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RNS
Vp PLC  -  VP.   

Final Results

Released 07:00 06-Jun-2017

RNS Number : 1985H
Vp PLC
06 June 2017
 

 

For immediate release

6 June 2017

 

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 2017.

 

Highlights

 

·   17% increase in profit before tax and amortisation to £34.9 million (2016: £29.8 million)

·   19% growth in revenues to £248.7 million (2016: £208.7 million)

·   Final dividend proposed of 16.0 pence per share, making a total of 22.0 pence for the full year (2016: 18.85 pence), an increase of 17%

·   EBITDA up 20% to £71.2 million (2016: £59.3 million)

·   Return on average capital employed 16% (2016: 16.3%)

·   Net debt of £98.9 million (2016: £86.1 million) after funding:

o Capital investment in the fleet of £57.6 million (2016: £45.9 million)

o Acquisitions of £10.0 million

·   Basic earnings per share, pre-amortisation, increased 12% to 69.52 pence (2016: 62.21 pence)

·   Statutory profit before tax of £30.3 million (2016: £27.5 million) and statutory earnings per share of 60.31 pence (2016: 57.49 pence)

 

Commenting on the Final Results, Jeremy Pilkington, Chairman of Vp plc, said:

"It has been another record-breaking performance for Vp and we are delighted with the significant progress made within the Group.  Reflecting this excellent set of results, the Board is recommending a final dividend of 16.0 pence per share making a total for the year of 22.0 pence per share, an increase of 17%.

 

Looking ahead, the new financial year has started well and at this very early stage, I believe there is every prospect that we may look forward to another year of significant 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 / Jamie Hooper

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 record year for the Group.

 

Profits before tax and amortisation increased 17% to £34.9 million (2016: £29.8 million) on revenues ahead by 19% at £248.7million (2016: £208.7 million), delivering a very robust 16% return on average capital employed. Reflecting the Group's very strong cash generation, net debt at the year end was £98.9 million (2016: 86.1 million) after funding £57.6 million investment in the rental fleet (2016: £45.9 million) and acquisitions of £10.0 million.

 

Earnings per share increased 12% to 69.5 pence per share (2016: 62.2 pence per share).  The rate of increase in earnings per share is lower than that of the growth in profits due to an increase in the effective tax rate this year.

 

In view of this excellent set of results, the Board is recommending a final dividend of 16.0 pence per share making a total for the year of 22.0 pence per share, an increase of 17%.  Subject to shareholders' approval at our Annual General Meeting on 1 August 2017, it is proposed to pay the final dividend on 8 August 2017 to members registered as at 14 July 2017.

 

In the UK, all of our businesses delivered strong organic growth supported by solid market demand and carefully targeted capital investment into the rental fleets.  The UK results were further enhanced by the first full year contribution from Higher Access which we acquired in March 2016.

 

Within the International division, the key development was the acquisition of TR Pty Ltd ("TR") in April 2016.  Founded in 1974, TR is the market leader in Australia for technical equipment rental, testing and calibration services.  In November 2016, TR acquired Tech Rentals New Zealand (TRNZ), reuniting this business with its original parent.  TR and TRNZ have settled in well to the Group and delivered a pleasing first time contribution.  Overall growth in the International division was slowed by the ongoing challenges faced in the oil and gas market, however we are starting to see some signs of modest stability returning to this sector.

 

We believe that the sectors within which we operate should continue to be broadly supportive over the coming year.  We are also very pleased to have completed two further acquisitions in April 2017, JMS M&E and Zenith Survey Equipment.  These businesses add a further nine locations to our specialist tool hire business in the UK.

 

Building on this very strong performance and with the positive momentum in the business, we remain confident in our ability to deliver growth in specialist rental markets both in the UK and overseas.

 

Looking ahead, the new financial year has started well and at this very early stage, I believe there is every prospect that we may look forward to another year of significant progress for the Group.

 

It is my pleasure on behalf of shareholders and the Board, to thank all our employees, whether long serving or newly joined, for their commitment and hard work which has delivered the outstanding results we are reporting today.

 

 

Jeremy Pilkington

Chairman

6 June 2017

 

 

 

 

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.  The Group comprises a UK and an International Division.

