REG - Vp PLC - Final Results <Origin Href="QuoteRef">VP.L</Origin>

VPAnnouncement

07/06/2016 07:06

RNS Number : 3738A
Vp PLC
07 June 2016
For immediate release
7 June 2016
Vp plc
("Vp", the "Group" or the "Company")
Final Results
Vp plc, the equipment rental specialist, today announces its Final Results for the year ended 31 March 2016.
Highlights
 11% improvement in profit before tax and amortisation to 29.8 million (2015: 26.8 million)
 2% increase in revenues to 208.7 million (2015: 205.6 million)
 14% increase in basic earnings per share, pre-amortisation, to 62.21 pence
 Return on average capital employed increased to 16.3% (2015: 16.2%)
 EBITDA up 10% to 59.3 million (2015: 53.8 million)
 Net debt of 86.1 million (2015: 66.8 million) after funding:
o Capital investment in the fleet of 45.9 million
o Acquisitions of Test & Measurement and Higher Access for 8.1 million
 Final dividend proposed of 13.5 pence per share, making a total of 18.85 pence for the full year (2015: 16.5 pence), an increase of 14%
Jeremy Pilkington, Chairman of Vp plc, commented:
"Following last year's record breaking results, the Group has continued to make further good progress this year reporting another strong financial performance with improvements in profits, margins and returns, delivered from a relatively modest growth in revenues. This trend is expected to continue as the varying demands of supportive infrastructure, housebuilding and construction markets play against a challenged oil and gas sector."


"It has also been a busy period for acquisitions, with two businesses acquired in the UK and post year end, the acquisition of TR Pty Ltd, which significantly expands the Group's non-UK revenue base, one of our key longer term strategic objectives."
"We enter the new financial year in good shape, with most end markets offering supportive trading environments and with the prospect of contributions from our acquisitions. Our business model of diverse and specialist services continues to serve us well and with the new financial year starting positively, we look forward to another year of progress for Vp and our shareholders."
- Ends -
Enquiries:
Vp plc
Jeremy Pilkington, Chairman
Tel: +44 (0) 1423 533 400
jeremypilkington@vpplc.com
Neil Stothard, Chief Executive
Tel: +44 (0) 1423 533 400
neil.stothard@vpplc.com
Allison Bainbridge, Group Finance Director
Tel: +44 (0) 1423 533 400
allison.bainbridge@vpplc.com
www.vpplc.com
Media enquiries:
Buchanan
Henry Harrison-Topham / Jane Glover
Tel: +44 (0) 20 7466 5000
Vp@buchanan.uk.com
www.buchanan.uk.com


CHAIRMAN'S STATEMENT
I am delighted to report to shareholders on another year of strong progress for the Group, both financially and also in terms of three exciting acquisitions, one of which, completed just after the year end, delivers part of our long term objective to expand the Group's overseas presence.
We have delivered an 11% increase in pre-tax profits at 29.8m (2015: 26.8m), beating last year's recording breaking result. Revenues improved 2% to 208.7m (2015: 205.6m). Earnings per share increased 14% to 62.2 pence per share (2015: 54.5 pence per share) and both margins and return on capital employed also moved ahead.
Net debt at the year-end increased to 86.1m (2015: 66.8m) after capital expenditure on the rental fleet of 45.9m (2015: 49.3m) and including the 8.1m outlay on the two acquisitions made during the year.
In view of this excellent set of results, the Board is recommending a final dividend of 13.5 pence per share making a total for the year of 18.85 pence per share, an increase of 14%. Subject to shareholders' approval at our Annual General Meeting on 26 July 2016, it is proposed to pay the final dividend on 2 August 2016 to members registered as at 8 July 2016.
It has been a busy period for acquisitions, with two concluded during the year and a third which completed just post the year end in April.
In November, we acquired Test & Measurement, a long established leader in the hire and sale of electrical instrumentation and environment monitoring equipment. Test & Measurement has two branches in the UK and now operates as part of our ESS Safeforce business.
In March, we acquired Higher Access Limited, a market leading hirer of tracked aerial work platforms. These products offer significant performance advantages over traditional access products and will also complement the service offerings provided by other businesses within the Group. Higher Access will continue to operate as a standalone business, working alongside our UK Forks activities.
For some time now, we have been seeking to grow our non-UK revenues, subject to identifying the right quality opportunities. We were therefore very pleased, in April, to acquire TR Pty Ltd, a market leading specialist provider of test and measurement equipment, rental and calibration services with 13 branches in Australia, New Zealand and Malaysia. We look forward to working with the TR team to grow this already excellent business.
It is my great pleasure, as always, to thank everyone for their hard work and loyalty which has made these excellent results possible but especially this year to extend a very warm welcome to all the new members who have joined the Group.
Jeremy Pilkington
7 June 2016


