation of authority with established contract approval levels. 7 Failure to comply with health and safety and environmental legislation A fatality or serious injury to an employee or member of the public through a failure to maintain high standards of safety and quality. Loss of employee, 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 ISO 45001). Extensive mandatory employee training programmes. A strengthened HSQE team developed across FY2022 and FY2023. 1 1 2 3 1 42 Van Elle Holdings plc Annual report and accounts 2023 Risk description Potential impact Mitigation 8 Not having the right skills to deliver Inability to attract, retain 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. Continuing to develop and implement leadership, personal development and employee engagement programmes that encourage and support all our people to achieve their full potential. Pre-employment checks ensure we have the right people in the right roles. Competitive remuneration packages, including a Group-wide bonus scheme, and additional employee incentives ensure we can attract and retain talent. 9 Raw material inflation and availability Change Link to strategy 1 3 A shortage of raw material product available in the market causing delays to project delivery. Margin reduction on longer-term contracts where price increases cannot be passed onto customers. 10 Cyber attack A cyber/hacking attack could temporarily impact on the ability of the IT systems to operate. Impairment of our ability to deliver contract works at profitable margins. Regular monitoring of key material costs by the procurement function to ensure contract pricing is updated in line with cost inflation. 2 Robust process for monitoring contract financial performance to track the impact of cost volatility. Tenders and contracts qualified to transfer the risk of significant material cost increases to the client. The Group applies selective criteria when choosing suppliers to ensure standards for quality, reliability and financial partnering are satisfied. A diverse supplier base is maintained to increase opportunities for supply. A cyber/hacking attack could impact the ability to procure materials and consumables to fulfil contract performance. A data breach could have significant financial consequences for the Group. Robust IT systems and processes maintained to mitigate the threat of a cyber attack. NEW Cyber insurance in place from 1 May 2023. Various actions undertaken in FY2023 to improve defences against a cyber attack including: cyber accreditations, removal of external storage devises, improved email filters, improved firewalls, cyber security and phishing training roll-out and multi-factor authentication introduced. 1 2 3 Financial risks 11 Inability to finance our business Loss of access to the financing facilities necessary to fund the business. Failure to continue in business or to meet our liabilities. Debt facility of up to £11m provides headroom for us to withstand a downturn in markets. Extension of debt facility to 2028 in progress. 2 3 Van Elle Holdings plc Annual report and accounts 2023 43 STRATEGIC REPORT Key performance indicators Improving financial performance The key performance indicators (“KPIs”) we utilise are instrumental in measuring and ensuring the Company maximises its financial performance. These are measured monthly and reviewed annually against our strategic outlook. Revenue (£m) £148.7m +19.1% 2023 2022 2021 2020 148.7 124.9 84.4 84.4 Operating profit (£m) £5.9m +34.0% 2023 2022 2021 (0.8) 2020 (1.6) 5.9 4.4 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 non-underlying items. Performance Revenue increased by 19% in total across the year to £148.7m. Strong trading momentum in the later part of FY2022 was sustained throughout H1, with all divisions operating at high activity levels and delivering record revenues. Rates of revenue growth slowed in H2 due to the industry-wide softening and investment delays due to macro- economic factors in the housing and infrastructure markets. Performance Operating profit has increased significantly in the year as record activity levels and flat gross margins resulted in improved overhead recovery rates. Operating profit margin (%) 3.9% 2023 2022 2021 2020 (0.7) (0.3) 3.9 3.5 Return on capital employed (%) 12.2% 2023 2022 2021 2020 (1.8) (3.6) 12.2 9.4 Description Operating profit margin is a key measure of performance against our strategic growth objectives. Performance Operating profit margin has increased significantly in the year as record activity levels and flat gross margins resulted in improved overhead recovery rates. Description This measure indicates the rate of return per pound invested in the operating assets of the business. Capital employed is taken to be average net assets excluding net funds (including IFRS 16 Property and Vehicle Lease Liabilities) and earnings is taken as operating profit. Performance ROCE has increased in the period to 12.2% at 30 April 2023 (2022: 9.4%), reflecting the impact of increased operating profits. 44 Van Elle Holdings plc Annual report and accounts 2023 Earnings per share (p) 4.4p +147.0% 2023 2022 2021 2020 (1.3) (3.0) 4.4 1.7 Net funds (£m) £7.5m +27.6% 2023 2022 2021 2020 7.5 5.9 3.7 4.8 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. Performance Reported basic earnings per share was 4.4p (2022: 1.7p) reflecting higher reported operating profits in the period. Description Net funds reflects the Group’s total cash and cash equivalents less any borrowings, excluding IFRS 16 Property and Vehicle Lease Liabilities. Performance Net funds have increased by £1.6m to £7.5m. Cash has increased by £1.9m to £8.9m as at 30 April 2023, and hire purchase debt has increased by £0.3m to £1.3m. The Group’s asset backed lending facility of up to £11m was undrawn as at 30 April 2023. Operating cash conversion (%) 83.1% 2023 2022 2021 2020 18.5 83.1 86.1 175.0 Leverage (times) 0.1 0.1 0.1 2023 2022 2021 2020 0.9 1.6 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. Performance Operating cash conversion has declined slightly in the year to 83.1% as the significant increase in revenue has resulted in a requirement to invest in working capital. Description This KPI measures our total debt as a proportion of EBITDA. Performance Leverage continues to be low as debt levels remain low. Our only remaining debt finance as at 30 April 2023 is £1.3m, being the amounts due on remaining hire purchase agreements that are due to expire in August 2024. Van Elle Holdings plc Annual report and accounts 2023 45 STRATEGIC REPORT Chief Financial Officer’s statement Record revenues and margin growth Financial review Revenue Revenue in the year to 30 April 2023 was significantly ahead of the previous financial year, up 19% in total. Strong trading momentum in the later part of FY2022 was sustained throughout H1, despite a challenging macro environment, with all divisions operating at high activity levels and delivering record revenues in the first half of the financial year. Rates of revenue growth slowed in H2 due to the industry-wide softening and investment delays due to macroeconomic factors in the housing and infrastructure markets. Despite market challenges and seasonal impacts on contract delivery during H2, revenues grew by 5% on the preceding year H2. 2023 £’000 2022 £’000 Change % 80,836 60,061 67,898 64,854 34.6 4.7 2023 % 54.3 45.7 2022 % 48.1 51.9 H1 H2 Revenue 148,734 124,915 19.1 100.0 100.0 We track enquiry levels by market sector, which helps to identify trends and target our activities into growth areas. The mix of revenue by end markets is shown below: 2023 £’000 2022 £’000 Residential 56,860 53,307 Change % 6.7 Infrastructure 62,592 43,378 44.3 Regional construction 28,943 27,879 Other 339 351 3.8 (1.5) 2023 % 38.2 42.1 19.5 0.2 2022 % 42.7 34.7 22.3 0.3 Revenue 148,734 124,915 19.1 100.0 100.0 Residential: Record levels of enquiries and contract activity reported in FY2022 continued into early FY2023, buoyed by pending changes in building regulations, which resulted in significant levels of new-builds being started. The levels of new-build housing starts began to slow down in Autumn 2022 due to increasing interest rates and approaching regulation changes. Despite this, enquiry and order levels remained at strong levels throughout H2 of FY2022, albeit lower than H1 levels. GRAEME CAMPBELL Chief Financial Officer OVERVIEW n Revenues up 19% on the previous financial year to £148.7m, with significant activity within the residential sector and several large infrastructure contracts delivered during the year n Gross margins maintained due to higher rig utilisation and improved contract execution offsetting negative margin mix and cost inflation n Growth in operating profit margin to 3.9% n Growth in return on capital employed to 12.2% n Year-end cash balance £8.9m n FY2022 final dividend of 1.0p and FY2023 interim dividend of 0.4p paid during the year n Capital expenditure of £6.2m focused on Rail fleet growth and renewal of transport fleet n Low level of debt with adequate liquidity headroom to support further growth and investment Inflation has continued to impact the Group throughout the year, mitigated through contract price mechanisms as far as possible.” 46 Van Elle Holdings plc Annual report and accounts 2023 KEY FINANCIAL DATA Revenue Return on capital employed £148.7m 12.2% Net funds* £7.5m Operating profit margin 3.9% Operating profit £5.9m * Net funds excluding IFRS 16 Property and Vehicle Lease Liabilities. Infrastructure: Rail activity levels improved in FY2023 as rail infrastructure spend levels increased ahead of the end of control period 6 in March 2024, and work was completed on our first major electrification programme since 2018. We has also had success in delivering two significant energy infrastructure projects utilising our deep CFA technical expertise, which drives the significant increase in this sector’s revenues in FY2023. The government pause to the new “all lane running” Smart Motorway projects has resulted in a slowdown in highways work during the year, although the final phase of the significant M6 contract, with installation of ScrewFast piles, was completed during the year, and work on new emergency areas on the existing smart motorway network is due to commence in H1 of FY2024. Regional construction: The sector has remained highly competitive despite an increase in activity levels. During the year we continued to secure and deliver high-quality projects whilst also continuing to focus on contract execution and commercial improvement. We had success in delivering large schemes utilising our vibro and recently developed rigid inclusions techniques. The mix of revenue by segment is shown below: 2023 £’000 2022 £’000 Change % General Piling 54,838 38,974 40.7 2023 % 36.9 2022 % 31.2 46,593 45,771 1.8 31.3 36.6 Specialist Piling and Rail Ground Engineering Services 47,067 40,043 Head office 236 127 17.5 85.8 31.6 0.2 32.1 0.1 Revenue 148,734 124,915 19.1 100.0 100.0 General Piling revenues, whilst impacted by high levels of competition within the regional construction market, have grown significantly in FY2023, with two significant energy infrastructure projects delivered during the year, which, combined, delivered £18m of revenue in FY2023. Revenue was also supported by further growth in our relatively new rigid inclusions technique, with several large projects completed successfully during the year. The Specialist Piling and Rail segment includes ScrewFast, which, as of the beginning of the financial year, was fully integrated into the Specialist Piling division. Growth in Rail revenues, driven by an increase in infrastructure spend ahead of the end of control period 6, delivery of significant electrification programmes and diversification into the rail civils market during the year, is offset by a reduction in activity within the Specialist Piling division predominately due to the slowdown in highways work as a result of the pause to the new Smart Motorways schemes. As such, revenue growth in this segment has been slower than the other segments in FY2023. As part of the strategic plan to grow the Rail division, Van Elle Canada Inc was incorporated in March 2023 ahead of major rail infrastructure and electrification opportunities in Ontario, which are expected to commence in FY2024. Growth in the Ground Engineering Services division’s revenue reflects the significant demand in the residential sector during the year and expansion into rail and highways ground investigation. The division has operated at near-capacity for the majority of the year. Head office revenues relate to the provision of training services delivered through the dedicated training facility located at Kirkby-in-Ashfield. Gross profit Gross margin remained relatively flat in FY2023 at 27% (FY2022: 27%). The strong growth in Ground Engineering Services revenues, particularly Housing, has a negative mix impact due to the highly competitive sector delivering margins at the lower end of our margin range. The two significant infrastructure projects supporting General Piling growth also have a negative mix impact with gross margins at the lower end of our margin range. These projects did, however, provided substantial overhead cover. Despite the negative revenue mix, gross margins have been maintained in FY2023 due to improved contract execution across all divisions, higher rig utilisation due to increased volumes and a softening of the supply chain challenges, including raw material availability and price volatility, seen in the previous financial year. Wage, utilities and fuel inflation have continued to impact us throughout the year, mitigated through contract price mechanisms as far as possible. Van Elle Holdings plc Annual report and accounts 2023 47 STRATEGIC REPORT Chief Financial Officer’s statement continued Financial review continued Operating profit Total operating profit and operating profit margins have improved in FY2023 as record activity levels resulted in improved overhead recovery rates. The rate of operating profit growth is limited by inflationary pressures, particularly in wages, utilities and fuel experienced during the year. These cost increases have been mitigated through contract price mechanisms as far as possible; however, in some cases there is a lag in recovery. Dividends An interim dividend of 0.4p (2022: nil) was paid on 17 March 2023. The Board is recommending a final dividend of 0.8p (2022: 1.0p) taking the total dividend payable for the year to 1.2p (2022: 1.0p). Subject to approval at the Annual General Meeting on Thursday 21 September 2023, the recommended final dividend will be paid on 13 October 2023 to shareholders on the share register as at 29 September 2023. The associated ex-dividend date will be 28 September 2023. Operating profit Operating margin 2023 £’000 5,858 3.9% 2022 £’000 4,372 3.5% Earnings per share Basic and diluted earnings per share are 4.4p in FY2023 (2022: 1.7p). An adjusted earnings per share of 2.7p was reported in the preceding financial year based on profit before non-underlying items, net of tax, and the one-off deferred tax charge relating to the restatement of deferred tax liabilities from 19% to 25%. Balance sheet Fixed assets (including intangible assets) 45,630 43,377 2023 £’000 2022 £’000 Net working capital Net funds/(debt) Deferred consideration Taxation and provisions Net assets 9,973 367 8,113 134 (790) (1,220) (5,149) (3,793) 50,031 46,611 Note: Net working capital and taxation and provisions are stated net of claim liabilities and associated insurance assets. Net assets increased by £3.4m to £50.0m (2022: £46.6m). ROCE has increased in the period to 12.2% at 30 April 2023 (2022: 9.4%), reflecting the impact of the increased operating profit. We invested £6.2m in capital over the course of the year with three new Rail rigs added to the fleet, as well as the mid-life overhaul and upgrade of approximately one-third of the existing Rail fleet. The programme of overhaul and upgrade commenced in the previous financial year and is due to conclude in FY2024. Investment in the Rail fleet supports growth opportunities in this sector in the UK and overseas. Approximately half of our ageing transport fleet was also replaced with more efficient vehicles in the financial year, with the remainder due to be replaced in FY2024. Working capital (defined as inventories, trade and other receivables and trade and other payables) increased to £10.0m (2022: £8.1m), due to increased activity in the year. Alternative performance measures In previous years, we have presented alternative performance measures (“APMs”), which are not defined or specified under the requirements of IFRS. We believe that these APMs provide depth and understanding to the users of the financial statements to allow for further assessment of the underlying performance of the Group and comparability from one year to the next. The Board believes that the underlying performance measures for operating profit, profit before tax and EPS, stated before the deduction of non-underlying items, give a clearer indication of the actual performance of the business. Our non-underlying items in FY2023 include a credit of £427,000 relating to the reduction in the deferred consideration due in respect of the acquisition of ScrewFast, and a charge of £350,000 relating to two warranty claims where the estimated costs of remediation have increased in the current financial year. The total value of £77,000 is recognised within administration expenses and forms part of underlying operating profits. Underlying operating profits and reported operating profits are consistent in FY2023. This is consistent with presentation in the previous financial year. Net finance costs Net finance costs were £487,000 (2022: £779,000). Finance costs relate to interest on outstanding hire purchase agreements and interest on property and vehicle liabilities classified under IFRS 16. Finance costs in the preceding year included accelerated interest charges as a result of early repayment of loans and hire purchase agreements in ScrewFast, which were repaid in April 2022. Taxation The effective tax rate in the year is 12.9% (2022: 48.2%). We have benefitted from the super deduction allowances on qualifying items of plant and machinery during the year, resulting in an effective tax rate below the rate of corporation tax applicable in the financial year. We carried forward taxable losses in the current financial year. Tax losses have been recognised on the basis we have net deferred tax liabilities against which to offset. Our net deferred tax liabilities were restated from 19% to 25% in the preceding year, resulting in the significant effective tax rate of 48.2% in FY2022. 