 

Year ended

31 March 2017

Year ended

31 March 2016

Revenue

£248.7 million

£208.7 million

Operating Profit before amortisation

£37.8 million

£31.9 million

Operating margin

15.2%

15.3%

Investment in Rental Fleet

£57.6 million

£45.9 million

Return on Average Capital Employed

16.0%

16.3%

 

The Group has made further significant progress in the current year, reporting a 18% increase in operating profits before amortisation.

 

Operating profits before amortisation were £37.8 million which compares with £31.9 million in the prior year.  Operating margins remained healthy at 15.2%, and our key measure of profit quality, return on average capital employed, continued to be robust at 16.0%.  Revenues in the year grew by 19% to £248.7 million (2016: £208.7 million).

 

Consistent with the previous financial year, market conditions have been varied, but generally favourable.  Across our four core sectors, we have seen good support in the infrastructure, housebuilding and construction markets, whereas our international exposure to oil and gas, and mining, remained a challenge for our businesses that serve those sectors.

 

Importantly, the Group continues to deliver strong cash generation from operations, highlighted by an increase of 20% in EBITDA, which grew to £71.2 million (2016: £59.3 million).

 

Investment in rental fleet remained strong at £57.6 million (2016: £45.9 million) delivering growth and ensuring maintenance of a young, high quality rental fleet.  Fleet disposal proceeds reduced slightly to £16.7 million (2016: £17.2 million) generating profit on disposal of £5.8 million (2016: £6.2 million).

 

In addition to organic fleet investment, the Group made two acquisitions in the period.  TR Pty Ltd ('TR') was acquired in Australia on 21 April 2016 for a cash consideration of AUS $17.4 million (Australian dollars) and assumed net debt of AUS $6.6 million.  TR subsequently purchased Tech Rentals NZ Ltd ('TRNZ') on 25 November 2016 for a cash consideration of NZ $2.592 million (New Zealand dollars).  TRNZ is engaged in the specialist rental of test & measurement equipment and calibration services in New Zealand.  The business is complementary to TR which provides these same services in Australia and Malaysia, and consolidates TR's position as the number one technical equipment rental group in Australasia.

 

Post the year end, we have made two further acquisitions.  On 7 April 2017, we announced the acquisition of the mechanical & electrical rental and sales activity of Jackson Mechanical Services (UK) Limited ('JMS M&E') for a cash consideration of £3.6 million.  Operating from locations in Harpenden and Leeds, JMS M&E has integrated within Hire Station, Vp's specialist tool hire business.

 

On 25 April 2017, we announced the acquisition of the entire issued share capital of Zenith Survey Equipment Limited ('Zenith') for a cash consideration of £3.85 million plus assumed debt of £2.3 million.  Zenith is engaged in the specialist rental and sale of survey & safety equipment from seven locations across the UK.  Zenith will also be integrated within Hire Station.

 

 

UK DIVISION

 

Year ended

31 March 2017

Year ended

31 March 2016

Revenue

£220.0 million

£193.6 million

Operating Profit before amortisation

£35.9 million

£30.7 million

Investment in rental fleet

£53.9 million

£44.5 million

 

Vp's UK division had an excellent trading year delivering a 17% increase in operating profits before amortisation to £35.9 million (2016: £30.7 million).  Revenues grew by 14% to £220.0 million (2016: £193.6 million).  The UK division comprises four main business groupings: UK Forks, Groundforce/TPA, Hire Station and Torrent Trackside.  All four enjoyed good demand from their end markets.

 

The UK Forks activity continued to experience steady demand from the housebuilding sector which remained stable and supportive throughout the year.  The Higher Access business, acquired in March 2016, completed a first full year in the Group.  It made excellent progress on good construction and utility demand, supported by investment in widening their product range.  Whilst UK Forks and Higher Access both operate in very competitive markets, a sustained focus on the quality of service, product and support is enabling the division to maintain market leadership and to deliver growth.

 

In Groundforce/TPA, the core shoring activity made good progress in the financial year, with the combination of sustained demand in the water sector from Asset Management Programme 6 (AMP 6) and successes on basement excavation projects particularly in the London region.  Demand for the wider range of Groundforce services was mixed across the regions of the UK, though strong in the South East.  Activity in mainland Europe, whilst still relatively small, was steady and improving, and we anticipate further progress in this region in the coming financial year.  Portable roadway activity was satisfactory against a highly competitive and over supplied market backdrop, particularly in the UK.

