Final Results
| Press Release | 29 May 2012 |
Vp plc
("Vp" or the "Group")
Final Results
Vp plc, the equipment rental specialist, today announces its Final Results for the year ended 31 March 2012.
Highlights
| Record revenues with excellent organic growth | |
| Revenues increased by 16% to £163.6 million (2011: £141.0 million) | |
| Profit before amortisation, exceptional items and tax increased 16% to £16.0 million (2011: £13.8 million) | |
| Basic earnings per share pre-amortisation and exceptional items, increased by 18% to 30.8 pence (2011: 26.1 pence) | |
| Proposed final dividend of 8.25 pence per share, an increase of 7.1%, making a total of 11.35 pence for the full year (2011: 10.80 pence) | |
| Capital investment in fleet of £32.1 million and net debt broadly unchanged at £40.4 million | |
| Post year end £7.8 million returned to shareholders by way of tender offer | |
| Solid balance sheet with strong operational cashflows |
Jeremy Pilkington, Chairman of Vp plc, commented:
"The Group has delivered another impressive trading performance despite the lack of improvement in general market conditions over the last year. The strength of these results once again demonstrates the benefits of our well established strategy of focusing on specialist sectors where the Group can command strong market positions.
"The new financial year will no doubt present further challenges and uncertainties but we remain committed, and confident in our continued ability, to create opportunities and to deliver growth in shareholder value over the longer term."
- Ends -
Enquiries:
| Vp plc | |
| Jeremy Pilkington, Chairman | Tel: +44 (0) 1423 533 405 |
| jeremypilkington@vpplc.com | |
| Neil Stothard, Group Managing Director | Tel: +44 (0) 1423 533 445 |
| neil.stothard@vpplc.com | |
| Allison Bainbridge, Group Finance Director | Tel: +44 (0) 1423 533 445 |
| allison.bainbridge@vpplc.com | www.vpplc.com |
Media enquiries:
| Abchurch Communications | |
| Sarah Hollins / Mark Dixon | Tel: +44 (0) 20 7398 7729 |
| mark.dixon@abchurch-group.com | www.abchurch-group.com |
CHAIRMAN'S STATEMENT
I am very pleased to be able to report on another excellent performance by the Group. Profits before tax and amortisation increased 16% to £16.0 million (2011: £13.8 million, pre-exceptional) on revenue also ahead by 16% at £164 million. Basic earnings per share pre amortisation rose 18% to 30.8 pence per share (2011: 26.1 pence, pre-exceptional).
Each of the Group's businesses reported advances in revenue and all except one delivered profit growth. The performances of the individual businesses are discussed in the Business Review.
Our continuous and determined focus on quality of profits has enabled us to invest over £32 million in expanding and refreshing our rental fleet in the period whilst holding year end debt at £40.4 million (2011: £40.5 million). Return on capital improved to 13.0% (2011: 12.3%).
Towards the end of the financial year, the Group announced a share buy back by way of a tender offer for up to 3.1 million shares as a means of returning £7.8 million of funds to shareholders and improving earnings per share. The tender was oversubscribed and successfully completed on 4 April 2012.
Reflecting the continued progress demonstrated by these results, your Board is recommending an increase of 7.1% in the final dividend to 8.25 pence per share (2011: 7.70 pence) making a total for the year of 11.35 pence per share. This year and in the future, the Annual General Meeting will be held in July rather than its traditional September date. This is to facilitate a more timely conclusion of the year's business and to bring forward the date for the final dividend to better balance the timing of the interim and final dividend payments. Subject to shareholders' approval at the Annual General Meeting on 18 July 2012 it is proposed to pay the final dividend on 10 August 2012 to members registered as of 13 July 2012.
The strength of this year's results once again demonstrates the benefits of our well established strategy of focusing on specialist sectors where the Group can command strong market positions. It is also a testament to the quality of leadership of our management team, which I believe to be the best in the industry.
