Vp PLC : Final Results
| Press Release | 5 June 2014 |
Vp plc
("Vp" or the "Group" or the "Company")
Final Results
Vp plc, the equipment rental specialist, today announces its Final Results for the year ended 31 March 2014.
Highlights
- Significant improvement in profit before tax and amortisation by 16% to £20.1 million (2013: £17.4 million)
- Revenues increased 10% to £183.1 million (2013: £167.0 million)
- Basic earnings per share pre-amortisation rose 18% to 42.0 pence
- Return on capital employed improved to 13.5% (2013: 13.3%) maintained above target threshold of 12% for 10 consecutive years
- Continued strong cash flow generation with EBITDA increasing to £44.3 million (2013: £41.0 million)
- Increase in net debt to £53.0 million (2013: £45.3 million) after funding:
- Capital investment in the fleet of £38.2 million
- Successful £4.6 million acquisition of Mr Cropper in September 2013
- Final dividend proposed of 10.4 pence per share, making a total of 14.0 pence for the full year (2013: 12.25 pence), an increase of 14%
Jeremy Pilkington, Chairman of Vp plc, commented:
"It has been another highly successful year for the Group with significant progress in revenue, profits, earnings per share and dividends.
Economic indicators in the UK and mainland Europe now appear more positive than for some time and all businesses within the Group are identifying significant opportunities for growth and investment.
We believe that our established financial discipline combined with the active pursuit of growth opportunities will continue to deliver quality returns for shareholders.
We look forward to the year ahead with confidence."
- 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 / Jamie Hooper / Stephanie Watson | Tel: +44 (0) 20 7398 7719 |
| jamie.hooper@abchurch-group.com | www.abchurch-group.com |
CHAIRMAN'S STATEMENT
I am very pleased to be able to report to shareholders on another excellent set of results and a year of further progress for the Group.
Profits before tax and amortisation improved 16% to £20.1 million (2013: £17.4 million) on revenues up 10% at £183.1 million (2013: £167.0 million) with margins increased to 11.0% (2013: 10.4%). Basic earnings per share pre-amortisation increased by 18% to 42.0 pence per share.
Return on average capital employed moved ahead to 13.5% (2013: 13.3%). Return on capital employed has long been a cornerstone key performance indicator for the Group, guiding our investment and acquisition decisions and informing longer term strategy. We have an outstanding track record in this regard, having maintained ROACE above our target threshold of 12% in each of the last 10 years, even throughout the worst periods of the recent recession.
The Group continued to generate strong cash flows with EBITDA increasing to £44.3 million (2013: £41.0 million). We spent £38.2 million on rental fleet upgrades and renewals, a 70% increase over the prior year, demonstrating our confidence in the quality of investment opportunities, plus £4.6 million on the acquisition of Mr Cropper in September 2013, which is now trading very successfully within Groundforce. Net borrowings rose to £53.0 million (2013: £45.3 million) representing a gearing of 49%. All businesses within the Group are identifying significant opportunities for growth and investment.
Reflecting this excellent set of results, the Board is recommending a final dividend of 10.4 pence per share, making a total for the year of 14.0 pence per share, an increase of 14%. Subject to shareholders approval at our Annual General Meeting on 22 July 2014, it is proposed to pay the final dividend on 8 August 2014 to members registered as of 11 July 2014.
Economic indicators in the UK and mainland Europe now appear more stable and positive than they have been for several years and it does not now seem unreasonable to assume that we will be operating within a more benign economic environment for the foreseeable future.
During the year, the Board conducted a review of Board effectiveness. The review confirmed that high standards of governance were generally being met but we have implemented certain specific recommendations and remain alert to opportunities for further improvement.
Our employees and their dedication to the business is our one truly unique distinguishing feature and their longevity of service is one of our greatest strengths. Fully 50% of our employees have more than 5 years' service and 25% have more than 10 years which is a remarkable record. There is no substitute for this deep, institutional experience and memory in terms of delivering outstanding service excellence to our customers.