BUSINESS REVIEW
OVERVIEW
Vp plc is a specialist rental business providing products and services to a diverse range of end markets including infrastructure, construction, housebuilding and oil and gas, both in the UK and overseas.
Year ended
31 March 2016
Year ended
31 March 2015
Revenue
208.7 million
205.6 million
Operating profit before amortisation
31.9 million
28.8 million
Operating margin
15.3%
14.0%
Investment in rental fleet
45.9 million
49.3 million
ROACE
16.3%
16.2%
The Group has made further significant progress in the current year, reporting an 11% increase in operating profits.
Operating profits were 31.9 million which compares with 28.8 million in the prior year. Operating margins again advanced strongly to 15.3%, and our key measure of profit quality, return on average capital employed, improved to 16.3% (2015: 16.2%) in the current year.
Market behaviours have been mixed, but generally favourable. Across our four core sectors, we have seen good support in infrastructure, housebuilding and construction markets, partially mitigated by a challenged oil and gas sector, where demand has fallen sharply as investment has been cut in response to a period of historically low oil prices.
Critically, the Group continues to deliver strong cash generation which is highlighted by the advance in EBITDA, which grew to 59.3 million (2015: 53.8 million), an increase of 10%.
Investment in rental fleet was robust at 45.9 million (2015: 49.3 million). Fleet disposals continue to be a key element of the capital investment process and proceeds increased to 17.2 million (2015: 12.0 million) generating profit on disposal of 6.2 million (2015: 3.3 million).
In addition to organic investment in the fleet, the Group made two acquisitions in the period, acquiring Test & Measurement Group Limited for 3.95 million in November 2015 and Higher Access Limited for 4.1 million in March 2016.
We have for some time been alert to opportunities to further expand our trading footprint overseas and we were delighted to announce, shortly after the end of the financial year, the acquisition of TR Pty Ltd (TR) on 21 April 2016 for a cash consideration of AUD $17.4 million (Australian dollars) and assumed net debt of AUD $6.6 million. TR adds significantly to the Group's existing Asia Pacific trading locations in Perth and Singapore, adding eight branches in Australia, three in New Zealand and two in Malaysia.
In the coming year, we anticipate that the UK infrastructure market will continue to remain supportive. The current Asset Management Programme (AMP6) in the water industry is in its second year and we anticipate that we will see activity in this sector start to pick up later in our financial year.
The non-residential construction market remains mixed, though overall we expect the sector to be positive for the Group. Equally, housebuilding is expected to remain supportive. The final key market area is oil and gas which represented c.9% of Group revenues in the year under review. This sector is still challenged by the collapse of the oil price and we expect the recovery will be over the medium rather than the short term.
The specialist nature of our services continues to provide an attractive, long term support to our customer base and the results for 2015/16 endorse the quality of our business offer.


UK Forks
Rough terrain material handling equipment and tracked access platforms for the housebuilding, general construction and industrial markets.

Year ended
31 March 2016
Year ended
31 March 2015
Revenue
20.0 million
18.2 million
Operating profit before amortisation 
5.2 million
4.0 million
Investment in rental fleet
11.1 million
11.2 million
UK Forks enjoyed another year of strong progress delivering a 30% increase in profits to 5.2 million (2015: 4.0 million). Revenues grew by 10% from 18.2 million to 20.0 million.
The business experienced similar levels of demand to prior year from both the housebuilding and construction sectors, a point reinforced by maintained levels of investment in the rental fleet of 11.1 million (2015: 11.2 million). Our diverse customer base continues to recognise and value the importance of our commitment to delivering outstanding service and backup.
On 1 March 2016 the business acquired Higher Access Limited, specialists in the rental of tracked access platforms to a wide range of markets including construction, transmission and utilities. Higher Access will work alongside the UK Forks telehandler activity and we look forward to helping their highly experienced team to continue the development of the business.
In the new financial year, we anticipate that housebuild and construction will remain supportive which, added to further development of the Higher Access business, points to another year of progress for the division.


