TIDMVP.
RNS Number : 0877B
Vp PLC
08 June 2021
For immediate release 8 June 2021
Vp plc
('Vp', the 'Group' or the 'Company')
Final Results
'PBT ahead of market expectations, debt significantly
reduced,
strong start to new financial year and supportive market
backdrop'
Vp plc, the equipment rental specialist, today announces its
audited Final Results for the year ended 31 March 2021 (FY-2021)
and an update on the Group's trading to date in FY-2022.
An excellent recovery for the business after an extremely
difficult period against a pre-Covid comparator, demonstrating the
strength of our model.
Financial Highlights
FY-2021 FY-2020
Revenues (GBPm) 308.0 362.9
Profit before tax, amortisation and exceptional
items (GBPm) 23.3 47.1
Return on average capital employed 9.2% 14.5%
Basic EPS pre-amortisation and exceptional
items (pence) 46.8 91.0
Proposed final dividend (pence per share) 25.0 *22.0
EBITDA before exceptional items (GBPm)(1) 72.7 98.1
Net debt (GBPm) 121.9 159.8
Capital investment in rental fleet (GBPm) 40.2 49.1
Exceptional items (15.1) (1.5)
Statutory loss before taxation (GBPm) (2.3) 28.4
Statutory (loss)/earnings per share (pence) (11.6) 46.9
Profit before tax, amortisation and exceptional
items inclusive of IFRS 16 impact (GBPm) 23.2 46.6
* Special dividend in lieu
Operational Highlights
-- Continued innovation, strategic and operational progress:
- Digital upgrades across the entire business
- Installation of Omni channel software, new app launching in Q2 and data led IT systems
- Sales resources unaltered providing customers with a
consistent service throughout the year, maintaining strong customer
relationships
-- Significant steps taken to reduce costs and preserve cash in response to Covid-19:
- Closed or merged 25 business locations to streamline the business
- Aligned the opening of locations with the return to work of customers
- Secured material cost reductions in areas such as the commercial vehicle fleet
-- Environmental, Social and Governance (ESG) initiatives maintained across all divisions
Outlook / Current FY-2022 Trading
-- Strong start to the financial year
-- Trading supported by positive market backdrop with
infrastructure sector poised for growth in the coming year and the
house building and construction sectors showing signs of sustained
improvement with some good customer contract renewals
-- Increasing confidence in the prospects for the coming year
Commenting on the Final Results, Jeremy Pilkington, Chairman of
Vp plc, said: "I am pleased to be reporting a set of results that
are ahead of our expectations in a year that has seen unprecedented
challenges for the business and its customers. The past twelve
months saw a focus on cash management which delivered a significant
reduction in net debt.
"We have exited the year at nearly pre-Covid levels which is a
better recovery than we anticipated at the beginning of the
pandemic. Given that we are reporting results beyond the upper end
of original expectations, and reflecting our confidence in the
prospects of the Group, the Board is recommending a final dividend
of 25.0 pence per share.
"As we look to the future with renewed optimism, I would like to
thank all colleagues at Vp for their hard work and dedication
throughout what has been the most challenging of times."
Neil Stothard, Chief Executive of Vp plc, added: "The Covid-19
pandemic has brought out the very best in the business against the
severest of backdrops and in response to a significant downturn in
activity early in the last financial year, we took significant
steps to de-risk the business by reducing costs. We finished the
prior year well and I am pleased to confirm that we have maintained
this into April and May of the new financial year, which has
started strongly for us.
"Looking ahead, the market backdrop for Vp is positive. Our core
markets of infrastructure, housebuilding and construction are
showing positive signs of sustained growth. At the onset of the
pandemic I said that we were entering a period of significant
economic uncertainty with an excellent and financially robust
business and we planned to exit with an equally strong business,
which I believe has been achieved.
"Vp has proven over time and throughout other economic downturns
that its business model can continue to deliver quality, market
leading earnings, for our shareholders. We are excited about the
prospects for the coming year which we approach with increasing
confidence."
- 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.
For further information:
Vp plc Tel: +44 (0) 1423 533 400
Jeremy Pilkington, Chairman www.vpplc.com
Neil Stothard, Chief Executive
Allison Bainbridge, Group Finance
Director
Media enquiries:
Buchanan
Henry Harrison--Topham / Jamie Hooper Tel: +44 (0) 20 7466 5000
/ George Beale
Vp@buchanan.uk.com www.buchanan.uk.com
Notes on alternative performance measures:
(1.) IFRS 16 was adopted on 1 April 2019 for statutory
reporting. As a result, the primary statements are shown on IFRS 16
basis. The table below provides the impact on the consolidated
income statement for the period ended 31 March 2021. As the
decision makers currently allocate resource and assess performance
primarily on an IAS 17 basis, the alternative performance measures
are disclosed on this basis.
Impact on Consolidated Income Statement, EBITDA and earnings per
share
Basic earnings per share before the amortisation of intangibles
and exceptional items decreased by 0.2 pence for the period to 31
March 2021 as a result of the adoption of IFRS 16. The financial
impact of IFRS 16 on the Group's Consolidated Income Statement and
EBITDA for the year ended 31 March 2021 is set out below:
Excluding IFRS 16 Reported
IFRS 16 Impact GBP000
GBP000 GBP000
Operating profit before amortisation
and exceptional items 27,721 3,207 30,928
Operating (loss)/profit 2,476 3,207 5,683
EBITDA 72,701 23,959 96,660
Net financial expense (4,448) (3,304) (7,752)
Profit before taxation, amortisation
and exceptional items 23,273 (97) 23,176
Loss before taxation (2,172) (97) (2,269)
-- All performance measures stated as before amortisation are
also before impairment of intangibles and exceptional items.
-- Basic earnings per share pre amortisation and exceptional
items is reconciled to basic earnings per share in note 3.
-- Profit before tax, amortisation and exceptional items is
reconciled to profit before tax in the Income Statement.
-- EBITDA is reconciled to profit before tax, amortisation and
exceptional items by adding back net financial expenses and
depreciation.
-- Return on average capital employed is based on profit before
tax, interest, amortisation and exceptional items divided by
average capital employed on a monthly basis using the management
accounts. Profit before tax, interest, amortisation and exceptional
items is reconciled to profit before interest and tax in the Income
Statement.
CHAIRMAN'S STATEMENT
I am very pleased to report on what we consider an extremely
satisfactory outcome for the year to 31 March 2021 given the unique
challenges that the business has faced this year.
