Vp excels in difficult UK market
By Murray Pollok29 May 2012
UK rental company Vp plc has reported double digit growth in all but one of its six rental divisions as revenues increased by 16% to £163.6 million for the year to 31 March 2012. Operating profits were up 16% to £16.0 million.
Neil Stothard, Vp's group managing director, told IRN that the increased revenues - a record for the company - were the result of improved utilisation, higher prices, and a larger fleet, with up to a half of the £32 million investment this year representing growth spending.
Vp is also benefitting from a lower exposure to the general construction market than some of its plant hire competitors. General construction now represents 24% of total revenues, down from 39% in 2008. In the same period, exposure to infrastructure - including regulated industries like water and rail - has grown from 33 to 43%.
This would also help the company in the event of a wider European downturn, said Mr Stothard; "regulated spend is not untouchable, but it has a better chance of being maintained".
Torrent Trackside, which services the "buoyant" rail infrastructure market, saw revenues increase by almost 50% to £22.1 million, benefitting from increased business with its largest customers and a full-year contribution from its Network Rail contract.
Revenues at VP's largest division, tool hirer Hire Station, rose 12.7% to £60.3 million - a record for the division - and profits were up 10%. VP said this was achieved despite "very testing market conditions", with Hire Station producing a strong second half of the year after a difficult first half.
The company said its focus on product availability had allowed it to gain market share on its competitors. Mr Stothard said tool hire remained highly competitive and that Vp needed to be "fleet of foot" to make good returns. This has included making adjustments to the fleet, with Hire Station withdrawing from some sectors, such as mini-plant, and investing in others, like low-level access.
Other well performing divisions included UK Forks, which rents telehandlers, with revenues up 22.2% to £13.2 million on the back of maintained housebuilding accounts and new business in the infrastructure sector.
Groundforce, Vp's shoring and trenching specialist, saw an 11.2% increase in revenues to £33.7 million with profits steady at £6.7 million. Vp said the business was helped by Olympic projects in the first half of the year and by increased water infrastructure projects in the second. The division continues to expand outside the UK, with operations in Ireland, Denmark, Germany and Italy.
The oil and gas business, Airpac Bukom Oilfield Services, which operates worldwide, reported an 11.4% revenue increase to £19.5 million and a 33.3% jump in profits to £3.6 million. A main contributor to its growth was the Pluto LNG project in Western Australia.
The TPA temporary trackway division saw revenues rise by just 5%, and profits fall by 14% - impacted by operational inefficiencies during a busy summer season - but all other divisions reported good performances.
The company increased its fleet capital expenditure by a third to £32.1 million during the year. At least half of that was replacement, with the remained representing fleet growth. Mr Stothard told IRN that there would be a similar level of investment in the current financial year.
Jeremy Pilkington, chairman of Vp plc, said; "The Group has delivered another impressive trading performance despite the lack of improvement in general market conditions over the last year.
"The strength of these results once again demonstrates the benefits of our well established strategy of focusing on specialist sectors where the Group can command strong market positions."
Mr Stothard said the results showed that Vp was able to "navigate through these difficult conditions and we have confidence in our ability to continue to do so. We believe the construction market in the UK will remain testing over the next 12 months, but we equally believe we have the ideas, the ambition and the ability to develop the business further into the future."