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Van Elle warns on profits but encouraged by cost-cutting, order book

The construction engineer sees strong fourth-quarter volumes but warned of delays to contract awards and start dates
groundwork
Van Elle's full-year sales likely to come in 3% lower than expected

Shares in ground engineer Van Elle Holdings PLC (LON:VANL) jumped on Friday in spite of a profit warning on the back of recent contract delays.

The UK-focused construction services group revealed that sales in the year to 30 April are likely to come in 3% lower-than-expected as economic uncertainty in the past quarter had weighed, in particular on the infrastructure sector.

READ: Cracks widen at Van Elle as order delays hit specialist division

While volumes in the fourth quarter have been the strongest in the financial year, along with encouraging progress in winning work, the awarding of “some” contracts and the start dates of others have been delayed by clients.

The lower sales is expected to result in the group adjusted profit before tax to be “slightly below the lower end of the range of market expectations”, Van Elle said.

Brighter news was to be had elsewhere, with greater cost savings than previously guided as streamlining efforts under new chief Mark Cutler’s three-phase transformation programme continued, while margins in the Piling business were said to be improving and better cash management has seen net debt shrink below previous forecasts.

Going into the new year, some Smart Motorway contract wins and improved levels of housing sector work lifted the order book to £35mln, up from £25mln a year before, with hopes for a further £25mln of contracts.

Despite the market uncertainty, with fourth quarter run-rate expected to “remain solid into the forthcoming year” the board said it was “very encouraged” that Cutler’s improvements were “generating tangible operational and commercial benefits”.

House broker Peel Hunt saw “rays of hope” from the work pipeline improvements and changes brought in by Cutler, upping its rating on its client to 'add' from 'hold' after the 40%-plus fall in the share price since the start of the year. 

Van Elle shares had rallied more than 10% to 48.96p by mid-morning, reversing almost all their decline over the past month.

-- Adds broker rating change -- 

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