The majority of our revenue decline was suffered in March and
April 2020 as Covid lockdowns impacted most heavily and
immediately. Thereafter, revenues have progressively recovered
across our businesses although varying in pace and extent. We have
exited the financial year with revenue run rate at 95% of prior
year, an exceptionally strong recovery of which we had no
expectation at the beginning of the pandemic.
Profit before tax, amortisation and exceptional items was
GBP23.3 million (2020: GBP47.1 million) on revenues down by 15% to
GBP308.0 million (2020: GBP362.9 million). EBITDA was GBP72.7
million (2020: GBP98.1 million) A relentless focus on cash
management helped to reduce year end debt by GBP37.9 million to
GBP121.9 million (2020: GBP159.8 million) whilst at the same time
enabling us to support specific high return on capital investment
opportunities to the extent of GBP40.2 million (2020: GBP49.1
million).
Return on average capital employed slipped to 9.2% (2020: 14.5%)
and earnings per share largely tracked reduced profitability to
46.8 pence per share (2020: 91.0 pence per share).
As we announced at the time of our Interim results, the Board
wished to have better visibility for the out turn for the year as a
whole before declaring a dividend. We are now reporting results
beyond the upper end of our original expectations and therefore the
Board will be recommending the payment of a final dividend of 25.0
pence per share (2020: Special Dividend 22.0 pence per share).
Subject to shareholders approval at the Annual General Meeting to
be held on 22 July 2021, it is proposed to pay the final dividend
on 5 August 2021 to members registered at 25 June 2021.
Historically our dividend policy has sought to maintain dividends
over the economic cycle having due regard to future prospects as
well as immediate performance and we have been guided by a dividend
cover ratio in the range of 2.5 to 3 times net earnings. We have
more recently operated outside of the upper limit of this range.
Going forward, we intend to more fully distribute earnings and
operate more towards the lower end of that range.
We did initially participate in the Government's job retention
scheme but all use of furlough support was ended in October 2020.
At no time did the company access Government support loans or seek
funding from shareholders. Throughout the period the Company
operated within its existing banking covenants although we did
secure a precautionary, temporary easing of these measures, which
ultimately were neither required nor utilised.
As has already been announced, after an investigation lasting
almost four years, the Competition and Markets Authority ("CMA")
announced that there had been a breach of competition law by three
major suppliers of groundworks products for hire in the UK,
including the Group's excavations support business, Groundforce
Shorco. The CMA imposed a penalty of GBP11.2 million on the
Company. We fundamentally disagree with the conclusions of the CMA
but the Board reluctantly decided that it was not in the best
interests of the business to contest this finding given the
uncertainty of the process, the costs and the continued distraction
that it would represent to senior management. Vp has always prided
itself on a corporate ethic of fairness, integrity and respect. We
believe that our behaviour continues to exemplify these values
irrespective of the CMA's findings.
Vp has always placed itself at the forefront of innovation and I
am very pleased to highlight the many initiatives that are taking
place throughout the business. Reduction of our carbon footprint,
addressing broader areas of environmental performance and the
application of information technology to enhance the customer
experience are just some of the programmes described in more detail
in the Business Review.
As we hopefully return to more normal trading conditions,
uninhibited by Government restrictions, we feel the market backdrop
for Vp is very positive. Particularly in the UK, major
infrastructure and levelling up projects provide significant upside
growth opportunities for the Group over the immediate and longer
term. Internationally the prospects for our energy business look
better now than they have for some time and the TR business appears
set to benefit from effective local pandemic responses. Extended
supply chains and shortages of certain construction materials
provide some challenges in the short term and against which we have
taken mitigation measures wherever possible.
I would like to extend a special thanks to all our employees at
this time as they have responded to these unprecedented challenges
with a courage and energy that has been remarkable to witness.
Jeremy Pilkington
Chairman
8 June 2021
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 2021 31 March 2020
--------------------------------------
Revenue GBP308.0 million GBP362.9 million
----------------- -----------------
Operating profit before amortisation GBP27.7 million GBP51.9 million
and exceptionals
----------------- -----------------
Operating margin 9.0% 14.3%
----------------- -----------------
Investment in rental fleet GBP40.2 million GBP49.1 million
----------------- -----------------
Return on average capital employed 9.2% 14.5%
----------------- -----------------
Statutory Operating profit GBP5.7 million GBP37.2 million
----------------- -----------------
The year to 31 March 2021 was an extremely challenging trading
period for the Group against a backdrop of a global pandemic and
the inevitable impact on economic conditions.
Whilst Group operating profits before amortisation and
exceptional items were significantly reduced at GBP27.7 million
compared with prior year of GBP51.9 million this represented an
excellent recovery from the business after an extremely difficult
first quarter trading impacted by national shutdowns. Operating
margins decreased to 9.0% (2020: 14.3%) with Group revenues at
GBP308.0 million (2020: GBP362.9 million) 15% down on prior year.
Return on average capital employed inevitably reduced to 9.2% from
prior year of 14.5%. Whilst this is below our average ROACE for the
last five financial years of 15.2%, we remain confident of
restoring this important measure towards historic levels as markets
recover and we maintain our investment disciplines with the
deployment of increased capex.
EBITDA before exceptionals was GBP72.7 million (2020: GBP98.1
million) and cash generation from trading remained robust. Net debt
at 31 March 2021 was GBP121.9 million (2020: GBP159.8 million), a
significant reduction of GBP37.9 million in the period, clearly
demonstrating the Group's ability to pay down debt even in the most
testing of circumstances.
With activity subdued during the year, the investment in rental
fleet was tailored accordingly with a reduced gross capital
expenditure of GBP40.2 million, (2020: GBP49.1 million). Fleet
disposal proceeds were GBP17.5 million (2020: GBP21.4 million)
generating profit on disposals of GBP4.3 million (2020: GBP8.9
million). We have recently seen supply chain lead times extend
significantly and we have committed new capex during March 2021 to
mitigate potential short falls in products later in the year.
To deliver a PBTA of GBP23.3 million is a tremendous achievement
and this underlines the quality of the business streams that we
have in Vp and the confidence derived from our success over the
long term. Our specialist divisions within the UK, Europe and other
International regions provide a level of diversity of risks which,
even against a poor market backdrop, demonstrate the resilient
characteristics of our business model.
With the rapid onset of Covid-19 in March 2020, most Group
activities were severely impacted by lockdowns and in the final two
weeks of March 2020 we saw demand for our products and services
drop significantly as customers closed down sites.