48 Van Elle Holdings plc Annual report and accounts 2023 The estimated remaining balance due in respect of the acquisition of ScrewFast Foundations Limited on 1 April 2021 is £790k, of which £740k is a guaranteed sum due on 31 August 2023 and £50k is the expected outcome of the consideration payable based on post-acquisition performance to 31 May 2023 and payable on 31 August 2023. This is a reduction of £427k on the estimate as at 30 April 2022 and £1.1m below the maximum possible contingent consideration. Performance is expected to be at the lower end of the pay-out range due to the delay to several large highways projects caused by a pause to the Smart Motorways programme, a work bank that favours the ScrewFast piling solution. Significant opportunities for ScrewFast in highways, high-voltage power and modular homes exist in FY2025 and beyond. Our deferred tax liability has increased in FY2023 due to utilisation of the super capital allowances scheme. Corporation tax receivables have also reduced in the year following the repayment of corporation tax as a result of an extended loss carry-back claim made in April 2022. Net funds Bank loans Lease liabilities Total borrowings Cash and cash equivalents Net funds 2023 £’000 — 2022 £’000 — (8,518) (6,853) (8,518) (6,853) 8,885 6,987 368 134 Net funds excluding IFRS 16 Property and Vehicle Lease Liabilities 7,526 5,935 Net funds has increased during the year to £0.4m (2022: £0.1m) with total cash and cash equivalents increasing to £8.9m at 30 April 2023 (2022: £7.0m). Our lease liabilities includes £7.2m of IFRS 16 Property and Vehicle Lease Liabilities (2022: £5.8m). The increase in IFRS 16 Property and Vehicle Lease Liabilities reflects the renewal of our van fleet, which commenced in previous years and was substantially complete in FY2023. Additional vans, required to service additional activity levels, have also been taken during the year. Vans are leased on a long-term hire basis over a period of four years with early termination possible. Remaining lease liabilities of £1.3m relate to outstanding hire purchase agreements. The majority of outstanding hire purchase debt relates to two new hire purchase agreements taken out in H1 of the current year, funded on a variable basis, expiring in August 2024. We have an £11m asset back lending facility, secured against our receivables and certain tangible assets. A draw-down of the facility was made in H1 to support working capital investment given the significant increase in revenues. This was repaid in H2 and the facility remains undrawn as at 30 April 2023. There are no financial covenants associated with the facility, which is due to expire in October 2024. It is expected that the facility will be extended for a further four-year period to October 2028. Cash flow 2023 £’000 2022 £’000 Operating cash flows before working capital 11,846 9,816 Working capital movements (including provisions and deferred consideration) Cash generated from operations Income tax received (1,885) (1,442) 9,961 323 8,374 — Net cash generated from operating activities 10,284 8,374 Investing activities Financing activities (5,602) (4,738) (2,784) (5,167) Net increase/(decrease) in cash 1,898 (1,531) Operating cash flows of £10.0m have primarily been used to repay outstanding debt and fund capital expenditure. Working capital increased in the year, due to the increased trading levels. Graeme Campbell Chief Financial Officer 25 July 2023 Van Elle Holdings plc Annual report and accounts 2023 49 STRATEGIC REPORT Corporate governance Corporate governance Contents 51 Board of Directors 52 Corporate governance statement 55 Audit and Risk Committee report 58 Nomination Committee report 59 Remuneration Committee report 61 Directors’ remuneration policy Annual report on remuneration 64 66 Directors’ report 67 Statement of Directors’ responsibilities 68 Independent auditor’s report 50 Van Elle Holdings plc Annual report and accounts 2023 Board of Directors Leading with experience A N R Frank Nelson Non-Executive Chair Mr Nelson has over 30 years’ experience in the housebuilding, infrastructure and energy sectors. He is a qualified accountant and is currently the Senior Independent Director of Eurocell plc, and the Chair of private equity- backed contractor and developer DSM SFG Group Holdings Limited. He was previously a Non-Executive Director at Telford Homes Plc and a Senior Independent Director at McCarthy and Stone. He recently retired as Senior Independent Director of HICL, the FTSE 250 infrastructure investment company. Graeme Campbell Chief Financial Officer Mr Campbell was appointed Chief Financial Officer in February 2020. Mr Campbell qualified as a Chartered Accountant in 2000 and was previously the Group Financial Controller of Severfield plc, the UK’s market-leading structural steel company and one of the largest structural steel businesses in Europe. Mr Campbell has spent his career in senior finance functions across a range of industrial businesses, including latterly as Group Chief Financial Officer and Company Secretary for ASX-listed international engineering services business Engenco. Mark Cutler Chief Executive Officer Mr Cutler was appointed to the Board in August 2018. A graduate of Imperial College London, Mr Cutler is a chartered civil engineer with over 30 years’ experience in the infrastructure, construction and utility sectors, having held various senior leadership roles with major UK contractors. Mr Cutler joined Tarmac Construction (later Carillion) as a graduate in 1990, working on several major civil engineering projects, leaving in 2005 to join Morgan Sindall as the Managing Director of its Infrastructure division. In 2010 he became Chief Executive of privately owned water sector specialist Barhale. In 2014 he joined Balfour Beatty, initially to lead its portfolio of UK regional civil engineering and construction businesses and latterly, before joining Van Elle, was Managing Director of the Balfour Beatty VINCI joint venture for High Speed 2. A N R A N R David Hurcomb Independent Non-Executive Director Mr Hurcomb 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. Charles St John Non-Executive Director Mr St John is a Chartered Accountant and has held many board level positions spanning over 20 years. This experience covers a range of industries, including within the UK building products and services sectors. Until 2012, Mr St John was a Partner at the private equity firm Cognetas and its predecessor firms, with significant involvement in the growth and development of its investee companies. Mr St John is currently Non-Executive Director of Capstone Foster Care Limited and Caroola Group Ltd. Key to Committee membership A N R Audit and Risk Committee Nomination Committee Remuneration Committee Committee Chair Van Elle Holdings plc Annual report and accounts 2023 51 CORPORATE GOVERNANCE Corporate governance statement Promoting long-term sustainable success All members of the Board believe strongly in the value and importance of good corporate governance and in our accountability to all of Van Elle’s stakeholders. The Company adopts the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”) on the basis the Board considers this to be the corporate governance code most suited to the size, risks, complexity and operations of the business. The Board is ultimately responsible for the Company’s strategic aims and long-term success; it seeks to achieve this by ensuring that the right financial resources and talent are in place to deliver the Company’s strategy. Our culture is fundamental to the successful delivery of our strategic objectives. The Board assesses and monitors the culture by specific reference to employees and their engagement during Board meetings as well as periodic discussions on the Group’s vision and values. Board composition and operation The QCA Code requires that the boards of AIM companies have an appropriate balance between executive and non-executive directors, of which at least two should be independent. The Board currently comprises two Executive and three Non-Executive Directors, one of whom is the Chair. The Non-Executive Directors are considered independent of the Company and, other than their fees and shareholdings as set out on pages 64 and 65, have no other financial or contractual interest in the Company. There is a clear division of responsibilities between the Chair and the Chief Executive Officer. The role of the Chair is to manage the Board in the best interests of its stakeholders, to ensure that shareholders’ views are communicated to the Board and to be responsible for ensuring the Board’s integrity and effectiveness. The role of the Chief Executive Officer is to manage the Group’s operations on a day-to-day basis, to ensure that Board decisions are implemented effectively and to develop and propose the Group’s strategy to the Board. The Group’s business model and strategy are described in detail in the strategic report. The strategy is closely monitored by the Board through reporting and discussion at Board meetings, including periodic reviews as part of the wider Board meeting agenda. Specific strategy updates are also held periodically with the senior management team. Progress on strategic actions are reviewed in the context of market developments and financial targets are kept under close review to ensure capital resources are directed to growth areas. The Board is satisfied that it has a balanced composition, with relevant sector and public market skills and expertise, details of which can be seen in the biographies on page 51. Directors maintain their expertise through attending relevant training and networking events and through ongoing experiences in other organisations. Board composition20+ Key Chair Non-Executive Executive 1 2 2 Meeting attendance Director Frank Nelson (Chair) David Hurcomb Charles St John Mark Cutler Graeme Campbell Board meetings Every Director was in attendance at all Board meetings during the year. Key Attended meeting Not due to attend Biographies of the Directors can be found on page 51 52 Van Elle Holdings plc Annual report and accounts 2023 40 + 40 + Q Remuneration Committee The Remuneration Committee comprises all Non-Executive Directors and is chaired by David Hurcomb. The Committee is primarily responsible for determining the contractual terms, remuneration and other benefits of the Executive Directors and the Chair of the Board. The Committee met on four occasions during the year. The Remuneration Committee report is set out on pages 59 and 60. 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 all Board members. Risk management and internal control The risk management framework is presented on pages 40 and 41 and sets out how the Board identifies, assesses and takes mitigating action to manage risk. The Audit and Risk Committee reviews and monitors the Group’s key risks and internal controls. However, 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 effective system can provide only reasonable, and not absolute, assurance against material misstatement or loss. The Group’s organisational 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. The Board controls the Group by delegating day-to-day responsibility to the executive management and operational Directors. Certain matters are specifically reserved for decision only by the Board of Directors. These matters were reviewed and amended as considered appropriate during the year and fall under the general headings of: strategy and management; structure and capital; financial reporting; internal controls; contracts; shareholder communication; Board membership; executive remuneration; delegation of authority; corporate governance matters; and Group policies. The Board held formal Board meetings ten times during the year. Board meetings are conducted to a set agenda with a pack of comprehensive briefing papers circulated to all Directors prior to each scheduled meeting. The Board also met on an ad hoc basis several times during the year to discuss various matters. The discussions of these more informal meetings are minuted in line with Board meetings. Directors are able, if necessary, to take independent professional advice in the furtherance of their duties at the Company’s expense. Board Committees The Board has delegated specific responsibilities to the Audit and Risk, Remuneration and Nomination Committees. All Board Committees have their own terms of reference, which are published on the Company’s website. Audit and Risk Committee The Audit and Risk Committee comprises all Non-Executive Directors and is chaired by Charles St John. The Committee’s primary responsibilities include monitoring internal controls, reviewing the key risks of the organisation, ensuring that the financial performance of the Group is properly measured and reported, and overseeing the relationship with the Group’s auditor. The Audit and Risk Committee met on three occasions during the year. Further details on the work and responsibilities of the Audit and Risk Committee are shown on pages 55 to 57. Nomination Committee The Nomination Committee comprises all Non-Executive Directors and is chaired by Frank Nelson. The Committee’s primary responsibilities include assessing the size, structure and composition of the Board, succession planning for Directors and other senior executives, and identifying and nominating candidates to fill Board vacancies, together with leading the process for such appointments. One Committee meeting was held during the year. The Committee comprises all members of the main Board and duties of the Committee in respect of evaluation of the composition of the Board and succession planning for Directors and other senior executives have been fulfilled by discussion at Board meetings. Further details on the work and responsibilities of the Nomination Committee are shown on page 58. Van Elle Holdings plc Annual report and accounts 2023 53 CORPORATE GOVERNANCE Corporate governance statement continued Going concern basis In determining whether the Group and Company annual consolidated financial statements can be prepared on a going concern basis, the Board considered all factors likely to affect its future performance and financial position, including cash flows, liquidity position, borrowing facilities and the risks and uncertainties relating to its business activities. A detailed forecast has been prepared for the period to 31 July 2024 which demonstrates healthy cash flow and liquidity headroom across the period to 31 July 2024. Reverse stress testing has been carried out and the Board is satisfied that the scenarios in which the level of trading is such that the Group experiences a cash outflow of such a level that further debt facilities would be required are remote. Based on this review the Directs conclude that the Group and Company are able to operate within the level of their current financial resources for a period of at least 12 months from the date of approving the financial statements. The full statement in respect of going concern is included in note 2 to the consolidated financial statements. Forward-looking statements The annual report and accounts include 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. Shareholder relationships The CEO and CFO are the key contacts for shareholders on any matters relating to the Group, its governance and investor relations. There is a programme of scheduled meetings with institutional investors, certain private shareholders and analysts, following full and half year results announcements. Presentations are also hosted through the digital platform Investor Meet Company, which allows all shareholders or other interested parties to attend. These meetings provide the CEO and CFO the opportunity to update shareholders on the Group’s performance and future strategy. Additionally, the Chair and Non-Executive Directors make themselves available to meet with shareholders as necessary. The AGM allows the Board to communicate with all investors, institutional or private, and provides shareholders the opportunity to ask questions and raise issues, as well as formally vote on resolutions circulated to shareholders in the Notice of AGM prior to the AGM. Copies of the Notice of AGM are also published on the Company website. Details of the Group’s corporate governance policies can be found at https://van-elle.co.uk/corporate-governance/. Approval The Board approved the corporate governance report on 25 July 2023. By order of the Board Graeme Campbell Company Secretary 25 July 2023 54 Van Elle Holdings plc Annual report and accounts 2023 Audit and Risk Committee report CHARLES ST JOHN Chair of the Audit and Risk Committee Director Attendance Charles St John (Chair) Frank Nelson David Hurcomb Mark Cutler* Graeme Campbell* * Attended by invitation. Key Attended meeting Not due to attend Biographies of the Directors can be found on page 51 Activities during the year The following matters were considered at the Committee meetings held during the year: Financial statements and reports: n Reviewed the interim results announcement, preliminary final results announcement and the annual report and accounts n Reviewed reports from the external auditor n Reviewed management representation letters, going concern reviews and significant areas of accounting estimates and judgements (including provisions for impairment of trade receivables and contract assets, provisions for insurance claims, exceptional and non-underlying items and the carrying value of intangible assets) n Considered the output of a third-party review on revenue recognition ahead of interim results announcement n Reported to the Board on the appropriateness of accounting policies and practices Risk management: n Reviewed the risk register, which identifies the Group’s key risk areas, the probability of these risks occurring and the impact they would have on the Group. Mitigating actions and internal controls are assigned to each risk, with an internal assessment of the residual risk to which the Group is exposed n Approved a schedule of controls review and testing and reviewed the outputs of controls reviews performed by management n Ensured that updates to the Group’s main governance policies were submitted and approved by the Board External audit and non-audit work: n Agreed the terms of engagement and fees to be paid to the external auditor n Reviewed and agreed the scope and methodology of the audit work to be undertaken by the external auditor n Reviewed the relationship with the external auditor including its independence, objectivity and effectiveness n Reviewed non-audit fees paid to the external auditor n Reviewed proposals for audit services from several audit firms following a recommendation in the previous year to undertake a tender for audit services Compliance: n Met with the external auditor without executive management being present Van Elle Holdings plc Annual report and accounts 2023 55 CORPORATE GOVERNANCE Audit and Risk Committee report continued Dear Shareholder, I am pleased to present the report on the activities of the Audit and Risk Committee for the year. The report provides details of the key matters considered by the Committee, and an explanation of how the Committee has obtained assurance on the integrity of the annual report. Role 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: n Assessing and advising the Board on the internal financial, operational and compliance controls n Monitoring and reviewing the Group’s accounting policies and significant accounting judgements n Reviewing the annual and interim financial statements and any public financial announcements and advising the Board on whether the annual report and accounts are fair, balanced and understandable n Monitoring and reviewing the adequacy and effectiveness of the risk management systems and processes n Overseeing the Group’s procedures for its employees to raise concerns through its whistleblowing policy In relation to the external audit, the Committee is responsible for: n Approving the appointment of the external auditor, including the terms of engagement and fees n Considering the scope of work to be undertaken by the external auditor and reviewing the results of that work n Reviewing and monitoring the independence of the external auditor and approving its provision of non-audit services; and monitoring and reviewing the effectiveness of the external auditor Membership and attendance The Quoted Companies Alliance Corporate Governance 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 that may, could or would be likely to, or appear to, affect their judgement, and that one such member has recent and relevant financial experience. Accordingly, the Committee comprises all Non-Executive Directors, with the Chair, as a Chartered Accountant, having recent and relevant financial and accounting experience. Committee meetings are also attended by the Chief Executive Officer and Chief Financial Officer by invitation. The external auditor is invited to attend certain meetings to report to the Committee, primarily on the planning and outcome of the audit. The Company Secretary acts as Secretary to the Committee. Other members of management may be invited to attend meetings depending on the matters under discussion. The Committee Chair meets periodically with the external auditor with no members of management present. The Committee held three meetings during the reporting period. 