TIDMVP.
RNS Number : 9305B
Vp PLC
07 June 2023
For immediate release 7 June 2023
Vp plc
('Vp', the 'Group' or the 'Company')
Final Results
Resilient Performance
Vp plc, the equipment rental specialist, today announces its
audited Final Results for the year ended 31 March 2023.
Financial Highlights
31 March 31 March %
2023 2022 change
Revenues (GBPm) 371.5 350.9 +6%
Adjusted profit before tax, amortisation,
impairment of intangible assets and
exceptional items* (GBPm) 40.5 38.9 +4%
Return on average capital employed* 14.4% 14.5%
Capital investment in rental fleet (GBPm) 59.9 59.8 0%
Net debt excluding lease liabilities*
(GBPm) 134.4 130.6 +3%
Exceptional items 5.0 - -
Adjusted basic EPS before amortisation,
impairment of intangible assets and
exceptional items* (pence) 79.0 71.2 +11%
Proposed final dividend (pence per share) 26.5 25.5 +4%
Dividend for the year (pence per share) 37.5 36.0 +4%
Statutory profit before taxation (GBPm) 30.7 35.6
Statutory earnings per share (pence) 58.1 64.5
Profit before tax, amortisation, impairment
of intangible assets and exceptional
items (GBPm) 40.2 38.9 +3%
* These measures are explained and reconciled in the Alternative
Performance Measures section below.
Operational Highlights
-- Revenue growth of 6% reflects a resilient performance
-- High quality of earnings highlighted by the return on average capital employed
-- Experienced solid demand from rail, transmission and the
water sectors in the UK's infrastructure markets
-- Fleet capex maintained with increased disposals in markets where growth has slowed
-- Secured cost efficiencies whilst restructuring several business units
-- Strong balance sheet. Gearing and interest cover well within covenants
-- ESG progress
o Additional investment in the rental fleet to introduce
cleaner, greener product solutions for customers
o Achieved ISO 50001 energy management standard across all of
the Group's UK network
Outlook / Current Trading
-- Markets remain stable into the new financial year
-- A strong balance sheet leaves the Group well placed for growth in the UK and Internationally
-- Investment in business infrastructure; people, rental fleet
and property to position the Group to deliver further growth
-- Supportive infrastructure market outlook in the UK with
expected recovery to growth after a flat 2022 driven by Rail, AMP7
(water), Hinkley Point and Transmission capital investment
-- Non-residential new construction segment forecasting modest
improvement and Repair and Maintenance is anticipated to be
stable
-- International businesses experiencing improving trading
conditions. Markets including mining, oil and gas, construction and
outdoor events, should be supportive in the current financial
year.
Commenting on the Final Results, Jeremy Pilkington, Chairman of
Vp plc, said: " We are pleased to report another solid year of
trading with good progress made across all key metrics, with the
Group successfully navigating a highly volatile macroeconomic
backdrop.
"The Group's return on average capital employed of 14.4%
continues to demonstrate our excellent quality of earnings and
resilience in times of supply chain disruption and slowing growth
in some markets. In line with our dividend policy and underpinning
our confidence in the business, we are pleased to propose a final
dividend of 26.5 pence per share, making a total for the year of
37.5 pence.
"We remain confident that the Group will continue to provide
shareholders with an attractive level of returns. Vp has an
excellent track record and we believe the current market challenges
will bring into view profitable growth opportunities."
Neil Stothard, Chief Executive of Vp plc, added: "Despite the
macro-economic conditions that continue to impact some of our core
markets, we are pleased that our performance has remained
consistent and in line with the Board's expectations.
"Our revenue rose by 6% during the year to GBP371.5 million,
providing some comfort that the Group can progress in a challenging
market. The increase was driven both by improving trading
conditions in our international businesses, particularly in South
East Asia, Australia and New Zealand, and in addition to good
progress made in the UK and Europe.
"Whilst some macro-economic volatility remains, we are confident
that the Group will continue to deliver on its objectives of
driving demand for products and services and increasing revenues
and profitability."
Analyst meeting
A meeting for analysts will be held in person at 9.00am today,
Wednesday 7 June 2023, at Buchanan, 107 Cheapside, London EC2V 6DN.
A copy of the presentation will be made available at the Group's
website: https://www.vpplc.com/investors
- Ends -
The information contained in this announcement is deemed by the
Company to constitute inside information for the purposes of
Article 7 of the Market Abuse Regulation (EU) No. 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR", and is disclosed in accordance with
the Company's obligations under Article 17 of MAR. Upon publication
of this announcement via a Regulatory Information Service, this
insider information is considered to be in the public domain.
For further information:
Vp plc Tel: +44 (0) 1423 533 400
Jeremy Pilkington, Chairman www.vpplc.com
Neil Stothard, Chief Executive
Anna Bielby, Chief Financial
Officer
Media enquiries:
Buchanan
Henry Harrison -- Topham / Jamie Tel: +44 (0) 20 7466 5000
Hooper / George Beale
Vp@buchanan.uk.com www.buchanan.uk.com
The person responsible of the arrangement for the release of
this announcement on behalf of Vp plc is Anna Bielby, Chief
Financial Officer .
CHAIRMAN'S STATEMENT
I am very pleased to report on a year of solid progress against
a background of stable but occasionally challenging markets.
For the year to 31 March 2023, adjusted profit before tax,
amortisation, impairment of intangible assets and exceptional
items* rose by 4% to GBP40.5 million (2022: GBP38.9 million) on
revenue ahead 6% to GBP371.5 million (2022: GBP350.9 million).
Adjusted EBITDA* improved to GBP92.9 million (2022: GBP88.9
million).
Capital investment in the rental fleet was GBP59.9 million
(2022: GBP59.8 million) as we responded to specific investment
opportunities and our continued transition towards more
environmentally friendly solutions. Supply chain challenges eased
somewhat during the year, although localised bottlenecks are still
present in certain areas.
Year-end net debt excluding lease liabilities* was GBP134.4
million (2022: GBP130.6 million).
Return on average capital employed* was 14.4% (2022: 14.5%) in
line with our long term target, an excellent result which reflects
once again the underlying quality of the Group's earnings. Adjusted
earnings per share* of 79.0 pence per share (2022: 71.2 pence per
share) grew faster than profit due to the impact of deferred tax
re-measurements discussed in note 5 below.
At the AGM, scheduled to be held on 20 July 2023, the Board will
be recommending payment of a final dividend of 26.5 pence per share
(2022: 25.5 pence per share) making a total for the year of 37.5
pence per share (2022: 36.0 pence per share). Subject to
shareholder approval, it is proposed to pay the final dividend on 4
August 2023 to members registered at 23 June 2023. This proposed
level of dividend is based on our policy to distribute on a two
times covered earnings basis over the cycle.
In April 2022, at the request of the controlling shareholder,
Ackers. P. Investment Company Limited, the Board launched a formal
sales process. Although significant interest was forthcoming, the
Board unanimously concluded that none of the proposals would meet
the Board's objectives of delivering an outcome that would satisfy
the interests of all stakeholders. Termination of the process was
announced on 16 August 2022. The process incurred exceptional costs
of GBP1.7 million. Throughout the process, we continued to run in a
"business as usual" mode and I am pleased to report that we have
not observed any negative consequences from the process, either
internally or externally.
Whilst the Covid-19 pandemic is thankfully behind us, it has
impacted much of the business landscape within which we operate.
This has made recovery more hesitant in certain markets than we had
originally expected but nevertheless the Group has made further
progress this year.
During the year, both Steve Rogers and Allison Bainbridge
retired from the Board after 13 and 11 years respectively with the
Group. It is my pleasure to extend a heartfelt thanks to both for
their exemplary service and to wish them a long and enjoyable
retirement.