On behalf of our shareholders and the Board, it is my pleasure to recognise the contribution of all employees, in the UK, Europe and further afield, to these excellent results.
Jeremy Pilkington
Chairman
5 June 2014
BUSINESS REVIEW
Overview
Vp plc is a specialist rental business with six market leading divisions operating in the UK and overseas. Our objective is to deliver sustainable, quality returns by providing products and services to a diverse range of end markets. These include rail, transmission, water, construction, civil engineering, housebuilding and oil and gas.
| Year ended 31 March 2014 | Year ended 31 March 2013 | ||
| Revenue | £ 183.1 million | £ 167.0 million | |
| Operating profit before amortisation | £ 21.8 million | £ 19.8 million | |
| Operating margin | 11.9% | 11.9% | |
| Investment in rental fleet | £ 38.2 million | £ 22.5 million | |
| ROACE | 13.5% | 13.3% |
The Group has again made excellent progressthis year, generating revenues of £183.1 million, 10% ahead of prior year. Whilst there was a small contribution from the mid-year Mr Cropper acquisition, the bulk of the increase was organic, with all operating divisions progressing during the year.
Operating profits before amortisation also grew by 10% to £21.8 million, and therefore margins were maintained at a healthy 11.9% (2013: 11.9%). Return on average capital employed (ROACE), a key indicator for the Group, improved to 13.5% (2013: 13.3%), further demonstrating that the Group is succeeding in both delivering growth whilst maintaining and improving the quality of returns.
The Group continued to generate strong cash flows with EBITDA increasing to £44.3 million (2013: £41.0 million).
The year to 31 March 2014 saw an uplift in investment with rental fleet capital expenditure increased to £38.2 million (2013: £22.5 million). Investment in rental fleet is a combination of growth, replacement and substitution. In addition, as previously reported, the Group acquired the entire issued share capital of Mr Cropper Ltd in September 2013 for £4.6 million.
As always, disposal of equipment is an important factor with sale proceeds of £8.6 million (2013: £9.6 million) generating profit on disposal of £2.9 million (2013: £2.6 million).
The market environment for the Group has been largely supportive. Housebuilding, infrastructure, water (AMP5) and transmission markets have continued to generate good demand throughout the year. Oil and gas markets have become more positive with improved prospects in liquefied natural gas (LNG) markets in particular. Overseas growth continues to be targeted both in the oil and gas sector globally and in transmission, civil engineering and wind power in mainland Europe. The UK general construction market remains a future opportunity as recovery improves. Whilst we are expectant of a modest rate of improvement in construction, the trend is positive and the Group is well positioned to benefit from this recovery as it happens.
The Group's strategy to support diverse markets both in the UK and overseas continues to deliver results. The strong growth in earnings during the year, yet again underlines the benefit and relevance of our business model, which is delivering genuine shareholder value over the longer term.
GROUNDFORCE
Excavation support systems, specialist piling solutions and trenchless technology for the water, gas, civil engineering and construction industries in the UK and mainland Europe.
| Year ended 31 March 2014 | Year ended 31 March 2013 | ||
| Revenue | £42.3 million | £37.2 million | |
| Operating profit before amortisation | £7.9 million | £7.8 million | |
| Investment in rental fleet | £8.0 million | £7.3 million |
Groundforce delivered another excellent performance with profits of £7.9 million (2013: £7.8 million) from revenues up 14% to £42.3 million. Whilst margins were reduced, largely due to a change in business mix, the net result remains of the highest quality.
Demand came from infrastructure projects, large and small, together with a strong contribution from AMP5. Design led, temporary works solutions, primarily London centric, also provided strong workflows through the year. The largest contract was for Crossrail in forming the entrance to Paddington station. Regional demand was varied, with increased activity in the South and the North of England compensating for a slower market in Scotland following completion of a significant contract in the transmission sector. Overall market share, however, was at least maintained.
Piletec performed very well, further enhanced by the acquisition of Mr Cropper in September 2013. Major piling projects were limited in number but Piletec maintained its share. Mr Cropper was quickly integrated into the business and subsequent investment in rental fleet and vehicles, plus the transfer to two new locations, has helped prepare the ground for further growth.
