Vp reaches revenue milestone as it reaps benefit of policy shift

The Harrogate-based group has shifted away from general construction in recent years to the more resilient markets of infrastructure, rail, housebuilding and oil and gas.

The group posted expectation-beating 16 per cent growth in both sales and profits in the year to the end of March, and said its strong balance sheet gives room for further growth.

Shares in the company gained six per cent to close up 14p at 251p.

Vp hires out equipment ranging from telescopic forklift trucks to temporary aluminium roadways.

“We’ve managed to move the group towards those segments where there’s expenditure,” said managing director Neil Stothard. “It’s all been organic growth and we’ve generated strong cash as ever.

“These are record revenues for the group – it’s a nice milestone to reach.”

Profits before tax, exceptional items and amortisation rose to £16m from £13.8m a year earlier. Revenues surged to £163.6m from £141m.

Despite spending a third more on its fleet at £32.1m, net debt was broadly unchanged at £40.4m. Vp also recently bought back £7.8m of shares via a tender offer to improve returns for investors.

After three years of flat total dividends, Vp surprised analysts by hiking its final payout by 7.1 per cent to 8.25p per share.

Vp now earns 43 per cent of its revenues from infrastructure, compared with 33 per cent in 2008. Construction revenues have fallen from 39 per cent in 2008 to 24 per cent.

“We have the ability to flex our position in terms of who we are working with,” said Mr Stothard. “It’s part of the reason we’ve been able to progress.

“We’re getting to the table with a lot more customers and that’s translating into some market share gain.”

Vp has rebounded strongly since its 2010 trough, when profits and sales tumbled. It responded by slashing debt and cutting costs, including shedding eight per cent of its workforce, plus re-focusing its business.

The group, which operates across six divisions, has been targeting areas such as oil and gas infrastructure renewal, where spending is vital for utility firms to keep water running and homes heated.

All six divisions, which span construction tools, portable roadways, forklift trucks, rail equipment, ground supports and oilfield services, remained profitable.

“General construction remains subdued and we think it will continue,” said Mr Stothard. “That’s going to be a long haul to recovery.”

International sales comprised 15 per cent of group turnover, an unchanged percentage. It opened a depot in Hanover, Germany, last year, and has sites across the globe.

Vp also recently opened a 10,000 sq ft depot in Castleford, which provides safety services and training for work in confined spaces.

Analysts said Vp is showing resilience. “The results confirm an improving t rend and demonstrate the benefit of focusing on specialist sectors despite the lack of improvement in the general market conditions,” said Charles Stanley analyst Andy Smith, adding profits exceeded his £15.2m expectations.

“Vp has proven it has the ability to navigate through these difficult conditions.”

Peel Hunt analyst Andrew Nussey said the surprise dividend increase and the strong yield give scope for a re-rating of its shares.

Michael Parkinson, analyst at house broker N+1 Brewin, said: “These results yet again demonstrate the benefits of the group’s strategy of focusing on specialist markets where it can command strong market positions. There remains scope for cyclical upside when economic conditions improve but even without this the shares are undervalued in our view.”

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