In response to the severe downturn in activity, we had to take
significant steps to de-risk the business by reducing costs. As the
year progressed many mothballed locations were re-opened and
furloughed employees returned to work. We controlled this process
so as to align with the return to work of our customers. We closed
or merged 25 business locations and also secured material cost
reductions in other areas of expenditure such as the commercial
vehicle fleet. Overall the average headcount in the Group reduced
by 279 (9%), of which 187 were in operational roles and 86 in
administration and included 160 redundancies. Sales resources were
largely unaltered and available to our customers throughout the
year.
The Covid-19 pandemic brought out the very best in the business
against the severest of backdrops.
Whilst carefully operating defined safe working protocols, our
colleagues on the 'front line' delivering and collecting equipment,
maintaining fleet or opening branches have done a tremendous job in
maintaining the quality of our services to those of our customers
who needed it. Equally many colleagues have had to adapt to working
remotely and this has proven to be a manageable temporary solution
throughout the worst of the pandemic.
UK DIVISION
Year ended Year ended
31 March 2021 31 March 2020
=====================================
Revenue GBP281.3 million GBP331.0 million
================= =================
Operating profit before amortisation GBP27.2 million GBP50.2 million
and exceptionals
================= =================
Investment in rental fleet GBP35.6 million GBP41.0 million
================= =================
Operating profits (before amortisation and exceptionals) in the
UK division decreased to GBP27.2 million compared with GBP50.2
million prior year. Revenues of GBP281.3 million (2020: GBP331.0
million) were 15% down on prior year.
The UK division, comprises seven main business units: UK Forks,
Groundforce, TPA, Brandon Hire Station, ESS, MEP Hire and Torrent
Trackside. Whilst mainly operating in the UK, TPA and Groundforce
also have operations in mainland Europe, primarily in Germany and
Austria. All the UK divisions support the three core sectors of
infrastructure, construction and housebuilding.
The following section comments on the highlights and key actions
for the constituent businesses within the UK division during the
year:
The UK Forks materials handling business had a satisfactory
year, recovering well from a difficult first few months once
housebuilding re-opened during May 2020. All depots remained
operational throughout the pandemic. A customer first approach has
been key, with all account managers remaining available to
customers throughout the year, and as a result, customer retention
has remained extremely high. A number of major housebuilder
agreements were also renewed for the coming year. Whilst capital
investment has been reduced, the business has continued to grow the
rotational and heavy lift telehandler fleet. Digital enhancements
to operational performance includes further upgrades to the JCB
Live Link system enabling our customers to receive real time data
on fleet usage and help them manage important targets such as fuel
consumption and CO (2) emissions. A focus on environmental matters
has seen UK Forks invest in both battery powered electric teletruks
and electric telehandlers. They are new products to the market and
key to engagement with our customers in achieving their
environmental goals. We have also been trialling the use of
hydrogenated vegetable oil (H.V.O) on our existing telehandler
fleet which, if proved to be successful, will deliver exceptional
carbon foot print reductions. Heading into the new financial year
the utilisation of our fleet is very high, and exacerbated by the
increased lead times for new product which are causing pinch points
on supply. Demand from housebuilding remains strong and general
construction continues to improve.
The Groundforce excavation support business has seen some
recovery in civil engineering work but there is still more to come.
The water industry investment programme (AMP 7) was in its first
year of five and, impacted by Covid-19, was slower than normal to
transition from the planning to implementation stage. This should
start to accelerate in the coming year. In addition, we are also
optimistic that other large infrastructure projects like HS2 and
the new Thames Crossing will provide further demand for our shoring
and associated excavation support products.
Focussed on improving our customer interaction, initiatives
embracing our digital strengths include the enhancement of our hire
system by the introduction of a mobile, tablet driven solution
within both Groundforce and elsewhere across Vp. This provides a
mobile system for our operational and commercial teams whilst
delivering material benefits to our customers. We have further
enhanced the customer experience by the launch of 'Your Solution'
which is a self-serve app which allows customers to create simple
but safe excavation designs, 24/7, ahead of finalising the detailed
solution with our engineering design team, a much more efficient
and validated process. An in-house developed pressure testing app
'Pressure Tests +' to support our AMP7 framework customers was also
launched in the year. Fleet investment was maintained and this
included, new excavator attachment solutions for both the rail and
road infrastructure customer base.
In Europe, the Groundforce business suffered from regional
Covid-19 driven restrictions. These regional constraints materially
impacted the construction sector in Germany, Austria and France.
Both core shoring and major project contracts suffered resultant
delays. We are however encouraged by progress into the new
financial year as both delayed and new projects are starting to
come on stream.
The TPA UK business which offers temporary access solutions had
an excellent year underpinned by strong demand for portable roadway
products. There was rapid growth in activity from contractors
working on the HS2 project, both on the enabling and construction
phases. This was supplemented by solid demand from the transmission
and ground investigation markets, and despite outdoor events being
completely closed in the year. TPA also delivers rapid rail access
solutions to the rail sector. The transition to CP6, the new five
year framework in the UK rail market, was slow and further impacted
by Covid. TPA's rail activity only started to materially recover in
the second half of the year. The strength of demand for roadway
product saw the business invest in further rental fleet in support
of the core customer base and backed by our positive longer term
view of the market.
The aluminium roadway panels have a long lifespan, are
manufactured from re-cycled metal, and are 100% recyclable at the
end of life, demonstrating a superior environmental solution to
that of many composite alternatives. Looking ahead, continuation of
the longer term HS2 work, an anticipated uplift of CP6 activities
in the rail sector, and the resumption of the outdoor event sector,
are all seen as excellent market opportunities for TPA UK.
In Europe, the TPA business also traded well with good demand
from transmission and construction customers and despite the
disruption of the various lockdowns in Germany and Austria. As in
the UK, the TPA Europe business has exposure to the outdoor event
sector which was also closed during the year. Stable demand from
the transmissions market more than compensated for this. We have
continued to invest in the roadway fleet, encouraged by the
prospect of resilient long term demand from the transmission,
renewable energy and gas pipeline sectors all of which are
benefitting from government infrastructure investment in Germany
and surrounding countries.
Brandon Hire Station, our tool and equipment hire specialist
business, entered the new financial year against a backdrop of a
national lockdown and a temporarily closed construction sector.
Revenues fell by 50% during April 2020 compared to the prior year
and as previously reported, over 100 locations were mothballed and
large numbers of employees furloughed. Despite this, 70 locations
remained open for business throughout as our activities were
classified as essential in support of the health, utility and
transport sectors and subsequently the construction sector, as that
market also re-opened. The sales team was retained in full
throughout the year and, as elsewhere in the Group, this enabled us
to maintain relationships with our customers, which was invaluable
to them particularly in those difficult early months. The business
has subsequently merged sixteen, and closed nine branch locations
to maintain an efficient, but still comprehensive, national tool
hire network. Our national business offers local service to a broad
customer base and focuses on availability and quality. Despite the
myriad of challenges and changes over the last twelve months,
keeping it simple has been the guiding mantra and we expect this to
pay dividends as the market picks up.