It is also my pleasurable duty to welcome three new members to
the Board. Anna Bielby joined on 1 January 2023 as our new Chief
Financial Officer and brings deep and relevant experience to the
role. Mark Bottomley and Stuart Watson joined the board as
Non-Executive Directors at the same time with Stuart assuming the
role of Audit Chairman to replace the retiring Steve Rogers. Mark
will, at the AGM, assume the role of Remuneration Committee
Chairman, succeeding Phil White who remains on the Board. We look
forward to enjoying the benefit of the experience and new insights
that these appointments will bring.
We have a successful long term track record of meeting and
overcoming economic challenges and we believe we can identify
profitable growth opportunities to continue to deliver the sector
leading results our stakeholders have come to expect.
It remains my great pleasure to thank all our employees for
their hard work and commitment that has made these results very
satisfactory.
Jeremy Pilkington
Chairman
7 June 2023
* These measures are explained and reconciled in the Alternative
Performance Measures section below.
BUSINESS REVIEW
OVERVIEW
Vp plc is a rental business providing specialist products and
services to a diverse range of end markets including
infrastructure, construction, housebuilding, and energy. The Group
comprises a UK and an International Division.
Year ended Year ended
31 March 2023 31 March 2022
-----------------------------------------
Revenue GBP371.5 million GBP350.9 million
----------------- -----------------
Adjusted operating profit before GBP46.0 million GBP43.3 million
amortisation, impairment of intangible
assets and exceptional items*
----------------- -----------------
Adjusted operating margin* 12.4% 12.3%
----------------- -----------------
Investment in rental fleet GBP59.9 million GBP59.8 million
----------------- -----------------
Return on average capital employed* 14.4% 14.5%
----------------- -----------------
Statutory operating profit GBP39.3 million GBP43.0 million
----------------- -----------------
* These measures are explained and reconciled in the Alternative
Performance Measures section below.
The year to 31 March 2023 was a period of further positive
development for Vp. In spite of significant macro-economic
headwinds, the Group delivered tangible progress as we proactively
evolved the business in response to those trading conditions and
with many of our core markets maintaining demand during the
period.
Group adjusted operating profit before amortisation, impairment
of intangible assets and exceptional items* increased by 6% to
GBP46.0 million compared with prior year of GBP43.3 million.
Adjusted operating margin* held up well, increasing to 12.4% (2022:
12.3%). Maintaining margin is particularly pleasing given the
significant supply chain cost inflation experienced throughout the
year. This resilience illustrates our ability to react quickly to
changing circumstances and to protect the quality of our profits
through a combination of price increases to customers, efficient
operational management and a keen eye on costs. Group revenue also
grew by 6% to GBP371.5 million (2022: GBP350.9 million). The
increased revenue was derived from a combination of price increases
and activity growth from certain of our markets.
Our Return on Average Capital Employed* (ROACE) continues to be
strong at 14.4% (2022: 14.5%) and close to our long term, through
the cycle, ROACE target of 15%.
Maintaining a modern and reliable rental fleet, including the
widespread introduction of cleaner, greener product solutions
remains a key driver of our capital investment programme. Gross
investment in rental fleet of GBP59.9 million was at a similar
level to prior year of GBP59.8 million. Fleet disposals proceeds
were GBP24.6 million (2022: GBP17.4 million). Net capital
expenditure therefore reduced to GBP35.3 million (2022: GBP42.4
million). The disposal of fleet in the year generated profits on
disposal of GBP9.1 million (2022: GBP7.0 million).
We entered the period under review with healthy order books for
new capital investment, partially to support growth and partially
as replacement of products retiring from the hire fleet in the
normal life cycle. Supply chains were particularly challenging in
terms of lead times as well as cost and we sought to maximise our
opportunity with some pre-emptive ordering. In response to those
markets where the rate of growth slowed, we subsequently reduced
fleet capex in the second half of the year and increased
disposals.
Our fleet capex included a large proportion (GBP15 million) of
more environmentally friendly products which replaced, in many
cases, petrol / diesel driven alternatives.
The Group experienced relatively consistent, but differing
conditions in its core markets. Both the UK and International
divisions made good progress. Our UK performance was positive,
despite generally weaker confidence in the wider economy. Our
International businesses particularly in South East Asia, Australia
and New Zealand experienced better trading conditions with an
overall improving outlook.
The infrastructure markets in the UK remained generally
supportive and we experienced solid demand from rail, transmission
and the water sectors in particular. After a strong performance
with HS2 in the prior year, the slowdown of workstreams during 2022
translated into lower levels of activity on this project.
Our other large market exposure is in general non-residential
construction where demand remained relatively stable but still
lacking any further signs of tangible recovery. In house building,
we enjoyed good demand throughout most of the year. Into the new
calendar year residential construction slowed a little but this has
stabilised as we enter our new financial year, and we remain
optimistic about longer term prospects in this sector.
The Group's operating profit before amortisation, impairment and
exceptional items* was primarily sourced in the UK division, but
the International division made good progress year on year.
Towards the end of the financial year, we carried out some
restructuring across a number of our business units where we had
identified tangible efficiency opportunities. These actions
incurred GBP3.3 million of exceptional costs in the year mostly
relating to properties and should help deliver further improvement
in Group performance in the new financial year.
We have two business units (Groundforce and TPA) that also
operate in mainland Europe and the Republic of Ireland, which
report into the UK division. Their respective contributions are
included within the UK divisional result. If we look at the Group's
trading outside of the UK, and take into consideration the European
business units, revenues were GBP63.3 million (2022: GBP50.9
million) which represents an increase of 24% in the year. The
overall geographic source of revenue for the Group was split 83%
from the UK, and 17% from outside of the UK.
UK DIVISION
Year ended Year ended
31 March 2023 31 March 2022
----------------------------------------
Revenue GBP333.4 million GBP320.2 million
-------------------------- --------------------------
Adjusted operating profit before GBP42.9 million GBP41.8 million
amortisation, impairment of intangible
assets and exceptional items*
-------------------------- --------------------------
Investment in rental fleet GBP53.6 million GBP55.2 million
-------------------------- --------------------------
* This measure is explained and reconciled in the Alternative
Performance Measures section below.
Adjusted operating profits before amortisation, impairment of
intangible assets and exceptional items* in the UK division
increased to GBP42.9 million compared with GBP41.8 million prior
year. Revenue of GBP333.4 million (2022: GBP320.2 million) were 4%
up on prior year.
The UK division, comprises seven main business units: UK Forks,
Groundforce, TPA, Brandon Hire Station, ESS, MEP and Torrent
Trackside. Whilst mainly operating in the UK, TPA and Groundforce
also have operations in mainland Europe, primarily in Germany,
Austria and the Republic of Ireland. All of the UK divisions
support the three core market sectors of infrastructure,
construction and housebuilding. The following section comments on
the highlights and key actions for these UK business units during
the year.
UK Forks made further progress in the year. Whilst revenue
growth was modest, careful management of the fleet and the
operational cost base enabled the division to deliver good year on
year profit growth. UK Forks encountered the same cost inflation
challenges as elsewhere in the Group and management protected
margin through a combination of increased hire rates, keen asset
management, including disposing of surplus equipment, and strong
control over spares and overhead costs. The residential
construction sector held up well until the final quarter of the
financial year when there was a small step down in demand which
quickly stabilised at new levels of activity. The business took the
opportunity in the fourth quarter to accelerate disposal of surplus
rental fleet as utilisation, which had been running extremely high,
eased to a more normalised level. A customer first approach has
continued to pay off as the long-standing relationships with our
core customers including the national house builders were
maintained in the year. During the period the overall fleet size by
number increased by 6% though this was primarily in the first half
of the year. Whilst market demand has marginally reduced into the
new financial year, the business is operationally geared up to that
change and we remain confident of making further
progress despite some elements of market weakness.
