Van Elle Holdings plc (LON:VANL) has announced a strong set of interim results for the six months to 31 October 2021. Activity in its core markets is recovering well and all divisions are operating at increased utilisation. Half-year revenue increased by 57.3% to £60.1m and PBT was £1.9m (vs. a £0.7m loss in H1 2021), exceeding the pre-pandemic PBT of £0.9m in H1 2020. In our view, today’s results show good delivery against the first two pillars of the Group’s strategic plan: stabilising and improving performance; and developing foundations for future growth. We upgrade our FY22 revenue by 13.0% to £116.0m and PBT by 18.3% to £3.0m on the back of today’s positive results.
- Interim results: Van Elle Holdings returned to profitably in H1 2022 and exceeded the earnings in the pre-pandemic H1 2020 period. Revenue increased by 23.8% vs. H1 2020 and operating profit increased by 90.4% to £2.3m in H1 2022. The Group’s core markets have recovered strongly, with higher activity levels and utilisation following the relaxation of pandemic restrictions. The balance sheet and cash levels remain robust despite a normalisation in net working capital, £2.2m of planned capex, and a £1.9m reduction in bank debt and HP loans. Net cash (excluding IFRS 16 leases) was £3.5m at 31 October 2021.
- Outlook: The positive trading momentum seen in H1 2022 has so far continued into H2 2022. High utilisation and favourable weather conditions have led to strong trading in the third quarter of FY22. The Group’s order book of £39.1m at 31 December 2021 underpins our revised forecasts for FY22. Long-term market dynamics remain positive, such as the national investment in rail decarbonisation projects where Van Elle has proven expertise.
- Forecasts: We have increased our FY22 revenue forecast by 13.0% to £116.0m, which results in a 15.7% upgrade to operating profit and an 18.3% upgrade to PBT. Management has reclassified share-based payments as an underlying expense, which we have mirrored. We increase our FY23 revenue forecast by 8.2% but are mindful of raw material availability issues and cost inflation, so have left our FY23 PBT forecast at £4.6m (which now includes share-based payments). This could prove conservative, particularly if supply chain issues resolve sooner.
- Valuation: On our revised forecasts, Van Elle Holdings trades on a P/E of 18.8x FY22, falling to 12.4x FY23, and has committed to return to the dividend list in FY22. In our initiation note we estimated Van Elle’s intrinsic value at 64.4p per share. Given the progress being made towards its medium-term financial objectives, we remain comfortable with this 64.4p estimate, which represents c. 50% upside to the current price.