Groundforce
Excavation support systems and specialist products for the water, civil engineering and construction industries in the UK, the Republic of Ireland and mainland Europe.
Year ended
31 March 2016
Year ended
31 March 2015
Revenue
45.0 million
44.4 million
Operating profit before amortisation
9.6 million
8.9 million
Investment in rental fleet
6.5 million
5.7 million
Groundforce delivered another good result, with profits improving to 9.6 million (2015: 8.9 million), a 9% increase year on year, from revenues of 45.0 million, which were marginally ahead of the prior year.
The shoring division made progress, with good contributions from UK major projects, construction and housebuilding. As anticipated, demand from the Water Industry (AMP6) was at its cyclical low. Initiatives on new transport and operating structures, instigated in the prior year, also started to deliver important efficiencies to the business. Within the piling business the overall trading levels were flat and, like shoring, regional demand was mixed, with Scotland and Ireland more subdued. A review of fleet saw the successful divestment of the under-utilised vacuum excavator fleet, through trade sales, generating in excess of 1.25 million of proceeds.
A number of basement propping schemes throughout Europe went live and were completed in the year, the most notable being in Norway. The on-going Qatar metro contract, for a European based consortium, continued through the year, though our operations in Germany faced trading headwinds as construction demand softened.
Capital investment into the rental fleet was 6.5 million (2015: 5.7 million). This both augmented the product portfolio and maintained the quality of the existing fleet.
It is anticipated that next year most markets will be stable but the timing of the release of AMP6 related work will be an important factor, the current view being that this will begin towards the end of calendar year 2016.


TPA
Portable roadway access solutions to the transmission, outdoor events, construction and utility sectors in the UK and mainland Europe.

Year ended
31 March 2016
Year ended
31 March 2015
Revenue
13.6 million
14.6 million
Operating profit before amortisation
1.0 million
1.0 million
Investment in rental fleet
4.3 million
2.3 million
TPA experienced a 7% drop in revenue to 13.6 million (2015: 14.6 million) primarily driven by softer levels of demand in Germany. Despite the reduction in revenue, overall margins improved and operating profits of 1.0 million were in line with the prior year.
The UK business traded satisfactorily despite a slower than expected transmission sector, a situation that has prevailed since the break-up of the National Grid Alliances. As a consequence, there was an oversupply of product in the UK market, resulting in price pressure. This was mitigated, in part, by a planned and progressive re-alignment of the business mix, including the introduction of new products and services, which has created fresh revenue streams for the UK business.
Germany, like the UK, experienced a shortfall in demand from the key renewables and transmission markets, which were heavily impacted by delays in project starts, mainly caused by caution surrounding government subsidies and planning approvals.
Capital expenditure on the rental fleet totalled 4.3 million (2015: 2.3 million), including new products, and in support of contracts for the new financial year.
We expect improved prospects in the new financial year, with early signs of recovery in transmission activity in the UK, and a gradual recovery in the German market.


Hire Station
Tools and specialist products for industry, construction and home owners.