56 Van Elle Holdings plc Annual report and accounts 2023 External audit The Committee 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 external auditor is permitted to provide non-audit services that 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 9 of the consolidated financial statements. Rotation of the audit partner took place in the prior year. Whilst the 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. In the previous annual report, the Audit and Risk Committee recommended that an audit tender process be undertaken. During the year, several firms were approached and invited to submit proposals for external audit services. The Committee reviewed all proposals and concluded that it was in the best interests of the Company not to run a formal audit tender process. The Committee also remains satisfied that the services provided by BDO LLP are appropriate and comparable to other audit firms’ pricing. However, given that BDO has been the Company’s external auditor for 12 years, the provision of external audit services will be kept under close review over the coming reporting periods. Internal audit The Group does not have a formal internal audit function. During the year the finance team has performed targeted reviews and visits to operations as well as high-level reviews of key finance processes and controls. The results of these reviews were communicated to the Committee. A schedule of detailed controls reviews and operating effectiveness testing has been established based on the output of the key finance process and controls reviews. This schedule of testing has been prioritised based on risk. The Committee also commissioned an independent review of contract revenue recognition ahead of the interim results announcement to provide additional assurance over reported contract positions in H1. 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 review. Internal controls and risk management The Board is responsible for the effectiveness of the Group’s internal control systems, which have 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. The Group risk register and the methodology applied were the subject of review by senior management and updated to reflect new and developing areas that 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 40 to 43. insurance and any reimbursements, where material and virtually certain, are treated as separate assets. The calculations of the provisions contain management estimates and judgement on the likely outcome of the claims. The Committee has reviewed the estimates and judgements applied by management and is satisfied with management’s conclusions n The carrying value of intangible items – the carrying value of goodwill has been tested for impairment. This testing includes sensitivities of future forecast performance, discount rates used and other key assumptions. The Committee has reviewed the estimates and judgements applied by management and is satisfied with management’s conclusion that no impairment is required. Going concern In determining whether the Group and Company annual consolidated financial statements can be prepared on a going concern basis, the Board considered all factors likely to affect its future performance and financial position, including cash flows, liquidity position, borrowing facilities and the risks and uncertainties relating to its business activities. A detailed forecast has been prepared for the period to 31 July 2024 which demonstrates healthy cash flow and liquidity headroom across the period to 31 July 2024. Reverse stress testing has been carried out and the Board is satisfied that the scenarios in which the level of trading is such that, the Group experiences a cash outflow of such a level that further debt facilities would be required are remote. Based on this review, the Directs conclude that the Group and Company are able to operate within the level of their current financial resources for a period of at least 12 months from the date of approving the financial statements. The full statement in respect of going concern is included in note 2 to the consolidated financial statements. Charles St John Chair of the Audit and Risk Committee 25 July 2023 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: n An appropriate organisational structure with clear lines of responsibility n An experienced and qualified finance function, which regularly assesses the risks facing the Group n A comprehensive annual strategic and business planning process n 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 n A robust financial control, budgeting and rolling forecast system, which includes regular monitoring, variance analysis and key performance indicator reviews n 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 n 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 Significant accounting matters The 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 provide details on the main financial reporting judgements. The Committee also reviews reports by the external auditor on the full year results, which highlight any issues arising from the work undertaken. Areas of audit and accounting risk reviewed by the Committee included: n Revenue recognition – the Group’s policy on revenue recognition, detailed in note 2 to the consolidated financial statements, is in accordance with IFRS 15. The Committee has reviewed the estimates and judgements applied by management and is satisfied with management’s conclusions n The carrying value of trade receivables and contract assets – the Group holds material trade receivable balances and contract asset balances, and the calculations of provisions for impairment are estimates of future events and therefore uncertain. The Group has purchased trade credit insurance in the year, which provides additional protection against the risk of bad debts. The Committee has reviewed the current year provisions (including the application of IFRS 9) against trade receivables and contract asset balances and is satisfied with management’s conclusions that the provisioning levels are appropriate n Provisions for legal and other claims – the Group holds material provisions in respect of legal and other claims. The Group carries Van Elle Holdings plc Annual report and accounts 2023 57 CORPORATE GOVERNANCE Nomination Committee report FRANK NELSON Chair of the Nomination Committee Director Attendance Frank Nelson (Chair) David Hurcomb Charles St John Mark Cutler* Graeme Campbell* * Attended by invitation. Key Attended meeting Not due to attend Biographies of the Directors can be found on page 51 Activities during the year The following matters were considered during the year: n Reviewed the Committee’s terms of reference; n Evaluated the balance of skills, experience, independence, diversity and knowledge on the Board n Commenced a process to review Board performance during the next financial year n Succession planning for the Executive Directors and the senior management team n Reviewed requirements for the re-election of Directors at the Annual General Meeting n Reviewed the Committee’s report in the annual report and accounts and recommended approval to the Board 58 Van Elle Holdings plc Annual report and accounts 2023 Dear Shareholder, On behalf of the Nomination Committee, I am pleased to present our report for the financial year ended 30 April 2023. Role and responsibilities The key responsibilities of the Committee are: n 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 n Examining succession planning for Directors and other senior executives and for the key roles of Chair of the Board and Chief Executive Officer n 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. 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 Chair of the Board normally chairs the Committee, except where it is dealing with their own reappointment or replacement. In this instance, the Committee is chaired by another Non-Executive Director nominated as sub-committee Chair. The Company Secretary acts as the Secretary to the Committee. The Board composition has remained unchanged since July 2020, which has provided a good level of stability for the Company. One Committee meeting was held during the year. The duties of the Committee in respect of evaluation of the composition of the Board and succession planning for Directors and other senior executives have been fulfilled by discussion at Board meetings. The Committee comprises all members of the main Board. Election of Directors On the recommendation of the Committee and in line with the Company’s Articles of Association, Directors stand for re-election at the Annual General Meeting. 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. Corporate governance The Committee’s terms of reference are available on the Group’s website (www.van-elle.co.uk). The terms of reference were reviewed during the year, with no changes to report. Frank Nelson Chair of the Nomination Committee 25 July 2023 Remuneration Committee report DAVID HURCOMB Chair of the Remuneration Committee Director Attendance David Hurcomb (Chair) Frank Nelson Charles St John Mark Cutler* Graeme Campbell* * Attended by invitation. Key Attended meeting Not due to attend Biographies of the Directors can be found on page 51 Activities during the year Matters considered and decisions reached by the Committee during the year included: n Reviewed and approved Executive Director and senior management team salaries, including inflationary pay increases processed in January 2023 n Reviewed and approved payments to Executive Directors and senior management under the FY2022 Annual Bonus Plan n Reviewed and approved the parameters of the FY2023 Annual Bonus Plan, including performance measures and targets for the Executive Directors and senior management team n Reviewed and approved the launch of the Company’s Save-As-You-Earn scheme following the expiry of the previous scheme during the year n Commissioned a report by an external expert on the Group’s long-term incentive policies, including benchmarking against companies of comparable size and advising on best practices Dear Shareholder, On behalf of the Remuneration Committee, I am pleased to present the Remuneration Committee report for the current financial year. Role and responsibilities The Committee’s role is to recommend to the Board a strategy and framework for the remuneration of Executive Directors and the senior management team. The framework should be designed to attract and retain leaders who are appropriately incentivised to deliver the Company’s strategic business priorities, aligned with the interests of shareholders and thus promote the long-term success of the Company. The Committee’s main responsibilities are: n Establishing and maintaining formal and transparent procedures for developing the policy on executive remuneration, fixing the remuneration packages of individual Directors, and monitoring and reporting on them n Determining the remuneration of the Executive Directors n Monitoring and making recommendations in respect of remuneration for senior management who report directly to the Chief Executive Officer n Approving the targets and level of awards for any long-term incentive arrangements n Determining the level of fees for the Chair of the Board n Selecting and appointing external advisers to the Committee Membership and attendance The Committee comprises all independent Non-Executive Directors. By invitation, the meetings of the Committee may be attended by the Chief Executive Officer and Chief Financial Officer. The Chair of the Committee acts as Chair for all matters except where it is dealing with their own remuneration. The Company Secretary acts as the Secretary to the Committee. The Committee plans to meet formally at least twice a year and at such other times as necessary. The Committee met four times during the year. Annual bonus scheme outcomes The Group delivered a significantly improved financial performance in FY2022, with revenue increasing by 48% to £124.9m and operating profit increasing to £3.6m compared to an operating loss of £0.8m in FY2021. This performance reflected an upgrade on market consensus during the year. The Committee approved the payment of annual bonuses in line with the scheme rules. Executive Director bonuses were paid in September 2022. In FY2023, the performance improved further with revenue increasing to £148.7m and operating profit increasing to £5.8m, which included an upgrade on market consensus during the year. The Committee approved the payment of annual bonuses in line with the scheme rules, with all bonuses expected to be paid in August 2023. Van Elle Holdings plc Annual report and accounts 2023 59 CORPORATE GOVERNANCE Remuneration Committee report continued 2023 salary review The Group has been impacted by high wage inflation over the year, particularly with the increased demand for labour from HS2. The Committee has considered the impacts of high inflation and cost of living challenges in the UK and, accordingly, has responded with several initiatives to mitigate these impacts across the workforce. Average salary increases of approximately 9% were awarded during the year, including the annual pay increase on 1 January 2023, with higher pay increases being awarded to lower paid employees. All Executive and Non-Executive Directors were awarded salary increases of 4% on 1 January 2023. Long-term incentives The LTIP awards granted in August 2019 lapsed in August 2022 as both the EPS and TSR performance conditions were not met. The CSOP awards granted in August 2019 vested in August 2022; however, to date, no options have been exercised. In January 2023, the Committee commissioned a report by an external expert on the Group’s long-term incentive policies, including benchmarking against companies of comparable size and advising on best practices. The report advised that the Group’s approach to long-term incentives is broadly consistent with similar-sized organisations and uses consistent measures of performance, which are aligned to the Company’s strategic objectives. No LTIP scheme was issued during the year. Based on the report recommendations, the Committee expects to issue LTIPs on an annual basis with participants being approved by the Committee for each issue. SAYE launch Following the expiry of the Group’s 2019 Save-As-You-Earn (“SAYE”) scheme, the Committee approved the launch of a new three-year scheme, commencing on 1 April 2023. 103 employees subscribed for shares under the 2023 Save-As-You-Earn scheme, resulting in 2,012,999 share options being granted. 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. David Hurcomb Chair of the Remuneration Committee 25 July 2023 60 Van Elle Holdings plc Annual report and accounts 2023 Directors’ remuneration policy Introduction The Committee considers the remuneration policy annually to ensure that it remains aligned with the business’s needs and is appropriately positioned relative to the market. We use target performance to estimate the total potential reward and benchmark it against reward packages paid within the sector. Performance measures and targets The performance measures used in the annual conditional share awards include total shareholder return and return on capital employed targets. The annual bonus scheme performance measures are profit before tax, year-end cash and cash equivalents and performance against personal objectives. Principles adopted The principles adopted, taken from the Association of British Insurers (“ABI”), are as follows: n Remuneration structures should be appropriate to the specific business, efficient and cost effective in delivery n Complexity is discouraged in favour of simple and understandable remuneration structures n Remuneration structures should seek to align executive and shareholder interests including through a meaningful level of personal shareholding n Remuneration structures should promote long-term focus through features such as deferral and measuring performance over the long term n Structures should include performance adjustments (malus) and/or clawback provisions n Pay should be aligned to long-term sustainable success and the desired corporate culture throughout the organisation n 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. The Committee has selected these performance conditions because they 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 and Risk Committee and are typically set at a level that is above the level of the Company’s forecasts. Differences in remuneration policy for all employees All employees of the Company are entitled to base salary, benefits and a pension. An employee bonus scheme is reviewed annually. 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 Remuneration Committee invites the Chief Executive Officer to present 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 Officer 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. Van Elle Holdings plc Annual report and accounts 2023 61 CORPORATE GOVERNANCE Directors’ remuneration policy continued 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. Pension To provide funding for retirement. 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 January in the financial year. 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. None. 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 following sign off of the financial statements for the 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 profit before tax. 100% of salary for the CEO and 80% for the CFO. Performance is measured over the financial year. Maximum bonus potential for Executive Directors is between 30% and 50%. 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. Defined contribution scheme. 3%–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 return on capital employed and total shareholder return 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 set targets (50% based on TSR and 50% based on ROCE). 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. Example – 2021 LTIP plan: TSR 25% vesting if TSR ranked at median within comparator group. 100% vesting if TSR ranked in upper quartile. ROCE: 25% vesting if ROCE in FY2024 exceeds 15%. 50% vesting if ROCE in FY2024 exceeds 17%. 100% vesting if ROCE in FY2024 exceeds 20%. The Committee has discretion to vary the weighting of performance metrics over the life of this remuneration policy. 62 Van Elle Holdings plc Annual report and accounts 2023 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 time frame 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-rata 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. Non-Executive Directors’ fees policy 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 Chair and each of the Non-Executive Directors of the Company do not have service contracts. Each of these Directors has a letter of appointment that 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 Date of service contract/ letter of appointment Mark Cutler 13 August 2018 Graeme Campbell 23 September 2019 Non-Executive Directors David Hurcomb Charles St John Frank Nelson 1 November 2017 24 February 2020 20 May 2020 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 Chair’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. Maximum potential value and payment at threshold Performance metrics used, weighting and time period applicable Current fee levels are shown in the annual report. Non-Executive Directors are not eligible to participate in any performance-related arrangements. 