4th Jun 2015 09:27
LONDON (Alliance News) - Vp PLC Thursday gave a positive outlook after it reported strong growth in earnings and revenue for its recently-ended financial year, as demand from the housebuilding and construction sectors more than offset quieter demand from the oil and gas and transmission sectors.
The specialist equipment rental company reported a pretax profit of GBP25.1 million for the year to end-March, up from GBP18.9 million a year earlier, as revenue grew 12% to GBP205.6 million from GBP183.1 million and margins also improved.
Pretax profit before amortisation, the company's preferred profit measure, rose by a third to GBP26.9 million from GBP20.1 million, exceeding its previous best year of 2009 when it had reported a figure of GBP21.7 million.
It said it will pay a final dividend for the last financial year of 11.5 pence, making a total dividend for the year of 16.5p, up from 14.0p.
"Whilst markets have generally been supportive, we have experienced some variance within individual sectors. Housebuilding, construction and elements of infrastructure have generated strong demand in the period. By contrast the oil and gas sector, primarily driven by the oil price fall in the latter half of 2014, and the UK transmission sector have been quieter," the company said.
Other key financial metrics also performed well. Return on average capital employed rose to 16.2% from 13.5%, while cash flow generation was strong as earnings before interest, tax, depreciation and amortisation rose to GBP53.8 million from GBP44.3 million. Its operating margin rose to 14.0% from 11.9%.
Vp invested GBP49.3 million in its fleet in the year, up from GBP38.2 million a year earlier, while proceeds from fleet disposals rose to GBP12.0 million from GBP8.6 million, generating a profit of GBP3.3 million up from GBP2.9 million.
Looking ahead, the company expects demand from the construction and housebuilding sectors to continue at similar levels, and some recovery in the transmission markets. It expects a quieter year in the UK water sector as it enters the first year of the new five-year regulatory investment plan, a typically low-spending year. It expects oil and gas markets to remain tough, "but with opportunity".
"The economic environment in both the UK and globally is more positive than for some time and all group business divisions are identifying significant growth and investment opportunities for the near and long term future," Vp Chairman Jeremy Pilkington said
"The board believes that Vp's diverse business model coupled with an active pursuit of growth opportunities will help to continue to deliver quality returns for our shareholders. We look forward to the year ahead with much confidence," he added.
Vp shares were up 6.0% at 715.25 pence Thursday morning, having hit an all-time high for the stock at 730.00 pence earlier in the session.
On a divisional basis, operating profit before amortisation rose 62% to GBP4.0 million from GBP2.5 million in its UK Forks business as increased demand from the general construction and housebuilding sectors pushed revenue up 12% to GBP18.2 million from GBP16.3 million.
Groundforce, which provides excavation support systems, specialist piling equipment and trenchless technology, reported operating profit before amortisation of GBP8.9 million, up from GBP7.9 million, as revenue grew to GBP44.4 million from GBP42.3 million.
Operating profit in the Hire Station business that provides small tools and specialist equipment for industry and construction rose to GBP8.7 million, from GBP4.8 million, as revenue grew to GBP20.1 million, from GBP13.4 million.
Airpac Bukom, which is the unit providing equipment and services to the international oil and gas exploration and development markets, reported operating profit of GBP2.8 million, up from GBP2.0 million, as revenue rose to GBP21.5 million to GBP20.2 million despite the steep oil price drop. It did caution that revenue had softened in the second half of the year. However, it also said it is seeing opportunities in the Liquified Natural Gas sector in Asia Pacific.
"There is little doubt that the oil and gas industry is experiencing extremely testing conditions which are likely to remain in the immediate term. Volumes and prices are being affected across most sub-sectors and management has reshaped the business to suit. As a consequence, the year ahead will be challenging, but we remain confident that opportunities will continue to be available, albeit reduced in number," the company said.
Vp's Torrent Trackside, which provides portable plant and specialist services to Network Rail, London Underground and their contractors in the UK, reported an operating profit of GBP3.4 million, up from GBP2.8 million a year earlier, as revenue rose to GBP29.9 million from GBP22.3 million. The unit got a boost after Vp acquired the plant assets, depots and staff of the track plant and equipment division of Balfour Beatty PLC's rail division during the year.
The only division to suffer a slowdown was TPA, which installs and rents portable roadways in the UK and mainland Europe. Operating profit before amortisation fell to GBP1.0 million from GBP1.8 million as revenue declined to GBP14.6 million, from GBP15.8 million. The business was hit by contract delays and reductions in the transmission sector following the break-up of the Electricity Alliances, as well as the dry winter weather. The Electricity Alliances were six joint ventures in the UK set up to support National Grid?s increased investment in the electricity transmission network.
Analysts said Vp's earnings beat their expectations, and they raised their earnings forecasts for the current financial year.
"If you had worried that possible disruption caused by May?s General Election might have affected the UK building market, then today?s ?record breaking? results from Vp should have somewhat dispelled these concerns," Equity Development wrote in a note to clients.
WH Ireland, which has a Buy rating and 800 pence price target on the stock, raised its adjusted pretax profit forecast for the current financial year to GBP28.2 million from GBP27.4 million, putting the stock at a 12.5 times forward price-to-earnings based on its new earnings per share forecast of 54.5 pence, up from 52p.
Equity Development raised its current year revenue and EPS estimates to GBP214.2 million and 57.3p, respectively, up 2.9% in both cases, and raised its price target to 800p from 775p.
N+1 Singer raised its current year adjusted pretax profit forecast by 3% to GBP28.1 million and its adjusted fully diluted EPS forecast by 5% to 53.1p.
"To our mind, Vp?s rating continues to look attractive both in isolation (considering the current upgrade momentum) and relative to peers. The shares have performed well since February?s positive update but are broadly unchanged since the beginning of last year in spite of the strong trading momentum. On a 12 month view, we see no reason why the shares should not trade on a circa14 times financial year 2017 EPS, which would imply fair value in the region of 785p," N+1 Singer wrote.
By Steve McGrath; [email protected]; @stevemcgrath1
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