 

The Hire Station business, comprising three elements: Hire Station (tool hire); ESS Safeforce (safety and survey); and MEP (press fitting tools and low level access) had an excellent trading year.  Growth was delivered in all areas as Hire Station capitalised on the quality of its varied service offering, continuing to secure further market share as well as leveraging the relative stability of their construction, housebuild, shop fitting, industrial and utility customer base.  Fleet investment in the division was strong in support of business growth and the level of return on capital continued to improve.  As highlighted above, shortly after the year end the business made two acquisitions: the first was JMS, a mechanical & electrical equipment rental and sales business which will be integrated within MEP.  The second was Zenith, specialists in survey & safety rental and sale, and this business will be integrated within ESS Safeforce.  The Hire Station operations have been further expanded during the year with nine new or relocated branches added to the network.  A simple, but highly focussed, approach to product availability and quality continues to pay off for Hire Station.

 

The UK rail market remained busy during the year and Torrent Trackside rose to the challenge from customers to deliver cost savings.  A focus on service delivery, compliance and safety has helped Torrent maintain its position as the supplier of choice for small rail portable plant in the UK rail market.  The business has defended margins by further improving operational efficiency and delivering internal cost savings.  Torrent continues to play an important role in support of Network Rail and was awarded a contract extension during the year.  As plain line renewal work has reduced due to CP5 expenditure restraints, Torrent has been busy in support of a number of the major nominated contractors on switches and crossings (S+C) work.  The Government has reiterated its commitment to invest in the major UK electrification programme and we look forward to engaging with that major initiative.  Capital investment has been directed to support that particular area of activity.

 

 

INTERNATIONAL DIVISION

 

Year ended

31 March 2017

Year ended

31 March 2016

Revenue

£28.7 million

£15.2 million

Operating Profit before amortisation

£1.9 million

£1.2 million

Investment in rental fleet

£3.7 million

£1.4 million

 

Operating profits before amortisation in the International division were £1.9 million (2016: £1.2 million), an increase of 53%, on revenues of £28.7 million (2016: £15.2 million).  The International division comprises two business groupings: Airpac Bukom and TR Group and the increase in profitability is wholly due to the acquisition of TR Group in April 2016.

 

Airpac Bukom, which provides compressors and steam generators in support of a range of global energy applications, continued to experience challenging trading conditions in the oil and gas segment.  Well testing and rig maintenance demand remained very subdued, but LNG held up well in Australia.  Exploration activity reduced further as operators maintained a tight control on all areas of spend with major contracts either delayed or postponed.  Trading improved in the second half of the year, albeit modestly, as some stability returned, primarily driven by the recovery in oil price.  Inquiry levels have started to increase in certain territories and we anticipate a continuation of a slow, but choppy, recovery in the market.

 

TR, which operates in Australia, New Zealand and Malaysia, made an 11 month contribution to the Vp Group during the financial year.  In November 2016, TR Group acquired Tech Rentals New Zealand, broadening the test and measurement offering to New Zealand.  Despite some impact from the oil and gas market and reduced demand from the Australian mining sector, this was balanced by good progress in other key markets such as telecommunications, utilities and defence.  Overall TR has settled in well and delivered a satisfactory first trading period in the Group.

 

 

Outlook

The new financial year has started in line with our expectations against the backdrop of an excellent prior year trading performance for the Group.  Expectations for our core markets are for a relatively similar pattern of demand over the new year.

 

We anticipate that the UK construction market will continue to be stable, with modest overall growth in Housing and non-residential construction, a small reduction in repair and maintenance, and stability in the infrastructure segment.  From an international viewpoint, we see the possibility of some marginal improvement in the oil and gas sector.  The increased commitment to infrastructure investment from the Australian State and National Governments should create a positive market backdrop for TR.

 

Vp has good momentum and this should be further enhanced by the two April 2017 acquisitions, referred to earlier.

 

We are targeting further growth both in the UK and in our International division.  Notwithstanding the increased prospect of inflationary pricing pressures, the UK election and Brexit negotiations, subject to a stable economic backdrop, Vp is well positioned to deliver further progress for the business, the employees and our shareholders in the coming year.