Progress in Ireland was limited, but positive, against a subdued market backdrop. Other Group products have been introduced during the year together with the opening of a satellite depot in Lisburn, Northern Ireland.
The start-up Groundforce business in Germany continues to develop and whilst still incurring losses, we remain positive about prospects. The business is centred around hubs in Germany which provide a platform for supply of traditional products on a regional basis, together with an infrastructure to undertake major project work across the wider mainland European market. The major project work is technically challenging but the business has been successful in achieving success on a number of high profile contracts.
Capital investment on rental fleet was £8.0 million (2013: £7.3 million) in support of opportunities largely in the UK but also Europe.
The new financial year holds the prospect of some further progress for Groundforce as a declining demand from AMP5, now in its 5th year, is mitigated by ongoing project work in Europe.
UK FORKS
Rough terrain material handling equipment for industry, residential and general construction.
| Year ended 31 March 2014 | Year ended 31 March 2013 | ||
| Revenue | £ 16.3 million | £14.1 million | |
| Operating profit before amortisation | £ 2.5 million | £2.1 million | |
| Investment in rental fleet | £ 7.0 million | £0.4 million |
The UK Forks division delivered excellent results with profits up 19% to £2.5 million (2013: £2.1 million). After a relatively modest investment in fleet in the prior year, increasing demand from customers and new contract wins saw fleet capital expenditure grow to £7.0 million (2013: £0.4 million) in the year. Whilst the level of investment in fleet has increased, the returns in the business have also continued to improve. Demand picked up in both core sectors; housebuilding and construction. The growing appetite for new homes across the UK acts as a driver to buoyant housebuild activity.
UK Forks remains the market leader in supplying telehandlers to the UK housing market and customers continue to recognise the value added benefit of our commitment to high quality customer service and back up.
The division has had a very strong run over the last three years as the recovery from recessionary conditions has been used as a platform for profitable growth. The business continues to explore new markets whilst maintaining strong management of the cost base and the quality of revenue. The new year has started well and prospects will be helped by further recovery in the general construction sector.
AIRPAC BUKOM OILFIELD SERVICES
Equipment and service providers to the international oil and gas exploration and development markets.
| Year ended 31 March 2014 | Year ended 31 March 2013 | ||
| Revenue | £ 20.2 million | £17.4 million | |
| Operating profit before amortisation | £ 2.0 million | £2.0 million | |
| Investment in rental fleet | £ 5.8 million | £2.1 million |
Airpac Bukom revenues grew to £20.2 million, 16% ahead of the prior year. Profits year on year were flat at £2.0 million but this represents a good recovery from the deficit against prior year reported at the interim stage. Trading has improved in most geographical areas, with South East Asia, Australia and the Middle East performing particularly well. In Asia, a number of contract awards were secured in well testing, with good demand in Indonesia, India and Thailand. In addition, LNG contracts were secured in support of the construction of new plants in Australia. This activity involved support in both Indonesia and Thailand for the fabrication testing and also projects in Australia on Curtis Island, Queensland. Prospects for further LNG activity remain positive with more projects expected to come on stream in the new financial year. The Middle East North Africa (MENA) region performed well with good ongoing demand in Kurdistan together with new opportunities in North Africa. The UK North Sea sector remained quiet with low well test activity and restrictions on rig fabric maintenance arising from a combination of adverse weather and helicopter issues. Activity in the Africa region was subdued compared with prior year.
Investment in rental fleet increased to £5.8 million as the division continued to broaden the product offering. The majority of this expenditure was at the end of the financial year and will only contribute in the new financial year.
We anticipate further increased capital investment as the business reacts to opportunities in the well test, rig maintenance and LNG markets and this should provide a good platform for the business into the new year.
