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Thu April 02 2020

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Van Elle hit by rail delays

22 Jan Delays to railway projects have delivered a blow to the profits of piling specialist Van Elle.

Van Elle chief executive Mark Cutler
Van Elle chief executive Mark Cutler

Van Elle Holdings’ pre-tax profit sank to just £900,000 for the six months to 31st October 2019 despite (2018: £2.4m) despite a 13% increase in revenue to £48.5m (2018: £42.9m).

Van Elle suffered from delays to Network Rail's CP6 programme and the completion of some longer running CP5 projects. This meant it had to redeploy some personnel and lay off others.

“The rail sector is typically the group's highest margin segment and so the impact of the very challenging market conditions in this sector during the first half have had a material adverse impact on divisional and group profitability,” the company said.

More optimistically, it added: “However, Van Elle remains a clear market leader in these activities and the potential opportunities presented by the mobilisation of major investment programmes, including CP6 and HS2, are significant.”

Revenue growth in the first half came from the Ground Engineering Services division, up £7m to £17m, driven primarily by housing sector growth with national housebuilders seeking integrated piling and foundation solutions to speed build times.

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Despite the rail issues, chief executive Mark Cutler said that good progress was being made in delivery of a three-phase transformation programme.

The restructuring of the business divisions is substantially complete, offices have been rationalised into a single open plan site in Kirkby, and the bidding process and governance has been strengthened, he said.

Mark Cutler said: “We have a clear strategy focused on three core markets – housing, infrastructure and regional construction – where we offer a broad range of end-to-end technical capabilities through our extensive and well-invested rig fleet. Good progress continues to be made in building long term and strategic relationships with our key customers in all sectors.

"Operational performance is stable with previous challenges now substantially addressed.  The simplified divisional structure with motivated, co-located teams under strengthened leadership means that we are more efficient and joined-up.  This allows us to focus even more intently on customer service, operational excellence, margin improvement and cash generation.

"Whilst mindful of ongoing volatility across construction markets and recognising a slower Q3 than previous years due to subdued rail activity, the board expects some market improvement and further progress in the balance of the second half.  This is also supported by the benefits of ongoing improvements under the group's transformation programme. Consequently, the board expects to deliver results for the full year within the range of market expectations."

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