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. Van Elle Holdings plc Annual report and accounts 2023 63 CORPORATE GOVERNANCE Annual report on remuneration Single total figure of remuneration The table below sets out the total remuneration for the Directors in the year ended 30 April 2023, with comparative figures for the year ended 30 April 2022. Executive Directors Mark Cutler Graeme Campbell Non-Executive Directors Charles St John David Hurcomb Frank Nelson Aggregate emoluments Salary/fees £’000 Benefits £’000 LTIP £’000 Pension £’000 Bonus £’000 309 176 48 48 101 682 47 12 — — — 59 — — — — — — — 9 — — — 9 163 74 — — — 237 2023 Total £’000 519 271 48 48 101 987 2022 Total £’000 539 281 46 46 97 1,009 Benefits comprise the provision of car allowance, payment in lieu of pension 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. An LTIP award reached the end of its vesting period on 16 August 2022; however, the options lapsed as the performance criteria were not met. As a result, this column has a zero figure. Bonus payments reflect estimated bonus outcomes for 2023 (detailed below) with final bonus payments subject to Remuneration Committee approval following issue of the FY2023 annual report. Annual Bonus Plan Bonuses are earned by reference to the financial year and paid in August following the end of the financial year. The 2023 annual bonus was based 80% on the achievement of stretching profitability and cash targets and 20% on individual objectives aligned to the delivery of key strategic and operational priorities. The targets and estimated bonus outcomes for 2023 for each Executive Director are set out below. Final bonus payments are subject to Remuneration Committee approval following issue of the FY2023 annual report. 2023 measurement ranges and outcome Bonus as % of salary Threshold Target Maximum Performance outcome Mark Cutler Graeme Campbell Measures 0% 40% Group profit before tax £4.25m £5.0m 100% £6.5m Maximum Outcome Maximum Outcome £5.4m 80% 42% 64% 34% £7.0m £7.0m £7.0m £8.9m Year-end cash and cash equivalents Total Group measures Individual objectives Total bonus Base salary* Bonus based on performance outcomes * Base salary is the base salary as at 30 April 2022. Aggregate Directors’ emoluments Salaries Taxable benefits Pension allowances Bonus Subtotal Employer’s NI Total 64 Van Elle Holdings plc Annual report and accounts 2023 80% 20% 100% 42% 12% 54% 64% 16% 80% 34% 10% 44% 305,000 173,250 163,000 74,000 2023 £’000 682 59 9 237 987 144 1,131 2022 £’000 649 26 37 297 1,009 133 1,142 Payments for loss of office There were no payments for loss of office in the year. Payments to past Directors There were no payments to past Directors in the year. Share awards granted during the year No conditional share awards were granted during the financial year. The Executive Directors were granted a conditional share award in the previous financial year on 27 September 2021, details of which are shown below: Director Mark Cutler Graeme Campbell Scheme Basis of award Face value £’000 % vesting at threshold Number of shares Vesting date LTIP 100% of salary LTIP 100% of salary 300 174 25 25 587,628 27/09/24 340,206 27/09/24 The face value of the awards is calculated using the share price at the date of grant, 27 September 2021, at £0.510 per share. The performance conditions in respect of the awards granted in the year ended 30 April 2022 are shown below: Performance measure Weighting Target 25% vesting Maximum 100% vesting Total shareholder return ranking* 50% Median, ranked 8th or higher Upper quartile, ranked 4th or higher Return on capital employed in FY2024 50% 15% 20% * Measured against a comparator group of 12 companies (i.e. 13 including Van Elle Holdings plc). Statement of Directors’ shareholdings and share interests 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 2023 as follows: Executive Directors Mark Cutler Graeme Campbell Non-Executive Directors Charles St John David Hurcomb Frank Nelson Ordinary shares held at 30 April 2023 Options held at 30 April 2023 752,767 1,390,444 50,000 804,994 100,000 65,000 140,000 — — — Statement of implementation of remuneration policy – year to 30 April 2023 The fees for the financial year for Non-Executive Directors David Hurcomb, Charles St John and Frank Nelson are £48,000, £48,000 and £101,000, 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 25 July 2023 and signed on its behalf by the Remuneration Committee Chair. David Hurcomb Chair of the Remuneration Committee 25 July 2023 Van Elle Holdings plc Annual report and accounts 2023 65 CORPORATE GOVERNANCE Directors’ report Introduction The Directors present their annual report and the Group audited financial statements for the year ended 30 April 2023. The strategic report on pages 1 to 46, the corporate governance report on pages 52 to 54 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 1 to 46. Results and dividend The Group’s result for the year is shown in the consolidated statement of comprehensive income on page 75. An interim dividend of 0.4p per share was paid to shareholders on 17 March 2023. The Board is recommending a final dividend of 0.8p for the year ended 30 April 2023. If approved at the Annual General Meeting on 21 September 2023, the final dividend is payable on 13 October 2023 to shareholders registered on 29 September 2023. The shares will be marked ex-dividend on 28 September 2023. 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 24 of the consolidated financial statements. Directors The Directors of the Company who held office during the year are: n M. Cutler n D. Hurcomb n G. Campbell n C. St John n F. Nelson The biographies of the Directors are detailed on page 51. Their interests in the ordinary shares of the Company are shown in the Directors’ remuneration report on page 64. 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 pages 64 and 65. 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. 66 Van Elle Holdings plc Annual report and accounts 2023 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 sustainable responsible business section on pages 26 to 36. 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 2022, the issued share capital of the Company was 106,666,650 ordinary shares of 2p each. Details of the share capital as at 30 April 2023 are shown in note 28 of the consolidated financial statements. The market price of the Company’s shares at the end of the financial year was £0.435 and the range of market prices during the year was between £0.343 and £0.545. 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 LLP Otus Capital Management Premier Miton Investors Close Brothers Assets Management 6,447,374 NR Holdings Harwood Capital Janus Henderson Investors 6,009,999 5,880,000 4,288,000 Total holding of shares % of total voting rights 20,715,000 20,462,441 11,084,782 19.42 19.18 10.39 6.04 5.63 5.51 3.96 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 is set out in note 2 to the consolidated financial statements on page 79. 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: Graeme Campbell Company Secretary 25 July 2023 Registered office: Summit Close, Kirkby-in-Ashfield, Nottinghamshire NG17 8GJ Company number: 04720018 Statement of Directors’ responsibilities 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 Accounting Standards in conformity with the requirements of the Companies Act 2006. 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: n Select suitable accounting policies and then apply them consistently n Make judgements and accounting estimates that are reasonable and prudent n State whether they have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006, and subject to any material departures disclosed and explained in the financial statements n 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. 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 UK 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: Graeme Campbell Company Secretary 25 July 2023 Van Elle Holdings plc Annual report and accounts 2023 67 CORPORATE GOVERNANCE Independent auditor’s report To the members of Van Elle Holdings plc Opinion on the financial statements In our opinion: n 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 2023 and of the Group’s profit for the year then ended; n the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; n the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and n the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. 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 2023 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 Parent Company statement of financial position, the Parent 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 their preparation is applicable law and UK adopted international accounting standards and, as regards the Parent Company financial statements, as applied in accordance with the provisions 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remain 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. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going concern basis of accounting included: n We assessed the trading and cash flow budgets and forecasts approved by the Directors, which cover the period to 31 July 2024. This included challenging the key estimates and judgements and the evidence underpinning them. In doing so, we specifically considered the principal trading and cash flow assumptions, and challenged the Directors on revenue forecasts, margins, and the levels of capital expenditure required to support the forecast levels of activity and corroborated these to post year end trading results, order book and the pipeline of potential future orders. We also challenged judgements taken on legal cash flows and earnout payment calculations. n We assessed the sensitivities undertaken against the level of available cash and contracted funding facilities. n We considered the results of the reverse stress test undertaken by the Directors and assessed the reasonableness of the Directors’ assessment that the scenario that could result in the Group facing a cash shortfall was remote in light of the historic trading results. n We considered the risks in the Groups risk register and their relevance to forecasts, including observations on supply chain challenges faced in the prior year and the risk that these could recur. n We also reviewed the going concern disclosures in the note to the financial statements to assess whether it is in accordance with relevant accounting framework requirements and provides meaningful and transparent information for the users of the financial statements. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. 68 Van Elle Holdings plc Annual report and accounts 2023 Overview Coverage 100% (2022: 100%) of Group profit before tax 100% (2022: 100%) of Group revenue 100% (2022: 100%) of Group total assets Key audit matters 2023 2022 Recognition of revenue and attributable profits (or losses) on contracts. The valuation of any legal claims against the Group, the recognition of associated insurance reimbursement assets and residual exposure. Materiality Group financial statements as a whole £265,000 based on 5% profit before tax (2022: £287,000 based on 8% of profit before tax). An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. The Group manages its central operations from the head office in Kirkby-in-Ashfield to support its subsidiary’s day to day operations with regional offices at various locations throughout the UK. As at 30 April 2023, the Group consisted of the Parent Company, one trading subsidiary in the UK, and three dormant subsidiaries. On 1 May 2022 ScrewFast Foundations Limited (the other trading subsidiary ) was hived up into Van Elle Limited (the trading subsidiary) and its results integrated into the Specialist Piling division. As a result, there is only one trading subsidiary in the Group. The trading subsidiary, Van Elle Limited, is considered to be the only significant component of the Group. The Group engagement team carried out a full scope audit on this significant component. 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. The Group engagement team have also undertaken a full scope audit on the Parent Company. Van Elle Holdings plc Annual report and accounts 2023 69 CORPORATE 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) that 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. Key audit matter Recognition of revenue and attributable profit (or losses) on contracts: The Group’s accounting policy is described in note 2. Refer note 6 to the financial statements. Revenue is recognised on the stage of completion of individual contracts. 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 and as such this was considered a significant audit risk and a key audit matter. How the scope of our audit addressed the key audit matter We tested the operating effectiveness of controls in the year surrounding the contract authorisation tender process, verification of works performed authorised by third party confirmation and senior management authorisation of adjustments to the financial statements regarding variable consideration and works performed not yet certified. We obtained a breakdown of contracts making up revenue in the year which we reconciled to the revenue reported per financial statements. We selected a sample of contracts from the breakdown and obtained a copy of the contract documentation and undertook the following work to substantiate the recognition of revenue from a review of the performance obligations as follows: n We assessed the position adopted by management at the year-end as compared to quantity surveyor applications or external evidence such as customers’ certification of work done. n We held meetings with contract managers and enquired on current progress on open contracts and final account negotiations on completed contracts substantiating explanations to supporting correspondence. For all the contracts which met our risk criterial and presented a potential risk to revenue recognition, we reviewed individual contract assets and trade receivables pertaining to those revenue samples which we considered presented the greatest risk of exposure to recoverability either by size or by age. For samples selected we agreed to either subsequent billing or settlement as relevant. For each material trade receivable or contract asset that had not been tested as part of our contract selection described above, we reviewed post year end correspondence and substantiated to customer certificates and invoices. Where contract assets had not been supported by external certifications we reviewed all other correspondence including support from applications for payment and final account settlements and challenged management’s judgement in respect of the recoverability of the amounts recoverable on contracts with reference to our own assessments. Key observations: We consider the judgements taken by management in relation to revenue recognition on contracts to be acceptable. 70 Van Elle Holdings plc Annual report and accounts 2023 Key audit matters continued Key audit matter Valuation of legal claims and recognition of related insurance reimbursement assets and residual exposure: Provisions are recognised in respect of legal claims against the business when in the Directors’ judgement it is probable that a liability will arise to settle or defend a claim against the business for work done prior to the year end. The Group’s accounting policy is described in note 2. Refer note 24 to the financial statements To the extent that the Group holds insurance policies to mitigate the losses arising as a result of settling the claims a separate insurance reimbursement asset is recognised if the recovery of such an asset is deemed virtually certain. Forming an estimate for the costs of defending or settling the claims involves a significant uncertainty and assessing that it is appropriate to recognise the associated insurance reimbursement asset or not is a significant judgement. The judgements and estimates involved have an individual or collectively material impact on the financial statements, whether through error or management bias and as such this was considered a significant audit risk and key audit matter. How the scope of our audit addressed the key audit matter We obtained a summary of the claims in the year together with the board’s assessment of the likely costs of defending or settling the claims. We agreed the summary to the amounts included in the financial statements. We engaged with the legal advisors, engaged by the Group’s insurer, to understand the legal basis of the claims and the relevant defence arguments. We considered additional correspondence since our initial assessment in the prior year to identify whether any adjustment to the estimates was required. For material legal provisions we engaged directly with legal claims adviser who have been appointed by the Group’s insurance providers and obtained confirmation of the extent of insurance cover in place for relevant claims. For contingent liabilities we engaged directly with the Group’s insurance broker and gained evidence of the likelihood of insurance cover. Key observations: We consider the process adopted by management in order to estimate the value of the legal claims provision and any related insurance asset to be appropriate. Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, 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. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Group financial statements Parent company financial statements Materiality Basis for determining materiality Rationale for the benchmark applied 2023 £265,000 2022 £287,000 5% of profit before tax 8% of profit before tax Earnings is a key measure of performance of the group and influence of shareholder assessment. Earnings is a key measure of performance of the group and influence of shareholder assessment. We have decreased the percentage applied to profit before tax in the current year to be in line with the industry norm. Albeit still supressed by the Covid-19 pandemic, the Group returned to a profit making position with performance expected to return to normalised levels going forwards. 2023 2022 £140,000 £130,000 2% of total assets 2% of total assets Total assets is considered an appropriate benchmark as the main purpose of the Parent Company is to hold the investments in subsidiaries. Performance materiality £172,000 £186,000 £91,000 £84,000 Basis for determining performance materiality 65% of materiality which is considered appropriate to mitigate potential aggregation risk across the various financial statement areas. Rationale for the percentage applied for performance materiality In setting the level of performance materiality we considered a number of factors including the expected total value of known and likely misstatements alongside management’s approach to adjusting for misstatements with a material impact on the financial statements. Van Elle Holdings plc Annual report and accounts 2023 71 CORPORATE GOVERNANCE Independent auditor’s report continued To the members of Van Elle Holdings plc Our application of materiality continued Component materiality Materiality applied to the significant trading component of the Group was calculated at £250,000 (2022: £224,000) based on 95% of Group materiality. In the audit of this component, we further applied performance materiality levels of 65% (2022 – 65%) of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated. Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £8,000 (2022: £5,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report and accounts 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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. Other Companies Act 2006 reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit: n 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 n the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and 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. Matters on which we are required to report by exception 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: n 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 n the Parent Company financial statements are not in agreement with the accounting records and returns; or n certain disclosures of Directors’ remuneration specified by law are not made; or n 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. 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. 