The new financial year has started well, in line with our expectations. There will no doubt be further challenges and uncertainties, but we remain committed, and confident in our continued ability, to create opportunities and to deliver growth in shareholder value over the longer term.
It is my pleasurable duty to thank all of our employees, both within the UK and increasingly throughout our international operations, for their contribution to an outstanding performance, in which we should all take great pride.
Jeremy Pilkington
Chairman
29 May 2012
BUSINESS REVIEW
OVERVIEW
Vp plc is a specialist rental business providing products and services to a diverse range of markets including civil engineering, rail, oil and gas exploration, construction, outdoor events and industry, primarily within the UK, but also overseas.
The Group has delivered another impressive trading performance despite the lack of improvement in general market conditions over the last 12 months. The quality of the earnings is underlined by the strong cash generation that has allowed net debt to remain broadly unchanged, notwithstanding an increased investment in the rental fleet in the year.
| Year ended 31 March 2012 | Year ended 31 March 2011 | |
| Revenue | £163.6 million | £141.0 million |
| Operating Profit before amortisation and exceptional items | £18.5 million | £16.5 million |
| Operating margin | 11.3% | 11.7% |
| Investment in Rental Fleet | £32.1 million | £24.2 million |
Our long established focus on business specialisation, both in services and markets, has yet again proven its worth as the Group has delivered significant profit improvement in the year. Whilst the general construction market has remained quiet, demand from the rail, housebuild, oil and gas and infrastructure markets, in particular, has helped fuel this increase in profitability.
Revenues grew by 16% to £163.6 million, a record turnover figure for the Group. This revenue increase translated into operating profits before amortisation of £18.5 million, an increase of 12% over the prior year. Operating margins reduced slightly from 11.7% to 11.3% largely reflecting the change in mix of the divisional results.
The financial progress highlighted above has been driven entirely by organic growth within our existing activities with no acquisitions in the period under review. We have continued to invest strongly in our businesses, with capital expenditure on rental fleet growing to £32.1 million (2011: £24.2 million). Whilst there is a proportion of renewal investment in these figures, there is also a strong element of fleet growth in support of secured business opportunities. The Group has also continued to streamline the fleet, withdrawing from or reducing low margin product lines. Fleet sale proceeds remained an important cash inflow at £7.4 million (2011: £7.2 million) generating profits on sale of £2.2 million (2011: £2.3 million).
UK FORKS
Rough terrain material handling equipment for industry, residential and general construction.
| Year ended 31 March 2012 | Year ended 31 March 2011 | |
| Revenue | £13.2 million | £10.8 million |
| Operating Profit before amortisation and exceptional items | £1.5 million | £1.1 million |
| Investment in Rental Fleet | £8.6 million | £4.4 million |
UK Forks made further significant progress in the period, reporting profits of £1.5 million (2011: £1.1 million). Hire revenues grew by around 20% for the second year in succession and with a well managed cost base, this has produced a valuable improvement in divisional profitability.
We have continued to secure new business relationships whilst maintaining our key housebuilding and construction accounts. The business has also made good inroads to the infrastructure segment over the last 12 months. UK Forks has an excellent industry reputation for quality of both service and equipment and these attributes are serving the business well as customers become increasingly discerning in the tougher market. Costs, particularly on new machines, spares and transportation, have escalated and the impact of these increases has been mitigated to some extent by securing hire rate increases for our services.
In the first half of the year, fleet utilisation was very high and this justified significant second half investment, with fleet numbers increasing by 14% on the back of capital investment of £8.6 million (2011: £4.4 million).
Trading since the start of the new calendar year has been slower to pick up than anticipated but we expect the business to make further progress in the new financial year.