Brandon Hire Station has developed its digital approach over
recent years aiming to leverage the associated benefits of a more
efficiently run business together with a transactional relationship
which offers customers market leading, quality management
information. All fleet assets at branches are bar coded and scanned
in and out to customers, and transactions are paperless. All
deliveries are managed by our drivers using tablet based mobile
technology and we are able to keep our customers up to date via
text at each stage of the transaction.
We expect to deliver the majority of our orders within a two to
three hour window and this quality of service can only be achieved
by having industry leading availability of tool hire fleet. Our IT
system assimilates both historical and current rental data to help
us establish minimum stock holding levels on the top 350 lines at
all branches. This system has been in place for a number of years
and it is designed to make it possible for us to say 'Yes' whenever
a customer requests a product.
Our National Customer Service Centre in Manchester handles a
third of all tool hire orders, processing over 18,000 transactions
per month. The installation of Omni channel software has boosted
productivity and upgraded our response to customers whether via
web, email, phone, SMS, live chat or social media. A new
progressive app will be launched to customers early in the new
financial year allowing customers to self-transact in a seamless
manner. We believe this will be transformational for our already
strong SME customer base. A key positive from the pandemic was the
emergence of a revitalised DIY sector. Online revenues more than
trebled compared with prior year and we estimate Brandon Hire
Station now captures c. 15% of all online tool hire transactions in
the UK via its website, a share that is continuing to grow.
Brandon Hire Station also completed a successful first year
supporting the new, minimum six year duration, Network Rail
contract and this will be the eleventh year of managing and
supplying Network Rail's small tool requirements. Infrastructure
projects on the rail network continued throughout the pandemic. The
business also provided regular essential support to certain NHS
departments during the year and continues to do so.
Brandon Hire Station is targeting further investment in
eco-friendly equipment to add to the rental fleet and the move away
from diesel powered, to electric and solar powered products is well
underway. The portable toilets offer is being rolled out nationally
and investment has been committed to deliver on that plan. The
Brandon Hire Station partnered services business has seen a rapid
acceleration in revenues over the last 12 months. This activity
acts as a transaction vehicle for all Vp products, alongside over
20 other key product suppliers from outside of the Vp group. This
offer is aimed at those specific customers who require a single
transactional source for all their rental requirements.
Looking forward, the Brandon Hire Station business, with a
genuine national footprint of 160 locations, is an attractive local
tool hire source, whilst also offering the largest tool hire
network of branches in the UK. It operates the largest owned tool
hire fleet, and the largest delivery fleet, providing support to
those larger customers who require a consistent and reliable
national service. We are confident that an already successful
combination of availability and reliability together with the most
experienced rental staff in the industry will deliver further
success for Brandon Hire Station this year.
ESS remains the market leading safety and survey rental business
in the UK and whilst inevitably impacted by Covid restrictions
stayed open for business throughout providing not only vital
support throughout the pandemic to key national infrastructure
organisations such as the NHS but also the rail, communications,
and utilities sectors. Revenues had reached c.95% of pre-Covid
levels by the close of the financial year. Highlights included the
award of a three year sole supply agreement of rail and location
equipment to Colas Rail, together with the successful delivery of a
wide range of services in support of a major shutdown at the Valero
oil refinery in Pembrokeshire supplying almost 2500 contractors.
ESS also completed a successful withdrawal of its operations in the
Netherlands at the end of the financial year enabling the division
to concentrate its resources and energies on the significant
opportunities available in the UK market. Capital investment was
maintained during the year with a particular focus on the survey
and test & measurement fleets to meet renewed demand. The
division has invested in the operation of hybrid service vehicles
in London with a view to significantly reducing vehicle emissions.
The plan is to roll this out further across ESS in the future.
MEP which supports the mechanical, electrical and plumbing
sectors had a very good year in the circumstances. Despite losing a
large percentage of monthly revenue in April 2020, the business
experienced a resilient and quick recovery and, by the end of the
financial year was operating ahead of prior year levels. Like many
Vp businesses, MEP maintained accessibility for its customer base
throughout 2020, with all branches bar one staying open and the
sales team largely operating as normal. This has undoubtedly
further reinforced MEP's already strong customer relationships as
we were able to deliver when it mattered most. MEP's success was
driven by a combination of a general recovery and specific,
targeted activity in the major conurbations outside of London.
Initially the London region was slower to recover but this has
accelerated in recent months as the city has re-opened. This should
provide added impetus for the new financial year, further helped by
a recent success to secure a major two year plus presence at one of
London's largest new office constructions. Investment continues to
grow and a number of exclusive innovative products have been added
to the fleet. Like UK Forks, MEP is trialling HVO fuels but this
time in the service and delivery vehicles. It is targeting emission
reductions of c. 90% from this source. MEP will further enhance its
branch network in the current year with relocation to an impressive
new location at Trafford Park improving their capacity to service
the growing North West market.
Torrent Trackside which provides specialist plant to the rail
sector, was open throughout the pandemic as the UK Rail industry
made an early call to maintain essential maintenance activity.
Whilst some projects were delayed, operational activity levels at
Torrent were similar to the prior year. Like Brandon Hire Station,
Torrent had a very successful first year of their new long term
contract in support of Network Rail.
Torrent is using Vp's M42 mobile IT system to enhance
operational efficiency and at the same time eliminate paperwork.
Torrent now provides a 100% digital service platform from placing
the initial enquiry, to delivery, collection and final
invoicing.
Torrent has also made large strides in reducing fossil fuel
usage and successfully trialled a "site of the future" concept,
showcasing our significant investment in battery powered rail
specific plant, which operates at lower noise levels and is
effectively carbon neutral. This concept was well received by our
rail customer base, including Network Rail, who see us as a pivotal
supply chain partner to help drive their own carbon reduction
targets over the next five years.
Despite CP6 being slow to develop, as the year progressed the
rail market became busier. We anticipate that some of the delayed
major rail projects will go live early in the new financial year.
These include the Trans Pennine upgrade programme and the TfW Core
Valleys Line upgrade, both of which have appointed Torrent as a key
supply chain partner. HS2 activity, for Torrent, is likely to pick
up in to 2022 when the construction phase has become more mature.
