Benefits of past investment will benefit Vp, suggests Les Copeland
Solidly profitable, growing well despite the economic turbulence, dividend paying and clearly on top of its trading niche, Vp has much to recommend itself to investors as 2012 limbers up.
The group is a specialist rental business, serving a multitude of markets from civil engineering, rail and oil & gas to construction and outdoor events.
It primarily serves the UK market, but it does have overseas interests. The benefits of this diversification is writ large over the latest interim results, which were much better than expected (not a bad achievement in the current climate).
In the six months to September, sales increased by 18% to £84 million as pre-tax profits leapt 21% to £10.4 million. The Harrogate- based firm invested heavily in its fleet, with money devoted to this cause soaring by 79% to £15.9m, although the typically weaker second half will not be quite as active.
CEO Neil Stothard said the figures underlined the firm’s ‘sector-leading performance’, and noted that, with general construction weak, Vp has worked hard to win new business in areas such as infrastructure. Five of its six divisions enjoyed sales growth, while Hire Station struggled due to the sluggish construction market.
The Groundforce arm, the most significant for Vp, performed robustly, while UK Forks continued its turnaround. Despite the recession, Vp has never cut its dividend so expectations of a 10.7p full-year payout will provide a useful bit of income for many portolios.
Brewin Dolphin has upped its forecasts by £400,000, and is now expecting a 2012 pre-tax profit of £14.7 million and EPS of 25.7p. With further benefits of operational gearing to come, the shares are too low. Buy and lock away.
Listing: Main Market
Sector: Support Services
Share price: 213p
52-week high/low: 254p/175p
Market cap: £96m