VP PLC

Earnings Release • Jun 6, 2017

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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
[email protected]
Neil Stothard, Chief Executive	Tel: +44 (0) 1423 533 400
[email protected]
Allison Bainbridge, Group Finance Director	Tel: +44 (0) 1423 533 400
[email protected]	www.vpplc.com

Media enquiries:

Buchanan
Henry Harrison-Topham / Jamie Hooper	Tel: +44 (0) 20 7466 5000
[email protected]	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
Amortisation		(4,512)		(2,298)
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 -

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