Torrent is however very well placed to support that work when it
comes on stream. Torrent also secured a major five year supply
contract with Balfour Beatty Rail supporting them on a number of
key rail projects including the Core Valleys Line extension
referred to above. The latter contract will be serviced by our
recently opened depot facility in South Wales. Investment in the
Torrent fleet has been maintained and more than 60% of the capex
spend is expected to be in substitutional, battery and solar
powered, products as we further enhance the environmental
credentials of our rail offer.
INTERNATIONAL DIVISION
Year ended Year ended
31 March 2021 31 March 2020
=====================================
Revenue GBP26.7 million GBP31.9 million
================ ================
Operating profit before amortisation GBP0.6 million GBP1.7 million
and exceptionals
================ ================
Investment in rental fleet GBP4.6 million GBP8.1 million
================ ================
The International division reported operating profits before
amortisation and exceptionals of GBP0.6 million, on revenues 16%
reduced on prior year of GBP26.7 million (2021: GBP31.9
million).
The International division comprises Airpac Bukom, 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. The following section comments on
the highlights and key actions for the two main business groupings
within the International division during the year.
Airpac Bukom, which provides equipment and services to the
international energy sector, encountered difficult trading
conditions in the year. A combination of cancelled or postponed
projects and a restricted ability for labour to cross many
international borders impacted revenue levels. Pre-Covid, the
business was anticipating a pick-up in activity and had secured a
number of new longer term contracts most of which however, fell
foul of Covid-19 delays or cancellation. Activity levels in our
three main geographical areas of operation, these being Europe,
Australia and Asia, were somewhat mixed. In Europe maintenance and
well testing was very subdued, but the markets are pleasingly now
starting to pick up into the new financial year. In Australia all
major shutdown activities were postponed but we are increasingly
confident of a resumption of shutdown work there, as we are in
Europe. Asia held up relatively well with good activity in both
drilling contracts and well test.
Despite a difficult trading year we have identified future
opportunities and have invested further in the rental fleet with
additional high pressure compressor/ booster products. We have also
added more environmentally friendly electric compressors to the
fleet during the year.
TR Group , Australasia's leading technical equipment rental
group, also experienced a challenging trading year across all its
geographies. All constituent businesses were impacted to some
extent, as borders were closed and lockdowns of varying lengths
imposed. Despite this, the business continued to operate, initially
supporting sectors deemed to be essential, but then more broadly as
conditions improved, particularly in Australia and New Zealand. The
TR Group offers instrumentation solutions and communication
products to a wide range of markets including construction, mining
and infrastructure. These sectors remained open. Revenues recovered
slowly and as we moved into 2021, were approaching pre-pandemic
levels. In New Zealand, the Vidcom business, which provides audio
visual rental solutions, was severely hit by the closure of large
elements of the conference and hospitality sector, Vidcom's main
market. In response the business was restructured in to a new
operating model. Physical attendance at events that did take place
was replaced by virtual access. Vidcom further developed their live
streaming services to a wide range of customers including the New
Zealand government. Other innovations across TR Group include
the
introduction of mobile calibration vans to TR Calibration
enabling instrument calibration services to be provided at remote
locations. Environmental initiatives at TR Group include the
installation of solar panels at a number of their locations.
Our expectation is that the international markets will, subject
to any further Covid setbacks, offer accelerating demand for our
services and flourish again as their respective economies
recover.
EMPLOYEES
As an asset management business we rightly focus on maximising
the physical assets in which we invest. However, the most important
assets we have are our people and investing in this aspect remains
critical to our ongoing and successful development. As highlighted
earlier in this review the response of our colleagues to the
Covid-19 pandemic has been extremely positive and fundamental to
the successful business recovery to date.
We are now in the 12(th) consecutive year of our engineering
apprenticeship programme and this year we are delighted to be
offering 41 apprentice roles across our business. We have gradually
increased the intake. Since we started the scheme in the last
global recession, we have seen 144 apprentice engineers recruited
to the programme. In 2021 we intend to expand our apprentice
training further with the launch of a sales programme targeting a
formal accreditation for both new and existing sales people within
the business. We are also recruiting four more graduates to our
well established Vp Graduate Scheme.
OUTLOOK
Across Vp, we are now firmly looking forwards rather than
backwards after the most testing year for everyone across the
business. We finished the prior year well and I am pleased to
confirm that we have maintained this into April and May of the new
financial year which has started strongly for us.
The market backdrop for Vp is positive. Major infrastructure
sectors, such as water, rail and transmission are primed for
escalating growth in the coming year, added to which other major
projects such as HS2 and Hinkley Point will continue to drive
demand. We see the residential construction market continuing to be
supportive as housebuilders maintain their build programmes. Whilst
the general construction sector has been slightly slower to
recover, we are seeing positive signs of a sustained improvement in
this key and large market.
We have taken robust action over the last twelve months to
streamline our divisional activities where necessary and I am
confident that we are well placed to deliver significant progress
over the next year.
I refer in the overview to our resilient characteristics as a
business and how that has contributed to our ability to
consistently combat the most challenging of conditions. We have,
however, also proven time and again in the past, that if the
markets are supportive then those same characteristics can also
deliver high quality, market leading earnings, for our
shareholders.
Twelve months ago I said that we had entered the pandemic with
an excellent business and that as best as we can manage, we planned
to exit with an equally excellent business. I believe this plan has
been achieved.
As a team we are excited about the prospects for the coming year
which we approach with increasing confidence as each day comes.
Neil Stothard
Chief Executive
8 June 2021
Consolidated Income Statement
for the year ended 31 March 2021
Note 2021 2020
GBP000 GBP000
---------- ----------
Revenue 1 307,997 362,927
Cost of sales (259,887) (292,746)
Gross profit 48,110 70,181
Administrative expenses (42,427) (32,975)
---------- ----------
Operating profit before amortisation
and exceptional items 1 30,928 55,480
Amortisation and impairment 1 (10,373) (16,756)
Exceptional items 2 (14,872) (1,518)
---------- ----------
Operating profit 5,683 37,206
Net financial expense (7,752) (8,840)
Profit before taxation, amortisation
and exceptional items 23,176 46,640
Amortisation and impairment 1 (10,373) (16,756)
Exceptional items 2 (15,072) (1,518)
---------- ----------
(Loss)/profit before taxation (2,269) 28,366
Taxation 5 (2,332) (9,779)
---------- ----------
(Loss)/profit attributable to
owners of the parent (4,601) 18,587
---------- ----------
Pence Pence
Basic earnings per share 3 (11.62) 46.92
Diluted earnings per share 3 (11.62) 46.17
Dividend per 5p ordinary share
interim and special paid and final
proposed 6 25.0 30.45
Note: IFRS 16 was adopted on 1 April 2019 for statutory
reporting. As a result, the primary statements are shown on IFRS 16
basis. Notes on alternative performance measures above provides the
impact on the consolidated income statement for the period ended 31
March 2021, including the GBP3.2 million positive impact on
operating profit before amortisation and exceptional items (GBP27.7
million pre-IFRS 16), GBP3.3 million adverse impact on net
financial expense (GBP4.5 million pre-IFRS 16) and GBP0.1 million
adverse impact on loss before taxation, amortisation and
exceptional items (GBP23.2 million pre-IFRS 16).
