Confident Vp in fit enough shape to withstand public sector cuts

The Harrogate-based group posted lower full-year profit, hit by continuing tough market conditions, and said it did not expect an imminent significant upturn in demand from the UK economy.

Vp, which comprises six divisions, said pre-tax profits fell 31 per cent to 14.3m in the year to the end of March.

Revenues fell 15 per cent to 134.2m. All divisions remained profitable.

"We've negotiated our way through an extremely tough trading period," said managing director Neil Stothard. "We entered the recession in pretty good financial shape and that's helped.

"We identified areas of the group where there was likely to be revenue weakness and took action to reduce cost."

Vp shed eight per cent of its workforce over the year to leave it with 1,358 staff. Other cost measures included wage freezes, fleet reductions and a handful of depot closures.

But Vp said compared to rivals, it has fared well, not having to issue equity, write down the value of assets, or cut dividends. It maintained its total dividend at 10.8p, level with a year ago.

Vp said looming public sector spending cuts, which are likely to affect infrastructure spending, mean it is cautious over its medium term outlook.

"We do support a very wide range of markets so we would hope that we can mitigate some of the inevitable cutbacks in public expenditure by reflecting that elsewhere," said Mr Stothard, adding the group's exposure to regulated spend gives it some resilience.

Vp also earns 15 per cent of its revenues overseas, particularly through its oil and gas division. It hopes to grow this to about 20 per cent.

"It's a little bit of a foil against the likely quiet UK market for the next couple of years," said Mr Stothard.

The group is also weighing up acquisitions, and with net debt down 17.5m to 48.3m, said it has money to spend.

Last month the group boosted its Groundforce division with the 900,000 acquisition of Harbray Plant Hire in Kent, its first purchase in 18 months.

"We think opportunities will arise over the next 12 months and if these are ones that we can get at the right level then indeed we will pursue them," said Mr Stothard. "There are weaker companies in the market who perhaps cannot pursue them.

"But we're not going hell for leather to make lots of acquisitions."

He added this year will see "overall stability" but some volatility in markets such as civil engineering.