72 Van Elle Holdings plc Annual report and accounts 2023 Auditor’s responsibilities for the audit of the financial statements continued Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: n We obtained an understanding of the legal and regulatory frameworks applicable to the Group based on our understanding of the Group and sector experience and discussions with management. The most significant laws and regulations for the Group were considered to be the Companies Act 2006, corporate taxes and VAT, employment tax legislation and the Health and Safety at Work Act. n We enquired of those charged with governance, directors and management and obtained and reviewed supporting documentation, concerning the Company’s policies and procedures relating to: n identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance; n detecting and responding to the risks of fraud and whether they had knowledge of any actual, suspected or alleged fraud; and n the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations. n We evaluated the directors and management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate financial results and management bias in accounting estimates including taking fraudulent judgements on revenue contracts open at year end. Our procedures in response to the above included: n We reviewed correspondence with the relevant authorities to identify any irregularities or instances of non-compliance with laws and regulations. We corroborated our enquiries of management and Those Charged with Governance through our review of board minutes. n We used data assurance techniques to identify and analyse the complete population of all journals in the year to identify any which we considered were indicative of management override. We corroborated such journals to supporting documentation. We also reviewed the consolidation journals and other adjustments made in the preparation of the financial statements to check these were in line with our expectation of journals required on consolidation. n We reviewed the Group’s accounting policies for non-compliance with relevant standards. Our work also included considering significant accounting estimates for evidence of misstatement or possible bias and testing any significant transactions that appeared to be outside the normal course of business. n We considered the appropriateness and application of the revenue and profit recognition policies and estimates as set out in the key audit matters section above. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were deemed to have the appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available 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. Greg Watts (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor Birmingham, UK 25 July 2023 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). Van Elle Holdings plc Annual report and accounts 2023 73 CORPORATE GOVERNANCE Financial statements Contents Financial statements 75 Consolidated statement of comprehensive income 76 Consolidated statement of financial position 77 Consolidated statement of cash flows 78 Consolidated statement of changes in equity 79 Notes to the consolidated financial statements 105 Parent company statement of financial position 106 Parent company statement of changes in equity 107 Notes to the parent company financial statements 110 Shareholder information IBC Corporate information 74 Van Elle Holdings plc Annual report and accounts 2023 Consolidated statement of comprehensive income For the year ended 30 April 2023 Revenue Cost of sales Gross profit Administrative expenses Credit loss impairment charge Other operating income Operating profit Finance expense Profit before tax Income tax expense Profit after tax and total comprehensive income for the year attributable to shareholders of the parent Earnings per share (pence) Basic Diluted Note 2023 £’000 2022 £’000 5 148,734 124,915 (108,646) (90,842) 40,088 34,073 (35,089) (29,980) (45) 904 (159) 438 5,858 4,372 (487) (779) 5,371 3,593 (693) (1,733) 4,678 1,860 4.4 4.4 1.7 1.7 19 7 9 11 12 14 14 All amounts relate to continuing operations. There was no other comprehensive income in either the current or preceding year. The notes on pages 79 to 104 form part of these financial statements. Van Elle Holdings plc Annual report and accounts 2023 75 FINANCIAL STATEMENTS Consolidated statement of financial position As at 30 April 2023 Non-current assets Property, plant and equipment Investment property Intangible assets Current assets Inventories Trade and other receivables Corporation tax receivable Cash and cash equivalents Total assets Current liabilities Trade and other payables Deferred consideration Lease liabilities Provisions Non-current liabilities Deferred consideration Lease liabilities Deferred tax Total liabilities Net assets Equity Share capital Share premium Other reserve Retained earnings Total equity Note 2023 £’000 2022 £’000 15 16 17 18 19 20 22 21 25 22 21 27 28 28 41,917 38,719 — 811 3,713 3,847 45,630 43,377 4,971 3,773 35,544 34,112 — 8,885 322 6,987 49,400 45,194 95,030 88,571 23,245 22,475 790 2,339 8,143 50 1,696 7,738 34,517 31,959 — 6,179 4,303 1,170 5,157 3,674 10,482 10,001 44,999 41,960 50,031 46,611 2,133 8,633 5,807 2,133 8,633 5,807 33,458 30,038 50,031 46,611 The financial statements were approved and authorised for issue by the Board of Directors on 25 July 2023 and were signed on its behalf by: Graeme Campbell Chief Financial Officer The notes on pages 79 to 104 form part of these financial statements. 76 Van Elle Holdings plc Annual report and accounts 2023 Consolidated statement of cash flows For the year ended 30 April 2023 Cash flows from operating activities Operating profit Depreciation of property, plant and equipment Amortisation of intangible assets Depreciation of investment property Profit on disposal of property, plant and equipment Share-based payment expense Operating cash flows before movement in working capital Increase in inventories (Increase) in trade and other receivables Increase in trade and other payables Increase in provisions Cash generated from operations Income tax received Net cash generated from operating activities Cash flows from investing activities Purchases of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of subsidiary, net of cash acquired Purchases of intangibles Net cash absorbed in investing activities Cash flows from financing activities Proceeds from new hire purchasing finance Proceeds from new borrowings Repayment of borrowings Principal paid on lease liabilities Interest paid on lease liabilities Interest on borrowings Dividends paid Net cash absorbed in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year The notes on pages 79 to 104 form part of these financial statements. Note 2023 £’000 2022 £’000 9 15 17 16 29 5,858 5,984 134 9 (310) 171 11,846 (1,200) 4,372 5,282 101 9 (122) 174 9,816 (750) (1,434) (2,074) 344 405 9,961 323 1,280 102 8,374 — 10,284 8,374 15 (6,167) (4,946) 615 (50) — 384 — (176) (5,602) (4,738) 17 1,544 3,000 — — (3,000) (812) 21 (2,394) (3,637) (388) (53) (1,493) (608) (110) — (2,784) (5,167) 1,898 6,987 8,885 (1,531) 8,518 6,987 Van Elle Holdings plc Annual report and accounts 2023 77 FINANCIAL STATEMENTS Consolidated statement of changes in equity For the year ended 30 April 2023 At 1 May 2021 Total comprehensive income Share-based payments Total changes in equity At 30 April 2022 Total comprehensive income Dividends paid Share-based payments Deferred tax credit on share-based payments Total changes in equity At 30 April 2023 The notes on pages 79 to 104 form part of these financial statements. Share capital £’000 2,133 — — — Share premium £’000 Other reserve £’000 Retained earnings £’000 Total equity £’000 8,633 5,807 28,004 44,577 — — — — — — 1,860 1,860 174 174 2,034 2,034 2,133 8,633 5,807 30,038 46,611 — — — — — — — — — — — — — — — 4,678 4,678 (1,493) (1,493) 171 64 171 64 3,420 3,420 2,133 8,633 5,807 33,458 50,031 78 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements For the year ended 30 April 2023 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 2023. A list of subsidiaries and their countries of incorporation is presented in note 6 of the parent company financial statements on page 88. Van Elle Holdings plc is a public limited company incorporated and domiciled in the UK under the Companies Act 2006 and limited by shares. 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 is set out in the strategic report on pages 1 to 46. The address of the Company’s registered office is Van Elle Holdings plc, Southwell Lane Industrial Estate, Summit Close, Kirkby-in-Ashfield, Nottinghamshire NG17 8GJ. 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 2023. 2. Basis of preparation Basis of accounting The Group financial statements have been prepared in accordance with UK adopted International Accounting Standards (“IAS”) in conformity with the requirements of the Companies Act 2006. 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 IAS requires the use of certain critical accounting estimates, which are outlined in the critical accounting estimates and judgements section disclosed in note 4. 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 In determining whether the Group and Company annual consolidated financial statements can be prepared on a going concern basis, the Board considered all factors likely to affect its future performance and financial position, including cash flows, liquidity position, borrowing facilities and the risks and uncertainties relating to its business activities. The following factors were considered as relevant: n Profitable trading performance in the preceding two years and a positive outlook in the Group’s markets over the medium to long term n Net funds position of the Group, which has increased in the year n Order book, framework agreements and the pipeline of potential future orders n Available borrowing facilities n The extent of liabilities from ongoing claims and associated insurance cover Net funds, excluding IFRS 16 property and vehicle lease liabilities, increased to £7.5m (30 April 2022: £5.9m). The Group’s remaining debt finance is £1.3m as at 30 April 2023 and relates to hire purchase agreements, with the majority of the outstanding debt financed on a variable basis, which allows early repayment. In October 2020, the Group secured up to £11m of asset backed lending facilities on a revolving basis over four years secured against the Group’s receivables and certain tangible assets. There are no financial covenants associated with the funding facility. There are operational covenants associated with the facilities, including debtor concentration, dilution and debt turn. Breach of operational covenants impacts the level of availability under the facility rather than representing an instance of default. The Directors are confident that the Company will continue to operate within the operational covenants. These facilities were drawn to the value of £3.0m and repaid during the year. The facilities were undrawn as at 30 April 2023 and remain undrawn to date. A detailed forecast has been prepared for the period to 31 July 2024. The forecast reflects an assessment of expected performance in each of the Group’s markets, including the expected softening of the new-build housing market. The forecast also considers the expected impacts from further cost inflation. The forecast shows a healthy cash flow and liquidity headroom across the period to July 2024. Reverse stress testing has been carried out and the Board is satisfied that the scenarios in which the level of trading is such that the Group experiences a cash outflow of such a level that further debt facilities would be required are remote. Based on the above, the Directors conclude that the Group and Company are able to operate within the level of their current financial resources for a period of at least 12 months from the date of approving the financial statements and therefore the financial statements have been prepared on a going concern basis. Van Elle Holdings plc Annual report and accounts 2023 79 FINANCIAL STATEMENTS 2. Basis of preparation continued Adoption of new and revised standards New standards, interpretations and amendments effective from 1 May 2022 During the year, the Group has adopted the following new and revised Standards and Interpretations. Their adoption has not had any significant impact on the accounts or disclosures in these financial statements: • • • IFRS 3 Business Combinations IFRS 16 Property, Plant and Equipment IFRS 37 Provisions, Contingent Liabilities and Contingent Assets • Annual improvements to IFRSs (2018-2020 Cycle): IFRS 1; IFRS 9; Illustrative Examples accompanying IFRS 16; IAS 41 New standards, interpretations and amendments not yet effective The Group has not early adopted the following new standards, amendments or interpretations that have been issued but are not yet effective: • • • IFRS 17 Insurance contracts including amendments to IFRS 17 (issued on 25 June 2020) IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information IFRS S2 Climate-related Disclosures • Amendments to IAS 1: Classification of Liabilities as Current or Non-current • Amendments to IAS 8 - Definition of Accounting Estimates • Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting policies • Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction • Amendment to IFRS 17 - Initial Application of IFRS 17 and IFRS 9 - Comparative Information • Amendment to IFRS 16 Leases: Lease liability in a Sale and Leaseback • Amendments to IAS 12 International Tax Reform – Pillar Two Model Rules 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 change in ownership in non-controlling interests is accounted for as an equity transaction. Revenue Revenue 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 line with IFRS 15 Revenue from Contracts with Customers, the Group recognises revenue based on the application of a principles- based “five-step” model. Only when the five steps are satisfied is revenue recognised. General and Specialist Piling The performance obligations and transaction price are defined within signed contracts between the customer and the Group. Each performance obligation represents a series of distinct items of goods that are substantially the same and that have the same pattern of transfer to the customer. This is classified as a series as each distinct item of goods in the series meets the definition of a performance obligation satisfied over time and the same method would be used to measure the entity’s progress towards complete satisfaction of the performance obligation as to transfer each item of goods to the customer. Mobilisation (moving the piling rig equipment to the customer site) does not represent a separate performance obligation. 80 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 3. Significant accounting policies continued Revenue continued General and Specialist Piling continued Mobilisation revenue is included within the transaction price of the related performance obligation and recognised over time. The revenue for each performance obligation is recognised over time because each pile enhances an asset that the customer controls. Revenue is recognised as progress towards complete satisfaction of that performance obligation over time occurs, using the output method. Progress is determined by completed pile logs. For performance obligations where the customer does not simultaneously receive and consume the benefits (e.g. designs, interpretative reports and testing), the work performed by the Group does not create or enhance an asset that the customer controls. Revenue for these performance obligations is recognised at a point in time (e.g. on delivery of report). Where the performance obligations within a contract are not substantially the same and do not have the same pattern of transfer to the customer, revenue is recognised as progress is made towards complete satisfaction of the performance obligations over time using the input method. Progress is determined based on costs incurred to date. Ground Engineering Services The performance obligations and transaction price are defined within signed contracts between the customer and the Group. Each individual service is not considered a separate performance obligation. For performance obligations where the customer does not simultaneously receive and consume the benefits (e.g. interpretative reports and testing), the work performed by the Group does not create or enhance an asset that the customer controls. Revenue for these performance obligations is recognised at a point in time (e.g. on delivery of report). Costs relating to these performance obligations are capitalised and fully amortised at the point in time when the performance obligation is fully satisfied. Contracts may also contain a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer (e.g. bore hole drilling). This is classified as a series, as an asset is enhanced that the customer controls, each distinct item of goods in the series meets the definition of a performance ,obligation satisfied over time and the same method would be used to measure the entity’s progress towards complete satisfaction of the performance obligation as to transfer each item of goods to the customer. The revenue for each performance obligation is recognised over time because each item of goods enhances an asset that the customer controls. Revenue is recognised as progress is made towards complete satisfaction of that performance obligation over time using the output method. Progress is determined by completed logs. Ground Engineering Products Each performance obligation represents a series of distinct goods that are substantially the same and that have the same pattern of transfer to the customer. Mobilisation (moving the piling rig equipment to the customer site) does not represent a separate performance obligation. Mobilisation revenue is included within the transaction price of the related performance obligation and recognised over time. The revenue for each performance obligation is recognised over time because each pile enhances an asset that the customer controls. Revenue is recognised as progress is made towards complete satisfaction of that performance obligation over time using the output method. Progress is determined by completed pile logs. Variable consideration The following types of income are variable consideration and are only recognised when management determines it to be highly probable that a significant reversal in revenue will not occur in a future period: Liquidated damages (“LADs”) These are included in the contract for both parties. The customer can reduce the amount paid to the Group if it is deemed the Group has caused unnecessary delays or additional work. The Group is also able to claim LADs where it can be proved that the customer has caused unnecessary delays or disruption. The method for claiming this revenue is to include it within the application to the customer, or for the customer to include or exclude it in the application certificate returned to the Group. At the point of making an application for LADs, the additional revenue or the reduction in revenue is only recognised when it is highly probable that it will occur. Standing time Within the contracts a penalty charge can be made where work is delayed, and the Group assets must stand idle. These charges can be disputed by the customer where blame may not be clear. The revenue for these charges is not recognised until it is highly probable that it will be received. Adjustments to invoiced variable consideration Where revenue relating to variable consideration is invoiced to the customer, revenue is adjusted to remove revenue that is not highly probable. This is subsequently recognised only once it becomes highly probable. Trade receivables Trade receivables include applications to the extent that there is an unconditional right to payment and the amount has been certified by the customer. Contract assets The recoverable amount of applications that have not been certified and other amounts that have not been applied for but represent the recoverable value of work carried out at the balance sheet date are recognised as contract assets within trade and other receivables on the balance sheet. Van Elle Holdings plc Annual report and accounts 2023 81 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 3. Significant accounting policies continued Variable consideration continued Contract liabilities Any payments received in advance of completing the work are recognised within contract liabilities. 