EQUIPMENT rental specialist Vp announced record half-year results thanks to strong demand from housebuilders and an improvement in the general construction market.
The Harrogate-based company said pre-tax profits rose 27 per cent to £16.2m in the six months to September 30 on the back of an 11 per cent rise in revenues to £101.3m.
Group managing director Neil Stothard said the six-month period was the strongest the group has ever had.
“It’s down to a combination of reasons,” he said.
“We’re seeing a sustained improvement in construction, although a gradual one. That is favouring Hire Station and UK Forks.”
He said the group’s Hire Station division delivered “an outstanding performance” with profits up 78 per cent to £4.8m.
Revenue growth was supported by fleet investment of £8.8m and improved product selection and availability. The division’s tools business benefited from improved demand from general construction customers.
Mr Stothard said prospects for the division remain “very positive” for the remainder of the financial year.
The group said its water, electricity transmission and rail operations experienced some expected, temporary disruption due to the changeover of long-term investment programmes.
“As we came out of recession we benefited from infrastructure spending on rail, water and transmission,” said Mr Stothard.
“But they’ve been more subdued this first half with some slow down on water activity as AMP5 draws to a close next March.”
It was a similar situation in rail as regulatory changes caused delays.
“In rail, CP5 has taken longer to get underway, but we don’t have concerns,” said Mr Stothard.
Capital investment in the rental fleet rose 30 per cent to £23.9m as Vp invested to support strengthening demand.
In July, it completed the acquisition of the trackside plant and equipment rental business of Balfour Beatty Rail for £5.5m. The business has been integrated into Torrent Trackside.
Asked about future acquisitions, Mr Stothard said: “We are always on the lookout. We’ll see acquisition activity become more of a feature as opportunities arise.”
Chairman Jeremy Pilkington said: “The board regards these half-year figures as an outstanding set of results and this positive start to the new financial year reflects the continuation of the improving trading conditions which the group enjoyed towards the end of last year.
“The trading trajectory into the second half of the current financial year provides us with every confidence that the group can deliver a very satisfactory result for the year as a whole.”
The group declared an interim dividend of 5.0p per share, up from last year’s 3.6p, as it addresses the historic imbalance between the final and interim dividends. Finance director Allison Bainbridge said the increase also reflects the growth in profitability.
Analyst Nick Spoliar, at WH Ireland, said: “UK Forks, Hire Station and Groundforce – the largest businesses – are all beneficiaries of the housebuilding and more general construction upturn.
“Rental into water and rail renewal remains strong. The shares have lost ground lately. We expect a further rise in capital expenditure and see good potential for the shares. We reiterate our ‘buy’ recommendation.”