For all their proximity to capital-intensive activity, equipment rental businesses do not always make for the best economic yardsticks. Take VP (VP.), which specialises in rentals to the extractive, construction and engineering sectors, and whose share price dropped precipitously immediately after the EU referendum. As results for the half year to September attest, management has seen little sign of an adverse hit on trading. In fact, analysts and chief executive Neil Stothard believe warmer government sounds in the Autumn Statement could open up the purse strings of VP's infrastructure clients.
Current trading is clearly going well. Stripping out amortisation charges, half-year results showed a 9 per cent increase in pre-tax profit to £18.7m, despite a 28 per cent leap in fleet investments and a 50 basis point drop in the rolling average return on capital employed, to 15.6 per cent. That key metric - which VP has long aimed to keep above 15 per cent - was actually better than expected, given the continued margin compression from struggling oil and gas clients.
Analysts at N+1 Singer are expecting adjusted pre-tax profit of £33.7m for the March 2017 year-end, leading to EPS of 66.6p, and rising to £35.7m and 71.4p in 2018 (from £29.8m and 59p in 2016).
VP (VP.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 759p | MARKET VALUE: | £305m | |
| TOUCH: | 758-759p | 12-MONTH HIGH: | 770p | LOW: 615p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 321p* | NET DEBT: | 83% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 105 | 16.3 | 33.4 | 5.35 |
| 2016 | 122 | 17.7 | 35.9 | 6.00 |
| % change | +16 | +9 | +8 | +12 |
Ex-div: 8 Dec Payment: 4 Jan *Includes intangible assets of £50m, or 125p a share | ||||