GROUNDFORCE
Excavation support systems, specialist solutions and trenchless technology for the water, gas, civil engineering and construction industries.
| Year ended 31 March 2012 | Year ended 31 March 2011 | |
| Revenue | £33.7 million | £30.3 million |
| Operating Profit before amortisation and exceptional items | £6.7 million | £6.7 million |
| Investment in Rental Fleet | £5.6 million | £3.8 million |
Groundforce produced another very good set of results, particularly in the context of the weakness in the construction sector. The first half of the year saw residual demand from the Olympics, whilst in the second half the division started to benefit from the water companies' infrastructure investment programme, AMP5. The division produced 11% revenue increase in the year, delivering maintained profits of £6.7 million with margins slightly impacted by higher operating costs, most notably on transport.
In the UK, the excavation support business maintained its strong market position and completed a number of key contracts including the Hilton Hotel in Southwark, the Riverside Quarter at Wandsworth and Heathrow Airport. Work arising from the energy sector saw an upturn, whilst general construction and commercial development remained subdued. Major propping work, primarily in London, provided a consistent demand and in the final quarter, work commenced on the Crossrail project at Woolwich.
Piletec made progress in a very challenging market place that has seen a number of national competitors cease trading entirely. This business has been operated efficiently during the downturn and remains well positioned to grow as work is released into a sector with a diminished supplier base. U Mole enjoyed another strong year, developing its market leading position in vacuum excavation.
Further growth is anticipated as an increasing number of contractors recognise the operational benefits of using their vacuum excavation rigs on utility contracts.
Outside the UK, the Irish business remained stable, in the toughest of trading environments. Activity on creating a rental footprint in Europe continued, with a number of projects being undertaken and successfully completed in countries such as Germany, Italy and Denmark. The recruitment of key personnel is well underway and an early structure has been established. Enquiry levels were broadly in line with expectation and levels of repeat business were encouraging. Sales to other overseas markets remained more subdued.
Capital expenditure on the rental fleet was up on prior year at £5.6 million, largely orientated towards organic growth, including investment in some of the specialist businesses.
Moving into the new financial year, demand from AMP5, infrastructure and utilities should provide support, whilst little improvement is anticipated in general construction and commercial development.
AIRPAC BUKOM OILFIELD SERVICES
Equipment and service providers to the international oil and gas exploration and development markets.
| Year ended 31 March 2012 | Year ended 31 March 2011 | |
| Revenue | £19.5 million | £17.5 million |
| Operating Profit before amortisation and exceptional items | £3.6 million | £2.7 million |
| Investment in Rental Fleet | £2.0 million | £1.3 million |
Airpac Bukom primarily provides support in well testing, rig maintenance, high pressure applications and LNG projects. Trading picked up during the year as exploration and production expenditure generally increased, albeit with regional variations. Revenues grew by 12% to £19.5 million, delivering increased profits of £3.6 million.
The Pluto LNG project in Western Australia was one of the main contributors to Airpac Bukom's growth, with testing of the assembled modules at Karratha continuing until the financial year end. The Pluto project is now largely complete but further opportunities exist within the region as other gas fields are developed.
Performance in the Middle East strengthened significantly. Whilst well testing in Saudi Arabia was the main catalyst, our geographical footprint broadened with activity in markets including Iraq and Oman. Supported by our base in UAE, we anticipate this region being capable of further sustainable growth.
The North Sea activity also delivered strong results although in this case it was driven by a combination of a healthy demand from rig maintenance and added value high pressure contracts, rather than any particular improvement in well testing activity.
Revenues in Africa were more subdued. Political and social unrest in Tunisia, Egypt and Libya meant that some of our core markets offered little chance for development, although we remain hopeful of improvement in this region over the next 12 months.
Capital investment in the fleet increased to £2.0 million in support of specific growth opportunities.
Whether the improvement in exploration and production activity will be sustained over the coming year against the backdrop of a delicate global economy remains to be seen. However, the combination of a recently strengthened management team, the investment that has already been made and the positive long term attributes of the energy sector makes Airpac Bukom well placed to deliver further progress.
