Vp makes good progress in a subdued market

The Harrogate-based firm said that despite the ongoing political and economic uncertainty in the UK, its focus on quality of earnings delivered better operating margins during the period.

Asked why Vp’s markets are subdued, Vp’s chief executive Neil Stothard said: “We are talking primarily about the construction market which is quiet because of macro, political and economic uncertainties that are out there with investors and customers.

“We are just seeing people taking a more measured approach. They are not sticking their necks out too far.”

He said that some customers, particularly smaller ones, are not willing to take as many risks as they did a year ago.

“A jobbing builder might say: ‘I’m not doing as much as I was. I was doing three jobs concurrently last year. This year I’m only going to do two or maybe one because I don’t know quite what this year is going to bring’,” said Mr Stothard.

“Some clarity, which no-one can guarantee, in terms of the broader issues would be very helpful.”

Vp maintained its underlying pre-tax profit at £26m in the six months to September 30 despite a reduction in revenues, which fell 3 per cent to £187m.

“We are happy we maintained profits,” said Mr Stothard.

“The trading environment isn’t as supportive as it was a year ago. In the context of that, we’ve produced some good results. The margins have improved.

“We knew 2019/2020 was going to be a lower growth opportunity for us because we could already see there was some slowdown in the market and we’ve taken action accordingly.

“We’ve reduced our capital investment slightly and we’ve focused on efficiencies and the costs within the business.”

The interim dividend was raised 3 per cent to 8.45p per share.

“The dividend underlines the fact we do believe these are a decent set of results,” said Mr Stothard.

“We feel, going forward, we can still progress the business.”

Asked what he would like to see in next week’s General Election, he said: “Clarity - from a business point of view it’s all about confidence.

“Confidence is impacted by a lack of certainty. That lack of certainty comes from lack of clarity about what’s around the corner.”

Analyst James Tetley at N+1 Singer said: “Vp’s interims confirm a period of good progress and maintained profitability despite a more subdued market backdrop.

“Operating margins have strengthened as a result of Vp’s focus on quality of earnings and cost discipline, underpinning full year expectations.

“Vp is a high quality business with industry leading margins, which has been consistently well managed through the economic cycle. The shares continue to trade at a substantial discount to the long run average rating and close peers, which in our view is unwarranted given Vp’s track record and attractive medium term growth prospects.”

Jeremy Pilkington, chairman of Vp, said: “The board remains confident of a positive full year outcome and looking ahead, we believe we will continue to deliver very satisfactory results for all stakeholders.”

Vp said its UK division delivered a solid first half, with underlying operating profits marginally ahead at £27m.