A brief AGM statement from groundworks specialist Van Elle (VANL) confirmed that trading for the four months of the current financial year has been in line with expectations, with high levels of activity across all of its divisions.
That news will come as relief to shareholders given the difficult economic backdrop, particularly in the housebuilding sector where activity has been declining. The S&P Global/CIPS UK Construction Purchasing Managers’ Index showed a reading of 40.7 for housebuilding in August, signalling the sharpest contraction since May 2020, but commercial and civil construction offset that weakness, meaning construction activity continued to expand overall.
Broker Zeus kept its forecasts unchanged, with housing sector weakness already factored into full year expectations. It noted a strong pipeline this year, including the start of work on the TransPennine rail upgrade and framework contract awards at its new Canadian rail subsidiary, more smart motorway safety work, and opportunities in energy transmission and distribution.
The housing market slowdown means that revenue is forecast to decline 12.1% to £130.7m in the current year, but a new SmartDeck foundation solution for housing leaves it well positioned for when the market recovers.
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It’s been a tough year for Van Elle, which it’s done well to navigate with profitability intact and £8m of net cash in the bank. Adjusted pre-tax profit is expected to slip from £5.4m last year to £5m in FY24, but then recover again to £6m the year after.
And with inflation on the turn and interest rates likely to have peaked, it’s possible that the gloomy prognosis for housebuilding could prove too negative. Meanwhile the group’s technical capabilities mean its services are likely to remain in demand for major - and politically important - infrastructure projects.