HIRE STATION
Small tools and specialist equipment for industry and construction.
| Year ended 31 March 2012 | Year ended 31 March 2011 | |
| Revenue | £60.3 million | £53.5 million |
| Operating Profit before amortisation and exceptional items | £3.3 million | £3.0 million |
| Investment in Rental Fleet | £8.1 million | £10.3 million |
Hire Station continued to operate in very testing market conditions throughout the year but, nevertheless, managed to make good progress. After a difficult first half, the business produced a stronger second half performance which helped revenues for the year grow by 13% to a record £60.3 million, and to deliver a 10% increase in profits to £3.3 million. These results were particularly pleasing given that seasonal incomes from our cooling, drying and heating products were adversely impacted by the mild weather conditions both in the summer and the winter periods.
Like the rest of the market, we were once again challenged by inflationary cost pressures with the capital cost of equipment rising and fuel and vehicle costs reaching unprecedented highs. Where possible we have mitigated these cost pressures on the business by hire rate increases and fuel supplement charges. Capital expenditure of £8.1 million was £2.2 million lower than prior year, and directed at optimising the fleet mix towards asset categories which provide a better return.
After a difficult start the Tools business made further progress in the year. The launch of our business improvement project entitled "Transform" has led to greater consistency and standardisation in operational processes which will ultimately deliver improved levels of service to our customers. The focus on high product availability has enabled us to gain market share at the expense of our competition as well as reducing inter-branch stock movements which historically added unnecessary cost. The first year of our five year contract with Network Rail went well with revenues surpassing our initial estimates and the business achieving excellent service levels for the customer.
ESS Safeforce, the division's specialist safety rental business, had an excellent year with growth in all of its key revenue streams. During the year we further strengthened the management team to capitalise on the many growth opportunities that exist for this market leading business. A new 10,000 square foot unit was opened in Castleford and in the current financial year we anticipate additional branch openings in the UK. We delivered our first monitoring project for a shutdown at Lindsey Oil Refinery, and also established an onsite shop presence in the Pembroke Oil Refinery utilising our RFID asset management system to service the many onsite contractors. Confined space training, now available from over 10 locations nationally, grew strongly during the period, strengthening our position as the UK's confined space training provider of choice. We now welcome over 25,000 delegates per year to our training business.
The MEP Hire business, which supplies specialist press fitting and electro fusion equipment into the mechanical and electrical sector, delivered further growth, aided by the establishment of a national sales team supporting its nine locations. This year we will see a further location opening in Bristol to service the South West market. The Climate Hire business, by its nature, relies on adverse weather conditions and, as reported earlier, received little or no help in this respect.
Overall, the division has made satisfactory progress over the past year in the face of some challenging markets. It is clear that the dynamics within the tool hire arena have changed over the last three years and we have had to adjust our model to take account of this. The business has a number of initiatives underway and the focus will continue to be on improving margins and delivering better quality returns by managing our business as efficiently as possible, whilst embracing fresh opportunities.
TPA
Portable roadway systems, primarily to the UK market, but also in mainland Europe and the Republic of Ireland.
| Year ended 31 March 2012 | Year ended 31 March 2011 | |
| Revenue | £14.7 million | £14.0 million |
| Operating Profit before amortisation and exceptional items | £1.2 million | £1.4 million |
| Investment in Rental Fleet | £5.1 million | £1.5 million |
TPA's revenues were ahead of the prior year at £14.7 million, an increase driven mainly from the UK, but there was also growth from our German operations. However, profit for the year was below prior year, being impacted by a change in the business sector and geographical mix and the seasonality of demand.
In the UK, the transmission sector was busier than anticipated and whilst demand from outdoor events remained strong, the less seasonal construction related activities showed a downturn. The timing, nature and geography of the work in the busy summer season created some operational inefficiencies leading to erosion of margins as costs escalated. Throughout the winter, actions were commenced to ensure these pressures are alleviated in the future.
