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Van Elle – argues first quarter “encouraging”, BUT…

By Steve Moore | Tuesday 12 September 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

An update from Van Elle Holdings (VANL) ahead of its AGM today includes “trading in the first quarter of the financial year has been encouraging” and that the board “remains confident in its expectations for the current financial year as well as the long-term potential of the group”. Sounds encouraging…

The announcement notes “good levels of activity” particularly within the General Piling division and the recently established Scottish operation, though also includes “market and operating conditions in the group's rail business remain more challenging but the board continues to see this as an area of opportunity for Van Elle over the medium term”.

Hmmm. I note that although “remains confident” in expectations sounds encouraging, this follows a profit warning less than 5 months after the October 2016 AIM IPO including delays particularly in “on-track rail business”. That saw me conclude the self-admitted limited visibility over a number of programmes and disappointment so soon after the IPO deter.

It also saw brokerage finnCap downgrade year to 30th April 2017 earnings per share forecasts from 12.6p and now-current year forecasts from 15.9p to 12p. Last year came in at a little changed from the prior year adjusted 12.1p, with £1.5 million of net debt (1.875p per share).

FinnCap updates that it maintains a, 10x forecast earnings, 120p per share target price. This compares to a current circa 100p share price, though the broker also notes “it seems clear that some risk remains around the rail business”. This, together with the disappointment so soon after IPO, sees me currently continue to avoid.

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