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Vp on track to profit

Equipment rental specialist Vp has benefited from resurgent construction and infrastructure markets.
November 27, 2014

Investors sent shares in Vp (VP.) up 5 per cent after its first-half operating profit rose a quarter to more than £16m. The equipment rental specialist, whose products include high-pressure compressors, railroad tracks and power systems, benefited from a boisterous housebuilding sector and an uptick in general construction.

IC TIP: Buy at 617p

Infrastructure sales rose 2 per cent to £45m, as Network Rail's five-year investment programme accelerated and civil engineering activity increased. However, there was some disruption in the water, electricity transmission and rail industries as some investment programmes ended and others began. Infrastructure activity is certain to accelerate in the short term, says Vp chief Neil Stothard, as authorities have already committed project funding. That's "the beauty of regulated markets", he says.

The group ramped up its capital spending by 30 per cent to nearly £24m, as it expanded its rental fleet to meet rising demand. It also strengthened its presence in the UK's key south east region by paying embattled construction group Balfour Beatty (BBY) £5.5m for its rail equipment business. That helped increase VP's return on average capital employed from 13.9 to 14.9 per cent.

Broker N+1 Singer upgraded its EPS forecast by 5 per cent. It now expects pre-tax profits of £24.3m, giving EPS of 44.7p, up from £20.1m and 38.3p.

VP (VP.)
ORD PRICE:617pMARKET VALUE:£248m
TOUCH:617-625p12-MONTH HIGH:690pLOW: 537p
DIVIDEND YIELD:2.5%PE RATIO:14
NET ASSET VALUE:273p*NET DEBT:60%

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20139112.325.73.6
201410115.531.45.0
% change+11+26+22+39

Ex-div: 04 Dec

Payment: 02 Jan

*Includes intangible assets of £44.4m, or 110p a share