Year ended
31 March 2016
Year ended
31 March 2015
Revenue
82.5 million
77.0 million
Operating profit before amortisation
11.5 million
8.7 million
Investment in rental fleet
17.4 million
20.1 million
Hire Station had an excellent trading year, reporting a profit increase of 32% to 11.5 million (2015: 8.7 million) on revenues 7% ahead, at 82.5 million (2015: 77.0 million). .
Healthy capital investment of 17.4 million, focussed mainly on high demand assets, means that we continue to build one of the youngest hire fleets in the market. The focus on availability, quality and compliance remains the key to offering operational excellence to our customers, and this we believe gives us a true competitive advantage. As usual safety has remained at the top of the agenda and Hire Station was recently named "Safehire Company of the Year" at the prestigious Hire Awards of Excellence 2016 awards.
The tools business made significant progress during the year, with new locations opened in London, South Wales, Glasgow and Birmingham. The National Call centre in Manchester has been expanded and during the year we improved our lifting equipment offer and further enhanced our on line presence.
ESS Safeforce had another impressive trading year delivering growth in all of its key revenue streams. We successfully negotiated a five year contract to supply the Valero Milford Haven Oil refinery and the business broadened its product offer further with the acquisition in November 2016 of Test and Measurement Ltd.
The MEP business supplies specialist press fitting and electro fusion equipment and low level access equipment to the mechanical and electrical sector. Revenues and profits moved ahead strongly in the year, supported by new locations in London and enhancement of existing locations.
The Hire Station division has entered the new financial year in excellent shape and the end markets that it serves are all expected to be supportive.

Torrent Trackside
Infrastructure equipment and services for the railway renewals and maintenance industry.

Year ended
31 March 2016
Year ended
31 March 2015
Revenue
32.5 million
29.9 million
Operating profit before amortisation
3.4 million
3.4 million
Investment in rental fleet
5.2 million
4.7 million
Torrent Trackside delivered profits of 3.4 million (2015: 3.4 million) in the year from revenues up 9% on the prior year, at 32.5 million.
During the year the contractual relationship with Network Rail has continued to work well. The business experienced good demand on both plain line track renewals, as well as switches and crossings work, and had a busy year on the London Underground infrastructure programme, servicing Track Partnership, a joint venture between Balfour Beatty and TFL. Torrent secured new work on the Crossrail project with Carillion and excelled during the Christmas programme, one of the largest it has ever undertaken.
The Government is committed to investing in a programme of electrification to upgrade the UK railway network, and in Control Period 5 there are numerous high profile projects notably Great Western, Midland Mainline and the North West Liverpool to Manchester scheme. We have invested to create a large and modern fleet of portable overhead line products for use on these projects. Total fleet capex was 5.2 million (2015: 4.7 million).
During the year there were two long awaited reports issued about the future shape of the industry. The Hendy and Shaw reports address, respectively, the rail enhancement programme, and railway funding and devolution, and both were viewed positively by Torrent. Equally, in Network Rail, we have excellent relationships both centrally and at route level and feel well placed to support any structural changes that may occur in the future.
The current year has started well and opportunities remain in what is always a changing and demanding market place. Torrent Trackside has an exemplary reputation for safety, service and delivery and remains well positioned to capitalise on those opportunities.

Airpac Bukom
Equipment and service providers to the international oil and gas exploration and development markets.

Year ended 
31 March 2016
Year ended
31 March 2015
Revenue
15.2 million
21.5 million
Operating profit before amortisation
1.2 million
2.8 million
Investment in rental fleet
1.4 million
5.3 million
Further deterioration in global oil prices meant that trading conditions remained difficult across most of our service offerings. As oil companies curtailed capital expenditure on exploration and production projects, well testing activity continued the downward trend first experienced in the second half of the prior year and this has impacted activities across most of our regions. Whilst revenues and profits reduced as a consequence of the prevailing market conditions, the business remained profitable. Operating profits were 1.2 million (2015: 2.8 million) generated from revenues of 15.2 million (2015: 21.5 million).
We did see resilience in our trading in the Americas and the scope of our presence in Australia saw that region perform ahead of expectation. Liquid Natural Gas (LNG) infrastructure projects again provided the major source of revenue in Australia. On the LNG contracts at Curtis Island in Queensland, testing work was completed on the QCLNG site and APLNG wound down towards the end of the year. New awards were secured on the Wheatstone and Ichthys facilities in Western Australia and the Northern Territory respectively.
Investment in fleet was 1.4 million, well down on the prior year spend of 5.3 million. Whilst management has further aligned costs and structure to meet what will remain a challenging trading environment over the next 12 months, we continue to be engaged in discussions on new added-value opportunities, and at the end of the year, secured a major geothermal project in Scandinavia.
The short term trading background remains challenging but the Airpac Bukom team are focused on maximising returns from a quiet market place, with the prospect of some recovery in the medium term as oil and gas prices return to levels more viable for exploration and production investment.


