PAUL SCOTT comments - Stockopedia - VANL19 Nov 2021 12:52
Trading Update
Van Elle Holdings plc (AIM: VANL), the UK's largest ground engineering contractor, today provides a trading update for the six months ended 31 October 2021 (the 'Period') ahead of announcing its half-year results, which are expected to be released on Monday 31 January 2022.
The text reads positively, but the conclusion is in line with expectations -
The Board is pleased with the progress delivered in the first half of the year and continues to be confident that FY22 full year performance will be in line with market expectations.
Summarising the other points -
H1 revenues £60m - up 56% on last year H1 (badly impacted by lockdown 1 remember), and up 24% on H1 before covid - so a good result by the looks if it, at least at the revenues line
“Good capacity usage across all divisions”
Residential construction is most active segment
Rail least active segment, but improving now
Management focused on improving margins - good
Cash down by £2.2m, to £6.3m in H1- due to higher working capital, and capex
Hire purchase debt reduced (no figures)
Order book £34.5m at end Oct 2021, almost unchanged in last 3 months
Supply chain - vague, but sounds OK -
The Group has continued to experience the effects of industry-wide supply chain challenges, salary inflation and short-term employee availability. These challenges continue to be mitigated at an operational level.
Outlook -
… remains confident that the strong market recovery and divisional performance will underpin an improved outlook…
The Board is pleased with the progress delivered in the first half of the year and continues to be confident that FY22 full year performance will be in line with market expectations.
My opinion - broker consensus forecast seems too low, at £100m revenues, given that £60m was achieved in H1. I’ve checked the seasonality, and pre-covid, it was sometimes H1 weighted, and other times H2 weighted, so no obvious pattern there.
I’ve checked the last reported balance sheet, which has £40.2m in NTAV - very strong for a £48m market cap company. Effectively, the company owns most of its fixed assets outright, which I very much like. That de-risks the business model almost completely, in my view - i.e. there’s not really any insolvency risk, even in a deep recession.
Thanks to Zeus, putting out a fresh note this morning. It expects 1.9p EPS in FY 04/2022 rising strongly to 3.5p next year. That puts it on PERs of 23.6 and 12.9 respectively.
I can’t get excited about this valuation, because this type of business is cyclical, and likely to be on a lowish rating permanently. Overall then, probably priced about right. There might be upside if it beats forecasts, but next year EPS is already forecast to rise by 84%, so much stronger performance is already priced-in. Hence why I can't get excited about the valuation
https://app.stockopedia.com/content/small-cap-value-report-fri-19-nov-2021-win-more-903604?order=createdAt&sort=desc&m
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