 

 

Neil Stothard

Chief Executive

6 June 2017

 

 

 

 

Consolidated Income Statement

for the year ended 31 March 2017

 

 

Note

2017

£000

 

2016

£000

 

Revenue

 

1

 

248,740

 

 

208,746

Cost of sales

 

(181,807)

 

(149,758)

 

 

 

 

 

Gross profit

 

66,933

 

58,988

Administrative expenses

 

(33,688)

 

(29,395)

 

 

 

 

 

Operating profit before amortisation

1

37,757

 

31,891

 

 

 

 

 

 

 

 

 

 

Operating profit

 

33,245

 

29,593

Net financial expense

 

(2,906)

 

(2,093)

 

 

 

 

 

Profit before taxation and amortisation

 

34,851

 

29,798

Amortisation

 

(4,512)

 

(2,298)

Profit before taxation

 

30,339

 

27,500

Taxation

4

(6,687)

 

(5,112)

 

 

 

 

 

Profit attributable to owners of the parent

 

23,652

 

22,388

 

 

 

 

 

 

 

Pence

 

Pence

Basic earnings per share

2

60.31

 

57.49

Diluted earnings per share

2

58.65

 

54.51

Dividend per share paid and proposed

5

22.00

 

18.85

 

 

 

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2017

 

 

2017

 

2016

 

 

£000

 

£000

 

 

 

 

 

Profit for the year

 

23,652

 

22,388

 

Other comprehensive income/(expense):

Items that will not be reclassified to profit or loss

 

 

 

 

Re-measurements of defined benefit pension schemes

 

366

 

122

Tax on items taken to other comprehensive income

 

(70)

 

(23)

Impact of tax rate change

 

-

 

(39)

Foreign exchange translation difference

 

783

 

693

Items that may be subsequently reclassified to profit

or loss

 

 

 

 

Effective portion of changes in fair value of cash flow hedges

 

367

 

581

Total other comprehensive income

 

1,446

 

1,334

Total comprehensive income for the year

 

25,098

 

23,722

             

 

 

 

 

Consolidated Statement of Changes in Equity

for the year ended 31 March 2017

 

2017

 

2016

 

£000

 

£000

Total comprehensive income for the year

25,098

 

23,722

 

Dividends paid

(7,632)

 

(6,568)

Net movement relating to shares held by Vp Employee Trust

(4,493)

 

(10,567)

Share option charge in the year

2,525

 

1,904

Tax movements to equity

468

 

1,123

Impact of tax rate change

-

 

(31)

Change in Equity

15,966

 

9,583

Equity at start of year

121,350

 

111,767

Equity at end of year

137,316

 

121,350

 

 

Consolidated Balance Sheet

as at 31 March 2017

 

Note

2017

 

2016

Restated*

 

 

£000

 

£000

 

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

 

195,569

 

167,201

Intangible assets

 

47,512

 

46,363

Employee benefits

 

1,928

 

1,534

Total non-current assets 

 

245,009

 

215,098

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

5,166

 

5,363

Trade and other receivables

 

49,723

 

44,817

Cash and cash equivalents

3

15,070

 

11,374

Total current assets

 

69,959

 

61,554

Total assets

 

314,968

 

276,652

 

 

 

 

 

 

Current liabilities

 

 

 

 

Interest bearing loans and borrowings

3

(5,823)

 

(7,730)

Income tax payable

 

(1,514)

 

(931)

Trade and other payables

 

(55,270)

 

(51,567)

Total current liabilities

 

(62,607)

 

(60,228)

 

 

 

 

 

Non-current liabilities

 

 

 

 

Interest bearing loans and borrowings

3

(108,180)

 

(89,778)

Deferred tax liabilities

 

(6,865)

 

(5,296)

Total non-current liabilities

 

(115,045)

 

(95,074)

Total liabilities

 

(177,652)

 

(155,302)

Net assets

 

137,316

 

121,350

 

 

 

 

 

Equity

 

 

 

 

Issued share capital

 

2,008

 

2,008

Capital redemption reserve

 

301

 

301

Share premium account

 

16,192

 

16,192

Hedging reserve

 

(153)

 

(520)

Retained earnings

 

118,941

 

103,342

Total equity attributable to equity holders of the parent

137,289

 

121,323

Non-controlling interests

 

27

 

27

Total equity

 

137,316

 

121,350

 

* Cash and cash equivalents and interest bearing loans and borrowings have been restated following the change in accounting policy required by the updated interpretation of IAS 32 as described in the notes.  The change has had no impact on net assets.

