Strong recovery for tool hire group

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Tool rental group Vp has recorded that revenues are almost back to pre-pandemic levels for the first half of the year to 30 September.

The Harrogate-based group, which previously said “Covid brought out the out the very best in the business” saw revenues for the six months of £176.1m compared to £142.1m last year and £186.6m in 2019.

The group highlighted that since the end of the period it has completed its acquisition in the wake of Covid-19 with the purchase of M&S Hire for £2.8m

Neil Stothard, CEO, Vp Group

Speaking to this morning about the the interim results Neil Stothard, chief executive of Vp Group said: “The main message of these results is the continuing strong recovery from the prior year.”

He noted that while revenues still remained behind those before the pandemic the business had restored its margins and return on capital employed noting “the quality of the earnings has improved significantly”.

“Whilst we’ve still got revenue to make up as markets recover, the quality of earnings is back towards where it was [before Covid].”

He highlighted that the housebuilding sector, HS2, repair and maintenance in the construction sector and the transmission market had been strong areas for the business but that there were “latent opportunities” within the water and rail sectors, which he eects to pick up towards the end of the financial year and which “offer opportunities in 2022”.

Stothard also noted the supply chain challenges noting that the business had been making significant capital investments to ensure it “stayed ahead of the curve” and avoided being short of equipment as markets continue to pick up, but that this was leading to extended lead times.

In particular he explained that while supply chain issues aren’t stopping activity it is arguable that the issues are stalling the growth/recovery of certain sectors.

Looking ahead the CEO said the business is optimistic about 2022, believing the regulated industries will have to invest noting that the water and rail programmes can “only be delayed for so long”.

He added that while the recent news about HS2 2B being cancelled may actually provide the business with opportunities.

“It’s arguable that [the cancelation of Phase 2B of HS2] might be better for us, because the replacement works which is more renewal of existing is likely to come along more quickly than it would have done on the new section of HS2. So on balance, assuming the spend that they promised as an alternative happens that that’s more proximate for us and actually more in line with the type of work that we do, so time will tell.”

James Tetley, analyst at Singer Capital Markets said: “Vp’s interims confirm a strong recovery in revenue and profitability metrics. Several end markets are trading back above pre-Covid levels, whilst committed infrastructure spending in Water and Rail represents upside potential for next year.

He added: “Management’s confidence in the market outlook can be seen in increased investment (in terms of capex and recent M&A).