The Groundforce UK & Ireland business enjoyed good levels of
demand driven by a generally more buoyant civil engineering sector.
Groundforce UK & Ireland comprises a number of constituent
specialist activities, the largest of which is the UK Shoring
division. This business benefitted from growing demand from general
infrastructure schemes including Hinkley Point, HS2 and AMP7,
although the latter was a little quieter than had been anticipated.
Groundforce secured preferred supplier status to Scottish Water on
their SR21 five year capital investment programme. This work should
contribute into the new financial year. Whilst revenues grew 10%
year on year, this was primarily from increased utilisation of
existing fleet and hire rate improvement, with fleet capex flat
year on year. The business continued to innovate and successfully
introduced Side Grip hammers to the piling rental fleet providing
quicker installation of pile sheets and enhancing health and safety
benefits. The shoring specification app 'Your Solution' was
developed further in the period and experienced strong customer
acceptance as a self-serve preliminary design tool. Prospects for
the new year remain good with ongoing demand from major
infrastructure projects and the expectation of further activity in
the water sector particularly with Scottish Water.
The Groundforce Europe business had an excellent year reporting
its best ever performance, driven by traditional core shoring
rental in Germany and complemented by a range of major excavation
support projects in Germany, Austria, France and Scandinavia. The
business, which was a greenfield start up in Germany some years
ago, has secured increasing brand recognition and a growing
acceptance of the hydraulic solutions offered by the Groundforce
fleet. On the back of a strong trading year we intend to invest in
the infrastructure of the business creating a platform for further
successful growth in supportive markets.
TPA UK had a quieter trading year primarily due to a significant
slowdown in HS2 activity, after enjoying buoyant demand from Phase1
of the project in the prior year. In addition, as a result of the
energy crisis heading into the winter the National Grid delayed
outage work, a key area of demand for TPA, to minimise the risk of
energy supply shortages. This resulted in a transmission sector
slowdown over the winter. Despite these unexpected challenges, the
TPA team made significant progress in sourcing alternative work in
the construction and outdoor events segments in particular, and
these mitigated much of the shortfall. Investment in fleet focused
on innovation with the introduction of a new wider aluminium track
panel offering increased flexibility and efficiency to both the
customer and the TPA operations team. Innovation in technology was
also a feature with the launch of an app which simplifies the
measurement and quotation process when specifying an access
solution at a site. A further initiative was the introduction of an
online carbon calculator which identifies the lower carbon impact
of utilising a portable roadway access solution in comparison to a
traditional stone road construction solution. Looking into the new
financial year, TPA anticipates improving demand in both
transmission and HS2 work to complement activity in the
construction, rail and outdoor event markets.
The TPA Europe business had a more challenging year, primarily
due to significant increases in supply chain costs particularly in
transport, together with some temporary shortfalls in staffing due
to a difficult employment market. The target markets of
transmission and renewables remain positive. Moving into the new
financial year, the business is in a good position to embrace the
opportunities those markets offer. Geographically, TPA Europe
operates in Germany and Austria. We anticipate an improved trading
environment for the TPA Europe business in the new financial
year.
Brandon Hire Station, the market leader for tool hire within the
UK, delivered modest year on year revenue growth against a
relatively difficult market backdrop. Whilst operating across all
three of Vp's largest market segments i.e. construction,
infrastructure and housebuilding, it is most exposed to the
non-residential construction market which remains subdued and in
relative terms more impacted by the overall economic uncertainty.
The business increased prices by c.10% at the beginning of the
calendar year by way of mitigating cost inflation in the business.
Brandon Hire Station made modest changes to its branch network
merging / closing five branches reducing the overall branch count
to just under 150. Brandon Hire Station signed a five year
exclusive trading agreement with Watkin Jones plc, the Build to
Rent and Student accommodation Group together with securing a
number of other long standing key account renewals.
Capital investment in fleet was strong in the first half but
slowed as demand eased during the year. A transition to a cleaner,
greener fleet has been a consistent focus for fleet investment and
as usual the routine retirement of older, less environmentally
friendly rental assets has been an important contributor to the
process. Innovations have included the launch of a solar powered
charging station for use on construction sites which was developed
in collaboration with a number of partners and has received
positive reviews. As we head into the new financial year the
construction market remains relatively subdued but we are
nevertheless keenly focused on securing additional revenue growth
through a wide range of initiatives.
The ESS division had a satisfactory trading year and maintained
its market leading status in safety, survey and test &
measurement providing a vital support service to the infrastructure
and industrial markets in particular. The year started relatively
slowly, but built up well delivering year on year revenue growth.
ESS re-structured to a de-centralised management structure in four
regions aimed at creating a better focus and proximity to the
customer from an operational view. This will deliver significant
cost savings. As elsewhere in the Group, ESS had to combat high
cost inflation and mitigated this in part through negotiated price
increases across the customer base. The management team was further
strengthened by the appointment of a new sales director and test
& measurement director as ESS target growth into the new
financial year.
MEP made substantive progress in the year delivering further
revenue and profit growth from the busy but stable mechanical,
electrical and plumbing sectors. The business continued to develop
operationally with the relocation in Manchester to a new 35,000
sq.ft facility. We also relocated the Glasgow central hire desk to
a bespoke location and at the same time embraced the Zendesk call
centre technology which is increasingly used across the Vp Group.
MEP acquired M&S Hire at the end of 2021 with a view to
expanding its service offer to the commercial fit out sector,
initially in London and subsequently on a national basis. This is
developing well. MEP have a track record of introducing new and
innovative products to their customer base and this year was no
exception with the build up of a new Microscissors fleet. Overall
capital investment was strong for MEP as the business supported
growth opportunities and geared up for the new year. After the
financial year-end MEP acquired a low level access fleet from
Aspire Platforms with back-to-back long term rental agreements.
Prospects remain positive for MEP with a number of large, longer
term, projects due to start in the first half of the new financial
year.
Torrent Trackside enjoyed stronger demand as the year progressed
and this despite the inevitable disruption from rail industrial
action in the second half of our financial year. Torrent benefitted
from a revival of CP6 rail activity with most Torrent depots across
the UK seeing good year on year improvements. Network Rail, a key
customer, remained busy throughout the period and Torrent continued
to achieve an excellent performance against the KPIs within their
contract. The Network Rail high output work also generated further
demand. The transpennine upgrade delivered improved revenues with
both the TRU East and TRU West joint ventures. The solar powered
Prolectric lighting fleet also experienced a busier year. Capital
investment in Torrent was relatively strong and in particular
sourcing further equipment in support of Network Rail. The CP6 five
year capital investment programme for the UK rail network finishes
in March 2024, and the appointment of contractors to CP7 is
advanced with Torrent well positioned to support those businesses.
Torrent successfully trialled a 'site of the future' concept
showcasing our significant commitment to and investment in battery
and solar powered rail specific equipment which operates at much
lower levels of noise and is practically carbon neutral. This
initiative was well received by the customer base who view Torrent
Trackside as a pivotal supply chain partner to help drive their own
carbon reduction targets. Torrent heads confidently into the new
financial year as overall activity within the rail sector remains
good.
INTERNATIONAL DIVISION
Year ended Year ended
31 March 2023 31 March 2022
======================================== ==========================
Revenue GBP38.1 million GBP30.7 million
========================== ==========================
Adjusted operating profit before GBP3.1 million GBP1.5 million
amortisation, impairment of intangible
assets and exceptional items*
========================== ==========================
Investment in rental fleet GBP6.3 million GBP4.6 million
========================== ==========================
* This measure is explained and reconciled in the Alternative
Performance Measures section below.
