Tough markets but Vp has right equipment

The group, which rents out equipment ranging from telescopic lifting machines to temporary aluminium roadways, said it continues to cut its debt pile, reducing it by 8m to 40m in the six months to the end of September.

Shares in the Harrogate-based group rose 1.5 per cent to 167p.

"It's been a very tough market," said chairman Jeremy Pilkington. "For the last two years, for anyone trying to service the broadly-defined construction industry, (it) has been very difficult."

Pressure on prices plus shorter rental periods eroded margins during the six months, driving pre-tax profits down about seven per cent to 8.2m. Sales were stable at 71.1m.

But Mr Pilkington said keeping all its six divisions profitable, plus avoiding having to do a dilutive fundraising, was a considerable achievement.

Vp maintained its interim dividend at 3.1p per share.

"We're pretty confident in what people are expecting us to do in the second half," said Mr Pilkington.

Vp increased its capital spending during the period to 9.7m from 7.6m, but net cash inflows of 8m helped it further drive down debt.

The group also renewed its debt facilities on "favourable terms" for a three-year period. It now has facilities of 65m, plus room for another 15m of debt if it needs.

"Whilst we are not thinking of spending that amount in the next 12 months it was clear from the renegotiations that if we really wanted we could get more than that," said managing director Neil Stothard.

Mr Pilkington said Vp expects a slow recovery next year, having seen stability over the past six months.

"We are hoping that markets remain fundamentally stable and return to modest levels of growth," he said. "There are many challenges ahead and many uncertainties."

He added a "useful proportion" of the group's revenues from the public sector are in regulated markets, giving the group a cushion against swingeing cuts.

During the six months its Groundforce arm, which supplies the construction industry with shoring and piling equipment, was its largest profit contributor with earnings of 3.5m. But these were down 31 per cent on a year ago due to subdued construction and property markets.

Airpac Bukom, which serves the oil and gas markets, saw profits fall by a quarter to 1.5m as the international well testing market dipped.

Its Hire Station UK tool hire business dropped profits by 15 per cent to 1.7m amid a "particularly challenging" market. TPA, which supplies portable roads, saw profits fall 13 per cent to 2.1m as its job mix and higher costs hurt it.

Rail equipment business Torrent Trackside and telescopic lifting business UK Forks both grew profits to about 600,000. In UK Forks, it bought 150 telehandlers, used on building sites, to expand its presence.

"Growth is going to come from the gradual recovery in the end markets to a degree," said Mr Stothard. "That may take some time."

He added short-term growth is likely to be organic rather than through acquisition.

"That (acquisitions) is not on our list of targets or options," he added. "But we would be disappointed if over the course of the next couple of years we did not come across a couple of businesses."

Vp is continuing its hunt for a new finance director after the previous incumbent, Mike Holt, left last month. The search for his replacement is "progressing well".

Analysts at house brokers Brewin Dolphin dropped their target price from 244p to 240p but maintained a 'buy' stance and said they were "good results in difficult markets".

"These are resilient results in challenging market conditions in many of the group's end markets," they said. "As is usually the case some businesses have beaten our expectations, notably UK Forks and Torrent Trackside, both of which delivered significantly improved profits compared to last year, whilst Airpac Bukom was slightly behind expectation due to subdued conditions in the well testing market."

They see Vp reporting pre-tax profits of 13.2m for the full-year, rising to 14.3m in 2012 and 15.9m in 2013.

Looking abroad to raise revenues

VP sees its overseas operations providing an increasing proportion of its revenues.

The group currently earns about 15 per cent of its sales from its overseas work, up from just one per cent in March 2006.

Managing director Neil Stothard said he expects to grow this to about 20 per cent as it taps into demand from Europe. Its TPA portable aluminium roadways arm is increasingly being used as a replacement for wood and its Groundforce division is seeing growing European demand for hydraulic propping systems.

"In both cases this is a product that's not readily available in mainland Europe at the moment," said Mr Stothard.

Its Airpac Bukom arm, which supplies the oil and gas sector with air compression equipment, now has bases in South America, the Middle East, West Africa, Singapore, the North Sea and Australia.