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Van Elle shares slip on another profit warning

Published: 18:12 19 Jul 2019 AEST

van elle
Shares fell more than 6% in morning trading

Van Elle Holdings PLC (LON:VANL) shares tanked after the engineering contractor issued a profit warning.

The company, which provides piling and ground engineering services, said it expects to take a £500,000 hit to underlying pre-tax profit for the year ended 30 April 2019 after adjusting a “small number” of specific balance sheet items and contract accruals as part of the year-end process.

In an April trading update, the group had warned that full-year profit would halve to £5mln, reflecting end-market volatility and project slippages in the second half.

While Van Elle said on Friday that it expects 2019 profits to take a further hit, its reported year-end net debt position is in line with expectations at less than £5mln.

Slow start to new financial year 

However, the firm warned that is continues to experience customer uncertainty in some of its markets, resulting in a quiet start to the 2020 fiscal year in some segments and increased volatility in its month-on-month performance.

“As set out in April, the group has been successful in securing positions on attractive, long term contracts,” it said.

“Although the company is seeing the benefits of a number of commercial and operational initiatives recently implemented, the board is mindful that market uncertainty and the resultant volatility may persist further into the current financial year, which would limit the rate at which progress can be made.”

Shares fell 6.8% to 34p in morning trading. 

Peel Hunt downgrades recommendation on stock 

Peel Hunt downgraded its stance to 'hold' from 'add' and cut its target price to 40p from 60p. 

"Combined with recent and ongoing end market volatility and project slippages, we have reduced our 2019 pre-tax profit estimate by 16% to £4.7mln (from £5.6mln)," the broker said. 

"There will be a more detailed update on the outlook at results on 24th July, however, there is clear uncertainty with a number of customer contract delays weighing on activity.

"While commercial and operational initiatives are being implemented the reduced visibility on trading leads us to reduce 2020 pre-tax profit estimate by 33% to £5.0mln (from £7.5mln)."

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