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. Non-underlying items Such items are those that in the Directors’ judgement occur infrequently and do not reflect the underlying performance of the business and therefore need to be disclosed separately. This is consistent with the way financial performance is measured by management and reported to the Board. Disclosing non-underlying 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. 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. 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 – – – – 2%–20% per annum straight line 8%–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. Subsequent expenditure on repairs and refurbishments that does not enhance the value or extend the lives of the related assets is recognised as an expense in the income statement as incurred. 82 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 3. Significant accounting policies continued Investment property Investment properties are held for long-term rental yields and are not occupied by the Group. They are carried at depreciated historical cost. Freehold land is not depreciated. Depreciation is provided on all other items of investment property 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 – 2%–20% per annum straight line 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. Development costs Costs associated with the development of new products and techniques are capitalised as intangible assets once technical and commercial feasibility of the asset for sale or use has been established and all the following conditions are met: n There is the intention to complete the asset n There is adequate technical, financial and other resources to complete the asset n An asset is created that can be used or sold n It is probable that the asset created will generate future economic benefits n The development cost of the asset can be measured reliably 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 inflows – 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. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and on hand. Cash at bank includes reconciling receipts where receipts have been processed before the balance sheet date. Van Elle Holdings plc Annual report and accounts 2023 83 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 3. Significant accounting policies continued Financial assets and liabilities On initial recognition, a financial asset is classified as measured at amortised cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”). Financial liabilities are measured at amortised cost or FVTPL. The classification of financial assets is based on the way a financial asset is managed and its contractual cash flow characteristics. Financial assets are measured at amortised cost if both of the following conditions are met and the financial asset or liability is not designated as at FVTPL: n The financial asset is held with the objective of collecting or remitting contractual cash flows n Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding A financial asset is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: n The financial asset is held with the objectives of collecting contractual cash flows and selling the financial asset n Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. The Group’s principal financial instruments comprise cash and cash equivalents, trade receivables, trade payables and interest bearing borrowings. Based on the way these financial instruments are managed and their contractual cash flow characteristics, all the Group’s financial instruments are measured at amortised cost using the effective interest method. The amortised cost of financial assets is reduced by impairment losses as described below. Interest income, foreign exchange gains and losses, impairments and gains or losses on derecognition are recognised through the statement of comprehensive income. Trade receivables and trade payables are held at their original invoiced value, as the interest that would be recognised from discounting future cash flows over the short credit period is not considered to be material. Cash equivalents comprise short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. An investment with a maturity of three months or less is normally classified as being short term. Cash and cash equivalents do not include other financial assets. Impairment losses against financial assets carried at amortised cost are recognised by reference to any expected credit losses against those assets. The simplified approach for calculating impairment of financial assets has been used. Lifetime expected credit losses are calculated by considering, on a discounted basis, the cash shortfalls that would be incurred in various default scenarios over the remaining lives of the assets and multiplying the shortfalls by the probability of each scenario occurring. The allowance is the sum of these probability weighted outcomes. 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 The Group recognises a right-of-use asset and a corresponding lease liability for all lease agreements in which it is the lessee (with the exception of short-term and low-value leases as defined in IFRS 16, which are recognised as an operating expense on a straight- line basis over the term). The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The right-of-use asset recognised initially is the amount of the lease liability, adjusted for any lease payments and lease incentives made before the commencement date, in accordance with IFRS 16.24. 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 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. Contingent liabilities Contingent liabilities are possible obligations of the Group of which the timing and amount are subject to significant uncertainty. Contingent liabilities are not recognised in the consolidated balance sheet. They are however disclosed unless they are considered to be remote. If a contingent liability becomes probable and the amount can be reliably measured it is no longer treated as contingent and recognised as a liability on the balance sheet 84 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 3. Significant accounting policies continued 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: n The initial recognition of goodwill n The initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither accounting nor taxable profit n 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 arising from tax losses is restricted to those instances where it is probable that taxable profit will be available in the foreseeable future 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 three equity-settled share-based payment plans, details of which can be found in note 29 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. Contingent consideration Contingent consideration is classified as a liability and is measured at fair value on the acquisition date. At each future reporting date contingent consideration will be remeasured to fair value with changes included in the income statement in the post-combination period. 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. Critical accounting judgements Contracts The point at which variable consideration becomes highly probable and therefore is recognised in the financial statements requires management judgement. The policy in respect of recognition of variable consideration is detailed in note 3. Insurance cover for legal and other claims against the Group When reviewing legal or warranty claims against the Group, the Directors assess if the claim will be covered by insurance by reference to the nature of the insurance policy and through direct engagement with the insurance brokers and underwriters and the Directors make a judgement if insurance cover in respect of the claim is virtually certain in relation to the claim. In reality this is when the insurance company has confirmed that the claim against the Group is covered by the policies in place. Leased assets In the application of the leasing standard, IFRS 16, right-of-use assets and lease liabilities have been recognised based on the discounted payments required under the lease, taking into account the lease term. The lease term is based on the non-cancellable period of the lease together with periods covered by an option to extend the lease where it is considered reasonably certain that options to extend will be exercised. Judgement is required in determining whether options to extend or terminate the lease will be exercised. Van Elle Holdings plc Annual report and accounts 2023 85 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 4. Critical accounting estimates and judgements continued Critical accounting judgements continued Development costs Costs associated with the development of new products and techniques are capitalised as intangible assets once technical and commercial feasibility of the asset for sale or use have been established. Judgement is required in determining whether development costs meet the criteria for capitalisation as an intangible asset including whether it is probable that future economic benefits will be derived from the asset. Sources of estimation uncertainty Contracts The key estimates in the recognition of contract revenue include the estimate of the recoverable value of work carried out at the balance sheet date shown under contract assets and the outcome of claims raised against the Group by customers or third parties. The estimate is formed based on confirmation of work done at the year end by customers and by its nature changes in the estimate would have a £ for £ consequential impact on the level of revenue and profit recognised. As at 30 April 2023, the Group has recognised estimated recoveries of £4,913,000 (2022: £2,163,000) from customers for the work carried out to the year-end date. These recoveries are recognised to the extent considered highly probable; however, there is a range of factors affecting potential outcomes as these contracts are completed. The level of management estimation uncertainty is reduced by the certification of work received from customers, approved applications for payment and in-house expert opinion. In addition, the Group recognises impairment provisions in respect of bad and doubtful trade debtors. The estimates necessary to calculate these provisions are based on historical experience adjusted for estimates of known changes in credit risk based on facts and circumstances at the year-end date. The simplified approach for calculating impairment of financial assets has been used. Lifetime expected credit losses are calculated by considering, on a discounted basis, the cash shortfalls that would be incurred in various default scenarios over the remaining lives of the assets and multiplying the shortfalls by the probability of each scenario occurring. The allowance is the sum of these probability weighted outcomes and further details are provided in note 19. Changing these estimates by 25% will not materially change the level of impairment provision recognised. Goodwill Impairment tests make assumptions about the amount and timing of future cash flows for each cash generating unit including estimates of growth rates, discount rates and cash conversion rates. Growth rates are estimated with reference to the Board-approved budget for the year ending 30 April 2024 and forecast cash flow projections for the years ending 30 April 2025 and 30 April 2026. Subsequent growth rates are estimated with reference to CPI inflation expectations. The rate used to discount the projected cash flows is a pre-tax risk-adjusted discount rate estimated based on the weighted average cost of capital of a basket of comparable companies plus a risk premium to reflect the size of the Group in comparison to the basket of comparable companies. Future cash conversion rates are estimated based on historical experience of cash conversion. The impact of these estimates is detailed further in note 17. Leased assets In the application of the leasing standard, IFRS 16, a right-of-use asset and lease liability are recognised based on the discounted payments required under the lease. The discount of future lease payments requires an estimate of the effective interest rate. The estimate of the effective interest rate is based on the Group’s incremental borrowing rate on similar assets. Legal and other claims against the Group In common with other companies in the sector, the Group is involved in matters that give rise to claims from customers. The Board assesses each claim, based on the facts and circumstances relating to each claim and with reference to internal and external expert advice, and recognises a provision for costs of defending and concluding such claims. By their nature, changes in the estimate would have a £ for £ impact on the level of the provision recognised. Where there is significant uncertainty of the amount and timing of a possible obligation, a contingent liability is disclosed however is not recognised in the consolidated balance sheet. Contingent consideration Contingent consideration is based on performance in the post-acquisition period up to 31 May 2023. The calculation of the consideration payable is based on forecasts of future performance. Estimated future performance is based on the current order book and pipeline of work. 86 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 5. Segment information The Group evaluates segmental performance based on profit or loss from operations calculated in accordance with IFRS but excluding non-recurring items. 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. 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 25. All turnover and operations are based in the UK. Operating segments – 30 April 2023 Revenue Other operating income Operating profit/(loss) Finance expense Profit/(loss) before tax Assets Property, plant and equipment Intangible assets Inventories Reportable segment assets Investment property Trade and other receivables Cash and cash equivalents Total assets Liabilities Trade and other payables Provisions Deferred consideration Lease liabilities Deferred tax Total liabilities Other information Ground General Piling £’000 Specialist Engineering Services £’000 Piling £’000 Head office £’000 Total £’000 54,838 46,593 47,067 236 148,734 — — — 904 904 3,403 2,236 3,642 (3,423) 5,858 — — — (487) (487) 3,403 2,236 3,642 (3,910) 5,371 9,090 14,411 8,005 10,411 41,917 11 3,483 219 1,858 727 1,902 — 484 3,713 4,971 10,959 18,621 10,126 10,895 50,601 — — — — — — — — — — — 35,544 35,544 8,885 8,885 10,959 18,621 10,126 55,324 95,030 — — — — — — — — — — — — — — — — — — 23,245 23,245 8,143 8,143 790 8,518 4,303 790 8,518 4,303 44,999 44,999 Capital expenditure (including IFRS 16 leased assets) Depreciation (including IFRS 16 leased assets) 1,171 1,422 4,188 2,262 1,351 1,421 1,977 879 8,687 5,984 Van Elle Holdings plc Annual report and accounts 2023 87 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 5. Segment information continued Operating segments – 30 April 2022 Revenue Other operating income Operating profit/(loss) Finance expense Profit/(loss) before tax Assets Property, plant and equipment Intangible assets Inventories Reportable segment assets Investment property Trade and other receivables Cash and cash equivalents Total assets Liabilities Trade and other payables Provisions Deferred consideration Lease liabilities Deferred tax Total liabilities Other information General Piling £’000 Ground Specialist Engineering Services £’000 Piling £’000 Head office £’000 Total £’000 38,974 45,771 40,043 127 124,915 — — — 438 438 1,804 2,998 2,115 (2,545) 4,372 — — — (779) (779) 1,804 2,998 2,115 (3,324) 3,593 9,341 12,589 18 1,251 3,594 1,163 10,610 17,346 — — — — — — 8,145 233 1,320 9,698 — — — 8,644 38,719 2 39 3,847 3,773 8,685 46,339 811 811 34,434 34,434 6,987 6,987 10,610 17,346 9,698 50,917 88,571 — — — — — — — — — — — — — — — — — — 22,475 22,475 7,737 1,220 6,854 3,674 7,737 1,220 6,854 3,674 41,960 41,960 Capital expenditure (including IFRS 16 leased assets) Depreciation (including IFRS 16 leased assets) 2,097 1,166 2,462 1,907 1,207 1,296 254 913 6,020 5,282 The Group has one customer with revenues greater than 10% in the current year (2022: none). Total revenues from the customer were £18.4m and these are reported within the General Piling operating segment. All revenue is generated in the UK. 6. Revenue from contracts with customers Disaggregation of revenue – 30 April 2023 End market Residential Infrastructure Regional construction Other Total Ground General Piling £’000 Specialist Engineering Services £’000 Piling £’000 Head office £’000 Total £’000 13,924 4,840 38,096 — 56,860 20,761 37,180 20,147 4,507 4,651 4,289 — 62,592 — 28,943 6 66 31 236 339 54,838 46,593 47,067 236 148,734 Head office revenue relates to revenue generated from the provision of training services. 88 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 6. Revenue from contracts with customers continued Disaggregation of revenue – 30 April 2022 End market Residential Infrastructure Regional construction Other Total Contract assets At 1 May Transfers from contract assets to trade receivables Excess of revenue recognised over invoiced amount Impairment of contract assets At 30 April Contract liabilities At 1 May Interest on contract liabilities Contract liabilities recognised as revenue in the period Deposits received in advance of performance At 30 April 7. Other operating income Research and development expenditure credit relating to prior years Research and development expenditure credit relating to current year Settlement of litigation General Piling £’000 Ground Specialist Engineering Services £’000 Piling £’000 13,569 6,346 33,392 5,224 34,333 20,177 4,872 4 220 3,821 2,830 — 38,974 45,771 40,043 Head office £’000 — — — 127 127 Total £’000 53,307 43,378 27,879 351 124,915 2023 £’000 2022 £’000 2,163 1,651 (1,943) (1,651) 4,913 2,163 (220) — 4,913 2,163 2023 £’000 388 — (188) 1,787 1,987 2023 £’000 479 425 — 904 2022 £’000 284 — (84) 188 388 2022 £’000 208 300 (70) 438 The research and development expenditure credit relating to prior years relates to the final value of the claim for the year ended 30 April 2022 in excess of the estimate made by management in the previous financial year. The research and development expenditure credit relating to the current year is based on the management estimate of the claim relating to the year ended 30 April 2023. The charge of £70,000 in the previous financial year for settlement of litigation relates to a provision for income recognised in previous financial years, the recovery of which is now uncertain. 8. Non-underlying items Deferred consideration Warranty provision charge Non-underlying credit 2023 £’000 2022 £’000 (427) (362) 350 (77) 350 (12) The Group’s current year non-underlying items are detailed in notes 22 (deferred consideration) and 25 (provisions). These non-underlying items have been recognised within administration costs. Van Elle Holdings plc Annual report and accounts 2023 89 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 9. Operating profit Operating profit is stated after charging/(crediting): Depreciation of property, plant and equipment Amortisation of intangible assets Depreciation of investment property Lease expense: – Plant and machinery on short-term hire Profit on disposal of property, plant and equipment Fees payable to the Company’s auditor for the audit of the Company 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 services 2023 £’000 2022 £’000 5,984 5,282 134 9 101 9 7,853 5,563 (310) 20 122 15 23 (123) 15 100 22 — 10. 