Although Vp (VP) recorded modest top-line growth for the reported period, double-digit increases in earnings, cash profits and dividends indicate that the equipment rental group's focus on improving the quality of its earnings is delivering. Margins continue to strengthen, but given the capital intensive nature of its business model, the group sets great store by its return on capital, which at 16.3 per cent was marginally up from 16.2 per cent last term.
UK Forks, Torrent Trackside, Groundforce and Hire Station all reported solid growth, with residential housebuilding and construction demand offsetting the problems caused by the group's oil and gas exposure. Tough conditions there are likely to persist despite the partial retracement in crude prices.
Management believes activity in the infrastructure segment should pick up as the water industry moves through the second year of its current regulatory period. Investment in the rental fleet declined slightly to £45.9m, while £6.2m in net profits was generated through fleet disposals.
N+1 Singer forecast adjusted profit of £32.2m for the year to March 2017, leading to EPS of 63.5p (£29.8m and 59p in FY2016).
| VP (VP.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 750p | MARKET VALUE: | £301m | |
| TOUCH: | 725-750p | 12-MONTHHIGH: | 816p | LOW: 640p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 302p* | NET DEBT: | 71% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 162 | 15.3 | 29.6 | 11.35 |
| 2013 | 167 | 16.4 | 33.6 | 12.25 |
| 2014 | 183 | 18.9 | 39.8 | 14.00 |
| 2015 | 206 | 25.1 | 51.0 | 16.50 |
| 2016 | 209 | 27.5 | 57.5 | 18.85 |
| % change | +2 | +10 | +13 | +14 |
Ex-div: 7 Jul Payment: 2 Aug *Includes intangible assets of £46.4m, or 115p a share | ||||
