Interim Results

RNS Number : 5629V

Vp PLC

04 December 2019

 

 

 

 

 

Press Release

4 December 2019

 

Vp plc

('Vp' or the 'Group')

 

Interim Results

 

Vp plc, the equipment rental specialist, today announces its Interim Results for the six months ended 30 September 2019 (the 'period').

Highlights

·	Profit before tax, amortisation and exceptional items maintained at £25.9 million (H1 2019: £25.9 million)1
·	Revenues reduced by 3% to £186.6 million (H1 2019: £193.2 million)
·	EPS, pre amortisation and exceptional items, increased to 52.5 pence per share (H1 2019: 52.3 pence per share) 1
·	Interim dividend increased by 3% to 8.45 pence per share (H1 2019: 8.20 pence per share)
·	Return on average capital employed robust at 14.5% (H1 2019: 14.5%)1
·	EBITDA increased slightly to £51.8 million (H1 2019: £51.6 million) 1
·	Capital investment in rental fleet down 28% at £26.6 million (H1 2019: £36.7 million)
·	Statutory profit before tax of £23.4 million (H1 2019: £23.9 million) 1 and statutory earnings per share of 47.3 pence (H1 2019: 48.3 pence)

Jeremy Pilkington, Chairman of Vp plc, commented: "The Group made good progress in the first half of the year against a subdued market backdrop.  Despite the ongoing political and economic uncertainty in the UK, our focus on quality of earnings has delivered enhanced operating margins during the period.

The Board remains confident of a positive full year outcome and looking ahead, we believe we will continue to deliver very satisfactory results for all stakeholders."

Analyst Briefing:

An analyst briefing given by Jeremy Pilkington (Chairman), Neil Stothard (Chief Executive) and Allison Bainbridge (Group Finance Director), will be held at 0930hrs today at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN.

- Ends -

 

For further information:

Vp plc
Jeremy Pilkington, Chairman	Tel: [phone]
Neil Stothard, Chief Executive	www.vpplc.com
Allison Bainbridge, Group Finance Director
Media enquiries:
Buchanan
Henry Harrison-Topham / Jamie Hooper / Tilly Abraham	Tel: [phone]
[e-mail]	www.buchanan.uk.com

Notes on alternative performance measures:

^1.         Following the adoption of IFRS 16 Leases with effect from 1 April 2019, as the Group has adopted the accounting standard using the modified retrospective approach to transition and has accordingly not restated prior periods, the results for the six months ended 30 September 2019 are not directly comparable with those reported in the prior period under the previous applicable accounting standard, IAS 17 Leases.  To provide meaningful comparatives, the results for the six months ended 30 September 2019 have therefore also been presented under IAS 17.  Further, as the decision makers currently allocate resource and assess performance primarily on an IAS 17 basis, the alternative performance measures will be disclosed based on IAS 17 until the transition to an IFRS 16 basis in the financial year ending 31 March 2021. See Note 5(b) for a reconciliation of the IAS 17 alternative performance measures to the equivalent IFRS 16 measures. The adoption of IFRS 16 did not have a significant impact on profit before taxation (£0.2 million impact).  The balance sheet impact has been disclosed in note 5(a).

·      All performance measures stated as before amortisation are also before impairment of intangibles and exceptional items.

·      Basic earnings per share pre amortisation and exceptional items is reconciled to basic earnings per share in note 9.

·      Profit before tax, amortisation and exceptional items is reconciled to profit before tax in the Consolidated Income Statement.

 

·      Return on average capital employed is based on profit before tax, interest, amortisation and exceptional items divided by average capital employed on a monthly basis using the management accounts. Profit before tax, interest, amortisation and exceptional items is reconciled to profit before interest and tax in the Consolidated Income Statement. 

CHAIRMAN'S STATEMENT

I am pleased to report a solid set of results for the Group which reflect the strength of Vp's fundamentals and the market leading quality of our earnings.  

For the six month period to 30 September 2019, profits before tax, amortisation and exceptional items were unchanged at £25.9 million (H1 2019: £25.9 million) on reduced revenues of £186.6 million (H1 2019: £193.2 million).  Statutory profit before taxation was £23.4 million (H1 2019: £23.9 million). Earnings per share pre-amortisation and exceptional items rose marginally to 52.5 pence per share (H1 2019:  52.3 pence per share).  Return on average capital employed ('ROACE') was maintained at a robust 14.5% (H1 2019: 14.5%) and well ahead of our cost of capital.