To complement the traditional roadway products, TPA introduced a plastic pitch cover, which is used in stadia for concerts. A trading agreement was concluded with a key manufacturer and early successes included outdoor concert tours for Take That and Kings of Leon. A second pitch cover was purchased towards the end of the financial year, in readiness for summer 2012.
The business in Germany experienced a consistent, less seasonal level of demand and produced another good result for the year. Investment in systems and processes in Europe continues to be made and a more resilient structure is taking shape. This has facilitated a widening of the customer base, particularly in construction and transport. Transmission work dominated the revenue stream, but outdoor events experienced healthy growth, with the annual Hessentag Festival in Germany being a key contract delivery.
Capital investment at £5.1 million is up on 2011, including the pitch cover investment highlighted above.
Towards the end of the year, the division was awarded BS OHSAS 18001 (Occupational Health and Safety Management System Standard) for their processes and systems, an accreditation demanded by an increasing number of clients and providing competitive advantage and differentiation.
Delivering on the operational improvements made over the winter will be crucial to TPA growing profitability in the new year. The business has carefully assessed the opportunities for the Olympics and will engage in a limited number of contracts whilst ensuring that it is not unduly distracted from maintaining existing customer relationships.
TORRENT TRACKSIDE
Suppliers of rail infrastructure portable plant and specialist services to Network Rail, London Underground and their appointed contractor base.
| Year ended 31 March 2012 | Year ended 31 March 2011 | |
| Revenue | £22.1 million | £14.9 million |
| Operating Profit before amortisation and exceptional items | £2.2 million | £1.6 million |
| Investment in Rental Fleet | £2.9 million | £2.9 million |
Torrent made significant progress in the year with revenue and profit growing by 48% and 38% respectively. This performance was delivered from improved revenues with our established key customer relationships combined with the benefits of our first full year of the contract award from Network Rail.
Torrent experienced strong demand from the UK rail infrastructure market, both in renewals and maintenance. In addition further growth has been secured through plant hire activities and contracting services to London Underground and other non national infrastructure contracts.
The rail market has been stable and consistent over the past year within the areas of spend from which Torrent derives most of its revenues. This positive market view is forecast to continue through into the new financial year.
Torrent has enjoyed a period of rapid growth and it is likely that the coming year will see some slowing in the rate of growth. However, the rail market remains buoyant, and as the market leading portable rail plant specialist, new opportunities will undoubtedly arise to further develop Torrent's added value service offerings to the rail sector.
PROSPECTS
The Group enters the new financial year against a background of uncertainty, in both domestic and European markets, which continues to challenge investment confidence. We have demonstrated that the Vp business model can navigate through these difficult conditions and we have confidence in our ability to continue to do so.
We believe the construction market in the UK will remain testing over the next 12 months, but we equally believe we have the ideas, the ambition and the ability to develop the business further into the future.
Financially, we remain in very good shape and have the capacity to utilise that financial strength in delivering continued shareholder value creation over the longer term.