TORRENT TRACKSIDE
Suppliers of rail infrastructure portable plant and specialist services to Network Rail, London Underground and their respective contractor base.
| Year ended 31 March 2014 | Year ended 31 March 2013 | ||
| Revenue | £22.3 million | £21.4 million | |
| Operating profit before amortisation | £2.8 million | £2.2 million | |
| Investment in rental fleet | £2.9 million | £0.9 million |
Torrent Trackside had an excellent year reporting revenues of £22.3 million up 4% on prior year and generating profits of £2.8 million (2013: £2.2 million).
Investment in the rail sector continued to be significant and as a major rental provider to that market, Torrent experienced another year of strong demand. Business levels were high as the control spend period 4 (CP4) completed with the division busy on renewal, project and maintenance activities. Torrent continued to provide a full range of services directly to Network Rail on maintenance across the UK rail network and also to the Network Rail appointed contractors.
The new 5 year control spend period (CP5) relating to track maintenance and renewal across the UK, will commence in 2014. Network Rail have recently confirmed the successful bidders for both plain line renewals and switches and crossings for CP5, and Torrent are well positioned to deliver both plant and associated services to the successful bidders.
Investment in the fleet increased significantly to £2.9 million (2013: £0.9 million) both to refresh the fleet and also in support of new growth opportunities.
The rail market is well funded, buoyant and challenging. Year on year, the market rightly demands increased productivity, efficiency gains and unit price reductions. Torrent's market leadership places it well to meet those demands whilst continuing to deliver excellence to both the existing and new customer base.
TPA
Portable roadway systems, primarily to the UK market, but also in mainland Europe.
| Year ended 31 March 2014 | Year ended 31 March 2013 | ||
| Revenue | £15.8 million | £14.9 million | |
| Operating profit before amortisation | £1.8 million | £1.3 million | |
| Investment in rental fleet | £1.0 million | £2.4 million |
The TPA business had a good year increasing revenues by 6% to £15.8 million, but more importantly further improving margins. Operating profits increased from £1.3 million to £1.8 million, a 36% improvement.
Investment in rental fleet was modest at £1.0 million (2013: £2.4 million) with revenue growth delivered from improved utilisation and rates.
In the UK, revenue quality improved as the business mix was changed, moving away from lower margin and seasonal outdoor event activity, towards the less seasonal transmission and day to day construction and rail markets. Trading during the winter was also better at what has, historically, been a quieter time for TPA. The increasing challenge of complying with HSE (health and safety) and VOSA (vehicle usage) regulations has also been met and operational efficiencies have been gained as a result.
The business in Germany had a much improved year with a more consistent revenue stream from a wider customer base and a busy transmission sector. The business enjoyed a strong final quarter and enters the new financial year with good momentum both in the UK and mainland Europe.
HIRE STATION
Small tools and specialist equipment for industry and construction.
| Year ended 31 March 2014 | Year ended 31 March 2013 | ||
| Revenue | £66.2 million | £62.0 million | |
| Operating profit before amortisation | £4.8 million | £4.3 million | |
| Investment in rental fleet | £13.4 million | £9.4 million |
The Hire Station division enjoyed improving markets during the year, particularly in the second half, and reported revenues of £66.2 million, a 7% uplift on prior year. This growth translated into a profit improvement of 11% to £4.8 million for the year. Progress was made in all three elements: Hire Station tools, ESS Safeforce and MEP.
The tools business, with its strengthened management, made excellent progress. Whilst enjoying growth, the emphasis has been on operational improvement and achieving high availability on the most popular products. The net result has been enhanced levels of service and market share gains. The business improved its infrastructure with relocations of certain key branches and selective openings of new locations in the new financial year. The tool hire business operates in a highly competitive market, and includes general construction as one of its key segments.
ESS Safeforce had another year of excellent growth. New locations were opened in Port Talbot and Exeter and additional capacity added in other existing locations. Shutdown activity was quieter, but prospects are improved and a number of contracts have been secured for the new financial year. The specialist focus on rental and sales of safety, survey and communications equipment continues to deliver strong results.