As budgeted, capital investment in fleet was reduced to £26.6 million (H1 2019: £36.7 million).   Borrowings at the period end stood at £183.7 million (H1 2019: £188.2 million).  EBITDA increased to £51.8 million (H1 2019: £51.6 million).

Against a backdrop of political and economic uncertainty, we consider these results to be a very satisfactory performance and the Board is therefore declaring a 3% increase in the interim dividend to 8.45 pence per share (H1 2019: 8.2 pence per share) payable on 17 January 2020 to shareholders registered as at 13 December 2019.

UK Division

The UK Division delivered a solid first half with operating profits before amortisation and exceptional items moving ahead marginally to £27.2 million (H1 2019: £26.9 million) on reduced revenues of £170.0 million (H1 2019:  £175.3 million). Statutory operating profit was £26.9 million (H1 2019: £25.1 million).

Infrastructure and housebuilding have remained supportive but commercial construction and civil engineering activity has been a little softer, primarily in the South East market.  In response to this backdrop, we have addressed cost lines and scaled back fleet capital investment accordingly.  We are pleased to see operating margins improving from 15.3% to 16.0% as a result of these measures.

In May, we acquired Sandhurst Limited for £3.3 million.  Sandhurst rents specialist excavator attachments to the construction and civil engineering sectors from five locations across the UK and now works alongside the Groundforce piling business.  Early results from Sandhurst have been encouraging as it integrates into the Group and we look forward to its contribution going forward.

International Division

Operating profits before amortisation and exceptional items eased slightly to £1.1 million (H1 2019: £1.3 million) on revenues marginally down at £16.6 million (H1 2019: £17.9 million). Statutory operating profit was £0.9 million (H1 2019: £1.1 million).

Whilst TR made reassuring progress in Malaysia and New Zealand, demand from the Australian market was a little quieter.  

Within the petro-chemical segment, there have been some early encouraging signs of improvements in workloads and future prospects and we have committed capital investment into these opportunities.  

Update on Regulatory Review

There is nothing further to report regarding the Competition and Markets Authority (CMA) provisional determination of 9 April 2019, which I highlighted in my last Chairman's statement, other than that we have now formally responded to the CMA with regard to the alleged breaches.

Outlook

Despite the domestic political uncertainty and a more subdued economic back-drop, we are reassured to have delivered market leading, and improving, earnings quality.  Trading for the Group continues in line with the Board's expectations and we remain confident of a positive full year outcome.  

Looking further ahead, we believe that the combination of our financial strength and our exceptional team of people will continue to deliver very satisfactory results for all stakeholders.

Jeremy Pilkington

Chairman

4 December 2019

 

Condensed Consolidated Income Statement

For the period ended 30 September 2019

	Note	Six months to 30 Sept 2019* (unaudited) £000		Six months to 30 Sept 2018 (unaudited) £000		Full year to  31 Mar 2019 (audited) £000
Revenue	3	186,585		193,211		382,830
Cost of sales		(142,328)		(146,101)		(295,539)
Gross profit		44,257		47,110		87,291
Administrative expenses		(16,504)		(20,917)		(48,968)
Operating profit before amortisation and exceptional items	5	30,250		28,178		51,571
Amortisation and impairment		(1,833)		(1,985)		(4,632)
Exceptional items		(664)		-		(8,616)
Operating profit	3	27,753		26,193		38,323
Net financial expense	5	(4,478)		(2,325)		(4,742)
Profit before taxation, amortisation and exceptional items	5	25,772		25,853		46,829
Amortisation and impairment		(1,833)		(1,985)		(4,632)
Exceptional items	4	(664)		-		(8,616)
Profit before taxation	5	23,275		23,868		33,581
Taxation	6	(4,735)		(4,752)		(7,759)
Profit attributable to owners of the parent		18,540		19,116		25,822
		Pence		Pence		Pence
Basic earnings per share	9	46.84		48.26		65.20
Diluted earnings per share	9	45.70		46.38		63.66
Dividend per share	10	8.45		8.20		30.20

*IFRS 16 was adopted on 1 April 2019 for statutory reporting without restating prior year figures.  As a result, the primary

statements are shown on IFRS 16 basis for the six months to 30 September 2019 and on an IAS 17 basis for the six months to 30 September 2018 and full year to 31 March 2019.  Note 5(b) provides the impact on the consolidated income statement for the period ended 30 September 2019, including the £1.9 million positive impact on operating profit before amortisation and exceptional items (£28.3 million pre-IFRS 16), £2.1 million adverse impact on net financial expense (£2.4 million pre-IFRS 16) and £0.2 million adverse impact on profit before taxation, amortisation and exceptional items (£25.9 million pre-IFRS 16).