Neil Stothard
Group Managing Director
29 May 2012
Consolidated Income Statement
for the year ended 31 March 2012
| Note | 2012 £000 | 2011 £000 | ||
| Revenue | 1 | 163,563 | 140,959 | |
| Cost of sales | (122,959) | (106,461) | ||
| Gross profit | 40,604 | 34,498 | ||
| Administrative expenses | (22,737) | (19,577) | ||
| Operating profit before amortisation and exceptional items | 1 | 18,500 | 16,472 | |
| Amortisation and impairment of intangibles Exceptional items | 2 | (633) - | (962) (589) | |
| Operating profit | 17,867 | 14,921 | ||
| Net financial expense | (2,539) | (2,687) | ||
| Profit before amortisation, exceptional items and taxation | 15,961 | 13,785 | ||
| Amortisation and impairment of intangibles Exceptional items | 2 | (633) - | (962) (589) | |
| Profit before taxation | 15,328 | 12,234 | ||
| Taxation | 5 | (3,101) | (2,451) | |
| Net profit for the year | 12,227 | 9,783 | ||
| Pence | Pence | |||
| Basic earnings per share | 3 | 29.63 | 23.42 | |
| Diluted earnings per share | 3 | 28.26 | 23.24 | |
| Dividend per share paid and proposed | 6 | 11.35 | 10.80 |
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2012
| 2012 | 2011 | |||
| £000 | £000 | |||
| Profit for the year | 12,227 | 9,783 | ||
| Other comprehensive income: Actuarial (losses)/gains on defined benefit pension scheme | (1,355) | 526 | ||
| Tax on items taken to other comprehensive income | 354 | (147) | ||
| Impact of tax rate change | (98) | (77) | ||
| Effective portion of changes in fair value of cash flow hedges | 684 | 1,493 | ||
| Foreign exchange translation difference | (182) | 11 | ||
| Total other comprehensive income | (597) | 1,806 | ||
| Total comprehensive income for the year | 11,630 | 11,589 |
Consolidated Statement of Changes in Equity
for the year ended 31 March 2012
| 2012 | 2011 | ||
| £000 | £000 | ||
| Total comprehensive income for the year | 11,630 | 11,589 | |
| Dividends paid | (4,457) | (4,509) | |
| Net movement relating to Treasury Shares and shares held by Vp Employee Trust | (9,268) | (392) | |
| Share option charge in the year | 1,415 | 624 | |
| Tax movements on equity | 233 | 24 | |
| Impact of tax rate change | (20) | 5 | |
| Change in Equity | (467) | 7,341 | |
| Equity at start of year | 91,528 | 84,187 | |
| Equity at end of year | 91,061 | 91,528 |
There were no changes in issued Share Capital or Share Premium.
Consolidated Balance Sheet
as at 31 March 2012
| Note | 2012 | 2011 | ||
| £000 | £000 | |||
Non-current assets | ||||
Property, plant and equipment | 110,680 | 101,286 | ||
| Intangible assets | 38,966 | 39,599 | ||
| Total non-current assets | 149,646 | 140,885 | ||
| Current assets | ||||
| Inventories | 4,826 | 5,388 | ||
| Trade and other receivables | 34,997 | 33,307 | ||
| Cash and cash equivalents | 4 | 5,582 | 5,509 | |
| Total current assets | 45,405 | 44,204 | ||
| Total assets | 195,051 | 185,089 | ||
| LIABILITIES | ||||
| Current liabilities | ||||
| Interest bearing loans and borrowings | 4 | (1) | (20,020) | |
| Income tax payable | (1,476) | (897) | ||
| Trade and other payables | (47,654) | (37,178) | ||
| Total current liabilities | (49,131) | (58,095) | ||
| Non-current liabilities | ||||
| Interest bearing loans and borrowings | 4 | (46,000) | (26,001) | |
| Employee benefits | (1,046) | (178) | ||
| Deferred tax liabilities | (7,813) | (9,287) | ||
| Total non-current liabilities | (54,859) | (35,466) | ||
Total liabilities | (103,990) | (93,561) | ||
| Net assets | 91,061 | 91,528 | ||
| EQUITY | ||||
| Issued share capital | 2,309 | 2,309 | ||
| Share premium account | 16,192 | 16,192 | ||
| Hedging reserve | (990) | (1,674) | ||
| Retained earnings | 73,523 | 74,674 | ||
| Total equity attributable to equity holders of the parent | 91,034 | 91,501 | ||
