Vp Share Discussion Threads

[kirkie001] 19/2/2018 12:50

Well, you're certainly doing your best to constantly suggest that the price is too high!

[kingston78] 16/2/2018 10:34

There is so little trading in VP's shares that it is difficult to say whether the share price is "genuine", for example, someone bought 30 shares at 880. Why would a small investor buy only 30 shares at a cost of £264 (plus broker's commission). It does not really make sense that this kind of small buying and selling continue, so far VP is concerned.

Market makers, or indeed, anyone for that matter can manipulate the share price by buying or selling tiny amount. I would say this is a false market.

[kingston78] 15/2/2018 19:37

I fear for the worst to come for VP plc as ambition stretches the Group too far with lots of intangibles and bank borrowings weakening the Group’s balance sheet.
The truth is that a good company should be able to grow organically and if by acquisition, should use its own cash resources rather than by borrowings.
It is a bridge too far in the economic cycle, which I think the board of VP has misjudged.

[kingston78] 09/2/2018 12:47

The CMA will report its findings in March. No one knows what the findings will be, however, it is understood that VP is not allowed to integrate Brandon Hire in the meantime. This is not going to help VP's business plan.

[kingston78] 04/2/2018 14:40

There was a typo in my previous post in that the current amount of borrowing is in the region of £200 million (not £120 million as I erroneously stated).

When you dissect the individual accounts of VP's subsidiaries you will find a lot of financial massaging. Whilst the overall group results would be the same the Holding Company charges no interest to the operating subsidiaries and cross charges a tiny amount of directors' remuneration to them. This means that VP can boast about the great performance of those operations whereas in reality their trading results have been flattered.

A company expanding rapidly via acquisition and financed by debt will make you wary.

I have seen it all before. There were great companies with good reputation and a cash mountain have been destroyed by poor acquisitions built on debt. Those good companies were completely destroyed in only a short few years.

[kingston78] 03/2/2018 22:27

The current balance sheet of VP Plc after its acquisition of Brandon Group would have £91 million of intangible assets. This is because Brandon Group had a net asset of only £7.5 million (actually it had a negative balance sheet of £1.9 million if we stripped out its own intangibles of £9.4 million), and the purchase price paid for Brandon was £41.6 million in cash[goodwill = £41.6 minus £7.5 million = £34.1 million). Funnily enough, the seller did not take shares in VP.

On the other hand its borrowing has increased to at least £120 million, as the acquisition has been funded entirely by borrowing and VP has also assumed the existing £27 debt of Brandon.

Intangible assets are worthless in practice. These are goodwill on acquisition (to balance the books in accounting terms), unlike IP which has a value.

The balance sheet is now very stretched. The idea of the acquisition was to buy market share and enhanced earnings (replacing Brandon's expensive debts with cheaper borrowings).

This strategy will come back to haunt the existing and future management when the demand for its services drops. It will be a downward spiral chasing business at all costs and at lower margin. VP is becoming a mini version of Carillion. Ego and ambition get the better of the present board of directors.

[kirkie001] 30/1/2018 12:10

I doubt it, to be honest.
It looks a good acquisition, made at a good time in the economic cycle with the opportunity of refinancing a load of debt into a longer, cheaper, affordable structure.
And this share is so thinly traded that it barely moves at all.
A long-term hold.

[kingston78] 30/1/2018 09:11

The share chart does not look good. It is likely that it will drop to 800p as a first stop. If it does not hold there it will drop to 700p.

[kingston78] 28/1/2018 22:44

The CMA is inviting interested parties to send in their views about VP's acquisition of Brandon Hire. In the event that the CMA asks VP to divest some of the Brandon Hire's branches its acquisition plan will falter, and the economy of scale that it envisaged will not be achieved to the full.

However, in the event that the CMA waves through the deal VP will be left with an expensive acquisition financed by debt. Brandon Hire made so little pretax profit because of its debt mountain paying a lot of interest. It is wrong for people to be fixated about EBIDTA.

Industry sources have revealed that Brandon Hire has adopted aggressive pricing to win over customers. It has probably adopted a Carillion style of chasing turnover at the expense of margins.

The VP board of directors will regret this deal when they look back in a few years time.

[tudes100] 18/1/2018 02:43

Sold rest of my holding on Monday after having a decent sized position for 4 yrs. Wasn't over keen on Brandon acquisition and little nervous about any possible exposure to CLLN. Dropped the Co an email over the weekend asking them to clarify but have had no response to date. Suspect it will be modest and covered by insurance but would have preferred to know.
Like the management team here and I'm sure they can knock Brandon into shape over time but given where we are in the current cycle & the level of existing debt even prior to acquisition I wanted to be cautious.
Best of luck all holders.

[kingston78] 17/1/2018 22:27

VP has bought poor quality earnings from Brandon Hire, which because of its huge debt has high interest charges, denting its pre-tax profit to a mere £1 million.

From VP's perspective this acquisition is a piece of financial engineering because it has borrowed from banks at a low interest rate to pay off some or all of Brandon's HP liability I presume, so that the overall earning of the enlarged group is enhanced. So far so good until the tide turns for the worse when trading becomes difficult with rising interest rate and the Groups' net debt becomes more difficult to manage. P/E will fall, so will the share price. Dividend will fall because the company's cash flow will be constrained.

As an investor I am wary of a company's rapid expansion built on debt. Carillion is a classic example.

[tudes100] 09/12/2017 00:26

trading bot, read Michael Lewis Flash Boys

[kingston78] 08/12/2017 16:36

At the close someone bought 12 shares at just under 900 p. During the day there were sells at much lower price. Someone, or could be a fund manager, tries to maintain a high share price buying small number again at the close.