 

 

Consolidated Statement of Cash Flows

for the year ended 31 March 2017

 

Note

2017

 

2016

 

 

£000

 

£000

Cash flow from operating activities

 

 

 

 

Profit before taxation

 

30,339

 

27,500

Pension fund contributions in excess of service cost

 

-

 

(369)

Share based payment charge

 

2,525

 

1,904

Depreciation

1

33,481

 

27,375

Amortisation and impairment

1

4,512

 

2,298

Financial expense

 

2,920

 

2,097

Financial income

 

(14)

 

(4)

Profit on sale of property, plant and equipment

 

(5,809)

 

(6,246)

Operating cash flow before changes in working capital

 

67,954

 

54,555

Decrease in inventories

 

197

 

1,132

Increase in trade and other receivables

 

(3,125)

 

(2,101)

Increase/(Decrease) in trade and other payables

 

4,860

 

(5,729)

Cash generated from operations

 

69,886

 

47,857

Interest paid

 

(2,738)

 

(2,097)

Interest element of finance lease rental payments

 

(183)

 

(4)

Interest received

 

14

 

4

Income tax paid

 

(4,539)

 

(4,840)

Net cash generated from operating activities

 

62,440

 

40,920

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Disposal of property, plant and equipment

 

16,686

 

17,179

Purchase of property, plant and equipment

 

(64,649)

 

(50,237)

Acquisition of businesses and subsidiaries (net of cash and overdrafts)

 

(9,984)

 

(7,068)

Net cash used in investing activities

 

(57,947)

 

(40,126)

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

Purchase of own shares by Employee Trust

 

(4,493)

 

(10,566)

Repayment of borrowings

 

(3,897)

 

-

Proceeds from new loans

 

19,000

 

16,000

Capital element of hire purchase/finance lease agreements

 

(636)

 

(497)

Dividends paid

 

(7,632)

 

(6,568)

Net cash used in financing activities

 

2,342

 

(1,631)

 

 

 

 

 

Increase/(decrease) in cash and cash equivalents

 

6,835

 

(837)

Effect of exchange rate fluctuations on cash held

 

(1,270)

 

118

Cash and cash equivalents at the beginning of the year

 

4,517

 

5,236

Cash and cash equivalents at the end of the year

 

10,082

 

4,517

 

 

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 2017.  The accounting policies applied are in line with those applied in the annual financial statements for the year ended 31 March 2016 other than the updated IFRSIC interpretation of IAS32 which means we can no longer offset the bank overdraft against cash balances.

 

EU Law (IAS Regulation EC1606/2002) requires that the consolidated accounts of the Group for the year ended 31 March 2017 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 2017.

 

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 March 2017 or 2016.  Statutory accounts for 31 March 2016 have been delivered to the registrar of companies, and those for 31 March 2017 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 2017 or 31 March 2016.

 

The financial statements were approved by the Board of Directors on 6 June 2017.

 

  

1.            Business Segments

 

 

Revenue

Depreciation and amortisation

Operating profit

before amortisation

 

2017

2016

2017

2016

2017

2016

 

 

 

 

 

 

 

 

£000

£000

£000

£000

£000

£000

UK

220,015

193,555

32,196

26,012

35,871

30,659

International

28,725

15,191

5,797

3,661

1,886

1,232

Total

248,740

208,746

37,993

29,673

37,757

31,891

 

 

 

2.            Earnings Per Share

 

The calculation of basic earnings per share of 60.31 pence (2016: 57.49 pence) is based on the profit attributable to equity holders of the parent of £23,652,000 (2016: £22,388,000) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2017 of 39,215,000 (2016: 38,942,000), calculated as follows:

 

2017

2016

 

Shares

Shares

 

000s

000s

Issued ordinary shares

40,154

40,154

Effect of own shares held

(939)

(1,212)

Weighted average number of ordinary shares

39,215

38,942

 

Basic earnings per share before the amortisation of intangibles was 69.52 pence (2016: 62.21 pence) and is based on an after tax add back of £3,610,000 (2016: £1,838,000) in respect of the amortisation of intangibles.