| Non-controlling interests | 27 | 27 | ||
| Total equity | 91,061 | 91,528 | ||
Consolidated Statement of Cash Flows
for the year ended 31 March 2012
Note | 2012 | 2011 | ||
| £000 | £000 | |||
| Cash flow from operating activities | ||||
Profit before taxation | 15,328 | 12,234 | ||
Pension fund contributions in excess of service cost | (487) | (423) | ||
Share based payment charge | 1,415 | 624 | ||
Depreciation | 1 | 20,169 | 18,558 | |
Amortisation and impairment of intangibles | 1 | 633 | 962 | |
| Financial expense | 2,575 | 2,689 | ||
| Financial income | (36) | (2) | ||
| Profit on sale of property, plant and equipment | (2,199) | (2,348) | ||
| Operating cashflow before changes in working capital | 37,398 | 32,294 | ||
| Decrease/(increase) in inventories | 562 | (1,571) | ||
| Increase in trade and other receivables | (1,690) | (5,898) | ||
| Increase in trade and other payables | 3,099 | 9,029 | ||
| Cash generated from operations | 39,369 | 33,854 | ||
| Interest paid | (2,558) | (2,677) | ||
| Interest element of finance lease rental payments | (3) | (31) | ||
| Interest received | 36 | 2 | ||
| Income tax paid | (3,530) | (3,065) | ||
Net cash flow from operating activities | 33,314 | 28,083 | ||
Cash flow from investing activities | ||||
| Disposal of property, plant and equipment | 7,370 | 7,188 | ||
Purchase of property, plant and equipment | (34,596) | (21,911) | ||
| Acquisition of businesses (net of cash and overdrafts) | - | (690) | ||
| Net cash flow from investing activities | (27,226) | (15,413) | ||
Cash flow from financing activities | ||||
Purchase of own shares by Employee Trust and Company | (1,422) | (392) | ||
Repayment of borrowings | (30,000) | (46,500) | ||
Proceeds from new loans | 30,000 | 43,000 | ||
Capital element of hire purchase/finance lease agreements | (20) | (189) | ||
Dividends paid | (4,457) | (4,509) | ||
Net cash flow from financing activities | (5,899) | (8,590) | ||
Increase in cash and cash equivalents | 189 | 4,080 | ||
Effect of exchange rate fluctuations on cash held | (116) | 44 | ||
Cash and cash equivalents at the beginning of the year | 5,509 | 1,385 | ||
Cash and cash equivalents at the end of the year | 5,582 | 5,509 |
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 2012.
EU Law (IAS Regulation EC1606/2002) requires that the consolidated accounts of the Group for the year ended 31 March 2012 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 IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements in June 2012.
The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 March 2012 or 2011. Statutory accounts for 31 March 2011 have been delivered to the registrar of companies, and those for 31 March 2012 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their 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 2012 or 31 March 2011.
The financial statements were approved by the board of directors on 29 May 2012.
1. Business Segments
| Revenue | Depreciation and amortisation | Operating profit before amortisation and exceptional items | ||||
| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| UK Forks | 13,231 | 10,789 | 2,070 | 1,645 | 1,462 | 1,055 |
| Groundforce | 33,706 | 30,314 | 3,648 | 3,702 | 6,738 | 6,711 |
| Airpac Bukom | 19,542 | 17,451 | 3,543 | 3,640 | 3,561 | 2,701 |
| Hire Station | 60,284 | 53,536 | 7,527 | 6,874 | 3,338 | 2,953 |
| TPA | 14,697 | 13,966 | 1,931 | 1,569 | 1,178 | 1,434 |
| Torrent Trackside | 22,103 | 14,903 | 1,720 | 1,643 | 2,223 | 1,618 |
| Group | - | - | 363 | 447 | - | - |
| Total | 163,563 | 140,959 | 20,802 | 19,520 | 18,500 | 16,472 |
2. Exceptional Items
The prior year exceptional items related to employment restructuring costs (2011: £589,000).
