Vp made a pre-tax loss of £6.2m for the six months to 30th September 2020 on revenue down 24% to £142.1m (2020 H1: £186.6m). In the same period last year it had made a pre-tax profit of £18.4m.
Without the £13.0m of exceptional items and £1.6m of amortisation and impairments, pre-tax profit would have been £8.6m, compared to £25.9m last year.
Exceptional items include a further £10.87m provision in anticipation of the outcome of an investigation by the Competition & Markets Authority into suspected anti-competitive behaviour in the temporary groundworks sector. Three companies are under investigation, including Vp’s Groundforce Shorco business. [See our previous report here.] Previous accounts included a provision of £4.5m in respect of this matter, so Vp has now set aside £15.37m for it in total.
Revenue was dampened by the impact of Covid-19. In April 2020, just after the first national lockdown began, Vp’s group monthly revenues dropped by almost 50% compared with the prior year.
In response, the company stopped all but essential capital investment and recruitment and staff were furloughed. While this managed to save many jobs, some downsizing was still required, resulting in 150 redundancies and the merger or closure of 23 Brandon Hire Station branches in the UK. Since October 2020, no employees have been on furlough.
Trading in the UK division improved as summer went on and by the end of October monthly revenues in the UK had been restored to 89% of 2019 levels. The recovery has been strongest in the MEP, Torrent and TPA (UK and Europe) divisions. ESS Safeforce (survey and safety rental) has also made a good recovery, the board said.
The Brandon Hire Station business, more dependent on the general construction market, has been slower to rebound but has seen a sustained revenue improvement as the branch network fully re-opened from August onwards. Despite the closures, Brandon Hire Station remains the largest stand-alone tool hire business in the UK, with162 branches nationwide.
Groundforce has seen a slower recovery in civil engineering activity but is starting to pick up now and there are firm hopes for 2021 as the new AMP7 five-year infrastructure investment programme is progressively released.
The house-building sector largely closed in April, impacting the telehandler hire business, UK Forks, but then recovered as sites re-opened from May.
During the period net debt reduced by £41.1m to £118.7m, while return on average capital employed was 10.3% (2020 H1: 14.5%).
Chairman Jeremy Pilkington said: “The resilience and diversity of the Vp offering has once again proved to be an invaluable asset as the Group and its customers recover from the economic impact of Covid-19. Vp’s businesses are gradually recovering towards prior year trading levels, buoyed by the positive medium-term outlook for infrastructure investment in the UK. The group remains in excellent financial condition and is well positioned to take advantage of the uplift in demand and return the business to its historic levels of profitability. The board is optimistic but also realistic about prospects for the second half and beyond.”