 

Condensed Consolidated Statement of Comprehensive Income

For the period ended 30 September 2019

	Six months to		Six months to		Full year to
	30 Sept 2019		30 Sept 2018		31 Mar 2019
	(unaudited)		(unaudited)		(audited)
	£000		£000		£000
Profit for the period	18,540		19,116		25,822
Other comprehensive income/(expense):
Items that will not be reclassified to profit or loss Actuarial gains on defined benefit pension scheme	-		-		536
Tax on items taken to other comprehensive income	-		-		(1)
Items that may be subsequently reclassified to profit or loss
Foreign exchange translation difference	644		667		(493)
Effective portion of changes in fair value of cash flow hedges	(357)		(194)		(614)
Other comprehensive income/(expense)	287		473		(572)
Total comprehensive income for the period	18,827		19,589		25,250

 

Condensed Consolidated Statement of Changes in Equity

For the period ended 30 September 2019

	Note	Six months to		Six months to		Full year to
		30 Sept 2019		30 Sept 2018		31 Mar 2019
		(unaudited)		(unaudited)		(audited)
		£000		£000		£000
Total comprehensive income for the period		18,827		19,589		25,250
Tax movements to equity		(309)		1,060		944
Share option charge in the period		1,151		1,339		2,395
Net movement relating to shares held by Vp Employee Trust		(1,998)		(2,029)		(3,297)
Dividends to shareholders		(8,705)		(7,606)		(10,853)
Change in equity during the period		8,966		12,353		14,439
Equity at the start of the period		168,885		154,446		154,446
Effect of changes in accounting standards	5	(2,151)		-		-
Equity at the end of the period		175,700		166,799		168,885

There were no movements in issued share capital, the capital redemption reserve or share premium in the reported periods.

 

Condensed Consolidated Balance Sheet

At 30 September 2019

	Note	30 Sept 2019		31 Mar 2019		30 Sept 2018
		(unaudited)		(audited)		Restated* (unaudited)
		£000		£000		£000
Non-current assets
Property, plant and equipment	7	252,319		248,651		249,683
Goodwill		63,975		62,495		63,386
Intangible assets		25,361		27,175		29,167
Right of use assets	5	74,857		-		-
Employee benefits		2,674		2,732		2,230
Total non-current assets		419,186		341,053		344,466
Current assets
Inventories		7,825		7,809		7,975
Trade and other receivables		87,977		80,433		82,334
Cash and cash equivalents	11	14,907		29,044		15,508
Income tax receivable		245		-		-
Total current assets		110,954		117,286		105,817
Total assets		530,140		458,339		450,283
Current liabilities
Interest bearing loans and borrowings	11	(4,310)		(17,659)		(7,784)
Income tax payable		-		(2,184)		(3,447)
Lease liabilities	5	(18,911)		-		-
Trade and other payables		(69,543)		(81,720)		(67,794)
Total current liabilities		(92,764)		(101,563)		(79,025)
Non-current liabilities
Interest bearing loans and borrowings	11	(194,343)		(179,485)		(195,960)
Lease liabilities	5	(58,937)		-		-
Deferred tax liabilities		(8,396)		(8,406)		(8,499)
Total non-current liabilities		(261,676)		(187,891)		(204,459)
Total liabilities		(354,440)		(289,454)		(283,484)
Net assets		175,700		168,885		166,799
Equity
Issued share capital		2,008		2,008		2,008
Capital redemption reserve		301		301		301
Share premium		16,192		16,192		16,192
Foreign currency translation reserve		(136)		(780)		380
Hedging reserve		(680)		(323)		97
Retained earnings		157,988		151,460		147,794
Total equity attributable to equity holders of parent		175,673		168,858		166,772
Non-controlling interest		27		27		27
Total equity		175,700		168,885		166,799

* The restatement of the prior year consolidated balance sheet reflects the fair value adjustments in regards to prior year acquisitions as described in Notes 7 and 8.