MEP, which supplies press fitting and electrofusion equipment, as well as operating the largest low level access fleet in the UK, delivered another year of growth. Supporting the M&E (mechanical and electrical) sector, activities in the year have included the new Southern General Hospital in Glasgow and Terminal 2 at Heathrow. The maintained drive by the HSE on site safety will drive best practice and act as a catalyst for further potential growth for MEP.
Capital investment in the year was healthy at £13.4 million (2013: £9.4 million) as the business invested into growth opportunities and improved product availability.
Within the tool hire market the dynamics continue to change and as customers become busier and seek to work more safely, availability, product quality and customer service become ever more important. The business survived the downturn better than most and is well positioned to participate in the market recovery, and we foresee another year of progress.
Prospects
Building on another good year for the Group, we expect further positive development both in the UK market place but also in our smaller but growing overseas activities.
The overall scenario for the markets we support remains positive, with further improvement anticipated in general construction and oil and gas, tempered by potential temporary, but modest slowdown in sectors which have been buoyant in recent times such as water and transmission.
Consistency of quality in products, services and people is increasingly valued by customers who rightly expect a top level service delivery. As markets recover, we believe that these factors will further enhance the attractiveness of our specialist service offering.
We enter the new financial year with excellent business momentum from a strong final quarter and this gives us confidence that Vp remains in a good position to deliver further progress for shareholders in the coming year.
Neil Stothard
Group Managing Director
5 June 2014
Consolidated Income Statement
for the year ended 31 March 2014
| Note | 2014 £000 | 2013 £000 | ||
| Revenue | 1 | 183,064 | 167,034 | |
| Cost of sales | (133,470) | (124,791) | ||
| Gross profit | 49,594 | 42,243 | ||
| Administrative expenses | (28,883) | (23,377) | ||
| Operating profit before amortisation | 1 | 21,831 | 19,815 | |
| Amortisation | (1,120) | (949) | ||
| Operating profit | 20,711 | 18,866 | ||
| Net financial expense | (1,778) | (2,464) | ||
| Profit before amortisation and taxation | 20,053 | 17,351 | ||
| Amortisation | (1,120) | (949) | ||
| Profit before taxation | 4 | 18,933 | 16,402 | |
| Taxation | 4 | (3,238) | (3,353) | |
| Net profit for the year | 15,695 | 13,049 | ||
| Pence | Pence | |||
| Basic earnings per share | 2 | 39.78 | 33.62 | |
| Diluted earnings per share | 2 | 36.31 | 30.84 | |
| Dividend per share paid and proposed | 5 | 14.00 | 12.25 |
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2014
| 2014 | 2013 | |||||
| £000 | £000 | |||||
| Profit for the year | 15,695 | 13,049 | ||||
| Other comprehensive income: Items that will not be reclassified to profit or loss | ||||||
| Remeasurements of defined benefit pension scheme | 233 | 697 | ||||
| Tax on items taken to other comprehensive income | (53) | (166) | ||||
| Impact of tax rate change | (118) | (42) | ||||
| Foreign exchange translation difference | (181) | 45 | ||||
| Items that may be subsequently reclassified to profit or loss | ||||||
| Effective portion of changes in fair value of cash flow hedges | 704 | 196 | ||||
| Total other comprehensive income | 585 | 730 | ||||
| Total comprehensive income for the year | 16,280 | 13,779 | ||||
Consolidated Statement of Changes in Equity
for the year ended 31 March 2014
| 2014 | 2013 | ||
| £000 | £000 | ||
| Total comprehensive income for the year | 16,280 | 13,779 | |
| Dividends paid | (4,962) | (4,437) | |
| Net movement relating to Treasury Shares and shares held by Vp Employee Trust | (8,593) | (1,922) | |
| Share option charge in the year | 1,735 | 1,225 | |
| Tax movements to equity | 2,876 | 1,258 | |
| Impact of tax rate change | (274) | (42) | |
| Change in Equity | 7,062 | 9,861 | |