3. Earnings Per Share
The calculation of basic earnings per share of 29.63 pence (2011: 23.42 pence) is based on the profit attributable to equity holders of the parent of £12,227,000 (2011: £9,783,000) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2012 of 41,268,000 (2011: 41,776,000), calculated as follows:
| 2012 | 2011 | |
| Shares | Shares | |
| 000's | 000's | |
| Issued ordinary shares | 46,185 | 46,185 |
| Effect of own shares held | (4,917) | (4,409) |
| Weighted average number of ordinary shares | 41,268 | 41,776 |
Basic earnings per share before the amortisation of intangibles and exceptional items was 30.76 pence (2011: 26.09 pence) and is based on an after tax add back of £468,000 (2011: £1,117,000) in respect of the amortisation of intangibles and exceptional items.
The calculation of diluted earnings per share of 28.26 pence (2011: 23.24 pence) is based on profit attributable to equity holders of the parent of £12,227,000 (2011: £9,783,000) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2012 of 43,269,000 (2011: 42,096,000), calculated as follows:
| 2012 | 2011 | |
| Shares | Shares | |
| 000's | 000's | |
| Weighted average number of ordinary shares | 41,268 | 41,776 |
| Effect of share options in issue | 2,001 | 320 |
| Weighted average number of ordinary shares (diluted) | 43,269 | 42,096 |
There are additional options which are not currently dilutive, but may become dilutive in the future. Diluted earnings per share before the amortisation of intangibles and exceptional items was 29.34 pence (2011: 25.89 pence).
4. Analysis of Debt
| At 31 March 2012 £000 | At 1 April 2011 £000 | ||
| Cash and cash equivalents | (5,582) | (5,509) | |
| Current debt | 1 | 20,020 | |
| Non current debt | 46,000 | 26,001 | |
| Net debt | 40,419 | 40,512 |
Year end gearing (calculated as net debt expressed as a percentage of shareholders' funds) stands at 44% (2011: 44%). Excluding investment in own shares at market value of £20.1 million (2011: £10.5 million), underlying financial gearing for business activities was 18% (2011: 29%).
After the year end, the Group paid £7.8m to the shareholders who took up the tender offer.
5. Taxation
The charge for taxation for the year represents an effective tax rate of 20.2% (2011: 20.0%). The tax charge was reduced by £0.8 million (5.0%) to reflect the adjustment to the deferred tax balance as a result of the future standard tax rate of 24% in the UK. The effective tax rate excluding adjustments in respect of prior years is 20.5% (2011: 20.8%).
6. Dividend
The Board has proposed a final dividend of 8.25 pence per share to be paid on 10 August 2012 to shareholders on the register at 13 July 2012. This, together with the interim dividend of 3.10 pence per share paid on 4 January 2012 makes a total dividend for the year of 11.35 pence per share (2011: 10.80 pence per share).
7. Principal risks and uncertainties
The Board has overall accountability for ensuring that risk is effectively managed across the Group and, on behalf of the Board, the Audit Committee reviews the effectiveness of the Group's risk process.
During the year the Group's risk process was refreshed. Potential risks were identified and reviewed by all business areas and measured against a defined set of likelihood and impact criteria. This work was carried out in a series of workshops involving senior operational and financial managers working alongside internal audit. The risks were defined using clear descriptions and wording developed by the business areas. Action plans with defined ownership and timeframes for completion have been prepared for any gap identified in internal controls. The risk profile for each business area 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 risk in the form of a Group risk profile. The Executive directors discussed the Group risk profile ahead of it being submitted to the Board for final approval. Action plans against each risk are to be monitored on a regular basis. Further information is provided below on our principal risks and mitigating activities 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 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 capital employed was a healthy 13% in 2011/12. 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 well being 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 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
The Group has a revolving credit facility of £65m 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 high proportion of debt with fixed interest rates through interest rate swaps and we have agreements in place to buy or sell currencies to hedge against foreign exchange movements. We have strong credit control practices and credit insurance where cost effective. Debtor days improved during the year and bad debts as a percentage of revenue remained low at 0.9% (2011: 0.9%).
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 2012 will be posted to shareholders on or around 15 June 2012.
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, includes 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 |
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Vp PLC via Thomson Reuters ONE
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