Yesterday morning, ahead of its AGM, Van Elle Holdings issued an Update that looked quite encouraging, certainly indicating that its shares are likely to react well to the anticipated uplift in the UK construction market.
Formed in 1984 and listed on AIM in 2016, today the group is the UK's largest specialist geotechnical engineering contractor and has completed more than 20,000 projects over the last 35 years or so.
It provides a wide range of ground engineering techniques and services including ground investigation, general and specialist piling, rail geotechnical engineering, modular foundations, and ground improvement and stabilisation services.
Operating through three divisions: General Piling; Specialist Piling and Rail; and Ground Engineering Services, it is focused on diverse end markets including residential and housing, infrastructure and regional construction.
The company reported that its order book had increased by approximately 14% since the start of the current year to end-April 2025.
It noted that it is working on a strong pipeline of bidding activity, and several framework agreement wins which will see activity levels increase over the next two to three years.
Like all companies operating within its industry, the company stated that market conditions in the first four months of the new financial year had proved challenging across all of its operating sectors.
However, the business is seeing early signs of a recovery in the housing market, with increased enquiry levels and order intake expected to translate into higher revenues in its second half-year.
Of importance, in the light of recent news, the group noted that certain subsidiaries of the ISG group have entered administration and accordingly confirmed that the maximum potential exposure to the group is likely to be less than £100,000.
Van Elle commented that good progress was being made in ground investigation, design development and workload planning, along with customer partners for two of the group's strongest future potential growth markets; water and energy.
Over in Canada, key framework contracts have been secured that position the company strongly for medium-term growth.
The company continues to expect results to be in line with market consensus for the current financial year, with FY2025 profitability expected to be weighted towards the second half of the financial year.
Analysts Andy Hanson and Carl Smith, at Zeus Capital, concluded that the current valuation does not capture Van Elle’s diversified growth opportunities, its strong balance sheet and its free cash generation.
Their estimate for the current year to end-April 2025 is for revenues of £146.1m (£139.5m), while adjusted pre-tax profits could come in at £6.0m (£5.1m), lifting earnings to 4.2p (3.4p), easily covering a 1.4p (1.2p) per share dividend.
For the end-April 2026 year they see £155.9m sales, £7.4m profits, 5.1p earnings and a 1.7p dividend.
Jumping forward to 2027 turnover of £163.7m is possible, with £9.1m profits, 6.3p earnings and maintaining a 1.7p dividend.
The analysts have a DCF valuation estimate of 68.5p per share.
Over at Progressive Research, analyst Alastair Stewart noted the group’s order book expanding.
His 2025 estimates are for £156.2m revenues, £6.1m profits, 4.3p earnings and a 1.3p dividend.
For 2026 he sees £166.7m sales, £7.4m profits, 5.2p earnings and a 1.4p dividend.
Going into 2027 Stewart looks for £178.6m turnover, £8.8m profits, 6.2p earnings and a 1.8p per share dividend.
With £6m cash in the bank, against its £43m market capitalisation, and earning around £6m in profits, this group’s shares at only 40p certainly are undervalued.
(Profile 29.03.21 @ 37.5p set a Target Price of 47p*)
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