Vp

Yorkshire-based equipment rental specialist Vp continues to trade very profitably, despite difficult trading conditions in most of its markets.

Annual numbers to March from Vp showcased its resilience, which stems from a broad market and product mix and an emphasis on defensive, regulated industries. Whilst pre-exceptional pre-tax profits came in 26% lower at £16m, this was a highly creditable result, given turnover was £23m down at £134.2m, with management's early cost-cutting actions mitigating lower demand levels. Strongly cash-generative, Vp maintained dividends at 10.8p following a year in which borrowings were reduced from £66m to £48m, lowering gearing to a comfortable 44%.

Impacted by recession to varying degrees, all divisions traded profitably and churned out cash. The star turns were Groundforce, which rents excavation support systems to the water, civil engineering and construction industries and UK Forks, focused on equipment hire across industry, residential and general construction. Performances here offset disappointment in the Airpac air compressors business, caused by relative softness in offshore oil and gas exploration.

Prudently-managed Vp, which has avoided the rights issues that have dogged peers and heavily diluted their shareholders, plans to maintain its strong balance sheet whilst remaining alive to acquisitive possibilities. ‘We are not closed for business’, explains chairman and shareholder Jeremy Pilkington.

For March 2011, lower profits of £13.2m are forecast, giving earnings of 22.6p, whilst a maintained dividend looks likely. Recommended by Growth Company Investor at 380p in 2007, Vp shares have fallen to 172.5p, where they sell on a single figure p/e which reflects overcooked public sector spending cut concerns. Offering an attractive 6.3% yield, we remain strong buyers on the back of Vp’s robustness and overall growth track record.