| Equity at start of year | 100,922 | 91,061 | |
| Equity at end of year | 107,984 | 100,922 |
Consolidated Balance Sheet
as at 31 March 2014
| Note | 2014 | 2013 | ||
| £000 | £000 | |||
| Non-current assets | ||||
| Property, plant and equipment | 124,834 | 110,577 | ||
| Intangible assets | 41,351 | 39,279 | ||
| Employee benefits | 689 | 80 | ||
| Total non-current assets | 166,874 | 149,936 | ||
| Current assets | ||||
| Inventories | 5,352 | 5,679 | ||
| Trade and other receivables | 38,356 | 33,256 | ||
| Cash and cash equivalents | 3 | 8,978 | 8,712 | |
| Total current assets | 52,686 | 47,647 | ||
| Total assets | 219,560 | 197,583 | ||
| Current liabilities | ||||
| Interest bearing loans and borrowings | 3 | (17) | (24,000) | |
| Income tax payable | (632) | (1,539) | ||
| Trade and other payables | (44,396) | (34,838) | ||
| Total current liabilities | (45,045) | (60,377) | ||
| Non-current liabilities | ||||
| Interest bearing loans and borrowings | 3 | (62,000) | (30,000) | |
| Deferred tax liabilities | (4,531) | (6,284) | ||
| Total non-current liabilities | (66,531) | (36,284) | ||
| Total liabilities | (111,576) | (96,661) | ||
| Net assets | 107,984 | 100,922 | ||
| Equity | ||||
| Issued share capital | 2,008 | 2,008 | ||
| Capital redemption reserve | 301 | 301 | ||
| Share premium account | 16,192 | 16,192 | ||
| Hedging reserve | (90) | (794) | ||
| Retained earnings | 89,546 | 83,188 | ||
| Total equity attributable to equity holders of the parent | 107,957 | 100,895 | ||
| Non-controlling interests | 27 | 27 | ||
| Total equity | 107,984 | 100,922 | ||
Consolidated Statement of Cash Flows
for the year ended 31 March 2014
Note | 2014 | 2013 | ||
| £000 | £000 | |||
| Cash flow from operating activities | ||||
| Profit before taxation | 18,933 | 16,402 | ||
| Pension fund contributions in excess of service cost | (376) | (429) | ||
| Share based payment charge | 1,735 | 1,225 | ||
| Depreciation | 1 | 22,507 | 21,173 | |
| Amortisation | 1 | 1,120 | 949 | |
| Financial expense | 1,790 | 2,484 | ||
| Financial income | (12) | (20) | ||
| Profit on sale of property, plant and equipment | (2,862) | (2,569) | ||
| Operating cash flow before changes in working capital | 42,835 | 39,215 | ||
| Decrease/(increase) in inventories | 364 | (796) | ||
| (Increase)/decrease in trade and other receivables | (3,525) | 1,741 | ||
| Increase/(decrease) in trade and other payables | 7,581 | (401) | ||
| Cash generated from operations | 47,255 | 39,759 | ||
| Interest paid | (1,848) | (2,504) | ||
| Interest element of finance lease rental payments | (5) | - | ||
| Interest received | 12 | 20 | ||
| Income tax paid | (3,949) | (3,809) | ||
| Net cash flow from operating activities | 41,465 | 33,466 | ||
| Cash flow from investing activities | ||||
| Disposal of property, plant and equipment | 8,554 | 9,609 | ||
| Purchase of property, plant and equipment | (39,535) | (29,635) | ||
| Acquisition of businesses and subsidiaries (net of cash and overdrafts) | (4,498) | (4,117) | ||
| Net cash flow from investing activities | (35,479) | (24,143) | ||
| Cash flow from financing activities | ||||
| Purchase of own shares by Employee Trust and Company | (8,593) | (9,767) | ||
| Repayment of borrowings | (54,000) | (5,000) | ||
| Proceeds from new loans | 62,000 | 13,000 | ||
| Capital element of hire purchase/finance lease agreements | (36) | (1) | ||
| Dividends paid | (4,962) | (4,437) | ||
| Net cash flow used in financing activities | (5,591) | (6,205) | ||
| Increase in cash and cash equivalents | 395 | 3,118 | ||
| Effect of exchange rate fluctuations on cash held | (129) | 12 | ||
| Cash and cash equivalents at the beginning of the year | 8,712 | 5,582 | ||
| Cash and cash equivalents at the end of the year | 8,978 | 8,712 |
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 2014. The accounting policies applied are in line with those applied in the annual financial statements for the year ended 31 March 2013 with the exception of the adoption of new standards applicable in the year, being IAS1 (as amended), IFRS 13 and IAS19 (as amended). None of these has had a material effect on the accounts.