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2021
2021 2020
GBP000 GBP000
-------- --------
(Loss)/profit for the year (4,601) 18,587
Other comprehensive income/(expense):
Items that will not be reclassified to
profit or loss
Remeasurements of defined benefit pension
schemes (795) 368
Tax on items taken to other comprehensive
income 56 86
Impact of tax rate change - 47
Items that may be subsequently reclassified
to profit
or loss
Foreign exchange translation difference 439 (1,045)
Effective portion of changes in fair value
of cash flow hedges 584 (482)
Total other comprehensive expense 284 (1,026)
Total comprehensive (expense)/income for
the year attributable to
owners of the parent (4,317) 17,561
-------- --------
Consolidated Statement of Changes in Equity
for the year ended 31 March 2021
2021 2020
GBP000 GBP000
--------- -------------
Total comprehensive (expense)/income for
the year (4,317) 17,561
Dividends to shareholders (8,674) (12,055)
Net movement relating to shares held by Vp
Employee Trust (5,076) (2,396)
Share option charge in the year 1,098 758
Tax movements to equity 165 (648)
Impact of tax rate change - (33)
Change in Equity (16,804) 3,187
Equity at start of year 169,921 168,885
Effect of changes in accounting standards - (2,151)
--------- ---------
Equity at end of year 153,117 169,921
--------- ---------
Consolidated Balance Sheet
as at 31 March 2021
Note 2021 2020
GBP000 GBP000
---------- ----------
Non-current assets
Property, plant and equipment 233,912 247,761
Intangible assets 64,366 74,267
Right of use asset 53,311 68,566
Employee benefits 2,175 3,018
---------- ----------
Total non-current assets 353,764 393,612
---------- ----------
Current assets
Inventories 7,342 9,073
Trade and other receivables 66,546 84,263
Income tax receivable 817 1,003
Cash and cash equivalents 4 15,917 20,094
---------- ----------
Total current assets 90,622 114,433
---------- ----------
Total assets 444,386 508,045
---------- ----------
Current liabilities
Interest-bearing loans and borrowings 4 (73,009) (6,161)
Lease liabilities (14,909) (17,692)
Trade and other payables (86,163) (75,186)
---------- ----------
Total current liabilities (174,081) (99,039)
Non-current liabilities
Interest-bearing loans and borrowings 4 (64,814) (173,739)
Lease liabilities (41,980) (54,158)
Deferred tax liabilities (10,394) (11,188)
---------- ----------
Total non-current liabilities (117,188) (239,085)
---------- ----------
Total liabilities (291,269) (338,124)
---------- ----------
Net assets 153,117 169,921
---------- ----------
Equity
Issued share capital 2,008 2,008
Capital redemption reserve 301 301
Share premium 16,192 16,192
Foreign currency translation
reserve (1,386) (1,825)
Hedging reserve (221) (805)
Retained earnings 136,196 154,023
---------- ----------
Total equity attributable to equity holders
of the parent 153,090 169,894
Non-controlling interests 27 27
---------- ----------
Total equity 153,117 169,921
---------- ----------
Consolidated Statement of Cash Flows
for the year ended 31 March 2021
2021 2020
Note GBP000 GBP000
----- --------- ---------
Cash flow from operating activities
(Loss)/profit before taxation (2,269) 28,366
Share based payment charge 1,098 758
Depreciation 1 44,980 46,160
Depreciation of right of use asset 20,752 22,177
Amortisation and impairment 1 10,373 16,756
Release of arrangement fees 215 -
Financial expense 7,760 8,892
Financial income (8) (52)
Profit on sale of property, plant and equipment (4,263) (8,939)
--------- ---------
Operating cash flow before changes in working
capital 78,638 114,118
Decrease/(increase) in inventories 1,731 (1,215)
Decrease/(increase) in trade and other receivables 17,717 (3,890)
Increase/(decrease) in trade and other payables 14,450 (8,898)
--------- ---------
Cash generated from operations 112,536 100,115
Interest paid (4,723) (4,454)
Interest element of finance lease rental
payments (38) (92)
Interest received 7 10
Income tax paid (2,867) (10,694)
--------- ---------
Net cash generated from operating activities 104,915 84,885
--------- ---------
Cash flow from investing activities
Proceeds from sale of property, plant and
equipment 17,536 21,381
Purchase of property, plant and equipment (46,582) (54,686)
Acquisition of businesses and subsidiaries
(net of cash acquired) - (3,325)
--------- ---------
Net cash used in investing activities (29,046) (36,630)
--------- ---------
Cash flow from financing activities
Purchase of own shares by Employee Trust (5,076) (2,396)
Repayment of borrowings (53,000) (94,000)
New loans 17,000 89,000
Payment of lease liabilities (24,107) (26,530)
Dividends paid (8,674) (12,055)
--------- ---------
Net cash used in financing activities (73,857) (45,981)
--------- ---------
Increase in cash and cash equivalents 2,012 2,274
Effect of exchange rate fluctuations on
cash held (242) (259)
Cash and cash equivalents net of overdrafts
at the beginning
of the year 14,147 12,132
---------
Cash and cash equivalents net of overdrafts
at the end of the year 15,917 14,147
--------- ---------
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 2021. The accounting policies
applied are in line with those applied in the annual financial
statements for the year ended 31 March 2020.
EU Law (IAS Regulation EC1606/2002) requires that the
consolidated accounts of the Group for the year ended 31 March 2021
be prepared in accordance with International Financial Reporting
Standards ("IFRSs") as adopted for use in the EU ('adopted
IFRSs').
Whilst the financial information included in this announcement
has been computed in accordance with adopted IFRSs, this
announcement does not itself contain sufficient information to
comply with IFRSs. The Company expects to publish full financial
statements in June 2021.
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 March 2021 or
2020. Statutory accounts for 31 March 2020 have been delivered to
the registrar of companies, and those for 31 March 2021 will be
delivered in due course. The auditor has reported on the 31 March
2020 accounts; the reports were (i) unqualified, (ii) did not
include a reference to any matters 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.
The financial statements were approved by the Board of Directors
on 8 June 2021.