 

Condensed Consolidated Statement of Cash Flows

For the period ended 30 September 2019

	Note	Six months to		Six months to		Full year to
		30 Sept 2019		30 Sept 2018		31 Mar 2019
		(unaudited)		(unaudited)		(audited)
		£000		£000		£000
Cash flows from operating activities Profit before taxation		23,275		23,868		33,581
Adjustment for:
Share based payment charges		1,151		1,339		2,395
Depreciation	7	23,525		23,451		49,768
Depreciation of right of use assets		11,007		-		-
Amortisation and impairment of intangibles		1,833		1,985		4,632
Net financial expense		4,478		2,325		4,742
Profit on sale of property, plant and equipment		(5,224)		(3,084)		(7,583)
Operating cash flow before changes in working capital and provisions		60,045		49,884		87,535
Decrease in inventories		49		617		853
Increase in trade and other receivables		(7,069)		(11,462)		(9,518)
(Decrease)/increase in trade and other payables		(13,607)		(3,560)		13,818
Cash generated from operations		39,418		35,479		92,688
Interest paid		(2,319)		(2,336)		(4,696)
Interest element of finance lease payments		(63)		(117)		(221)
Interest received		28		91		88
Income tax paid		(7,204)		(3,451)		(7,948)
Net cash flows from operating activities		29,860		29,666		79,911
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		10,839		9,850		19,969
Purchase of property, plant and equipment		(29,386)		(39,194)		(74,588)
Acquisition of businesses and subsidiaries (net of cash and overdrafts)		(3,325)		-		-
Net cash flows used in investing activities		(21,872)		(29,344)		(54,619)
Cash flows from financing activities
Purchase of own shares by Employee Trust		(1,998)		(2,029)		(3,297)
Repayment of loans		(7,000)		-		(44,000)
New loans		22,000		9,000		37,000
New finance leases		-		108		108
Payment of lease liabilities		(13,457)		(880)		(1,551)
Dividends paid	10	(8,705)		(7,606)		(10,853)
Net cash flows used in financing activities		(9,160)		(1,407)		(22,593)
Net (decrease)/increase in cash and cash equivalents		(1,172)		(1,085)		2,699
Effect of exchange rate fluctuations on cash held		30		249		(70)
Cash and cash equivalents at beginning of period		12,132		9,503		9,503
Cash and cash equivalents at end of period	11	10,990		8,667		12,132

 

Notes to the Condensed Financial Statements

1.            Basis of Preparation

Vp plc (the "Company") is incorporated and domiciled in the United Kingdom.  The Condensed Consolidated Interim Financial Statements of the Company for the half year ended 30 September 2019 consolidate the financial information of the Company and its subsidiaries (together referred to as the "Group").

This interim announcement has been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority and the requirements of IAS34 ("Interim Financial Reporting") as adopted by the EU.  With the exception of the new standard disclosed in note 5, the accounting policies applied are consistent for all periods presented and are in line with those applied in the annual financial statements for the year ended 31 March 2019, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU.

A new accounting standard became applicable for the current reporting period and the Group changed its accounting policies as a result of adopting IFRS 16 Leases.  The impact of the adoption of this standard and the new accounting policies are disclosed in note 5.

The interim announcement was approved by the Board of Directors on 4 December 2019.

The Condensed Consolidated Interim Financial Statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

The comparative figures for the financial year ended 31 March 2019 are extracted from the Company's statutory accounts for that financial year.  Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies.

The report of the auditors was (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.

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.  In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 March 2019.

The Group continues to be in a healthy financial position with total banking facilities at the period end of £207.5 million, including an overdraft facility.  Since the year end net debt has increased by £15.6 million to £183.7 million, which is £4.5 million lower than 30 September 2018.  The Group has a revolving credit facility of £65 million which matures in May 2020.  The process to refinance this facility is well advanced with the intention that a new facility be in place early calendar year 2020. The Board has evaluated the banking facilities and the associated covenants on the basis of current forecasts, taking into account the current economic climate, the refinancing and an appropriate level of sensitivity analysis.  Having reassessed the principal risks the Directors consider it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.

2.            Risks and Uncertainties

The principal risks and uncertainties facing the Group and the ways in which they are mitigated are described on page 20 and 21 of the 31 March 2019 Annual Report and Accounts.  The principal risks and uncertainties are market, competition, investment / product management, people, safety, financial, contractual and legal and regulatory requirements, which remain the same for this interim financial report.