EU Law (IAS Regulation EC1606/2002) requires that the consolidated accounts of the Group for the year ended 31 March 2014 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 2014.
The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 March 2014 or 2013. Statutory accounts for 31 March 2013 have been delivered to the registrar of companies, and those for 31 March 2014 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 2014 or 31 March 2013.
The financial statements were approved by the board of directors on 5 June 2014.
1. Business Segments
| Revenue | Depreciation and amortisation | Operating profit before amortisation | ||||
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| UK Forks | 16,301 | 14,061 | 2,841 | 2,629 | 2,482 | 2,099 |
| Groundforce | 42,298 | 37,165 | 4,600 | 4,015 | 7,917 | 7,833 |
| Airpac Bukom | 20,201 | 17,450 | 3,466 | 3,458 | 2,035 | 2,015 |
| Hire Station | 66,174 | 62,017 | 9,192 | 8,454 | 4,798 | 4,323 |
| TPA | 15,786 | 14,897 | 1,582 | 1,540 | 1,779 | 1,310 |
| Torrent Trackside | 22,304 | 21,444 | 1,534 | 1,655 | 2,820 | 2,235 |
| Group | - | - | 412 | 371 | - | - |
| Total | 183,064 | 167,034 | 23,627 | 22,122 | 21,831 | 19,815 |
2. Earnings Per Share
The calculation of basic earnings per share of 39.78 pence (2013: 33.62 pence) is based on the profit attributable to equity holders of the parent of £15,695,000 (2013: £13,049,000) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2014 of 39,451,000 (2013: 38,818,000), calculated as follows:
| 2014 | 2013 | |
| Shares | Shares | |
| 000's | 000's | |
| Issued ordinary shares | 40,154 | 40,154 |
| Effect of own shares held | (703) | (1,336) |
| Weighted average number of ordinary shares | 39,451 | 38,818 |
Basic earnings per share before the amortisation of intangibles was 41.97 pence (2013: 35.47 pence) and is based on an after tax add back of £862,000 (2013: £721,000) in respect of the amortisation of intangibles.
The calculation of diluted earnings per share of 36.31 pence (2013: 30.84 pence) is based on profit attributable to equity holders of the parent of £15,695,000 (2013: £13,049,000) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2014 of 43,222,000 (2013: 42,308,000), calculated as follows:
| 2014 | 2013 | |
| Shares | Shares | |
| 000's | 000's | |
| Weighted average number of ordinary shares | 39,451 | 38,818 |
| Effect of share options in issue | 3,771 | 3,490 |
| Weighted average number of ordinary shares (diluted) | 43,222 | 42,308 |
Diluted earnings per share before the amortisation of intangibles was 38.31 pence (2013: 32.55 pence).
3. Analysis of Net Debt
| At 31 March 2014 £000 | At 1 April 2013 £000 | ||
| Cash and cash equivalents | (8,978) | (8,712) | |
| Current debt | 17 | 24,000 | |
| Non current debt | 62,000 | 30,000 | |
| Net debt | 53,039 | 45,288 |
Year end gearing (calculated as net debt expressed as a percentage of shareholders' funds) stands at 49% (2013: 45%).
On 15 May 2013 the existing bank facilities, including the facility which was due to expire on 31 May 2013, were replaced by a £35 million revolving credit facility which expires in May 2016 and a £30 million four and a half year revolving credit facility which expires in October 2017. The agreed facilities also included a £25 million step up facility. The Group will make use of this facility and in June 2014 will establish a £20 million committed revolving credit facility also expiring in October 2017.