The International division reported adjusted operating profit
before amortisation, impairment of intangible assets and
exceptional items*of GBP3.1 million, (2022: GBP1.5 million) on
revenue 24% ahead of prior year of GBP38.1 million (2022: GBP30.7
million).
The International division comprises Airpac Rentals, a global
supplier to the energy sector and TR Group which operates in
Australia, New Zealand, Malaysia and Singapore and is a leading
technical equipment rental group in the region. The following
section comments on the highlights and key actions of the two
business groupings within the International division during the
year.
Airpac Rentals delivered good revenue and profit growth as
trading conditions improved throughout the year. In recent times,
Airpac has diversified its activities across a number of new
applications including renewable energy, decommissioning and
infrastructure chemical cleaning. Demand for the provision of
exploration and production project support in the oil and gas
segment also improved in the year. Our operations primarily centre
around Europe, South East Asia and Australia. Highlights in the
year included increased well testing activity in the North Sea,
support of geothermal projects in Europe, and pipeline and process
services support primarily in South East Asia and Australia. We
have committed further investment to high pressure equipment as we
support the return of activity in new Liquefied Natural Gas (LNG)
production facilities (Asia and Australia) together with extended
shutdown maintenance at the existing LNG plants. We anticipate
further growth across most of Airpac's end markets during the new
financial year.
TR Group ('TR') made further good progress in the year
delivering strong revenue and profit growth as the trading
environment across the region staged further post pandemic
recovery. As elsewhere, this positive performance was delivered
despite the same pressures from cost inflation, supply chain and
labour shortages experienced elsewhere in the Group. Customer
pricing has been increased and this helped mitigate the cost
inflation challenge. The communications division, Hirecom, enjoyed
further growth but the Tech Rentals business in Australia
experienced a subdued market recovery, as project delays slowed
progress but ultimately finished the financial year well. The TR
businesses in New Zealand and Singapore traded strongly whilst TR
Malaysia was quieter partially due to the economic impact of local
political uncertainty. TR Calibration and the Vidcom audio visual
business both made good progress. The TR Group businesses are well
placed to build further on the platform of a strong year.
Employees
The consistent quality of the Group's business performance over
many years is underpinned by our people. The individual and
collective contributions of colleagues is fundamental to our
success. We seek to fulfil our commitment to create a great place
to work, where people feel valued and have the opportunities to
fulfil their potential.
In the current year, we have invested in well-being including
mental health awareness training and installation of defibrillators
at larger operational sites. We have also invested in learning and
development, maintained our highly successful graduate programme,
now in its 5(th) year and renewed our ongoing commitment to
engineering apprentice training. We have introduced our Long
Service Recognition Programme and it is testament to the whole of
Vp that we have 270 colleagues, representing 10% of Group
headcount, with over 20 years' service. We look forward to
delivering further supportive initiatives to employees over the
coming year.
Environmental
The business has maintained a keen focus on all matters
environmental, guided by the Environmental Steering Group, which I
chair, alongside the Director of Risk and Sustainability and with
representatives from within the trading divisions. The Steering
Group acts as the main co-ordination point of this topic for the
whole business.
We have maintained momentum in conversion of our rental fleet
towards cleaner solutions led by innovation from our buying teams
and supply chain and taking into account our customer
requirements.
Achievements in the year include securing Plant Charter Gold
Status in an initiative sponsored by the Supply Chain
Sustainability School, an organisation facilitating best
environmental practice in the construction sector. We have also now
achieved the ISO 50001 energy management standard across all our UK
network.
Our scope 3 emissions inventory was completed in the year and we
subsequently submitted our science based targets data and hope to
achieve full accreditation during 2023. We have set up a
cross-divisional working party for sustainable procurement, to
develop workstreams designed to formally assess supply chain
partners in terms of sustainability commitments. Overall governance
of environmental matters has been strengthened with the appointment
of a director dedicated to risk and sustainability and reporting in
to the plc Board. Communication of developments has been enhanced
by the launch of a dedicated Environmental and Sustainability
website which is aimed at keeping all stakeholders informed of
achievements and current initiatives. We look forward to reporting
on further substantial progress on our environmental initiatives in
due course.
Outlook
The financial year under review presented many unexpected
macro-economic challenges and which the whole Vp team tackled to
great effect enabling the Group to deliver another high quality set
of results demonstrating the resilient nature of the Vp business
model. The Group businesses have taken the necessary action to
ensure that we are as efficient as possible whilst costs have
increased and market growth has been relatively subdued.
After a period of little change within the wider UK construction
market, some adjustments to recent trends are forecast in the
coming 12 months. Housebuilding which has been relatively buoyant
for the last two years is forecast to experience moderate
contraction in 2023 before recovering in 2024. Infrastructure will
recover to modest growth after a flat 2022 driven by Rail, AMP7
(water), Hinkley Point and Offshore Wind capital investment. The
non-residential new construction segment, comprising Public,
Private Industrial and Private Commercial output is expected to see
modest improvement overall and the Repair and Maintenance sectors
are anticipated to be stable. This market backdrop remains positive
for Vp.
(Source: Experian UK Construction Forecast - Spring 2023).
Our International business is experiencing improving trading
conditions and we believe that the wide range of markets to which
this division is exposed, including mining, oil and gas,
construction and outdoor events, will be supportive in the new
financial year.
Our plan is to develop our business infrastructure and invest in
our people, rental fleet and property to ensure we are well
positioned to deliver further growth. A strong balance sheet
provides a solid financial base that we can utilise to facilitate
both organic and acquisitive growth both in the UK and
Internationally as attractive opportunities are identified.
Neil Stothard
Chief Executive
7 June 2023
FINANCIAL REVIEW
TRADING PERFORMANCE
The Group has delivered a strong financial performance against a
challenging backdrop with Group revenue increasing by 6% to
GBP371.5 million (2022: GBP350.9 million). Profit before taxation,
amortisation, impairment of intangible assets and exceptional items
increased to GBP40.2 million (2022: GBP38.9 million) with net
margins at 10.8% (2022: 11.1%). Statutory profit before tax was
GBP30.7 million (2022: GBP35.6 million). The return on average
capital employed was 14.4% (2022: 14.5%).
EXCEPTIONAL ITEMS
This year the Group has recorded exceptional items of GBP5.0
million (2022: GBPnil), these items have been reported separately
due to their size and nature and in order to better understand the
underlying performance of the Group. Exceptional items comprise
GBP1.7 million of costs from the Group's terminated formal sale
process alongside restructuring costs of GBP3.3 million, mainly in
relation to depot closures across three of the Group's business
units.
EARNINGS PER SHARE, DIVID AND SHARES
Adjusted basic earnings per share before amortisation,
impairment of intangible assets and exceptional items* increased
from 71.2 pence to 79.0 pence. The increase of 7.8 pence includes
the impact of a lower effective tax rate in the current year. Basic
earnings per share is 58.1 pence (2022: 64.5 pence).
The Board has proposed a final dividend of 26.5 pence per share.
If approved the full year dividend would increase to 37.5 pence per
share with dividend cover of 2.1 times (2022: 2 times) based upon
adjusted earnings per share before amortisation, impairment of
intangible assets and exceptional items*. At 31 March 2023, 40.2
million shares were in issue of which 609,000 were held by Vp's
Employee Trust.
BALANCE SHEET
Total property, plant and equipment increased by GBP4.9 million
to GBP252.4 million. The movement in the year mainly comprised
GBP66.9 million (2022: GBP68.0 million) of capital expenditure
offset by depreciation of GBP46.9 million (2022: GBP45.5 million)
and GBP15.7 million (2022: GBP10.7 million) of disposals (net book
value).