3.            Summarised Segmental Analysis

		Revenue							Operating Profit Before Amortisation and Exceptional Items
	Sept 2019				Sept 2018		Mar 2019		Sept 2019	Sept 2018	Mar 2019
	£000				£000		£000		£000	£000	£000
UK	170,016				175,338		350,308		29,133	26,912	49,838
International	16,569				17,873		32,522		1,117	1,266	1,733
	186,585				193,211		382,830		30,250	28,178	51,571
Amortisation and impairment									(1,833)	(1,985)	(4,632)
Exceptional items									(664)	-	(8,616)
Operating Profit									27,753	26,193	38,323

	Assets						Liabilities
	Sept 2019		Mar 2019		Sept  2018 Restated*		Sept 2019		Mar 2019		Sept 2018  Restated*
	£000		£000		£000		£000		£000		£000
UK	486,700		421,840		410,924		345,316		283,832		277,343
International	43,440		36,499		39,359		9,124		5,622		6,141
	530,140		458,339		450,283		354,440		289,454		283,484

		Net Assets
		Sept 2019		Mar 2019		Sept 2018
		£000		£000		£000
UK		141,384		138,008		133,581
International		34,316		30,877		33,218
		175,700		168,885		166,799

*The restatement of prior year balances is disclosed in Note 8.

3.            Summarised Segmental Analysis (continued)

Below summarises the disaggregation of revenue from contracts with customers from the total revenue disclosed in the Condensed Consolidated Income Statement:

	Sept 2019	Sept 2018	Mar 2019
	£000	£000	£000
Equipment hire	138,323	146,070	286,913
Services	33,512	30,680	61,023
Sales of goods	14,750	16,461	34,894
Total revenue	186,585	193,211	382,830

4.            Exceptional Items

During the period the Group incurred £664,000 of exceptional costs in relation to continued restructuring costs regarding severance payments within Hire Station.

During the year ended 31 March 2019, the Group incurred £8,616,000 of exceptional costs in relation to regulatory review costs; integration of the Brandon Hire Group Holdings Limited acquisition; together with restructuring costs in relation to severance payments and depot closure costs within Hire Station and Airpac Bukom. 

The Competition and Markets Authority (CMA) announced on 9 April 2019 that it is investigating three major suppliers of groundworks products to the construction industry.  The CMA has provisionally found that the three businesses, including a part of the Group's excavation support system business (Groundforce), were involved in suspected anti-competitive behaviour.  The CMA's findings are, at this stage in its investigation provisional and do not necessarily lead to a decision that the companies have breached competition law.  At this point in the process we cannot make an accurate estimate of the likely cost that may subsequently arise in the event that the CMA were to decide in the future that a breach of competition law has taken place.  However, accounting standards IAS 37 required us to provide an amount in the 31 March 2019 Annual Report and Accounts and accordingly we included a figure of £4.5 million which we have materially brought forward to these accounts.  This figure is in the midpoint of a range of possible outcomes (£0 to £9.0 million) that we have calculated based upon previous cases and CMA published guidance and without any admission of culpability. As commented on in the Chairman's Statement, the CMA process is still ongoing.

These are analysed as follows:

	Sept 2019	Sept 2018	Mar 2019
	£000	£000	£000
Restructuring costs	664	-	1,112
Regulatory review costs	-	-	4,500
Integration costs	-	-	3,004
	664	-	8,616

Exceptional costs are excluded from the profit measures reported in the strategic report on the basis that they are non-recurring in nature.

5.            Changes in Accounting Policies

This note explains the impact of the adoption of IFRS 16 Leases on the Group's consolidated financial statements and discloses the new accounting policies that have been applied from 1 April 2019.

5.            Changes in Accounting Policies (continued)

The Group has applied IFRS 16 using the modified retrospective approach from 1 April 2019 where the cumulative effect of initially applying the standard has been recognised as an adjustment to the opening balance of retained earnings and comparatives have not been restated. Under IFRS 16, the Group will experience a different pattern of expense within the Income Statement, with the IAS 17 operating lease expense replaced by depreciation and interest expense.  There is no impact on the Group's underlying cash flows except to present cash outflows as financing instead of operating. 

(a)  Adjustments recognised on adoption of IFRS 16

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which have previously been classified as 'operating leases' under IAS 17 Leases.  These liabilities were measured at the present value of the remaining lease payments, discounted using the Group's weighted average incremental borrowing rates as of 1 April 2019.  The weighted average incremental borrowing rate applied to lease liabilities at 1 April 2019 was 5.3%.

