08.06.2022

VP bounces back

UK rental group Vp -owner of telehandler rental company UK Forks, low level access business MEP, tool rental company Brandon Hire - has reported a solid rise in revenues and the strongest pre-tax profits in many years.

Total revenues grew by 14 percent to £350.9 million, while pre-tax profits increased from a loss last year of £2.3 million to a profit this year of £35.6 million. Capital expenditure increased 49 percent to £59.8 million with all of the increase made in the UK operations. Net debt edged up seven percent to £130.6 million.

UK operations posted revenues of £320.2 million just under 14 percent up on last year, while operating profits increased almost 55 percent to £41.8 million. The capital expenditure on the UK rental feet was £55.2 million compared to £35.6 million last year, an increase of 55 percent.

International operations - mostly made up of Airpac Rentals and TR Group in Australia and New Zealand - posted revenues of £30.7 million, up by more than 15 percent on the year. Operating profits more than doubled to £1.5 million, while capital expenditure was flat at £4.6 million.

UK Forks

“The UK Forks business had a good year, experiencing high levels of activity for their telehandler fleet, particularly in the residential construction sector where demand remained very good throughout the year. This performance was despite the ongoing challenges of supply chain delays on acquiring new machines for the hire fleet and as a result, the division is not yet back to its pre Covid fleet size. Overall fleet numbers grew by seven percent. Disposal of fleet was also slowed down and equipment retained longer in the rental fleet to ensure that we were able to meet the demands of our customer base. As part of our sustainability commitments the business has started to introduce electric versions of both the six metre telehandler and Teletruck products and further investment in these lines will continue into the current financial year. Whilst we have seen inflationary cost increases in both parts and labour the business has been able to pass on some of these costs by increasing hire rates.”

“We have successfully renewed all our key account relationships during the year. In March 2022 the Higher Access spider platform business transitioned to a partnered services offer, with our customer base primarily utilising third party products.”

MEP Hire

“MEP Hire which provides low level access delivered another excellent performance in the year. The business recovered quicker than most after the worst of the pandemic in the prior year and pleasingly this trend was maintained. The business benefitted from good demand from contracts in schools and hospitals alongside projects aimed at re-purposing existing buildings into living accommodation or re-configuring offices for new modes of working. MEP further expanded its national operational footprint opening new depots in Scotland and Manchester during the year. Recent growth in the business has been derived from further market penetration in the major conurbations outside of London.”

“In November 2021, MEP acquired M&S Hire, a South East based supplier to the large scale commercial fit out sector. The acquisition widens MEP's offer and establishes an important foothold in the commercial fit out market. Capital investment in the fleet was strong combining fleet refreshment with the introduction of additional new and innovative product solutions to further enhance the customer experience.”

TPA

Temporary track and mat supplier TPA also had a good year buoyed up by strong demand for long term rental of roadway panels from HS2 and the electrical transmission markets provided an increase in longer term hires. The company also stepped up its investment in aluminium roadway panels to meet demand.
Demand from the transmission and renewables sectors was also good in Germany and Austria with higher revenues, although costs increased, particular on transport and recruitment. Business is also looking positive for the current year.

Brandon Hire

“The Brandon Hire Station business secured further recovery particularly in the early months of the year, though activity levels did subsequently flatten out through to the end of the year.”

Chairman Jeremy Pilkington said: "These results represent significant progress across the Group, as the business continues its recovery following Covid related impacts and we have seen substantial progress across all key financial metrics.”
"We are particularly pleased with the increased investment into the rental fleet which was driven by increased demand and an emphasis on lower emission products. The strong return on average capital employed performance demonstrates the resilience of the group's quality of earnings. Although there are some macro related headwinds from cost inflation and supply chain disruptions, we see significant upside growth opportunities for this year and further ahead.”

Chief executive Neil Stothard added: "The quality of the recovery in our trading performance is extremely pleasing and these results demonstrate a significant increase in profitability and a material recovery in the quality of those profits. These strong results have been largely supported by the core markets which we serve.”

"Over the last financial year, I am particularly pleased with our ESG initiatives where we have continued to invest in apprenticeships and our employees as well as our commitment to the environment. Throughout the year we continued to invest in our ambition to be net carbon zero by 2050 with all our businesses continuing to introduce new greener equipment solutions to their customers.”

"Although there are widely reported macro issues for all businesses, we continue to meet current challenges on a day to day basis. I am optimistic of Vp's future prospects and believe our core markets will continue to offer good opportunities for further increases in demand for our products and services in the new financial year. The group is in a strong position to continue to embrace those new opportunities as well as managing any potential headwinds."

Vertikal Comment

This is an excellent result from Vp, although revenues still fall short of the £382 million achieved in 2019, however statuary pre-tax profits were considerably better than 2019 hitting what appears to be a new record.

While the statement stresses that it is business as usual for Vp, the company is seeking a potential buyer, which has generated a good deal of activity in share dealings, with significant changes in major holdings, either in anticipation of a bid or simply to take a profit. When the decision was announced on April 28th, the share price nosedived to a 12 month low, but has fully recovered and has been trading at or close to its six month high, but so far, no signs of any takeover bid premium anticipation.
The business is in good shape and would be a good candidate for a major company looking to enter the UK rental market.