PROSPECTS
We enter the new financial year in good shape, with most end markets offering supportive trading environments and with the prospect of fresh contributions from the three newly acquired businesses.
In particular, the acquisition of TR Group Pty underlines our determination to expand our trading horizons both in terms of product and geography. We believe that opportunity exists to further leverage Vp's key skill sets in equipment rental both in the UK and in overseas markets.
Reflecting this, and catalysed by the TR acquisition, we have, in the new financial year, started to report the Group's performance in two distinct segments. These are UK and International: International being defined as the consolidated performance of Airpac Bukom and TR, with the UK containing the consolidated performance of all other businesses within the Group.
Vp has, in the year under review, reported good progress, with further improvement in profit margins and returns, delivered from a relatively modest growth in revenues. This trend is expected to continue as the varying demands of supportive infrastructure, housebuilding and construction markets play against a challenged oil and gas sector.
The new financial year has started well and we look forward to another year of progression for Vp and our shareholders.
Neil Stothard
Chief Executive
7 June 2016


Consolidated Income Statement
for the year ended 31 March 2016
Note
2016
000
2015
000
Revenue
1
208,746
205,602
Cost of sales
(149,758)
(148,773)
Gross profit
58,988
56,829
Administrative expenses
(29,395)
(29,733)
Operating profit before amortisation
1
31,891
28,780
Amortisation
(2,298)
(1,684)
Operating profit
29,593
27,096
Net financial expense
(2,093)
(2,023)
Profit before taxation and amortisation
29,798
26,757
Amortisation
(2,298)
(1,684)
Profit before taxation
27,500
25,073
Taxation
4
(5,112)
(5,202)
Profit attributable to owners of the parent
22,388
19,871
Pence
Pence
Basic earnings per share
2
57.49
51.03
Diluted earnings per share
2
54.51
47.01
Dividend per share paid and proposed
5
18.85
16.50


Consolidated Statement of Comprehensive Income
for the year ended 31 March 2016


2016

2015


000

000




Profit for the year

22,388

19,871
Other comprehensive income/(expense):
Items that will not be reclassified to profit or loss


Remeasurements of defined benefit pension scheme

122

(55)
Tax on items taken to other comprehensive income

(23)

12
Impact of tax rate change

(39)

-
Foreign exchange translation difference

693

(1,028)
Items that may be subsequently reclassified to profit
or loss



Effective portion of changes in fair value of cash flow hedges

581

(1,011)
Total other comprehensive income/(expense)

1,334

(2,082)
Total comprehensive income for the year

23,722

17,789


Consolidated Statement of Changes in Equity
for the year ended 31 March 2016

2016
2015

000
000
Total comprehensive income for the year
23,722
17,789
Dividends paid
(6,568)
(5,986)
Net movement relating to shares held by Vp Employee Trust
(10,567)
(11,059)
Share option charge in the year
1,904
1,894
Tax movements to equity
1,123
1,145
Impact of tax rate change
(31)
-
Change in Equity
9,583
3,783
Equity at start of year
111,767
107,984
Equity at end of year
121,350
111,767


Consolidated Balance Sheet
as at 31 March 2016

Note
2016

2015


000

000



Non-current assets


Property, plant and equipment

167,201

147,817
Intangible assets

46,363

43,394
Employee benefits

1,534

1,043
Total non-current assets
215,098

192,254
Current assets


Inventories

5,363

6,495
Trade and other receivables

44,817

41,102
Cash and cash equivalents
3
4,517

5,236
Total current assets

54,697

52,833
Total assets

269,795

245,087


Current liabilities


Interest bearing loans and borrowings
3
(873)

-
Income tax payable

(931)

(1,948)
Trade and other payables

(51,567)

(54,988)
Total current liabilities

(53,371)

(56,936)



Non-current liabilities


Interest bearing loans and borrowings
3
(89,778)

(72,000)
Deferred tax liabilities

(5,296)

