REG - Vp PLC - Final Results
07/06/2023 07:00
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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 2023 31 March 2022 %
change
Revenues (£m) 371.5 350.9 +6%
Adjusted profit before tax, amortisation, impairment of intangible assets and 40.5 38.9 +4%
exceptional items* (£m)
Return on average capital employed* 14.4% 14.5%
Capital investment in rental fleet (£m) 59.9 59.8 0%
Net debt excluding lease liabilities* (£m) 134.4 130.6 +3%
Exceptional items 5.0 - -
Adjusted basic EPS before amortisation, impairment of intangible assets and 79.0 71.2 +11%
exceptional items* (pence)
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 (£m) 30.7 35.6
Statutory earnings per share (pence) 58.1 64.5
Profit before tax, amortisation, impairment of intangible assets and 40.2 38.9 +3%
exceptional items (£m)
* 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 £371.5 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 (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 (http://www.vpplc.com)
Neil Stothard, Chief Executive
Anna Bielby, Chief Financial Officer
Media enquiries:
Buchanan
Henry Harrison‐Topham / Jamie Hooper / George Beale Tel: +44 (0) 20 7466 5000
Vp@buchanan.uk.com www.buchanan.uk.com (http://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 £40.5
million (2022: £38.9 million) on revenue ahead 6% to £371.5 million (2022:
£350.9 million). Adjusted EBITDA* improved to £92.9 million (2022: £88.9
million).
Capital investment in the rental fleet was £59.9 million (2022: £59.8
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 £134.4 million (2022:
£130.6 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 £1.7 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 £371.5 million £350.9 million
Adjusted operating profit before amortisation, impairment of intangible assets £46.0 million £43.3 million
and exceptional items*
Adjusted operating margin* 12.4% 12.3%
Investment in rental fleet £59.9 million £59.8 million
Return on average capital employed* 14.4% 14.5%
Statutory operating profit £39.3 million £43.0 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 £46.0 million compared with
prior year of £43.3 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 £371.5
million (2022: £350.9 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 £59.9
million was at a similar level to prior year of £59.8 million. Fleet
disposals proceeds were £24.6 million (2022: £17.4 million). Net capital
expenditure therefore reduced to £35.3 million (2022: £42.4 million). The
disposal of fleet in the year generated profits on disposal of £9.1 million
(2022: £7.0 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 (£15 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 £3.3 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 £63.3 million (2022: £50.9 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 £333.4 million £320.2 million
Adjusted operating profit before amortisation, impairment of intangible assets £42.9 million £41.8 million
and exceptional items*
Investment in rental fleet £53.6 million £55.2 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 £42.9 million
compared with £41.8 million prior year. Revenue of £333.4 million (2022:
£320.2 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 £38.1 million £30.7 million
Adjusted operating profit before amortisation, impairment of intangible assets £3.1 million £1.5 million
and exceptional items*
Investment in rental fleet £6.3 million £4.6 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 £3.1
million, (2022: £1.5 million) on revenue 24% ahead of prior year of £38.1
million (2022: £30.7 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 £371.5 million (2022: £350.9
million). Profit before taxation, amortisation, impairment of intangible
assets and exceptional items increased to £40.2 million (2022: £38.9
million) with net margins at 10.8% (2022: 11.1%). Statutory profit before
tax was £30.7 million (2022: £35.6 million). The return on average capital
employed was 14.4% (2022: 14.5%).
EXCEPTIONAL ITEMS
This year the Group has recorded exceptional items of £5.0 million (2022:
£nil), 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 £1.7 million of costs from the Group's
terminated formal sale process alongside restructuring costs of £3.3 million,
mainly in relation to depot closures across three of the Group's business
units.
EARNINGS PER SHARE, DIVIDEND 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 £4.9 million to £252.4
million. The movement in the year mainly comprised £66.9 million (2022:
£68.0 million) of capital expenditure offset by depreciation of £46.9
million (2022: £45.5 million) and £15.7 million (2022: £10.7 million) of
disposals (net book value).
Rental equipment at £220.6 million (2022: £216.6 million) accounts for 87%
of property, plant and equipment net book value. Expenditure on equipment
for hire was £59.9 million (2022: £59.8 million) and depreciation of rental
equipment was £40.9 million (2022: £39.9 million).
Intangible assets are £57.7 million (2022: £62.4 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 £77.6 million at 31 March 2023 (2022: £72.8 million). Bad
debt and credit note provisions totalled £4.6 million (2022: £5.2 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 £2.3
million (2022: £2.7 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 £3.8
million to £134.4 million.
The Group continues to generate strong cash flows with £80.2 million (2022:
£90.4 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 £63.3 million (2022: £68.7
million). Proceeds from disposal of assets totalled £24.9 million (2022:
£17.8 million), generating a profit on disposal of £9.2 million (2022: £7.0
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 £5.4
million (2022: £4.5 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 £8.6 million (2022: £7.4 million).
Cash tax was £5.5 million (2022: £6.3 million).
Dividend payments to shareholders totalled £14.5 million (2022: £14.0
million), and cash investment in own shares on behalf of the Employee Benefit
Trust (EBT) during the year was £1.1 million (2022: £0.5 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 £183.0 million debt capacity (2022:
£183.0 million) comprising £90.0 million committed revolving credit
facilities and £93.0 million private placement agreements. At 31 March 2023
£146 million of the facilities were drawn down (2022: £145 million). In
addition to the committed facilities, the Group's net overdraft facility at
the year end was £7.5 million (2022: £7.5 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 £20.0 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 £93.0 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 £7.7 million (2022: £10.1 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*
£000 £000
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 1
exceptional items
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
£000 £000
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
£000 £000
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
£000 £000
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 £000 £000
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 £90.0 million, drawn to £53.0
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
£000 £000 £000 £000
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 £4.5 million (2022: £3.3 million) includes £1.2 million (2022:
£nil) 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
£000 £000
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
£1.2 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
£23,010,000 (2022: £25,535,000) 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 £8,067,000 (2022: £2,675,000) 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 £23,010,000 (2022 £25,535,000) 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 Mar 2022 Cash movements Non-cash movements As at 31 Mar 2023
£000 £000 £000 £000
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 £183.0 million (2022: £183.0 million) of
debt capacity comprising committed revolving credit facilities of £90.0
million and private placements of £93.0 million. In addition to the
committed facilities, the Group net overdraft facility at the year-end was
£7.5 million (2022: £7.5 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 £190.5 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 £3.8 million from £130.6 million at 31 March 2022 to £134.4
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
£'000 £'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 40,489 38,905
exceptional items APM (PBTAE)
Interest (excluding interest on lease liabilities) 5,542 4,431
Adjusted operating profit before tax, amortisation, impairment of intangible 46,031 43,336
assets and exceptional items APM
Depreciation (excluding depreciation of right of use assets) 46,853 45,532
Adjusted EBITDA APM 92,884 88,868
2023 2022
UK Segment International Segment Total UK Segment International Segment Total
Operating profit before tax, amortisation, impairment of intangible assets and 45,564 3,211 48,775 44,704 1,595 46,299
exceptionals
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 42,942 3,089 46,031 41,832 1,504 43,336
assets and exceptional items APM
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 20.3 6.7
after tax
Impact of IFRS 16 0.6 -
Adjusted basic earnings per share APM 79.0 71.2
2023 2022
£'000 £'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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