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 annual report on remuneration on pages 64 and 65. Employee benefit expenses (including Directors): Wages and salaries Social security contributions and similar taxes Defined contribution pension cost Share-based payments (note 29) Directors and key management personnel: Wages and salaries Defined contribution pension cost Share-based payments (note 29) 2023 £’000 2022 £’000 35,887 31,838 4,102 1,062 171 3,487 961 174 41,222 36,460 2,202 1,652 70 59 80 92 2,331 1,824 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. Details of the highest paid Director are included in the annual report on remuneration on page 64. The average number of employees, including Directors, during the year was as follows: Administrative Operative 2023 2022 Number Number 259 389 648 201 400 601 90 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 11. Finance expense Finance expense Finance leases Unwinding of discount on deferred consideration Interest on borrowings 12. Income tax expense Current tax credit Current tax on profit/(loss) for the year Adjustment for over provision in the prior period Total current tax credit Deferred tax expense Origination and reversal of temporary differences Adjustment for over provision in the prior period Effect of decreased tax rate on opening balance Total deferred tax expense Income tax expense 2023 £’000 2022 £’000 388 47 52 487 608 61 110 779 2023 £’000 2022 £’000 — — — 1,176 (483) — 693 693 — (238) (238) 842 396 733 1,971 1,733 The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK applied to profit for the year are as follows: Profit before income taxes Tax using the standard corporation tax rate of 19.5% (2022: 19%) Adjustments for over provision in previous periods Expenses not deductible for tax purposes Income not taxable Tax rate changes Previously unrecognised tax losses used to reduce current tax expense Capital allowances super deductions Total income tax expense 2023 £’000 5,371 1,047 (483) 130 (83) 259 — (177) 2022 £’000 3,593 683 159 104 (40) 1,072 (30) (215) 693 1,733 During the year ended 30 April 2023, corporation tax has been calculated at 19% of estimated assessable profit for the 11-month period to 1 April 2023 and 25% for the one-month period ending 30 April 2023 (2022: 19%). Deferred tax balances as at 30 April 2023 are measured at the current corporation tax rate of 25%. Van Elle Holdings plc Annual report and accounts 2023 91 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 13. Dividends Final dividend – year ended 30 April 2022 1.0p per ordinary share paid during the year Interim dividend – year ended 30 April 2023 0.4p per ordinary share paid during the year 2023 £’000 2022 £’000 1,067 426 1,493 — — — A final dividend for the year ended 30 April 2023 of 0.8p per share amounting to £853,333 is proposed. This represents a total dividend of 1.2p per share for the full year. The final dividend will be paid on 13 October 2023 to the shareholders on the register at the close of business on 29 September 2023. The proposed final dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 14. 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 Earnings per share Basic Diluted Basic – adjusted* Diluted – adjusted* 2023 ’000 2022 ’000 106,667 106,667 473 — 107,140 106,667 £’000 £’000 4,678 1,860 2023 Pence 2022 Pence 4.4 4.4 4.4 4.4 1.7 1.7 2.7 2.7 * Adjusted earnings per share in the prior year is stated before the one-off deferred tax charge of £1.1m, relating to the enacted change to the future corporation tax rate. The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders and on 106,666,650 ordinary shares (2022: 106,666,650), being the weighted average number of ordinary shares. The dilutive shares of 473,000 represent share options exercisable under the Group’s CSOP scheme that vested during the financial year, as disclosed within note 29. 92 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 15. Property, plant and equipment Cost At 1 May 2021 Additions Disposals At 1 May 2022 Additions Reclassification of investment property (note 16) Disposals At 30 April 2023 Accumulated depreciation At 1 May 2021 Charge for the year Disposals At 1 May 2022 Charge for the year Reclassification of investment property (note 16) Disposals At 30 April 2023 Net book value At 30 April 2022 At 30 April 2023 Land and Plant and buildings machinery £’000 £’000 Motor vehicles £’000 Office equipment £’000 Total £’000 8,827 48,535 262 4,464 8,980 1,241 604 66,946 53 6,020 — (1,409) (1,439) (190) (3,038) 9,089 51,590 8,782 467 69,928 66 4,528 4,093 1,315 — — — (454) (2,372) — — — 8,687 1,315 (2,826) 10,470 55,664 10,503 467 77,104 1,693 21,522 3,529 5,094 1,238 394 28,703 90 5,282 2,118 23,735 (1,316) (1,270) (190) (2,776) 5,062 1,317 — 4,193 — (393) (2,126) 294 31,209 29 — — 5,984 513 (2,519) 425 — 445 513 — 3,076 27,535 4,253 323 35,187 6,971 27,855 3,720 173 38,719 7,394 28,129 6,250 144 41,917 The amounts shown above include the following right-of-use assets: Plant and Land and buildings machinery £’000 £’000 Motor vehicles £’000 Cost At 1 May 2022 Additions Disposals Transfer from owned assets Transferred to owned assets At 30 April 2023 Accumulated depreciation At 1 May 2022 Charge for the year Disposals Transfer from owned assets Transferred to owned assets At 30 April 2023 Net book value At 30 April 2022 At 30 April 2023 Total £’000 15,037 2,518 (45) 1,731 3,659 7,945 — — — — 5 — 1,731 (7,173) 3,433 2,513 (45) — (779) (7,952) 3,659 2,508 5,122 11,289 359 119 — — — 2,649 608 — 157 970 886 (16) — 3,978 1,613 (16) 157 (3,005) (385) (3,390) 478 409 1,455 2,342 3,300 5,296 2,463 11,059 3,181 2,099 3,667 8,947 Van Elle Holdings plc Annual report and accounts 2023 93 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 16. Investment property Cost At 1 May 2022 and 30 April 2023 Reclassification to property, plant and equipment (note 15) At 30 April 2023 Accumulated depreciation At 1 May 2022 Charge for the year Reclassification to property, plant and equipment (note 15) At 30 April 2023 Net book value At 30 April 2022 At 30 April 2023 Land and buildings £’000 1,315 (1,315) — 504 9 (513) — 811 — The Group’s investment property was reoccupied by the Group on 1 April 2023 and therefore has been reclassified to property, plant and equipment during the financial year. Goodwill £’000 Software £’000 Development costs £’000 Total £’000 5,208 176 5,384 — 418 176 594 — 594 5,384 136 84 220 132 352 1,436 101 1,537 134 1,671 374 3,847 242 3,713 4,559 — 4,559 — 4,559 1,101 — 1,101 — 1,101 3,458 3,458 231 — 231 — 231 199 17 216 2 218 15 13 17. Intangible assets Cost At 1 May 2021 Additions At 1 May 2022 Additions At 30 April 2023 Accumulated amortisation At 1 May 2021 Charge for the year At 1 May 2022 Charge for the year At 30 April 2023 Net book value At 30 April 2022 At 30 April 2023 94 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 17. Intangible assets continued Goodwill Goodwill relates to the purchase of subsidiary undertakings. Goodwill is not amortised but is tested for impairment in accordance with IAS 36 Impairment of Assets at least annually or more frequently if events or changes in circumstances indicate a potential impairment. Goodwill is allocated to cash generating units (“CGUs”) as follows: Specialist Piling Ground Engineering Services ScrewFast 2023 £’000 3,270 188 — 3,458 2022 £’000 890 188 2,380 3,458 During the year, the ScrewFast CGU has been aggregated with the Specialist Piling CGU following the hive up of ScrewFast Foundations Limited into Van Elle Limited on 1 May 2022 and integration of ScrewFast into the Specialist Piling division. The carrying value of goodwill allocated to the Specialist Piling and Ground Engineering Services CGUs has been compared to its recoverable amount based on the value in use of the CGUs to which the goodwill has been allocated. Each operating segment within the Group has been assessed as a separate CGU, being the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other groups of assets. The value-in-use calculations use pre-tax cash flow projections based on the Board-approved budget for the year ending 30 April 2024 which takes into account secured orders, the order pipeline, business plans and management actions and forecast future cash flows for the period to 30 April 2026. Subsequent cash flows are extrapolated using an estimated growth rate of 2% in line with long-term CPI inflation expectations. The rate used to discount the projected cash flows is a pre-tax risk-adjusted discount rate of 13.5% (2022: 12.7%) based on the weighted average cost of capital of a basket of comparable companies plus a risk premium. The same discount rate has been used for each CGU as the principal risks associated with the Group, as highlighted on pages 40 to 43, would also impact each CGU in a similar manner. The key assumptions to which the assessment of the recoverable amounts of CGUs is sensitive are the projected operating profit for the period to 30 April 2024, forecast growth in the period to 30 April 2026 and the discount rate applied. For each CGU, management has considered the level of headroom resulting from the impairment tests and performed further sensitivity analysis by changing the base case assumptions applicable to each CGU. The sensitivities tested related to changes in discount rate, changes in operating profit and a combination thereof. The value-in-use calculations, together with the sensitivity analysis described above, do not indicate an impairment of goodwill is required. The sensitivity analysis performed indicates that reasonable changes in discount rate or growth rates would not result in an impairment of goodwill; as such the Board is satisfied that no impairment is required. 18. Inventories Raw materials and consumables Work in progress 2023 £’000 2,864 2,107 4,971 2022 £’000 2,555 1,218 3,773 There were no impairment losses relating to damaged or obsolete inventories in the current or previous periods. The cost of materials recognised as an expense within cost of sales is £62,447,000 (2022: £51,962,000). Van Elle Holdings plc Annual report and accounts 2023 95 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 19. Trade and other receivables Trade receivables Less: provision for impairment Trade receivables – net Receivables from related parties Financial assets classified as amortised costs Contract assets Prepayments Other receivables 2023 £’000 2022 £’000 17,614 20,596 (475) (430) 17,139 20,166 — — 17,139 20,166 4,913 1,769 2,163 544 11,723 11,239 35,544 34,112 Other receivables of £11.7m (2022: £11.2m) relate to the receivables in respect of the research and development expenditure credit claim for the financial years ended 30 April 2022 and 2023, VAT recoverable and insurance recoveries. The carrying value of trade and other receivables classified as amortised costs approximates fair value. All amounts shown under receivables fall due within one year. The Group does not hold any collateral as security over trade receivables or contract assets. The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets. To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and ageing. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts. The expected loss rates are based on the Group’s historical credit losses experienced over the three-year period prior to the period end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group’s customers and isolated items not deemed to be indicative of future credit losses . As of 1 May 2022, the Group has trade credit insurance covering 90% of outstanding debtor balances in the instance of customer default. As at 30 April 2023, the lifetime expected loss provision for trade receivables is as follows: Current 0–30 days past due More than 30 days past due More than 60 days past due More than 90 days past due As at 30 April 2022, the lifetime expected loss provision for trade receivables was as follows: Current 0–30 days past due More than 30 days past due More than 60 days past due More than 90 days past due 96 Van Elle Holdings plc Annual report and accounts 2023 Expected loss rate 0.0% 0.5% 1.0% 12.5% 20.0% Expected loss rate 0.0% 0.5% 1.0% 15.0% 25.0% Gross carrying amount £’000 8,125 4,810 1,157 976 2,546 17,614 Gross carrying amount £’000 9,196 7,607 2,021 806 966 20,596 Loss provision £’000 — 24 11 61 379 475 Loss provision £’000 — 39 21 121 249 430 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 19. Trade and other receivables continued 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 At 30 April Other classes of financial assets included within trade and other receivables do not contain impaired assets. 20. Trade and other payables Trade payables Other payables Accruals Financial liabilities measured at amortised cost Contract liabilities Tax and social security payments 2023 £’000 430 190 (145) 475 2022 £’000 271 251 (92) 430 2023 £’000 2022 £’000 17,243 18,130 229 176 2,553 2,583 20,025 20,889 1,987 1,233 388 1,198 23,245 22,475 The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value. 21. Lease liabilities All leases are accounted for by recognising a right-of-use asset as detailed in note 14 and a lease liability except for leases of low-value assets and leases with a duration of 12 months or less. The Group leases a number of rig assets under hire purchase agreements and hires vehicles on a long-term hire basis. Hire purchase agreements are repaid over a five or three-year period; long-term hire agreements are over a four-year period and have been recognised in accordance with IFRS 16. The Group also leases two properties with fixed repayments. The remaining lease periods as at 30 April 2023 in respect of these property leases are 50 and 1. The expense relating to short-term leases and leases of low-value assets is not material to the financial statements. The following table sets out the movement in lease liabilities during the financial year: At 1 May 2022 Additions Interest expense Principal and interest paid on lease liabilities At 30 April 2023 The following table sets out the maturity of discounted lease liabilities: Due less than 3 months Due between 3 and 12 months Current lease liabilities Due between 1 and 2 years Due between 2 and 5 years Due after 5 years Non-current lease liabilities Plant and Land and buildings machinery £’000 £’000 3,838 — 146 905 1,544 118 Motor vehicles £’000 2,110 2,515 124 Total £’000 6,853 4,059 388 (274) (1,213) (1,295) (2,782) 3,710 1,354 3,454 8,518 Carrying value £’000 583 1,756 2,339 1,717 4,462 — 6,179 The maturity of undiscounted lease liabilities is disclosed in note 24. Van Elle Holdings plc Annual report and accounts 2023 97 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 22. Deferred consideration The deferred consideration relates to the acquisition of ScrewFast Foundations Limited for consideration of £1,760,000 plus £740,000 payable on 31 August 2023 and up to a further £1,175,000 of which a maximum of £65,000 was payable on 31 August 2022 and a maximum of £1,110,000 is payable on 31 August 2023 subject to achievement of performance criteria. Of the maximum £65,000 payable on 31 August 2022, £50,000 was paid during the financial year. The maximum £1,110,000 payable on 31 August 2023 is subject to performance over the period 1 April 2021 to 31 May 2023. Management’s assumptions are that of the further potential payment of £1,110,000 subject to performance criteria, £50,000 will be payable based on current forecasts of performance over the relevant performance periods. This is a reduction of £443,000 on the estimate as at 30 April 2022. A credit of £427,000, being the reduction in the discounted consideration payable, has been recognised as a credit within administrative expenses in the period. Given the size and nature of this credit, this is considered to be non-underlying. The discounted amount payable due beyond one year as at 30 April 2023 is £nil (2022: £1,170,000) and within one year is £790,000 (2022: £50,000). Amounts charged to finance expenses during the year are £30,000 (2022: £61,000). 23. Reconciliation of financing liabilities The following table sets out the movement in finance liabilities during the financial year: Non-current lease liabilities £’000 Current lease liabilities £’000 Non-current deferred consideration £’000 Current deferred consideration £’000 At 1 May 2022 Cash flows Non-cash flows: Additions to lease liabilities 5,157 1,696 1,170 — (2,782) 1,986 2,073 — — Movement in deferred consideration payable — — (427) Liabilities classified as non-current at 30 April 2022 becoming current in the year ended 30 April 2023 Unwind of discount on deferred consideration Interest accruing in the period At 30 April 2023 (964) — — 964 — 388 6,179 2,339 (790) 47 — — Total £’000 8,073 (2,832) 4,059 (427) — 47 388 50 (50) — — 790 — — 790 9,308 24. Financial instruments and risk management The Group’s financial instruments comprise cash, lease liabilities and various items such as receivables and payables that 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 Contract assets Total financial assets Amortised cost 2023 £’000 2022 £’000 8,885 6,987 17,139 20,166 4,913 2,163 30,937 29,316 98 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 24. Financial instruments and risk management continued Financial instruments by category continued Current financial liabilities Trade and other payables Deferred consideration Lease liabilities Total current financial liabilities Non-current financial liabilities Lease liabilities Deferred consideration Total non-current financial liabilities Total financial liabilities Amortised cost 2023 £’000 2022 £’000 20,025 20,889 790 50 2,339 1,696 23,154 22,635 6,179 — 6,179 5,157 1,170 6,327 29,333 28,962 Capital management The Group’s capital structure is kept under constant review, taking account of the need for, and availability and cost of, various sources of finance. The capital structure of the Group consists of net debt, as shown in note 30, 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. 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 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. Van Elle Holdings plc Annual report and accounts 2023 99 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 24. Financial instruments and risk management continued 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 the foreseeable future. The Group also seeks to reduce liquidity risk by fixing interest rates (and hence cash flows) on any 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 asset-based lending facility. The following table sets out the undiscounted contractual payments and maturities (including future interest charges) of financial liabilities: At 30 April 2023 Trade and other payables Lease liabilities (note 21) Deferred consideration At 30 April 2022 Trade and other payables Lease liabilities (note 21) Deferred consideration Carrying value £’000 Total £’000 Due less than 3 months £’000 Due between 3 and 12 months £’000 Due between 1 and 5 years £’000 20,025 20,025 20,025 — 8,518 10,238 3,388 6,098 790 790 — 790 29,333 31,053 23,413 6,888 — 752 — 752 20,889 20,889 20,889 — — 6,854 1,220 11,968 1,283 618 50 1,284 10,066 — 1,233 28,963 34,140 21,557 1,284 11,299 Market risk – interest rate risk It is currently Group policy that 100% of external Group borrowings (excluding short-term overdraft facilities) are fixed-rate borrowings. Divisions are not permitted to borrow short or long term from external sources. 