(4,384)
Total non-current liabilities

(95,074)

(76,384)
Total liabilities

(148,445)

(133,320)
Net assets

121,350

111,767


Equity


Issued share capital

2,008

2,008
Capital redemption reserve

301

301
Share premium account

16,192

16,192
Hedging reserve

(520)

(1,101)
Retained earnings

103,342

94,340
Total equity attributable to equity holders of the parent
121,323

111,740
Non-controlling interests
27

27
Total equity

121,350

111,767


Consolidated Statement of Cash Flows
for the year ended 31 March 2016

Note
2016

2015


000

000
Cash flow from operating activities


Profit before taxation

27,500

25,073
Pension fund contributions in excess of service cost

(369)

(409)
Share based payment charge

1,904

1,894
Depreciation
1
27,375

25,023
Amortisation and impairment
1
2,298

1,684
Financial expense

2,097

2,024
Financial income

(4)

(1)
Profit on sale of property, plant and equipment

(6,246)

(3,277)
Operating cash flow before changes in working capital

54,555

52,011
Decrease/(increase) in inventories

1,132

(854)
Increase in trade and other receivables

(2,101)

(2,746)
(Decrease)/increase in trade and other payables

(5,729)

6,114
Cash generated from operations

47,857

54,525
Interest paid

(2,097)

(2,016)
Interest element of finance lease rental payments

(4)

(2)
Interest received

4

1
Income tax paid

(4,840)

(2,873)
Net cash generated from operating activities

40,920

49,635


Cash flow from investing activities


Disposal of property, plant and equipment

17,179

11,982
Purchase of property, plant and equipment

(50,237)

(52,887)
Acquisition of businesses and subsidiaries (net of cash and overdrafts)

(7,068)

(5,405)
Net cash used in investing activities

(40,126)

(46,310)


Cash flow from financing activities


Purchase of own shares by Employee Trust

(10,566)

(11,059)
Repayment of borrowings

-

(10,000)
Proceeds from new loans

16,000

20,000
Capital element of hire purchase/finance lease agreements

(497)

(17)
Dividends paid

(6,568)

(5,986)
Net cash used in financing activities

(1,631)

(7,062)


Decrease in cash and cash equivalents

(837)

(3,737)
Effect of exchange rate fluctuations on cash held

118

(5)
Cash and cash equivalents at the beginning of the year

5,236

8,978
Cash and cash equivalents at the end of the year

4,517

5,236


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 2016. The accounting policies applied are in line with those applied in the annual financial statements for the year ended 31 March 2015.
EU Law (IAS Regulation EC1606/2002) requires that the consolidated accounts of the Group for the year ended 31 March 2016 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 preliminary 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 2016.
The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 March 2016 or 2015. Statutory accounts for 31 March 2015 have been delivered to the registrar of companies, and those for 31 March 2016 will be delivered in due course. The auditor has reported on those 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 in respect of the accounts for 31 March 2016 or 31 March 2015.
The financial statements were approved by the Board of Directors on 7 June 2016.