 

The calculation of diluted earnings per share of 58.65 pence (2016: 54.51 pence) is based on profit attributable to equity holders of the parent of £23,652,000 (2016: £22,388,000) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2017 of 40,330,000 (2016: 41,069,000), calculated as follows:

 

 

2017

2016

 

Shares

Shares

 

000s

000s

Weighted average number of ordinary shares

39,215

38,942

Effect of share options in issue

1,115

2,127

Weighted average number of ordinary shares (diluted)

40,330

41,069

 

Diluted earnings per share before the amortisation of intangibles was 67.60 pence (2016: 58.99 pence).

 

3.            Analysis of Net Debt

 

 

At

31 March

2017

£000

At

1 April

2016

£000

Cash and cash equivalents

 

(15,070)

(11,374)

Bank overdraft

 

4,988

6,857

Cash and cash equivalents as per cash flow statement

 

(10,082)

(4,517)

Current finance lease debt

 

835

873

Non current debt

 

108,180

89,778

Net debt

 

98,933

86,134

 

Year end gearing (calculated as net debt expressed as a percentage of shareholders' funds) stands at 72% (2016: 71%).

 

As at 31 March 2017 the Group had £120 million (2016: £95 million) of committed revolving credit facilities.  The year on year increase in the facilities reflects an additional facility of £20 million taken out in April 2016 using the step up facility and the replacement of the two facilities which were due to expire in October 2017, which totalled £50 million, with a new facility of £55 million taken out in December 2016.  In addition, there is an overdraft facility of £5 million (2016: £5 million) and a new uncommitted step up facility of £20 million.

 

 

4.            Taxation

 

The charge for taxation for the year represents an effective tax rate of 22.0% (2016: 18.6%).  The effective tax in the prior year was reduced by 1.3% (£0.3 million) as a result of a reduction in the deferred tax liability due to the reduction in the future standard rate in the UK to 19%.  This reflects the reduction in the rate to 19% for the year ended 31 March 2018.  The expected further reduction to 17% for the year ended 31 March 2021 is not reflected at either year end as it is deemed that a significant proportion of the deferred tax balance will reverse before 31 March 2020.  The effective tax rate excluding adjustments in respect of prior years is 21.5% (2016: 18.5%).

 

5.            Dividend

 

The Board has proposed a final dividend of 16.0 pence per share to be paid on 8 August 2017 to shareholders on the register at 14 July 2017.  This, together with the interim dividend of 6.00 pence per share paid on 4 January 2017, makes a total dividend for the year of 22.00 pence per share (2016: 18.85 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.

 

The Group has an established risk management strategy in place and regularly reviews divisional and department risk registers as well as the summary risk registers used at board level.  A risk register is prepared as part of the due diligence carried out on acquisitions and the methodology is subsequently embedded.

 

All risk registers have a documented action plan to mitigate each risk identified. The progress made on the action plan is considered as part of the risk review process.  The summary divisional and departmental risk registers and action plans were reviewed at risk meetings held in April 2017.  In all cases it is considered that the risk registers are being used as working documents which provides the required assurance that existing risks are being managed appropriately. In addition, the risk registers provide a process for recognising, scoring and thus appropriately managing new risks.

 

The risk registers are reviewed at the start (to facilitate the planning process) and at the end of each internal audit project.  A post audit risk rating is agreed with management.  If new risks are identified following an audit project they are added to the relevant risk register.  Heat maps illustrating post audit risk ratings and new risks are provided to the board in each published internal audit report.

 

To promote risk awareness amongst group and divisional employees, risk registers have now been disseminated further down levels of management.

 

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 16.0% (2016: 16.3%) in 2016/17.  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.  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 £120 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 significant 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 51 (2016: 56) days at the year end and bad debts, as a percentage of revenue remained low at 0.4% (2016: 0.4%).

 

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 2017 will be posted to shareholders before the end of June 2017.

 

Directors' Responsibility Statement in Respect of the Annual Financial Report (extracted from the Annual Financial Report)

 

We confirm that to the best of our knowledge:

 

·     The Group and Parent Company financial statements which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Parent Company; and

·     The Business Review and Financial Review, which form part of the Directors' Report, include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with the description of the principal risks and uncertainties that they face.

For and on behalf of the Board of Directors

J F G Pilkington

Director

A M Bainbridge

Director

 

 

- Ends -


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