	1 April 2019
	£000
Operating lease commitments disclosed as at 31 March 2019	80,776
Discounted using the incremental borrowing rate at 1 April 2019	(11,680)
(Less): short-term leases recognised on a straight-line basis as expense	(104)
(Less): low-value leases recognised on a straight-line basis as expense	(191)
Add: adjustments as a result of a different treatment of extension and termination options1	14,522
Lease liability recognised at 1 April 2019	83,323

Note:

¹ Previously, lease commitments only included non-cancellable periods in the lease agreements.  Under IFRS 16, the lease term includes periods covered by options to extend the lease where the Group is reasonably certain that such options will be extended.

The recognised lease liabilities relate to the following types of assets:

		Sept 2019	Mar 2019
		£000	£000
Property		55,236	58,538
Equipment		10,956	11,919
Vehicles		11,656	12,866
Total lease liabilities		77,848	83,323
Of which are:
Current lease liabilities	18,911		19,948
Non-current lease liabilities	58,937		63,375
	77,848		83,323

The associated right of use assets were measured on a retrospective basis as if the new standard has always been applied.  Onerous lease contracts have been adjusted through the right of use assets.

The recognised right of use assets relate to the following types of assets:

	Sept 2019	Mar 2019
	£000	£000
Property	52,405	55,972
Equipment	10,635	11,627
Vehicles	11,817	12,889
Total right of use assets	74,857	80,488

5.            (a) Adjustments recognised on adoption of IFRS 16 (continued)

The change in accounting policy affected the following items in the balance sheet:

	1 April 2019
	£000
Right of use assets - increase	80,488
Lease liabilities - increase	(83,323)
Trade and other payables - decrease	202
Deferred tax liabilities - decrease	482
Net impact on retained earnings at 1 April 2019	(2,151)

(b)  Impact on Consolidated Income Statement, EBITDA, segment disclosures and earnings per share

Basic earnings per share before the amortisation of intangibles and exceptional items decreased by 0.41 pence for the period to 30 September 2019 as a result of the adoption of IFRS 16. The financial impact of the transition on the Group's Consolidated Income Statement and EBITDA is set out below:

	Sept 2019 Excluding IFRS 16	Sept 2019 IFRS 16 Impact	Sept 2019 Reported
	£000	£000	£000
Operating profit before amortisation and exceptional items	28,315	1,935	30,250
Operating profit	25,818	1,935	27,753
EBITDA	51,840	12,942	64,782
Net financial expense	(2,383)	(2,095)	(4,478)
Profit before taxation, amortisation and exceptional items	25,932	(160)	25,772
Profit before taxation	23,435	(160)	23,275

Operating profit before amortisation and exceptional items, segment assets and segment liabilities all increased as a result of the change in accounting policy.  The IFRS 16 adjustments that have been posted to each segment for the half year ending 30 September 2019 are as follows:

Operating Profit before Amortisation and Exceptional Items

				Pre IFRS 16	IFRS 16 Adjustment	Per Note 3
				£000	£000	£000
UK				27,245	1,888	29,133
International				1,070	47	1,117
				28,315	1,935	30,250

	Assets						Liabilities
	Pre IFRS 16		IFRS 16 Adjustment		Per Note 3		Pre IFRS 16		IFRS 16 Adjustment		Per Note 3
	£000		£000		£000		£000		£000		£000
UK	414,579		72,121		486,700		270,783		74,533		345,316
International	40,666		2,774		43,440		6,452		2,672		9,124
	455,245		74,895		530,140		277,235		77,205		354,440

5.            Changes in Accounting Policies (continued)

(c)   Practical expedients applied

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

·    The use of a single discount rate to a portfolio of leases with reasonably similar characteristics

·    Reliance on previous assessments on whether leases are onerous

·    The accounting for certain operating leases with a remaining lease term of less than 12 months as at 1 April 2019 as short-term leases

·    The exclusion of initial direct costs for the measurement of the right of use asset at the date of initial application, and

·    The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease

The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application.  Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17.

(d)  Accounting for leasing activities under IFRS 16

The Group holds leases for various properties, equipment and vehicles.  Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.  Until 1 April 2019, leases of property, plant and equipment were classified as either operating leases or finance leases.  Payments made under operating leases were charged to the Consolidated Income Statement on a straight-line basis over the lease term.

From 1 April 2019, leases are recognised as a right of use asset and a corresponding liability at the date at which the leased asset is available for use by the Group.  Each lease payment is allocated between the liability and finance cost.  The finance cost is charged to profit over the lease period.  The right of use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Lease liabilities arising from a lease are initially measured on a present value basis.  Lease liabilities include the net present value of fixed payments less any incentives receivable, variable lease payments that are based on a specified index or a rate, the exercise price of a purchase option if the Group is reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.  A separate provision for onerous leases is therefore no longer required.  The lease payments are discounted using the incremental borrowing rate.  This rate is the interest rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value over a similar term and with similar security to the right of use asset in a similar economic environment. 