25. Provisions At 1 May 2022 Utilised Additional provision Released unused At 30 April 2023 Warranty Legal and provision other claims £’000 £’000 Total £’000 440 (5) 450 (40) 845 7,298 7,738 — — — (5) 450 (40) 7,298 8,143 The warranty provision relates to customer claims and is based on potential costs to make good defects and associated legal and professional fees in contesting and settling the claims. The increase in the warranty provision of £450,000 relates to an increase in provision for two existing claims and one new claim arising in the year. The costs associated with the two existing claims of £350,000 are considered to be non-underlying due to their size and nature, similarly to FY2022. See note 8. Additionally, in common with comparable companies in the sector, the Group is involved in a small number of commercial disputes in the ordinary course of business which may give rise to claims by customers. These types of claims can take several years to come to light and can also take several years to resolve and so it can take many months, or years, before management are able to reliably estimate the likely cost of resolution. The legal and other claims provision includes management’s best estimate of the costs that are likely to be incurred in defending and concluding such ongoing claims against the Group. The Group carries insurance and any reimbursements, where material and considered virtually certain, are treated as separate assets and disclosed within other receivables (see note 19). In the statement of comprehensive income, the expense relating to a provision is presented net of the amount recognised for the insurance reimbursement. No separate disclosure is made of the detail of these claims or proceedings or the costs recovered by insurance, as the negotiations are ongoing in respect of the claims and further disclosure could be seriously prejudicial to the Group. 100 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 26. Contingent liabilities The Group is involved in two further legal claims for which management are presently unable to reliably estimate the likely costs of defending, concluding or settling and therefore no provision has been recognised in respect of these claims as at the year end date. The Group carries insurance in respect of the full cost of these claims for which any excess has been provided for within provisions above. Therefore, management consider there to be no further income statement or cash exposure in relation to these claims. At such time management consider it possible to reliably estimate the costs of defending, concluding or settling these claims a provision will be made in the financial statements along with any virtually certain insurance receivables. No disclosure is made of the detail of these claims as the investigation and negotiations are ongoing and further disclosure could be seriously prejudicial to the Group. 27. Deferred tax Deferred tax liabilities At 1 May 2021 Charge to income statement Charge to equity At 30 April 2022 Charge to income statement Charge to equity At 30 April 2023 Deferred tax assets At 1 May 2021 (as restated) Charge to income statement Charge to equity At 30 April 2022 Credit to income statement Credit to equity At 30 April 2023 Accelerated allowances £’000 Total £’000 2,459 2,459 1,530 1,530 — — 3,989 3,989 1,025 1,025 — — 5,014 5,014 Short-term Unutilised losses £’000 timing Share-based Payments £’000 differences £’000 749 (442) — 307 244 — 551 8 — — 8 9 — 17 — — — — 78 65 143 Total £’000 757 (442) — 315 331 65 711 The Group offsets deferred tax assets and deferred tax liabilities as they relate to income taxes levied by the same taxation authority on the same taxable entity. The net deferred tax liability as at 30 April 2023 is £4,303,000 (2022: £3,674,000). Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 25% (2022: 25%), being the rate at which deferred tax is expected to reverse in the future (see note 12). The Group has recognised a deferred tax asset in relation to £2,205,000 (2022: £1,481,000) of tax losses carried forward on the basis that taxable profits will be available in the future against which the losses can be utilised. There are no unused tax losses that have not been recognised (2022: £nil). Van Elle Holdings plc Annual report and accounts 2023 101 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 28. Share capital Authorised At 30 April 2023 Number Ordinary Share of shares ’000 shares £’000 premium £’000 106,667 2,133 8,633 All shares are allotted, issued and fully paid. The nominal value of all ordinary shares is 2p. Share options The maximum total number of ordinary shares exercisable under the Group’s CSOP scheme that vested during the financial year amounted to 472,500 (2022: nil). The maximum total number of ordinary shares that may vest in the future, in respect of conditional performance share plan awards at 30 April 2023, amounted to 6,555,878 (2022: 8,104,905). These shares will only be issued subject to satisfying certain performance criteria (note 29). 29. Share-based payments The Company operates three share-based incentive schemes for employees, known as the Van Elle Holdings plc Long Term Incentive Plan (“LTIP”), the Van Elle Holdings plc Company Share Option Plan (“CSOP”) and the Van Elle Holdings plc Save-As-You-Earn Plan (“SAYE”). All schemes are UK tax authority-approved schemes and the CSOP and SAYE schemes are tax-advantaged schemes. The Group recognised total expenses of £171,000 (2022: £174,000) 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. No share options were granted under the scheme in the current financial year. In the previous financial year, share options were granted on 27 September 2021 to senior executives and management. 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 ROCE performance. A previous grant of options in September 2020 has not yet vested. The extent to which these 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 TSR performance and the other 50% by ROCE performance in the final year of vesting. The grant of options in August 2019 lapsed in August 2022 as the performance criteria were not met. 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 2023, are shown below. At 1 May Lapsed in the year Granted in the year Forfeited in the year At 30 April 2023 2022 Number Number 5,479,791 4,619,890 (1,265,430) (331,395) — 1,294,388 (477,692) (103,092) 3,736,669 5,479,791 The weighted average exercise price for all options is £0.02. Of the total number of options outstanding at 30 April 2023, none had vested or were exercisable. The weighted average fair value of each option granted during the year was £nil (2022: £0.42). The weighted average remaining contractual life for share options outstanding at the balance sheet date was 93 months (2022: 99 months). 102 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 29. Share-based payments continued The following information is relevant in the determination of the fair value of options granted in the previous financial 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) Monte-Carlo simulation/Black-Scholes 2022 £0.36 £0.02 3 years 40.29% 4.94% 0.84% £0.42 The expected volatility is based on historical volatility over the period since listing. The risk-free rate is the yield of 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 with over ten years’ service at the time of listing of the Company. Details of the maximum total number of ordinary shares that may be exercised in future periods in respect of conditional share awards at 30 April 2023 are shown below. At 1 May Forfeited in the year At 30 April 2023 2022 Number Number 1,516,948 1,544,448 (220,418) (27,500) 1,296,530 1,516,948 The weighted average exercise price for all options is £0.80. The weighted average remaining contractual life for share options outstanding at the balance sheet date for the combined grants was 54 months (2022: 66 months). Of the total number of options outstanding at 30 April 2023, 472,500 had vested or were exercisable. Save-As-You-Earn Plan (“SAYE”) The Group operates a SAYE scheme open to all employees. Under the offering, on 22 February 2022, 2,012,999 share options were granted to 103 participants. The option price was set at £0.40, which represented a 20% discount on the closing share price on 26 January 2023. The options have a term of three years starting on 1 April 2023, maturing on 1 April 2026. Participants have six months from 1 April 2026 to exercise options. Options in respect of the previous offering under the SAYE scheme that matured on 1 April 2022 lapsed during the financial year as the option price was in excess of the share price in the six-month period following the maturity date. 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 2023, are shown below. At 1 May Lapsed in the year Granted in the year Forfeited in the year At 30 April 2023 2022 Number Number 1,108,166 1,194,237 (1,108,166) 2,012,999 — — (17,820) (86,071) 1,995,179 1,108,166 The weighted average remaining contractual life for share options outstanding at the balance sheet date was 40 months (2022: 5 months). The weighted average fair value of each option granted during the year was £0.19 (2022: £nil). Van Elle Holdings plc Annual report and accounts 2023 103 FINANCIAL STATEMENTSNotes to the consolidated financial statements continuedFor the year ended 30 April 2023 30. Reserves The following describes the nature and purpose of each reserve within equity: Share premium Other reserves The amount of capital contributed in excess of the nominal value of each ordinary share. The amount of capital contributed in excess of the nominal value of each ordinary share in respect of the “cash box” share placing on 9 April 2020 net of transaction costs. Retained earnings All other net gains and losses and transactions with owners not recognised elsewhere. 31. Analysis of cash and cash equivalents and reconciliation to net debt Cash at bank Cash in hand Cash and cash equivalents Lease liabilities 2022 £’000 Cash flows £’000 6,948 1,899 39 (1) 6,987 (6,853) 1,898 2,782 Non-cash flows £’000 — — — 2023 £’000 8,847 38 8,885 (4,447) (8,518) Net funds/(debt) including IFRS 16 Property and Vehicle Lease Liabilities 134 4,680 (4,447) 367 Cash flows in respect of lease liabilities include interest paid on leases of £388,000 (2022: £608,000) and principal paid of £2,394,000 (2022: £3,637,000). Non-cash flows in respect of lease liabilities include the purchase of £4,059,000 of fixed assets on long-term hire and interest expense of £388,000 (2022: £608,000). Cash at bank Cash in hand Cash and cash equivalents Loans and borrowings Lease liabilities 2021 £’000 Cash flows £’000 8,480 (1,532) 38 1 8,518 (1,531) (812) 861 Non-cash flows £’000 — — — (49) 2022 £’000 6,948 39 6,987 — (9,417) 4,245 (1,681) (6,853) Net funds/(debt) including IFRS 16 Property and Vehicle Lease Liabilities (1,711) 3,575 (1,730) 134 32. Capital commitments Contracted but not provided for 2023 £’000 2022 £’000 3,886 2,580 33. Related party transactions Details of Directors’ remuneration and key management personnel remuneration are given in note 9. During the year, transactions with Directors and key management personnel included the purchase of shares on an arm’s length basis. The CEO’s spouse is employed by the Group, working on a part-time basis within the HR function. Remuneration is on an arm’s length basis with a salary of £14,000 paid in the current year (2022: £12,000). 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 2023 or 2022 regarding related party debtors. 104 Van Elle Holdings plc Annual report and accounts 2023 Notes to the consolidated financial statements continuedFor the year ended 30 April 2023 Parent company statement of financial position As at 30 April 2023 Non-current assets Investments Trade and other receivables Total assets Current liabilities Trade and other payables Net assets Equity Share capital Share premium Other reserve Retained earnings Total equity Note 2023 £’000 2022 £’000 6 7 8 10 10 7,013 6,842 11,016 10,375 18,029 17,217 18,029 17,217 31 31 31 31 17,998 17,186 2,133 8,633 5,807 1,425 2,133 8,633 5,807 613 17,998 17,186 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 (2022: £nil). The financial statements were approved and authorised for issue by the Board of Directors on 25 July 2023 and were signed on its behalf by: Graeme Campbell Chief Financial Officer The notes on pages 107 to 109 form part of these financial statements. Van Elle Holdings plc Annual report and accounts 2023 105 FINANCIAL STATEMENTS Parent company statement of changes in equity For the year ended 30 April 2023 Share premium £’000 Other reserve £’000 Retained earnings £’000 Share capital £’000 2,133 — 8,633 5,807 — — 2,133 8,633 5,807 — — — — — — Total equity £’000 17,012 174 17,186 2,134 439 174 613 2,134 (1,493) (1,493) 171 171 2,133 8,633 5,807 1,425 17,998 Balance at 1 May 2021 Share-based payment expense Balance at 30 April 2022 Dividends received Dividends paid Share-based payment expense Balance at 30 April 2023 The notes on pages 107 to 109 form part of these financial statements. 106 Van Elle Holdings plc Annual report and accounts 2023 Notes to the parent company financial statements For the year ended 30 April 2023 1. General information These financial statements were approved and authorised for issue by the Board of Directors on 25 July 2023. 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, Southwell Lane Industrial Estate, Summit Close, Kirkby-in-Ashfield, Nottinghamshire NG17 8GJ. 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 UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006. 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. Receivables from Group undertakings The Company holds intercompany loans with subsidiary undertakings, which are repayable on demand. None of these loans are past due nor impaired. The carrying value of these loans approximates their fair value. 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. Dividends paid 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. 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. 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 6. 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. Van Elle Holdings plc Annual report and accounts 2023 107 FINANCIAL STATEMENTS Notes to the parent company financial statements continued For the year ended 30 April 2023 5. Dividends Final dividend – year ended 30 April 2022 1.0p per ordinary share paid during the year Interim dividend – year ended 30 April 2023 0.4p per ordinary share paid during the year 2023 £’000 2022 £’000 1,067 426 1,493 — — — The proposed final dividend for the year ended 30 April 2023 of 0.8p per share amounting to £853,333 and representing a total dividend of 1.2p per share for the full year will be paid on 13 October 2023 to the shareholder on the register at the close of business on 29 September 2023. The proposed final dividend is subject to approval by the shareholder at the Annual General Meeting and has not been included as a liability in these financial statements. 6. Investments Cost At 30 April The undertakings in which the Company has an interest at the year end are as follows: Class of share capital held Proportion of share capital held Subsidiary undertakings Van Elle Limited Ordinary 100% Subsidiary undertakings of Van Elle Limited A & G (Steavenson) Limited Dram Investments Limited Van Elle 15 Ltd Van Elle Canada Inc Ordinary Ordinary Ordinary Ordinary 100% 100% 100% 100% 2023 £’000 2022 £’000 7,013 6,842 Nature of business Open-site piling, ground stabilisation, restricted access micro piling, site investigation and subsidence repair in the construction/civil engineering sector Dormant Dormant Dormant Piling and ground stabilisation in the Rail construction/civil engineering sector in Canada ScrewFast Foundations Limited Ordinary 100% Design, supply and installation of helical piles The registered office of all subsidiary undertakings is Southwell Lane Industrial Estate, Summit Close, Kirkby-in-Ashfield, Nottinghamshire NG17 8GJ. 7. Trade and other receivables Receivables from related parties Receivables from Group undertakings Financial assets classified as loans and receivables 2023 £’000 — 2022 £’000 — 11,016 10,375 11,016 10,375 The receivables from Group undertakings represent an interest-free loan to the subsidiary, which is repayable on demand. In assessing the expected credit loss, the general approach has been applied. The subsidiary has resources to repay the loan on demand at the year end and as such the probability of default is considered to be very low and any expected credit loss is immaterial. There has been no change in credit risk since initial recognition. 108 Van Elle Holdings plc Annual report and accounts 2023 Notes to the parent company financial statements continued For the year ended 30 April 2023 8. Trade and other payables Other payables Financial liabilities measured at amortised cost 2023 £’000 2022 £’000 31 31 31 31 31 31 9. 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 Current financial liabilities Trade and other payables Total financial liabilities Amortised cost 2023 £’000 2022 £’000 11,016 10,375 11,016 10,375 Amortised cost 2023 £’000 2022 £’000 31 31 31 31 Financial risk management The Company’s objectives when managing finance and capital are detailed in note 24 of the consolidated financial statements. 10. Share capital Authorised At 30 April 2023 All shares are allotted, issued and fully paid. Number Ordinary Share of shares ’000 shares £’000 premium £’000 106,667 2,133 8,633 11. Share-based payments For detailed disclosures of share-based payments granted to employees, refer to note 29 of the consolidated financial statements. 12. Reserves The nature and purpose of each reserve are provided in note 30 of the consolidated financial statements. 13. 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, which is the key management personnel of the Company and therefore related parties of the Group, is set out in the annual report on remuneration on page 64. 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 2023 was £11,016,000 (2022: £10,375,000). 14. Ultimate controlling party The Company does not have an ultimate controlling party. Van Elle Holdings plc Annual report and accounts 2023 109 FINANCIAL STATEMENTS Shareholder information 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. Electronic communications You can elect to receive shareholder communications electronically by signing up to Link Group’s 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 Group, 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL. Your correspondence should state Van Elle Holdings plc and the registered name and address of the shareholder. 110 Van Elle Holdings plc Annual report and accounts 2023 Corporate information Registered office and advisers Directors Frank Nelson (Non-Executive Chair) David Hurcomb (Non-Executive Director) Charles St John (Non-Executive Director) Mark Cutler (Chief Executive Officer) Graeme Campbell (Chief Financial Officer) Group Company Secretary Mark Cutler (Chief Executive Officer) Graeme Campbell (Chief Financial Officer) Registered office Southwell Lane Industrial Estate Summit Close Kirkby-in-Ashfield Nottinghamshire NG17 8GJ Company registered number 04720018 Nominated adviser and broker Peel Hunt LLP 100 Liverpool Street London EC2M 2AT Solicitors Eversheds Sutherland (International) LLP Eversheds House 70 Great Bridgewater Street Manchester M1 5ES Registered auditor BDO LLP 2 Snow Hill Queensway Birmingham B4 6GA Registrar Link Group 10th Floor Central Square 29 Wellington Street Leeds LS1 4DL Banker Lloyds Bank PLC 33 Park Row Butt Dyke House Nottingham NG1 6GY Financial PR Walbrook Public Relations 75 King William Street London EC4N 7BE CBP020014 Van Elle Holdings plc’s commitment to environmental issues is reflected in this Annual Report, which has been printed on Amadeus Silk, an FSC® certified material. This document was printed by Pureprint Group using its environmental print technology, with 99% of dry waste diverted from landfill, minimising the impact of printing on the environment. The printer is a CarbonNeutral® company. Both the printer and the paper mill are registered to ISO 14001. Van Elle Holdings plc Southwell Lane Industrial Estate Summit Close Kirkby-in-Ashfield Nottinghamshire NG17 8GJ +44 (0) 1773 580580 info@van-elle.co.uk