VP's dividend greenlit despite HS2 cancellation

VP's (VP.) results for the six months to 30 September marked two firsts – one potentially auspicious and one likely not.

It was the first set of results under the construction materials rental company's new chief executive Anna Bielby, appointed in September following her predecessor Neil Stothard's retirement. "What refreshed leadership can do for this group is some new ideas, some focus on digital, some focus on ESG, and giving those things a bit more attention," Bielby told Investors' Chronicle.

Investors will hope this "refreshed" ethos grows and diversifies the business as the results also marked VP's first since HS2's cancellation last month. "Obviously, our preference would have been for it to continue," Bielby said, but added it still had business from water and rail infrastructure projects across the country. Chairman Jeremy Pilkington was even more confident, saying that the scrappage could instead present an opportunity "if promised investment elsewhere in the network is delivered", but that is a large 'if' dependent on this government and the next one keeping its promises.

Because the results only run until the end of September, they do not cover the time since the cancellation. As such, any potential impact is likely to be reflected in next year's results, leaving investors with a thumb-twiddling wait. However, there is some evidence to back VP's bullishness. Sales, earnings and dividends all ticked up despite the slowdown in the housing market, another significant revenue source for the company. It pinned this on its "diversified" revenue stream, which bodes well for its need to diversify its income away from HS2.

These assurances might make some investors interested in VP, especially considering its dividend yield, but housing and HS2 setbacks combined with its continued high debt and low liquidity mean we remain a tad bearish. Hold.