Right of use assets (at cost comprising of the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, initial direct costs and restoration costs) are measured as if IFRS 16 has been applied since the lease commencement date, discounted by the Group's incremental borrowing rate as at 1 April 2019.  Payments associated with short term leases and leases of low value assets are recognised on a straight-line basis as an expense in the Consolidated Income Statement.  Short term leases are certain leases with a lease term of 12 months or less.  Low value assets comprise certain IT equipment and small items of office equipment.

Extension and termination options are included in a number of leases across the Group.  In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option.  Extension options (or periods after termination options) are only included in the lease term if the lease is

5.            (d) Accounting for leasing activities under IFRS 16 (continued)

reasonably certain to be extended (or not terminated).  The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects the assessment and that is within the control of the Group. This reassessment could result in a recalculation of the lease liability and a material adjustment to the associated balances.

6.            Income Tax

The effective tax rate is 20.3% in the period to 30 September 2019 (H1 2019: 19.9%).  The effective rate for the period reflects the current standard tax rate of 19% (H1 2019: 19%), as adjusted for estimated permanent differences for tax purposes offset by gains covered by exemptions.  This is the best estimate of the weighted average annual income tax rate expected for the full financial year.

7.            Property, Plant and Equipment

	Sept 2019	Mar 2019	Sept 2018 Restated*
	£000	£000	£000
Opening carrying amount	248,651	239,739	239,739
Additions	30,467	71,389	39,935
Acquisitions	1,798	-	(115)
Depreciation	(23,525)	(49,768)	(23,451)
Disposals	(5,615)	(12,386)	(6,766)
Effect of movements in exchange rates	543	(323)	341
Closing carrying amount	252,319	248,651	249,683

The value of capital commitments at 30 September 2019 was £11,353,000 (31 March 2019 £10,758,000). 

*The restatement of prior year balances reflects the completed fair value assessment of the Brandon Hire acquisition for £1,643,000 as disclosed in Note 8 and a correction of the fair value classification of other acquisitions related to a decrease in land and buildings of £556,000.

8.            Business Combinations

On 9 May 2019 the Company acquired 100% of the issued share capital of Sandhurst Limited ("Sandhurst") for a cash consideration of £3.3 million.  Sandhurst is engaged in the rental of specialist excavator attachments to the construction and civil engineering sectors.  The acquisition will complement the Group's piling division within Groundforce and expand product range.  During the measurement period, the fair value of the assets acquired and liabilities assumed are provisional while management finalise the fair value assessment, including the identification of intangible assets acquired. Preliminary details of the acquisition is provided below:

8.            Business Combinations (continued)

		Sept 2019
		£000
Property, plant and equipment		1,798
Current assets		540
Tax, trade and other payables		(471)
Fair value of assets acquired		1,867
Goodwill on acquisition		1,458
Cost of acquisitions		3,325
Satisfied by
Cash consideration		3,325
Analysis of cash flow for acquisitions
Cash consideration		3,325
Net (cash)/overdraft in acquisition		-
		3,325

The Group acquired Brandon Hire during the year ended 31 March 2018 and the fair value assessment of the acquired net assets for the Brandon acquisition was completed within the measurement period during the prior financial year in line with IFRS 3 (revised).  The fair value of assets acquired generally reflects the book value of assets in the acquired company/business, however the key adjustment to the acquired Brandon Hire Group Holdings Limited assets was to bring the value of the hire fleet in line with the depreciation policy used within Hire Station Limited, our existing tool hire business.  The restatement of the prior year balances noted in the consolidated balance sheet reflects the completed fair value assessment for £2,284,000 related to reductions in property, plant and equipment (£1,643,000); inventories (£42,000); trade and other receivables (£43,000) and increase in trade and other payables (£556,000).  In addition, a correction of the fair value classification of other acquisitions of £556,000 has been adjusted in the prior year balances related to a decrease within land and buildings.