Going Concern
Notwithstanding the impact of Covid 19, the Group ended the
financial year in a healthy financial position. The Group continues
to generate strong cash flows and net debt reduced by GBP37.9
million from GBP159.8 million at 31 March 2020 to GBP121.9 million
at 31 March 2021. EBITDA before exceptional items and IFRS 16
impact totalled GBP72.7 million which was lower than prior year
GBP98.1 million due to the impact of Covid 19. The Business Review
above sets out the Group's business activities, markets and outlook
for the forthcoming year and beyond.
The Group finances its operations through a combination of
shareholders' funds, bank borrowings, finance leases and operating
leases. The capital structure is monitored using the gearing ratio
of adjusted Net Debt/EBITDA. The Group's funding requirements are
largely driven by capital expenditure and acquisition activity.
As at 31 March 2021 the Group had GBP200.0 million of debt
capacity (2020: GBP200.0 million) comprising committed revolving
credit facilities of GBP135.0 million and a GBP65.0 million private
placement which are subject to covenant testing. In addition to the
committed facilities, the Group net overdraft facility at the
year-end was GBP7.5 million (2020: GBP7.5 million).
The GBP135.0 million revolving credit facilities were due to
mature in December 2021. Consequently in April 2021, the Group drew
down a new GBP28.0 million seven year private placement under the
existing agreement with PGIM, Inc. In June 2021, the Group also
refinanced its GBP135.0 million committed revolving credit
facilities with a new GBP90.0 million facility. The new revolving
credit facility agreement also includes a GBP20.0m uncommitted
accordion facility. Management are in regular dialogue with our
lenders who continue to express their commitment to the
business.
The Board has evaluated the facilities and covenants on the
basis of the budget for 2021/22 (including 2022/23 long term
forecast). All of which has been prepared taking into account the
current economic climate, together with appropriate sensitivity
analysis. Stress scenarios have also been considered by the Board.
Under these scenarios material revenue reductions have been applied
for the financial year ended 31 March 2022 against the Group's
original budget. All scenarios retain adequate headroom against
borrowing facilities and fall within the existing covenants.
Our most severe downside modelling, which reflects a 20%
reduction in revenue levels demonstrates headroom over borrowing
facilities and existing covenant levels throughout the forecast
period to the end of June 2022.
On the basis of this testing, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operation for the foreseeable future. For this reason the going
concern basis has been adopted in preparation of the consolidated
financial statements.
1. Business Segments
Revenue Depreciation, Operating profit
amortisation before amortisation
and and exceptional
impairment items
2021 2020 2021 2020 2021 2020
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- -------- -------- ------- ------- ----------- ----------
UK 281,309 331,005 50,157 58,346 30,266 53,672
International 26,688 31,922 5,196 4,570 662 1,808
--------------- -------- -------- ------- ------- ----------- ----------
Total 307,997 362,927 55,353 62,916 30,928 55,480
--------------- -------- -------- ------- ------- ----------- ----------
Operating profit before amortisation and exceptional items is
reconciled to profit before tax in the Income Statement. In
addition, all performance measures stated as before amortisation
are also before impairment of intangibles and exceptional
items.
The amortisation and impairment charge of GBP10.4 million (2020:
GBP16.8 million) includes GBP7.1 million (2020: GBP13.2 million) in
relation to impairment of goodwill and intangibles.
Furthermore, return on average capital employed is based on
profit before tax, interest, amortisation and exceptional items
divided by average capital employed on a monthly basis.
2. Exceptional Items
During the year, the Group incurred GBP15.1 million (2020:
GBP1.5 million) of exceptional costs in relation to regulatory
review costs, restructuring costs and Covid-19 covenant
amendments.
The Competition and Markets Authority (CMA) announced on 17
December 2020 that three businesses, including a part of the
Group's excavation support system business (Groundforce), were
involved in anti--competitive behaviour. Consequently, the CMA
imposed a penalty of GBP11.2 million on the Group.
In April 2019, the CMA had announced its provisional findings
and as required by accounting standard IAS 37, an exceptional cost
of GBP4.5 million was recorded in the Annual Report and Accounts
for the year ended 31 March 2019.
Although, the Board fundamentally disagrees with the conclusions
of the CMA it was determined after careful consideration that on
balance it would be in the best interests of the Group not to
appeal the decision and to pay the penalty when it became due in
February 2021. A further exceptional item of GBP6.8m has been
recognised after utilising the GBP4.5 million provision already
held at 31 March 2020. The Group also incurred professional fees of
GBP0.7m relating to this matter which are also classified as
exceptional.
During the period the Group also incurred GBP7.4 million of
exceptional costs in relation to restructuring costs across the
Group, arising primarily from required cost mitigation actions as a
result of the Covid 19 impact on business revenues.
As noted in the previous year's accounts, in May 2020 the Group
incurred financing expenses of GBP0.2 million relating to
precautionary Covid-19 covenant amendments.
In the prior year ended 31 March 2020, the Group incurred GBP1.5
million of exceptional costs in relation to regulatory review costs
and continued restructuring costs regarding severance payments.
Exceptional costs are analysed as follows:
2021 2020
GBP000 GBP000
Regulatory review costs 7,519 834
Restructuring costs 7,353 684
Exceptional items recognised in Operating
Profit 14,872 1,518
Financing expense 200 -
------- -------
Exceptional items recognised in Net Financial 200 -
Expenses
------- -------
Total Exceptional items 15,072 1,518
------- -------
3. Earnings Per Share
The calculation of basic earnings/ (loss) per share of (11.62)
pence (2020: 46.92 pence) is based on the loss attributable to
equity holders of the parent of GBP4,601,000 (2020: profit of
GBP18,587,000) and a weighted average number of ordinary shares
outstanding during the year ended 31 March 2021 of 39,595,000
(2020: 39,618,000), calculated as follows:
2021 2020
Shares Shares
000s 000s
Issued ordinary shares 40,154 40,154
Effect of own shares held (559) (536)
------- -------
Weighted average number of ordinary shares 39,595 39,618
------- -------
Basic earnings per share before the amortisation of intangibles
and exceptional items was 46.56 pence (2020: 90.21 pence) and is
based on an after tax add back of GBP23,073,000 (2020:
GBP17,153,000) in respect of the amortisation of intangibles and
exceptional items.