4. Taxation
The charge for taxation for the year represents an effective tax rate of 17.1% (2013: 20.4%). The tax charge was reduced by £1.1 million (5.7%) to reflect the adjustment to the deferred tax balance as a result of the future standard tax rate of 20% in the UK. The effective tax rate excluding adjustments in respect of prior years is 17.7% (2013: 21.6%).
5. Dividend
The Board has proposed a final dividend of 10.40 pence per share to be paid on 8 August 2014 to shareholders on the register at 11 July 2014. This, together with the interim dividend of 3.60 pence per share paid on 3 January 2014 makes a total dividend for the year of 14.00 pence per share (2013: 12.25 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.
Our approach identifies risks arising in all parts of the Group, using both a top down and bottom up approach. Once identified, the impact and probability of risks are determined and scored at both a gross (before mitigation) and net (after mitigation basis). These risk scores are documented in risk registers which are maintained at a divisional and Group level. Risk registers are subject to ongoing review based upon business activity.
The risk profile for each division is used to determine the programme of work carried out by Internal Audit. The risk assessments are captured in consistent reporting formats, enabling Internal Audit to consolidate the risk information and summarise the key risks in the form of a Group risk profile. Mitigation action plans against each risk continue to be monitored on a regular basis. Further information is provided below on our principal risks and mitigating actions to address them.
Market risk
Risk description
A downturn in economic recovery could result in worse than expected performance of the business, due to lower activity levels or prices.
Mitigation
Vp provides products and services to a diverse range of markets with increasing geographic spread. The Group regularly monitors economic conditions and our investment in fleet can be flexed with market demand.
Competition
Risk description
The equipment rental market is already competitive, and could become more so, potentially impacting market share, revenues and margins.
Mitigation
Vp aims to provide a first class service to its customers and maintains significant market presence in a range of specialist niche sectors. The Group monitors market share, market conditions and competitor performance and has the financial strength to maximise opportunities.
Investment/product management
Risk description
In order to grow, it is essential the Group obtains first class products at attractive prices and keeps them well maintained.
Mitigation
Vp has well established processes to manage its fleet from investment decision to disposal. The Group's return on average capital employed was a healthy 13.5% in 2013/14. The quality of the Group's fleet disposal margins also demonstrate robust asset management and appropriate depreciation policies.
People
Risk description
Retaining and attracting the best people is key to our aim of exceeding customer expectations and enhancing shareholder value.
Mitigation
Vp offers well structured reward and benefit packages, and nurtures a positive working environment. We also try to ensure our people fulfil their potential to the benefit of both the individual and the Group, by providing appropriate career advancement and training.
Safety
Risk description
The Group operates in industries where safety is a key consideration for the well being of both our employees and the customers that hire our equipment. Failure in this area would impact our results and reputation.
Mitigation
The Group has robust health and safety policies, and management systems and our induction and training programmes reinforce these policies.
We provide support to our customers exercising their responsibility to their own workforces when using our equipment.
Financial risks
Risk description
To develop the business Vp must have access to funding at a reasonable cost. The Group is also exposed to interest rate and foreign exchange fluctuations which may impact profitability and has exposure to credit risk relating to customers who hire our equipment.
Mitigation
The Group has a revolving credit facility of £65.0 million and maintains strong relationships with all banking contacts. Our treasury policy defines the level of risk that the Board deems acceptable. Vp continues to benefit from a strong balance sheet, with growing EBITDA, which allows us to invest into opportunities.
Our treasury policy requires a tangible proportion of debt to be at fixed interest rates, and we facilitate this through interest rate swaps. We have agreements in place to buy or sell currencies to hedge against foreign exchange movements. We have strong credit control practices and use credit insurance where it is cost effective. Debtor days were unchanged during the year and bad debts, as a percentage of revenue, remained low at 0.6% (2013: 0.7%).
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 2014 will be posted to shareholders on or around 20 June 2014.
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 issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Vp PLC via Globenewswire
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