9.            Earnings Per Share

Earnings per share have been calculated on 39,581,748 shares (H1 2019: 39,608,968 shares) being the weighted average number of shares in issue during the period.  Diluted earnings per share have been calculated on 40,569,647 shares (H1 2019: 41,215,948 shares) adjusted to reflect conversion of all potentially dilutive ordinary shares.  Basic earnings per share before the amortisation of intangibles and exceptional items was 52.10 pence (H1 2019: 52.32 pence) and was based on an after tax add back of £2,081,000 (H1 2019: £1,608,000) in respect of the amortisation of intangibles and exceptional items.  Diluted earnings per share before amortisation of intangibles and exceptional items was 50.83 pence (H1 2019: 50.28 pence).

10.          Dividends

The Directors have declared an interim dividend of 8.45 pence (H1 2019: 8.20 pence) per share payable on 17 January 2020 to shareholders on the register at 13 December 2019.  The dividend declared will absorb an estimated £3,342,000 (H1 2019: £3,247,000) of shareholders funds.  The dividend proposed at the year-end was subsequently approved at the AGM in July 2019 and £8,705,000 was paid in the period (H1 2019: £7,606,000 was paid).  The cost of dividends in the Statement of Changes in Equity is after adjustments for the interim and final dividends waived by the Vp Employee Trust in relation to the shares it holds for the Group's share option schemes.

11.          Analysis of Net Debt

		As at			Cash		As at
		1 Apr 2019			Flow		30 Sep 2019
		£000			£000		£000
Cash and cash equivalents		29,044			(14,137)		14,907
Bank overdraft		(16,912)			12,995		(3,917)
Revolving credit facilities / loans		(179,000)			(15,000)		(194,000)
Finance leases excluded under IFRS 16		(1,232)			496		(736)
		(168,100)			(15,646)		(183,746)

The Group's committed revolving credit bank facilities comprise a £65 million facility which expires in May 2020 and a £135 million facility which expires in December 2021, together with overdraft facilities totalling £7.5 million. The process to refinance the £65 million facility is well advanced with the intention that a new facility be in place early calendar year 2020.

12.          Related Party Transactions

Transactions between Group Companies, which are related parties, have been eliminated on consolidation and therefore do not require disclosure.  The Group has not entered into any other related party transactions in the period which require disclosure in this interim statement.

13.          Contingent Liabilities

In an international group a variety of claims arise from time to time in the normal course of business. Such claims may arise due to actions being taken against group companies as a result of investigations by fiscal authorities or under regulatory requirements. Provision has been made in these consolidated financial statements against any claims which the directors consider are likely to result in significant liabilities.

14.          Forward Looking Statements

The Chairman's Statement includes 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.

15.          Alternative Performance Measures

(i)            All performance measures stated as before amortisation are also before impairment of intangibles and exceptional items.

(ii)           Basic earnings per share pre amortisation and exceptional items is reconciled to basic earnings per share in note 9.

(iii)          Profit before tax, amortisation and exceptional items is reconciled to profit before tax in the Consolidated Income Statement.

(iv)         Return on average capital employed is based on profit before tax, interest, amortisation and exceptional items divided by average capital employed on a monthly basis using the management accounts. Profit before tax, interest, amortisation and exceptional items is reconciled to profit before interest and tax in the Consolidated Income Statement.

 

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

·    the condensed consolidated set of interim financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

·    the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

4 December 2019

The Board

The Directors who served during the six months to 30 September 2019 were:

Jeremy Pilkington (Chairman)

Neil Stothard (Chief Executive)

Allison Bainbridge (Group Finance Director)

Steve Rogers (Non-Executive Director)

Phil White (Non-Executive Director)

 

Independent review report to Vp plc

Report on the Condensed Consolidated Interim Financial Statements

Our conclusion

We have reviewed Vp plc's Condensed Consolidated Interim Financial Statements (the "interim financial statements") in the Interim Report 2019/2020 of Vp plc for the 6 month period ended 30 September 2019.  Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

·    the Condensed Consolidated Balance Sheet as at 30 September 2019;

·    the Condensed Consolidated Income Statement and Condensed Consolidated Statement of Comprehensive Income  for the period then ended;

·    the Condensed Consolidated Statement of Cash Flows for the period then ended;

·    the Condensed Consolidated Statement of Changes in Equity for the period then ended; and

·    the explanatory notes to the interim financial statements.

The interim financial statements included in the Interim Report 2019/2020 have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Interim Report 2019/2020, including the interim financial statements, is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the Interim Report 2019/2020 in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the Interim Report 2019/2020 based on our review.  This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose.  We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

We have read the other information contained in the Interim Report 2019/2020 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Leeds

4 December 2019

- Ends -

 

END

 

 

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