Rental equipment at GBP220.6 million (2022: GBP216.6 million)
accounts for 87% of property, plant and equipment net book value.
Expenditure on equipment for hire was GBP59.9 million (2022:
GBP59.8 million) and depreciation of rental equipment was GBP40.9
million (2022: GBP39.9 million).
Intangible assets are GBP57.7 million (2022: GBP62.4 million)
and relate to goodwill, customer relationships and trade names.
Days sales outstanding has increased by four from 55 to 59 days
as we have seen a slight worsening of the external credit
environment. Gross trade debtors were GBP77.6 million at 31 March
2023 (2022: GBP72.8 million). Bad debt and credit note provisions
totalled GBP4.6 million (2022: GBP5.2 million) equivalent to 6%
(2022: 7%) of gross debtors. The impairment of trade receivables
for the year as a percentage of total revenue was 0.9% (2022:
0.6%).
The Group's defined benefit pension schemes have a net surplus
of GBP2.3 million (2022: GBP2.7 million) which is recorded as an
asset on the balance sheet on the basis that the Company has an
unconditional right to a refund of the surplus of its main
scheme.
CASH FLOWS AND NET DEBT
Year end net debt excluding lease liabilities* increased
slightly by GBP3.8 million to GBP134.4 million.
The Group continues to generate strong cash flows with GBP80.2
million (2022: GBP90.4 million) generated from operating
activities.
This includes working capital outflow as a result of revenue
growth experienced during the year and a slight worsening of the
external credit market, particularly in the construction
sector.
Cash flows in respect of capital expenditure were GBP63.3
million (2022: GBP68.7 million). Proceeds from disposal of assets
totalled GBP24.9 million (2022: GBP17.8 million), generating a
profit on disposal of GBP9.2 million (2022: GBP7.0 million). The
margin on profit on sale from disposals of fleet assets at 37%
(2021: 40%) continues to demonstrate effective asset
management.
Net interest outflows, excluding IFRS 16 interest, for the year
were GBP5.4 million (2022: GBP4.5 million). This additional cost
was largely due to the increase in SONIA in the second half of the
year. Interest cover before amortisation was 8.3 times (2022: 10.1
times) and the gearing ratio of adjusted Net Debt/EBITDA was 1.44
(2022: 1.43); both are calculated in accordance with our bank
facility agreements and are comfortably within our covenants of
greater than 3 times and lower than 2.5 times respectively. Net
interest expense including IFRS 16 was GBP8.6 million (2022: GBP7.4
million). Cash tax was GBP5.5 million (2022: GBP6.3 million).
Dividend payments to shareholders totalled GBP14.5 million
(2022: GBP14.0 million), and cash investment in own shares on
behalf of the Employee Benefit Trust (EBT) during the year was
GBP1.1 million (2022: GBP0.5 million).
CAPITAL STRUCTURE
The Group finances its operations through a combination of
shareholders' funds, bank borrowings and leases. The capital
structure is monitored using the gearing ratio quoted above. The
Group's funding requirements are largely driven by capital
expenditure and acquisition activity.
At the year end date, the Group had GBP183.0 million debt
capacity (2022: GBP183.0 million) comprising GBP90.0 million
committed revolving credit facilities and GBP93.0 million private
placement agreements. At 31 March 2023 GBP146 million of the
facilities were drawn down (2022: GBP145 million). In addition to
the committed facilities, the Group's net overdraft facility at the
year end was GBP7.5 million (2022: GBP7.5 million). These
facilities were with NatWest Bank, HSBC Bank plc and PGIM, Inc.
Borrowings under the Group's bank facilities are priced on the
basis of SONIA plus a margin. The interest rate margin is linked to
the net debt to EBITDA leverage of the Group. The Group also has a
GBP20.0 million uncommitted accordion facility.
The Group's revolving credit facility is due to expire in June
2024 and positive preliminary conversations have been held with our
lenders. We anticipate the refinance of the Group's facilities in
advance of the Group's interim results announcement in November
2023.
The Board has evaluated the facilities and covenants on the
basis of the 2024/25 long term forecasts, which has been prepared
taking into account the current economic climate, together with a
severe but plausible downside scenario. All scenarios retain
adequate headroom against borrowing facilities and fall within
existing covenants.
This evaluation, alongside the anticipated bank facility
renewal, gives the Directors confidence that Group has adequate
resources to continue in operation for the foreseeable future.
TREASURY
The Group has exposure to movements in interest rates on its
borrowings, which is managed by maintaining a mix of fixed and
floating debt. The fixed element of borrowings was GBP93.0 million
which was 69% of net debt excluding lease liabilities during the
year.
The Group is exposed to movements in exchange rates for both
foreign currency transactions and the translation of net assets and
income statements of foreign subsidiaries. The Group regards its
interests in overseas subsidiary companies as long term investments
and manages its translational exposures through the currency
matching of assets and liabilities where possible.
The matching is reviewed regularly with appropriate risk
mitigation performed, where necessary. During the year the Group
has not had any foreign exchange hedges.
TAXATION
The overall tax charge for the year was GBP7.7 million (2022:
GBP10.1 million). This represents an effective rate of 25.1% (2022:
28.3%). In both years, the rate is higher than the statutory rate
in the UK of 19%, principally as a result of the re-measurement of
deferred tax liabilities reflecting the forthcoming change in
corporation tax rates alongside certain expenses not deductible for
tax.