1. Business Segments
Revenue
Depreciation and amortisation
Operating profit
before amortisation
2016
2015
2016
2015
2016
2015
000
000
000
000
000
000
UK Forks
19,984
18,247
3,549
3,487
5,226
4,025
Groundforce
45,008
44,350
5,244
5,010
9,584
8,833
Airpac Bukom
15,191
21,460
3,661
3,769
1,232
2,753
Hire Station
82,486
77,031
12,078
10,222
11,491
8,731
TPA
13,588
14,585
783
1,015
989
1,009
Torrent Trackside
32,489
29,929
3,915
2,820
3,369
3,429
Group
-
-
443
384
-
-
Total
208,746
205,602
29,673
26,707
31,891
28,780
2. Earnings Per Share
The calculation of basic earnings per share of 57.49 pence (2015: 51.03 pence) is based on the profit attributable to equity holders of the parent of 22,388,000 (2015: 19,871,000) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2016 of 38,942,000 (2015: 38,940,000), calculated as follows:
2016
2015
Shares
Shares
000s
000s
Issued ordinary shares
40,154
40,154
Effect of own shares held
(1,212)
(1,214)
Weighted average number of ordinary shares
38,942
38,940
Basic earnings per share before the amortisation of intangibles was 62.21 pence (2015: 54.45 pence) and is based on an after tax add back of 1,838,000 (2015: 1,330,000) in respect of the amortisation of intangibles.
The calculation of diluted earnings per share of 54.51 pence (2015: 47.01 pence) is based on profit attributable to equity holders of the parent of 22,388,000 (2015: 19,871,000) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2016 of 41,069,000 (2015: 42,273,000), calculated as follows:
2016
2015
Shares
Shares
000s
000s
Weighted average number of ordinary shares
38,942
38,940
Effect of share options in issue
2,127
3,333
Weighted average number of ordinary shares (diluted)
41,069
42,273
Diluted earnings per share before the amortisation of intangibles was 58.99 pence (2015: 50.15 pence).
3. Analysis of Net Debt
At
31 March
2016
000
At
1 April
2015
000
Cash and cash equivalents
(4,517)
(5,236)
Current debt
873
-
Non current debt
89,778
72,000
Net debt
86,134
66,764
Year end gearing (calculated as net debt expressed as a percentage of shareholders' funds) stands at 71% (2015: 60%).
On 11 April 2016 the Group took out an additional facility of 20 million which expires in May 2020 by making use of the existing uncommitted step up facility. The Group therefore now has committed facilities of 115 million, an uncommitted step up facility of 5 million and an overdraft facility of 5 million.


4. Taxation
The charge for taxation for the year represents an effective tax rate of 18.6% (2015: 20.8%). The effective tax was reduced by 1.3% (2015: nil %) as a result of a 0.3 million credit (2015:  nil) from a reduction in the deferred tax liability due to the reduction in the future standard rate in the UK to 19% in the year ended 31 March 2018. It does not reflect the further reduction in the tax rate for the year ended 31 March 2021 as it is deemed that a significant proportion of the deferred tax balance as at 31 March 2016 will reverse before 31 March 2020. The effective tax rate excluding adjustments in respect of prior years is 18.5% (2015: 20.7%).
5. Dividend
The Board has proposed a final dividend of 13.5 pence per share to be paid on 2 August 2016 to shareholders on the register at 8 July 2016. This, together with the interim dividend of 5.35 pence per share paid on 8 January 2016, makes a total dividend for the year of 18.85 pence per share (2015: 16.5 pence per share).
6. 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.
During the year the Board continued to develop the Group's risk management framework. Our approach identifies risks arising in all parts of the Group, using both a top down and bottom up approach. Once identified, the impact and probability of risks are determined and scored at both a gross (before mitigation) and net (after mitigation) basis. These risk scores are documented in risk registers which are maintained at a divisional and Group level. Risk registers are subject to ongoing review based upon business activity.
The risk profile for each division is used to determine the programme of work carried out by Internal Audit. The risk assessments are captured in consistent reporting formats, enabling Internal Audit to consolidate the risk information and summarise the key risks in the form of a Group risk profile. Mitigation action plans against each risk continue to be monitored on a regular basis. Further information is provided below on our principal risks and mitigating actions to address them.
Market risk
Risk description
A downturn in economic recovery 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, 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 a healthy 16.3% in 2015/16. 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 the well being of both our employees and the 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 and our induction and training programmes reinforce these policies.
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
At the year end the Group had a revolving credit facility of 95 million and maintains strong relationships with all banking contacts. Our treasury policy defines the level of risk that the Board deems acceptable. Vp continues to benefit from a strong balance sheet, with growing EBITDA, which allows us to invest into opportunities.
Our treasury policy requires a tangible proportion of debt to be at fixed interest rates, and we facilitate this through interest rate swaps. 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 reduced to 56 days at the year end and bad debts, as a percentage of revenue, remained low at 0.4% (2015: 0.3%).
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.
7. 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.


8. Annual Report and Accounts
The Annual Report and Accounts for the year ended 31 March 2016 will be posted to shareholders on or around 24 June 2016.
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 financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; 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
Director
A M Bainbridge
Director

This information is provided by RNS
The company news service from the London Stock Exchange
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