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VP and the Brandon Hire effect

The acquisition of Brandon Hire has driven growth at the equipment hire group
November 27, 2018

The Competition and Markets Authority cleared equipment hire group VP’s (VP.) acquisition of Brandon Hire in March this year, meaning the half-year numbers are the first to give an impression of the division’s performance. Early indications are positive. VP delivered record first-half revenues and profits in the six months to September 2018, thanks in large part to Brandon Hire’s contribution, which accounted for nearly 70 per cent of the increase in group revenue. Management is still in the process of wringing synergies out of the business, but expects the integration process to complete within the next 12 months.

IC TIP: Hold at 1,028p

Predictably, acquisition costs have increased the group’s net debt and pushed return on average capital employed down to 14.5 per cent, from 16 previously, although the latter rate is maintained once you strip out the impact of the deal. The UK’s impending departure from the European Union was widely expected to affect VP given its exposure to the UK construction industry, but adverse effects have yet to materialise. Chairman Jeremy Pilkington said that while Brexit is a “distraction”, day-to-day activity is mostly unaffected. The infrastructure business has been similarly resilient, with strong demand across the rail, transmission and water markets.

House broker N+1 Singer is forecasting adjusted pre-tax profits of £46.8m for March 2019, giving EPS of 90.9p (up from £40.6m and 80.8p in FY2018).

VP (VP.)    
ORD PRICE:1,028pMARKET VALUE:£413m
TOUCH:1,025-1,035p12-MONTH HIGH:1,230pLOW: 820p
DIVIDEND YIELD:2.7%PE RATIO:15
NET ASSET VALUE:415p*NET DEBT:113%
Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201713620.342.56.80
201819323.948.38.20
% change+42+18+14+21
Ex-div:06 Dec   
Payment:11 Jan   
Includes intangible assets of £89.7m, or 223p a share