Anna Bielby
Chief Financial Officer
7 June 2023
Consolidated Income Statement
for the year ended 31 March 2023
Restated
Note 2023 2022*
GBP000 GBP000
---------- ----------
Revenue 1 371,519 350,915
Cost of sales (284,176) (261,876)
Gross profit 87,343 89,039
Administrative expenses (44,763) (43,968)
Impairment losses on trade receivables (3,305) (2,074)
---------- ----------
Operating profit before amortisation,
impairment of intangible assets
and exceptional items 1 48,775 46,299
Amortisation and impairment of
intangible assets 1 (4,490) (3,302)
Exceptional items 2 (5,010) -
---------- ----------
Operating profit 39,275 42,997
Net financial expense (8,569) (7,353)
Profit before taxation, amortisation,
impairment of intangible assets
and exceptional items 40,206 38,946
Amortisation and impairment of
intangible assets 1 (4,490) (3,302)
Exceptional items 2 (5,010) -
---------- ----------
Profit before taxation 30,706 35,644
Income tax expense 5 (7,696) (10,109)
---------- ----------
Profit after tax 23,010 25,535
---------- ----------
Pence Pence
Basic earnings per share 3 58.05 64.49
Diluted earnings per share 3 57.76 63.83
Dividend per 5p ordinary share
interim paid and final deferred 6 37.5 36.0
* In accordance with IAS 1, impairment losses on trade
receivables are required to be presented separately on the face of
the Income Statement. Previously such losses were presented within
cost of sales. This has been corrected in the current year and the
comparatives restated accordingly.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2023
2023 2022
GBP000 GBP000
-------- --------
Profit for the year 23,010 25,535
Other comprehensive income/(expense):
Items that will not be reclassified to
profit or loss
Remeasurements of defined benefit pension
schemes (319) 693
Tax on items taken to other comprehensive
income 5 (183)
Impact of tax rate change 58 110
Items that may be subsequently reclassified
to profit or loss
Foreign exchange translation difference 502 361
Effective portion of changes in fair value
of cash flow hedges - 221
Total other comprehensive income 246 1,202
Total comprehensive income for the year 23,256 26,737
-------- --------
Consolidated Statement of Changes in Equity
for the year ended 31 March 2023
2023 2022
GBP000 GBP000
--------- ---------
Total comprehensive income for the year 23,256 26,737
Dividends to shareholders (14,471) (14,054)
Net movement relating to shares held by
Vp Employee Trust (1,096) (516)
Share option charge in the year 580 1,249
Tax movements to equity 62 90
Impact of tax rate change 16 (11)
Movement in minority interest - (27)
Change in Equity 8,347 13,468
Equity at start of year 166,585 153,117
Equity at end of year 174,932 166,585
--------- ---------
Consolidated Balance Sheet
as at 31 March 2023
Note 2023 2022
GBP000 GBP000
---------- ----------
Non-current assets
Property, plant and equipment 252,385 247,526
Intangible assets 57,748 62,422
Right of use assets 54,637 54,151
Employee benefits 2,300 2,738
---------- ----------
Total non-current assets 367,070 366,837
---------- ----------
Current assets
Inventories 8,915 7,956
Trade and other receivables 81,513 76,057
Income tax receivable 736 -
Cash and cash equivalents 4 11,140 13,617
---------- ----------
Total current assets 102,304 97,630
---------- ----------
Total assets 469,374 464,467
---------- ----------
Current liabilities
Lease liabilities 4 (14,622) (14,147)
Income tax payable - (152)
Trade and other payables (72,184) (80,676)
---------- ----------
Total current liabilities (86,806) (94,975)
Non-current liabilities
Interest-bearing loans and borrowings 4 (145,508) (144,221)
Lease liabilities 4 (43,896) (43,496)
Provisions (1,612) (1,512)
Deferred tax liabilities (16,620) (13,678)
---------- ----------
Total non-current liabilities (207,636) (202,907)
---------- ----------
Total liabilities (294,442) (297,882)
---------- ----------
Net assets 174,932 166,585
---------- ----------
Equity
Issued share capital 2,008 2,008
Capital redemption reserve 301 301
Share premium 16,192 16,192
Foreign currency translation
reserve (518) (1,020)
Retained earnings 156,949 149,104
---------- ----------
Total equity 174,932 166,585
---------- ----------
Consolidated Statement of Cash Flows
for the year ended 31 March 2023
2023 2022
Note GBP000 GBP000
----- --------- ---------
Cash flow from operating activities
Profit before taxation 30,706 35,644
Share based payment charge 580 1,249
Depreciation 46,853 45,532
Depreciation of right of use asset 16,305 16,561
Amortisation and impairment of intangible
assets 1 4,490 3,302
Release of arrangement fees 287 314
Financial expense 8,601 7,355
Financial income (32) (2)
Profit on sale of property, plant and equipment (9,174) (7,045)
--------- ---------
Operating cash flow before changes in working
capital 98,616 102,910
Increase in inventories (959) (614)
Increase in trade and other receivables (5,452) (9,133)
Decrease in trade and other payables (11,979) (2,781)
--------- ---------
Cash generated from operations 80,226 90,382
Interest paid (5,413) (4,456)
Interest element of lease liability payments (3,038) (2,940)
Interest received 32 2
Income tax paid (5,496) (6,282)
--------- ---------
Net cash generated from operating activities 66,311 76,706
--------- ---------
Cash flow from investing activities
Proceeds from sale of property, plant and
equipment 24,855 17,819
Purchase of property, plant and equipment (63,312) (68,679)
Acquisition of businesses and subsidiaries
(net of cash acquired) - (2,693)
--------- ---------
Net cash used in investing activities (38,457) (53,553)
--------- ---------
Cash flow from financing activities
Purchase of own shares by Employee Trust (1,096) (516)
Repayment of borrowings (29,000) (95,044)
New loans 30,000 102,044
Arrangement fees - (773)
Capital element of lease liability payments (15,921) (17,149)
Dividends paid (14,471) (14,054)
--------- ---------
Net cash used in financing activities (30,488) (25,492)
--------- ---------
Decrease in cash and cash equivalents (2,634) (2,339)
Effect of exchange rate fluctuations on
cash held 157 39
Cash and cash equivalents net of overdrafts
at the beginning
of the year 13,617 15,917
---------
Cash and cash equivalents net of overdrafts
at the end of the year 4 11,140 13,617
--------- ---------
NOTES
The final results have been prepared on the basis of the
accounting policies which are set out in Vp plc's annual report and
accounts for the year ended 31 March 2023. The accounting policies
applied are in line with those applied in the annual financial
statements for the year ended 31 March 2022 and conform with
UK-adopted International Accounting Standards ("UK-adopted IASs").
The financial statements have also been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006.
Whilst the financial information included in this announcement
has been computed in accordance with UK-adopted IASs, this
announcement does not itself contain sufficient information to
comply with UK-adopted IASs. The Company expects to publish full
financial statements in June 2023.
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 March 2023 or
2022. Statutory accounts for 31 March 2022 have been delivered to
the registrar of companies, and those for 31 March 2023 will be
delivered in due course. The auditor has reported on those
accounts; the reports were (i) unqualified, (ii) included a
reference to going concern to which the auditor drew attention by
way of emphasis without qualifying the report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006 in respect of the accounts for 31 March 2023.
The financial statements were approved by the Board of Directors
on 7 June 2023.
Going Concern
The going concern basis has been adopted in preparation of the
consolidated financial statements. The Board has evaluated funding,
facilities and covenants on the basis of the budget for 2023/24
(including 2024/25 long term forecast) and has performed
sensitivity analysis on them.
The Group and parent company forecast positive cash inflows
through a pipeline of existing and new hire agreements and other
services; the Group and parent company also have sufficient finance
facilities available if required, subject to the successful renewal
of the revolving credit facility ('RCF'). The assessment included
an analysis of the Group's and parent company's current financial
position, ability to trade, principal risks facing the Group, and
the effectiveness of its strategies to mitigate the impact of
liquidity risks. On the basis of these procedures, the Board have a
reasonable expectation that the Group has adequate resources to
continue in operation for the foreseeable future.
In making this assessment the Board recognises that one of the
borrowing facilities used by the Group, the RCF of GBP90.0 million,
drawn to GBP53.0 million at the balance sheet date, expires in June
2024. The Board has already held positive preliminary conversations
with its lenders and has considered the availability and likelihood
of securing replacement facilities on or before the date of expiry
as part of their consideration and testing above. Although no
facility has been formally agreed at the date of approval of these
financial statements, the Board considers it appropriate to
continue to assume this facility will be renewed or replaced.
However, it recognises that as the Group's (and, inter alia, the
parent company's) committed financing facilities do not extend over
the full going concern review period and renewal or replacement is
subject to future agreement with lenders. Therefore, the Board is
unable to be certain that the required levels of financing will be
available throughout the going concern assessment period to enable
the group to meet its liabilities as they fall due. These
conditions indicate the existence of a material uncertainty which
may cast significant doubt about the Group's and the parent
company's ability to continue as a going concern.
Notwithstanding the above, the Board has a reasonable
expectation that the Group and parent company have adequate
resources to continue in operational existence for at least the
next 12 months from the date of approval of these financial
statements. The financial statements do not include the adjustments
that would result if the Group and parent company were unable to
continue as a going concern.
1. Business Segments
Operating profit
Revenue before amortisation
and exceptional items
2023 2022 2023 2022
GBP000 GBP000 GBP000 GBP000
--------------- -------- -------- ------------ -----------
UK 333,453 320,203 45,564 44,704
International 38,066 30,712 3,211 1,595
--------------- -------- -------- ------------ -----------
Total 371,519 350,915 48,775 46,299
--------------- -------- -------- ------------ -----------
Operating profit before amortisation and exceptional items is
reconciled to profit before tax in the Income Statement. The
amortisation and impairment charge of GBP4.5 million (2022: GBP3.3
million) includes GBP1.2 million (2022: GBPnil) in relation to
impairment of goodwill and intangible assets.
