Vp looks to long term for growth

The Harrogate-based company has focused on more resilient areas such as infrastructure and increasingly offers services such as training for confined spaces alongside its core rental business.

The company added it does not need to make big acquisitions to continue growing.

“We are looking at growing the business over the long term, rather than trying to make short-term soundbite acquisitions,” said managing director Neil Stothard.

“Our longer-term plans are not reliant on acquisitions. There was a time five to six years ago where that was clearly the way forward.

“We’ve got a lot of organic opportunities with the businesses we’ve got at the moment.”

Vp rents out equipment ranging from portable roadways to hydraulic ground supports, serving sectors including rail, infrastructure, housebuilding, general construction and oil and gas.

It has rebounded strongly from its 2009/10 trough, when revenues plunged 15 per cent to £134.2m and it was forced to cut costs. Underlying profits for the year to the end of March 2012 surged 16 per cent to £16m, on record revenues of £163.6m.

Vp has done a handful of bolt-on deals in recent years. It bought Balfour Beatty’s survey, safety, communication and plant rental businesses for £4m in July, embedding itself further with the infrastructure giant.

Infrastructure is up to 43 per cent of revenues from a third in 2008, as Vp targets spending such as the AMP5 investment scheme to upgrade Britain’s water network. It has cut its exposure to construction from about 40 per cent to under a quarter.

The company is also targeting growth abroad, and last year opened in Germany to expand its Groundforce hydraulic supports business, used in excavation. Its biggest struts can take loads of up to 500 tonnes, and are gradually gaining acceptance abroad.

“One of the challenges for mainland Europe as a whole was a lack of use of hydraulics,” said Mr Stothard. “We had to prove to German engineers that this was a safe way of doing it.”

Innovations include monitors which allow customers to check loads on the supports in real-time on handheld devices. About 15 engineers in Groundforce in Morley work on design and innovation. “We’re innovative,” said finance director Allison Bainbridge. “People do not always think of equipment rental businesses as being innovative.”

Earlier this year it also opened a 10,000 sq ft depot in Castleford, to provide safety services and training for work in confined spaces. More than 25,000 people a year use its training business.

“We’re not just a pure rental company,” said Mr Stothard.

“All this training we can give to our customers is an important add-on.”

Each of the six divisions has its own managing director, and Mr Stothard said Vp tries to “let the divisions create their own sense of direction and develop without being quashed by the group”.

It now employs about 1,650 staff across the group, including around 100 at its Harrogate headquarters.

Vp, founded in 1954 by Fred Pilkington, is still about 53 per cent owned by the Pilkington family trust.

Chairman Jeremy Pilkington, grandson of the company’s founder, said while the company does get occasional complaints about lack of liquidity in its shares, it “focuses relentlessly on shareholder value”.

He said the family has “no specific plans at the moment” to sell shares.

“Our view has always been that we would want to maintain the family stake above 50 per cent unless there was a compelling argument in terms of acquisition opportunity to dilute that,” he said.

“That’s not to say we don’t have ambitions to take the company forward and does not mean we would not contemplate a big acquisition.”

But Mr Pilkington said that would be weighed against the “risks and high failure rate of large acquisitions” and “how confident are you that this acquisition is going to be value-enhancing over the medium to longer term”.

He added the family would want to see the company achieve a better market valuation before contemplating dilution.

“We are cheap compared to our peer group; we’re generally trading at a significant discount,” he said. “That hurdle needs to be passed to contemplate using it.”