Record profits for tool hire group

Profitability at tool rental group Vp has reached record levels as the Harrogate business continues to grow strongly.

However its accounts also include a £4.5m provision relating to a Competition and Markets Authority (CMA) investigation which is underway.

Despite that, operationally the business has delivered “excellent” results.

Pre-tax profits before amortisation and exceptional items – which also included acquisition costs – were £46.8m. Revenues were up 26% to £382.8m in the year to March, helped by the impact of those acquisitions.

In particular the purchase of Brandon Hire in November 2017, which added 1,500 people, 200 branches and 200,000 items of rental equipment, has been viewed as a success.

The tool rental group has six divisions, ranging from Hire Station which has more than 100 centres across the UK to its specialist oilfield services business Airpac Bukom.

Neil Stothard, chief executive of Vp, said: “We have had a very good trading year with some good successes.”

One cloud on the horizon is the Competition and Markets Authority’s (CMA) provisional determination that Vp, together with two other companies, had “acted in a manner deemed to be uncompetitive in the market for certain elements of temporary groundworks”.

Vp is preparing a response to the CMA but has included an exceptional cost of £4.5m in its accounts, which it says represents the midpoint in the £0-£9m range it believes are the possible outcomes to the investigation.

Investors responded strongly with Vp’s share price up 10% to 817p in early trading, although still significantly below the 1000p-plus seen in 2019 before the early April announcement of the CMA investigation.

N+1 Singer analyst James Tetley said the CMA investigation “has had a disproportionate impact on Vp’s share price”.

“It’s not dominating our lives,” said Stothard. “We are taking it very seriously but the process has been underway for a couple of years now and we have maintained our focus on the business, as seen by us delivering these excellent results.”

Stothard is confident the business is well placed for further growth, albeit at a slower rate.

He added: “Vp has started the new financial year positively and in line with our expectations. We anticipate that our main markets in the UK will continue to be supportive, but with slightly slower overall growth than experienced in recent years influenced by the current political and economic uncertainty.

“I am pleased to say that the international backdrop is also broadly positive, with opportunities in Australasia with TR group and the wider oil and gas exploration and maintenance sectors too.”

Vp has increased its dividend by 16%, to 30.2p, which Stothard said “isn’t just struck on the year we have reported but also on how we view the next 12-18 months.”

He told its key markets are showing “stability” while there are “some interesting opportunities” in both its UK and international businesses.

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