2. Exceptional Items
During the year, the Group incurred costs which were identified
as being exceptional.
2023 2022
GBP000 GBP000
Costs associated with Formal Sale Process 1,687 -
Restructuring and reorganisations 3,323 -
Total Exceptional items 5,010 -
------- -------
Costs associated with the Formal Sale Process were professional
fees which were incurred by the Group as part of
the procedure. This was a one off process which is deemed to be exceptional.
Costs incurred regarding restructuring and reorganisations
relates to various regionalisation projects and the closure of
certain branches during the year. Costs cover redundancies,
property exit costs and write off of assets which can no longer be
used. In all cases, these closures and reorganisations were part of
a one off process and are thus deemed to be exceptional. The
goodwill and intangible assets charge of these closures was GBP1.2
million. This is not included in exceptional items as it is
separately presented in the Income Statement.
During the year to 31 March 2022, the Group incurred no
exceptional items.
3. Earnings Per Share
The calculation of basic earnings per share of 58.05 pence
(2022: 64.49 pence) is based on the profit attributable to equity
holders of the parent of GBP23,010,000 (2022: GBP25,535,000) and a
weighted average number of ordinary shares outstanding during the
year ended 31 March 2023 of 39,635,000 (2022: 39,597,000),
calculated as follows:
2023 2022
Shares Shares
000s 000s
Issued ordinary shares 40,154 40,154
Effect of own shares held (519) (557)
------- -------
Weighted average number of ordinary shares 39,635 39,597
------- -------
Basic earnings per share before the amortisation of intangibles
and exceptional items was 78.41 pence (2022: 71.24 pence) and is
based on an after tax add back of GBP8,067,000 (2022: GBP2,675,000)
in respect of the amortisation of intangibles and exceptional
items.
The calculation of diluted earnings per share of 57.76 pence
(2022: 63.83 pence) is based on profit after tax of GBP23,010,000
(2022 GBP25,535,000) and a weighted average number of ordinary
shares outstanding during the year ended 31 March 2023 of
39,835,000 (2022: 40,009,000), calculated as follows:
2023 2022
Shares Shares
000s 000s
Weighted average number of ordinary shares 39,635 39,597
Effect of share options in issue 200 412
------- -------
Weighted average number of ordinary shares
(diluted) 39,835 40,009
------- -------
Diluted earnings per share before the amortisation of
intangibles and exceptional items was 78.01 pence (2022: 70.51
pence). The calculation of diluted earnings per share in the prior
year does not assume conversion, exercise, or other issue of
potential ordinary shares that would have an antidilutive effect on
earnings per share.
4. Analysis of Net Debt
As at 31 Non-cash As at 31
Mar 2022 Cash movements movements Mar 2023
GBP000 GBP000 GBP000 GBP000
Secured loans 145,000 1,000 - 146,000
Arrangement fees (779) - 287 (492)
Cash and cash equivalents (13,617) 2,634 (157) (11,140)
------------ ----------------- ------------- ------------
Net debt excluding lease
liabilities 130,604 3,634 130 134,368
Lease liabilities 57,643 (19,757) 20,632 58,518
Net debt including lease
liabilities 188,247 (16,123) 20,762 192,886
------------ ----------------- ------------- ------------
Year end gearing (calculated as net debt expressed as a
percentage of shareholders' funds) stands at 76% (2022: 77%).
As at 31 March 2023 the Group had GBP183.0 million (2022:
GBP183.0 million) of debt capacity comprising committed revolving
credit facilities of GBP90.0 million and private placements of
GBP93.0 million. In addition to the committed facilities, the Group
net overdraft facility at the year-end was GBP7.5 million (2022:
GBP7.5 million).
5. Taxation
The charge for taxation for the year represents an effective tax
rate of 25.1% (2022: 28.3%). The underlying tax rate was 21.1%
(2022: 20.6%) before exceptional items, prior year adjustments,
impact of tax rate changes and impairment of intangible assets.
6. Dividend
The Board has proposed a final dividend of 26.5 pence per share
to be paid on 4 August 2023 to shareholders on the register at 23
June 2023. Including the interim dividend of 11.0 pence per share,
this makes a total dividend for the year of 37.5 pence per share
(2022: 36.0 pence per share).
The ex-dividend date will be 22 June 2023 and the last day to
elect to participate in the dividend reinvestment plan will be 7
July 2023.
7. Principal risks and uncertainties
The Board is responsible for determining the level and nature of
risks it is appropriate to take in delivering the Group's
objectives, and for creating the Group's risk management framework.
The Board recognises that good risk management aids effective
decision making and helps ensure that risks taken on by the Group
are adequately assessed and challenged.
The Group has an established risk management strategy in place
and regularly reviews divisional and departmental risk registers as
well as the summary risk registers used at board level. A risk
register is prepared as part of the due diligence carried out on
acquisitions and the methodology is subsequently embedded.
All risk registers have a documented action plan to mitigate
each risk identified. The progress made on the action plan is
considered as part of the risk review process. Within the last
financial year the Group Internal Audit Department has completed
key control reviews in all divisions.
The summary divisional and departmental risk registers and
action plans were reviewed at risk meetings held in during the
year. In all cases it is considered that the risk registers are
being used as working documents which provides the required
assurance that existing risks are being managed appropriately. Work
is also underway on communicating risk registers more effectively
using our chosen visualisation software. This will enhance
accountability over key risk areas.
The risk registers are reviewed at the start (to facilitate the
planning process) and at the end of each internal audit project. A
post audit risk rating is agreed with management. If new risks are
identified following an audit project they are added to the
relevant risk register. Heat maps illustrating post audit risk
ratings and new risks are provided to the board in each published
internal audit report.
Further information is provided below on our principal risks and
mitigating actions to address them.
Market risk
Risk description
An economic downturn (as a result of economic cycles, political
or global related uncertainly) could result in worse than expected
performance of the business due to lower activity levels or
prices.
Mitigation
Vp provides products and services to a diverse range of markets
with increasing geographic spread. The Group regularly monitors
economic conditions and our investment in fleet can be flexed with
market demand.
Competition
Risk description
The equipment rental market is already competitive and could
become more so, impacting market share, revenues and margins.
Mitigation
Vp aims to provide a first class service to its customers and
maintains significant market presence in a range of specialist
niche sectors. The Group monitors market share, market conditions
and competitor performance and has the financial strength to
maximise opportunities.
Investment/product management
Risk description
In order to grow it is essential the Group obtains first class
products at attractive prices and keeps them well maintained.
Mitigation
Vp has well established processes to manage its fleet from
investment decision to disposal. The Group's return on average
capital employed was 14.4% in 2023 (2022: 14.5%). The quality of
the Group's fleet disposal margins also demonstrate robust asset
management and appropriate depreciation policies.
People
Risk description
Retaining and attracting the best people is key to our aim of
exceeding customer expectations and enhancing shareholder
value.
Mitigation
Vp offers well-structured reward and benefit packages, and
nurtures a positive working environment. We also try to ensure our
people fulfil their potential to the benefit of both the individual
and the Group, by providing appropriate career advancement and
training.
Safety
Risk description
The Group operates in industries where safety is a key
consideration for both the wellbeing of our employees and customers
that hire our equipment. Failure in this area would impact our
results and reputation.
Mitigation
The Group has robust health and safety policies and management
systems. Our induction and training programmes reinforce these
policies. We have compliance teams in each division.
We provide support to our customers exercising their
responsibility to their own workforces when using our
equipment.
Financial risks
Risk description
To develop the business Vp must have access to funding at a
reasonable cost. The Group is also exposed to interest rate and
foreign exchange fluctuations which may impact profitability and
has exposure to credit risk relating to customers who hire our
equipment.
