Vp announces record profits despite political uncertainty

Equipment hire firm Vp has announced record annual results although it warned that it expects slightly slower growth in the UK as a result of the current political and economic uncertainty.

Vp said it is tapping into market areas which are still showing some strength and stability
Vp said it is tapping into market areas which are still showing some strength and stability

The Harrogate-based firm reported a 15 per cent increase in underlying pre-tax profits to a record £47m in the year to March 31.

Neil Stothard, chief executive of Vp, said: "We have an excellent spread of activity. Our market diversity is helping the performance of the business.

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"In a more uncertain economic backdrop we are tapping into market areas which are still showing some strength and stability. These areas are the infrastructure market, the rail sector, transmission sectors and the water industry."

Vp said the housebuilding sector showed some modest growth, up 7 per cent.

When asked about the current political and economic uncertainty, Mr Stothard said: "The area that I didn't mention is construction, our largest sector, where we've seen some elements of a slowdown.

"There has been a slight reduction in confidence from developers. There are regional differences. The South East is slowing a bit more than elsewhere. There's still quite a lot of activity in the major conurbations of the UK.

"The froth has come off the top of the growth we've enjoyed over the last few years, but we still anticipate growth opportunity."

Vp reported a 26 per cent rise in revenues to £383m.

The firm described its performance as a strong set of full year results, with key financial metrics ahead of last year, and said it has entered the new financial year in excellent shape.

The group announced a final dividend recommendation of 22p per share, making a total for the year of 30.2p per share, an increase of 16 per cent on last year.

In April the Competition and Markets Authority (CMA) said it had reached a provisional determination that Vp, together with two other companies, had acted in a manner deemed to be uncompetitive in the market for certain elements of temporary groundworks.

Vp said it is in the process of reviewing these alleged breaches and it expects to be in a position to respond to the CMA shortly. The group has made a £4.5m theoretical provision for costs which was included in the exceptional items.

Vp's finance director Allison Bainbridge said: "The CMA issued provisional findings on April 9. It was really their provisional findings. It doesn't mean there has been untoward behaviour.

"For accounting purposes we had to put a number in and therefore we came up with a mechanical number."

Mr Stothard added: "We were bound by accounting standards to make some form of estimate as to a potential liability could be, but it's quite difficult as it's still very much work in progress."

Analyst Andrew Nussey at Peel Hunt said trading was in line with expectations, but there was some uncertainty over the CMA investigation.

"There were no major surprises in the trading commentary. Vp is finalising its response to the CMA investigation and exceptionals totalling £8.6m have been taken,

of which £4.5m relate to the CMA review.

"The outlook is confident and trading is in line with expectations.

"We are still more confident of Brandon synergies than consensus, but wary of CMA review on group trading. Shares have fallen from April highs following news of the CMA investigation. Assuming some CMA clarity, the shares offer good value. However, we prudently reduce our target price to 800p ahead of CMA news flow."

Mr Stothard said the group was particularly pleased with the quality of the Brandon Hire integration.

"One of the highlights of the results is the Brandon business we purchased 18 months ago," he said.

"We are very pleased with the integration. It's been a massive undertaking.

"We will continue with a mix of organic and acquisitive growth, but only where the opportunity arises. We don't need to do acquisitions."