Better-than-expected first-half numbers from Vp (VP.) offered proof that the UK economy is in recovery mode. Indeed, the figures propelled shares in the equipment rental company to a record high and had City analysts rushing to rework estimates.
A 17 per cent leap in underlying pre-tax profit to £12.8m clearly took Peel Hunt by surprise; beating the broker's forecasts by 11 per cent and forcing a 7 per cent upgrade to full-year estimates. It now expects adjusted pre-tax profit of £19.5m, giving adjusted EPS of 36p (from 32.5p in 2013), and admits that the ongoing recovery could generate further earnings upside.
Management thinks so, too, given they ramped up investment in the rental fleet by over 46 per cent. An uptick in both housebuilding and infrastructure investment has been instrumental. Vp's UK Forks division thanked the former for a 59 per cent surge in operating profit to £1.5m and, given housebuilding is still way below peak, volumes should keep growing. The larger tool hire business made £2.7m, also up 59 per cent, and ongoing investment by water utilities increased profit at Groundforce unit by 12 per cent to £4.6m. Things have improved at the Airpac Bukom oilfield services division, too. Delayed liquefied natural gas projects almost halved the division's profit to £0.7m, but the unit had a decent summer and business is getting better.
VP (VP.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 531p | MARKET VALUE: | £213m | |
| TOUCH: | 526-540p | 12-MONTH HIGH: | 540p | Low: 310p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 272p* | NET DEBT: | 51% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 84.0 | 10.5 | 21.6 | 3.25 |
| 2013 | 91.3 | 12.3 | 25.7 | 3.60 |
| % change | +9 | +17 | +19 | +11 |
Ex-div: 4 Dec Payment: 3 Jan *Includes intangible assets of £41.6m, or 104p a share | ||||