Mitigation
The Group has borrowing facilities of GBP190.5 million and
strong relationships with all lenders. Our treasury policy defines
the level of risk that the Board deems acceptable. Vp continues to
benefit from a strong balance sheet, and EBITDA, which allows us to
invest into opportunities.
The Group continues to generate strong cash flows and net debt
increased modestly by GBP3.8 million from GBP130.6 million at 31
March 2022 to GBP134.4 million at 31 March 2023. Management are in
regular dialogue with our lenders who continue to express their
commitment to the business.
Our treasury policy requires a significant proportion of debt to
be at fixed interest rates and we facilitate this through fixed
interest borrowings. We have agreements in place to buy or sell
currencies to hedge against foreign exchange movements. We have
strong credit control practices and use credit insurance where it
is cost effective. Debtor days were 59 days (2022: 55 days) and bad
debts, as a percentage of revenue remained low at 0.9% (2022:
0.6%).
Contractual risks
Risk description
Ensuring that the Group commits to appropriate contractual terms
is essential; commitment to inappropriate terms may expose the
Group to financial and reputational damage.
Mitigation
The Group mainly engages in supply only contracts. The majority
of the Group's hire contracts are governed by the hire industry
standard terms and conditions. Vp has robust procedures for
managing non-standard contractual obligations.
Legal and regulatory requirements
Risk description
Failure to comply with legal or regulatory obligations
culminating in financial penalty and/or reputational damage.
Mitigation
The Group mitigates this risk utilising:
-- Specialist project committees with ongoing responsibility to
review key compliance areas and investigate breaches and
non-conformance.
-- Assurance routines from Group Internal Audit and External Auditors.
-- Comprehensive training and awareness programmes rolled out to
wider business (including Modern Slavery, Competition Law, Bribery
and Corruption) by representitives from Group Finance, HR, Internal
Audit and IT. Many of these programmes are completed using our
preferred online training portals.
-- Established whistleblowing policy circulated to all employees.
-- Use of legal advisors where required.
Climate change
Risk description
The effects of climate change and the transition to a lower
carbon economy could lead to increasing levels of regulation and
demands on the business from customers, employees and shareholders.
Changes in weather patterns may increase the likelihood of
disruption to our business, although this is considered minimal at
this stage.
Mitigation
The Group has formally declared the intention to be net carbon
zero by 2050 at the latest. This declaration is part of a wider
body of work in relation to quantifying and ultimately reducing the
environmental impact of the Group's operations. We have completed
our Scope 3 emissions inventory, this has unlocked many workstreams
to reduce our carbon emissions. We have submitted our Science-Based
Targets to the Science-Based Targets Initiative for validation.
IT Resilience
Risk description
As is the case with most businesses, the Group is reliant on the
consistent availability of its IT systems and security of key
systems. Disruption to, or failure of, our principle systems could
result in significant disruption to our business, potentially
leading to reputation and financial loss. The Group continues to
develop existing systems and introduce new software packages. As
such cyber and data risks have become an area of increased focus
and controls and are constantly evolving.
Mitigation
This area is being led by our Group IT Director supported by our
IT Technical and development teams. Where appropriate consultancy
is provided by trusted third parties who understand and validate
the level of risk the Group faces in its various processes, systems
and interfaces.
The Group has tested planning in place and reviews learnings on
an ongoing basis. Employee awareness continuous and is being
enhanced to ensure it remains relevant and meaningful with the
added ability for easier and more timely delivery to all users.
The Group has achieved Cyber Essentials and Cyber Essentials
Plus.
8. Forward Looking Statements
The Chairman's Statement and Business Review include statements
that are forward looking in nature. Forward looking statements
involve known and unknown risks, assumptions, uncertainties and
other factors which may cause the actual results, performance or
achievements of the Group to be materially different from any
future results, performance or achievements expressed or implied by
such forward looking statements. Except as required by the Listing
Rules and applicable law, the Company undertakes no obligation to
update, review or change any forward looking statements to reflect
events or developments occurring after the date of this report.
9. Annual Report and Accounts
The Annual Report and Accounts for the year ended 31 March 2023
will be provided to shareholders before the end of June 2023.
Alternative Performance Measures
The Board monitors performance principally through adjusted and
like-for-like performance measures. Adjusted profit and earnings
per share measures exclude certain items including the impact of
IFRS16, amortisation of acquired intangible assets and goodwill
impairment charges and exceptional items.
The Board believes that such alternative measures are useful as
they exclude one-off (amortisation, impairment of intangible assets
and exceptional items) and non-cash (amortisation of intangible
assets) items which are normally disregarded by investors, analysts
and brokers in gaining a clearer understanding of the underlying
performance of the Group from one year to the next when making
investment and other decisions. Equally, IFRS16 is excluded from
measures used by these same stakeholders and so is removed from
certain APMs.
The key measures used as APMs are reconciled below.
2023 2022
GBP'000 GBP'000
Profit before tax as per Income Statement 30,706 35,644
Adjustment to remove IFRS 16 impact 283 (41)
Adjusted profit before tax APM 30,989 35,603
Amortisation and impairment of intangible
assets 4,490 3,302
Exceptional items 5,010 -
Adjusted profit before tax, amortisation,
impairment of intangible assets and exceptional
items APM (PBTAE) 40,489 38,905
Interest (excluding interest on lease liabilities) 5,542 4,431
Adjusted operating profit before tax, amortisation,
impairment of intangible assets and exceptional
items APM 46,031 43,336
Depreciation (excluding depreciation of right
of use assets) 46,853 45,532
Adjusted EBITDA APM 92,884 88,868
2023 2022
International International
UK Segment Segment Total UK Segment Segment Total
Operating profit before
tax, amortisation, impairment
of intangible assets and
exceptionals 45,564 3,211 48,775 44,704 1,595 46,299
Adjustment to remove IFRS
16 impact (2,622) (122) (2,744) (2,872) (91) (2,963)
Adjusted operating profit
before tax, amortisation,
impairment of intangible
assets and exceptional
items APM 42,942 3,089 46,031 41,832 1,504 43,336
Adjusted operating margin is calculated by dividing adjusted
operating profit before tax, amortisation, impairment of intangible
assets and exceptional items by revenue.
2023 2022
Pence Pence
Basic earnings per share 58.1 64.5
Impact of amortisation, impairment of intangible
assets and exceptional items after tax 20.3 6.7
Impact of IFRS 16 0.6 -
Adjusted basic earnings per share APM 79.0 71.2
2023 2022
GBP'000 GBP'000
Net debt including lease liabilities 192,886 188,247
Lease liabilities (58,518) (57,643)
Net debt excluding lease liabilities APM 134,368 130,604
Return on average capital employed (ROACE) is based on profit
before Operating Profit before tax, amortisation, impairment of
intangible assets and exceptional items as defined above divided by
average capital employed on a monthly basis using the management
accounts.
Directors' Responsibility Statement in Respect of the Annual
Financial Report (extracted from the Annual Financial Report)
We confirm that to the best of our knowledge:
-- The Group and Parent Company financial statements which have
been prepared in accordance with UK-adopted IASs give a true and
fair view of the assets, liabilities, financial position and profit
of the Group and Parent Company; and
-- The Business Review and Financial Review, which form part of
the Directors' Report, include a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with the description of the principal risks and
uncertainties that they face.
For and on behalf of the Board of Directors.
J F G Pilkington A C Bielby
Director Director
- ENDS -
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FR EASKXEDPDEEA
(END) Dow Jones Newswires
June 07, 2023 02:00 ET (06:00 GMT)
VP (AQSE:VP.GB)
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