The dominant narrative surrounding equipment rental specialist Vp (VP.) has been the ongoing investigation being conducted by the competition and markets authority (CMA). The CMA announced in April that it was probing suspected anti-competitive behaviour in the groundworks rental market. It provisionally found that three major suppliers – including Vp’s Groundforce piling business – had “formed a cartel to reduce competition and keep prices up”. There were no further developments on this front in the first half of the 2020 financial year and as the case rolls on, the group continues to carry a £4.5m provision for any potential fine.
Meanwhile, uncertainty in Vp’s end markets saw sales dip in the six months to 30 September, although adjusted pre-tax profit remained flat at £25.9m. The UK business – which accounts for over 90 per cent of sales and adjusted operating profit – came up against the construction slowdown. While the infrastructure and housebuilding sectors were resilient, commercial construction and civil engineering saw softer levels of activity. In response to the subdued market backdrop, the group trimmed costs and reduced capital investment in its rental fleet by 28 per cent to £26.6m. These measures drove a 0.7 percentage point expansion in the adjusted operating margin to 16 per cent, offsetting the 3 per cent decline in domestic revenue to £170m. The group is targeting further margin recovery after the acquisition of lower-margin Brandon Hire in 2017.
A £7m hike in trade and other receivables came as debtor days increased from 58 to 66 days. Some customers implemented system changes that slowed down payments while shifting Brandon Hire onto the group’s IT platform caused some delay in collections. Vp expects this impact to reverse in the second half.
House broker N+1 Singer forecasts adjusted pre-tax profit of £49.6m and EPS of 97.4p for the March full year, rising to £50.4m and 101.7p in FY2021.
| Vp (VP.) | ||||
| ORD PRICE: | 884p | MARKET VALUE: | £355m | |
| TOUCH: | 880-898p | 12-MONTH HIGH: | 1,060p | LOW: 690p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 437p* | NET DEBT: | 105%** | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 193 | 23.9 | 48.3 | 8.20 |
| 2019 | 187 | 23.3 | 46.8 | 8.45 |
| % change | -3 | -2 | -3 | +3 |
| Ex-div: | 12 Dec | |||
| Payment: | 17 Jan | |||
| *Includes intangible assets of £89.3m, or 222p a share. **Excludes lease liabilities of £77.8m | ||||