The calculation of diluted earnings/ (loss) per share of (11.62)
pence (2020: 46.17 pence) is based on loss attributable to equity
holders of the parent of GBP4,601,000 (2020: GBP18,587,000) and a
weighted average number of ordinary shares outstanding during the
year ended 31 March 2021 of 40,218,000 (2020: 40,260,000),
calculated as follows:
2021 2020
Shares Shares
000s 000s
Weighted average number of ordinary shares 39,595 39,618
Effect of share options in issue 623 642
------- -------
Weighted average number of ordinary shares
(diluted) 40,218 40,260
------- -------
The calculation of diluted earnings per share does not assume
conversion, exercise, or other issue of potential ordinary shares
that would have an antidilutive effect on earnings per share.
Diluted earnings per share before the amortisation of
intangibles and exceptional items was 45.84 pence (2020: 88.77
pence).
4. Analysis of Net Debt At At
31 March 1 April
2021 2020
GBP000 GBP000
Cash and cash equivalents 15,917 20,094
Bank overdraft - (5,947)
---------- ----------
Cash and cash equivalents as per cash
flow statement 15,917 14,147
Current debt obligations, net of arrangement
fees (73,009) (214)
Non-current debt, net of arrangement
fees (64,814) (173,739)
---------- ----------
Net debt (121,906) (159,806)
---------- ----------
Year end gearing (calculated as net debt expressed as a
percentage of shareholders' funds) stands at 81% (2020: 94%).
As at 31 March 2021 the Group had GBP200.0 million (2020:
GBP200.0 million) of debt capacity comprising committed revolving
credit facilities of GBP135.0 million and a GBP65.0 million private
placement. In addition to the committed facilities, the Group net
overdraft facility at the year-end was GBP7.5 million (2020: GBP7.5
million).
The GBP135.0 million revolving credit facilities were due to
mature in December 2021. Consequently in April 2021, the Group drew
down a new GBP28.0 million seven year private placement under the
existing agreement with PGIM, Inc. In June 2021, the Group also
refinanced its GBP135.0m committed revolving credit facilities with
a new GBP90.0 million facility. The new revolving credit facility
agreement also includes a GBP20.0m uncommitted accordion
facility.
5. Taxation
The charge for taxation for the year represents a negative
effective tax rate of (102.8%) (2020: 34.5%). The underlying tax
rate was 24.2% (2020: 20.3%) before exceptional items, prior year
adjustments, impact of tax rate changes and impairment of
intangibles.
6. Dividend
The Board has proposed a final dividend of 25.0 pence per share
to be paid on 5 August 2021 to shareholders on the register at 25
June 2021. As no interim dividend was paid, this makes a total
dividend for the year of 25.0 pence per share (2020: 30.45 pence
per share). A special dividend of 22.0 pence per share was paid to
shareholders on 17 January 2021 in lieu of the final dividend for
the financial year ended 31 March 2020, which was delayed due to
Covid-19 uncertainties.
The ex-dividend date will be 24 June 2021 and the last day to
elect to participate in the dividend reinvestment plan will be 9
July 2021.
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 May 2021. 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.
Covid-19 has not been identified as a specific new risk, but
considered in relation to each area of risk it impacts. As such, 3
of the 8 principal risks disclosed in this report (Market, Safety
and Financial) have an increased risk status.
The executive board created a Covid-19 working party (Group CEO,
Group FD, Group HR Director and senior Divisional Managing
Directors) to consider the risks facing the Group and individual
Divisions. This group has met regularly throughout the pandemic and
continues to meet as the Group navigates through the re-opening of
the economy. Refer to further discussion regarding going concern
above.
Further information is provided below on our principal risks and
mitigating actions to address them.
Market risk - increased due to the impact of Covid-19
Risk description
An economic downturn (as a result of economic cycles, political
or Brexit related uncertainty) 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.
The Covid-19 pandemic has impacted the business, some Divisions
being more affected than others depending on the end market they
serve.
Competition
Risk description
The equipment rental market is already competitive and could
become more so, potentially 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 9.2% (2020: 14.5%) in 2021. The quality of the
Group's fleet disposal margins also demonstrate robust asset
management and appropriate depreciation policies. Immediate action
taken in response to Covid 19 was to defer capital expenditure in
many areas. Selective spending resulted in fleet capital spend of
GBP40.2 million (2020: GBP49.1 million).
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.
The Group utilised the Government's Job Retention Scheme until
October 2020.
Safety - increased due to the impact of Covid-19
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.
The Covid-19 pandemic has had a significant impact on our
employees, many of whom successfully transitioned to working from
home as required during the various lockdowns. Our IT processes and
prior planning facilitated this. In line with Government guidance,
we have commenced a phased transition back into working at our
various back office locations.
Our compliance teams continue to carefully considered safe
methods of working in our depot network and with due consideration
of how the business can safely interact with our customers.
Financial risks - increased due to the impact of Covid-19
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.
Our strong balance sheet position and committed borrowing
facilities provided adequate headroom against the downturn in
activity caused by the Covid-19 pandemic. Notwithstanding the
impact of Covid-19, the Group ended the financial year in a healthy
financial position. The Group continues to generate strong cash
flows and net debt reduced by GBP37.9 million from GBP159.8 million
at 31 March 2020 to GBP121.9 million at 31 March 2021. 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 interest
rate swaps and 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 56 days
(2020: 62 days) and bad debts, as a percentage of revenue remained
low at 0.6% (2020: 0.8%).
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 defined and 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 (e.g. GDPR) 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
the wider business (including GDPR, Modern Slavery, Competition
Law, Bribery and Corruption) by representatives from Group Finance,
HR, Internal Audit and IT. Many of these programmes are completed
using our preferred on line training portals.
-- Established whistleblowing policy circulated to all employees.
-- Use of legal advisers where required.
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 2021
will be provided to shareholders before the end of June 2021.
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 IFRSs as adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union,
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.
10. Alternative Performance Measures
(i) All performance measures stated as before amortisation are
also before impairment of intangibles and exceptional items.
(ii) Basic earnings per share pre amortisation and exceptional
items is reconciled to basic earnings per share in note 3.
(iii) Profit before tax, amortisation and exceptional items is
reconciled to profit before tax in the Income Statement.
(iv) EBITDA is reconciled to profit before tax, amortisation and
exceptional items by adding back net financial expenses and
depreciation.
(v) Return on average capital employed is based on profit before
tax, interest, amortisation and exceptional items divided by
average capital employed on a monthly basis using the management
accounts. Profit before tax, interest, amortisation and exceptional
items is reconciled to profit before interest and tax in the Income
Statement.
For and on behalf of the Board of Directors.
J F G Pilkington A M Bainbridge
Director Director
- Ends -
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FR EAXKXEEAFEFA
(END) Dow Jones Newswires
June 08, 2021 02:00 ET (06:00 GMT)
Vp (LSE:VP.)
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