I would call this manipulation. Is this another scandal?

[tudes100] 08/12/2017 02:50

worth a read on VP debt...
www.sharescope.co.uk/richardbeddard_article185.jsp

[kingston78] 07/12/2017 22:21

I have observed in recent days that some people appear to be manipulating the share price by buying in small number (17 shares) towards the close paying at a "high" price, thus pushing up the share price.

[kingston78] 03/12/2017 23:44

I don't even need any charting software to predict a price of 800 p. Many years of experience tell me that the shares were running of steam at around 920 p when it could not break new ground. Subsequent attempts to move higher were muted. As soon as the price fell below 900 p you could see the next stop at 800 p where there were supports on three previous occasions.

I normally use candle chart.

Share prices go in cycles, and even very successful companies see their price fall from time to time.

Personally, I would not invest in plant hire companies at the current economic climate. Growing by acquisition carries risk, and the risk becomes bigger when the Company borrows heavily to finance the acquisition.

[mammyoko] 03/12/2017 17:55

Still comfortably above 50-, 100- and 150-day moving average. What chart formation are you using to suggest 800p? There's plenty of support in between here and there.

[kirkie001] 01/12/2017 16:59

Interesting comment, based on not much more than your perception that the share price should be lower, rather than any actual knowledge or insight?

[kingston78] 01/12/2017 15:55

The share chart looks negative and the next stop / support is 800 p, which I expect it to hold.

[kingston78] 28/11/2017 14:04

Westcountryboy, I agree with some of your comments. I am not saying that VP is not a successful company. I just want to emphasise the point that sometimes ambition overstretches a company and sometimes detrimentally.

There are a number of financial ratios to measure success or failure of a company, two of which are cash flow and profit after tax. These two factors determine the company's ability to pay dividend and to finance operations and future growth. Whilst VP has the ability to manage growth as well as paying a dividend, you should note that it has had a recent history of increasing net debt at the end of each reporting period.

In essence it is borrowing to pay for acquisitions, not a good sign. At the interim stage at 30/9/2017 it had net debt of £115 million. It has arranged additional facility to finance the two latest acquisitions (cash consideration and debt = £70.5 million). So the Company now has a net debt of £185 million, against a total new facility of £205 million.

[westcountryboy] 26/11/2017 22:28

Always interesting to read contrary opinions. I have no idea whether VP overpaid for Brandon Hire. What I do know is that VP is a very successful and savvy family firm that was incorporated in 1950. I have been invested in them for many years and would trust their judgment. It is inconceivable that they did not weigh up this decision from many perspectives. Brandon Hire is hardly an unknown quantity to them - it was a competitor for years, indeed once upon a time I had shares in them myself. VPs' profit margins are healthily above 10% so they must be doing something right.

Is VP's chart toppy? EPS estimate for the year to March 2019 has been increased to 94p, giving a prospective PE ratio of less than 10.

[kingston78] 25/11/2017 12:42

Some analysts do not know what they are talking about because they do not have the necessary accounting knowledge and analytical skills to delve into the details. Moreover, they are using the wrong measurement of success, using EBITDA as the main indicator. This financial ratio was invented in the 1990's during the internet boom when most startup companies were losing money, so EBITDA would show them in a better light.

Please remember that interest, tax, depreciation and amortisation are a real cost. Interest and tax need to be paid. Depreciation and amortisation reflect the use of the fixed assets which are depreciating as they get older, and they will be replaced one day. There will be a cash effect. EBITDA should not be used for mature businesses and most companies. Management and their house brokers should not be fixated by EBITDA.

The latest audited accounts of Brandon Hire show a turnover of £80 million, EBITDA £6 million, but wait, the profit after tax is a mere £511,000. Using the cash consideration paid by VP Plc of £41.6 million the P/E ratio paid for this acquisition is 81 times [£41,600,000 / £511,000], which is an astonishing figure. VP Plc will assume their debt of £27.2 million. Assuming they negotiate with the Finance Lease creditors and pay off those debts immediately, it is true that Brandon Hire will save a lot of interest and increase the bottom line profit. The total enterprise value paid for this acquisition is £68.8 million [41.6 + 27.2 debt].

It would appear to me that VP Plc has done this deal for commercial reason to increase market share However, Brandon has 143 locations with 900 employees. It will not be easy to integrate successfully and rapidly. I believe that VP has over estimated the effect of synergy and under estimated the scale of the challenge of integration. If the debt of £27.2 million remains in Brandon's balance sheet it will probably produce a similar bottom line profit of £500,000 per annum. This will not enhance VP's earnings per share, but in fact will depress it. I believe that this is a very poor decision by VP in taking over Brandon Hire. Brandon Hire must have been struggling to some degree because it had little cash but a large debt and producing little profit despite a high turnover.

Turnover is vanity, profit is sanity and cash is king.

VP is misguided. The management has failed to see the motto above.

There is a lot of price cutting now in the plant hire industry, akin to the price wars between supermarkets. You know what that will lead to profitability, earnings per share, cash flow and the company's ability to pay a dividend. P/E ratio will go down so will the share price.

VP's share chart looks toppy and is now turning downwards. It is time to take profit if you own shares in this company.

[ed 123] 08/11/2017 10:58

Three positives arriving here:-

(1) Recent positive trading update .... We anticipate that Vp will make further progress in the current financial year. ... suggests that the interims (due on 21st November) will reveal an increase in eps.

(2) Budget (on 22nd November) trailed to be housing construction friendly.

(3) Today's announcement of the buy of Brandon Hire. Said to be earnings enhancing in the first year.

It's a well run business. The shares are tightly held, so it's more of a buy and hold stock.

Happy to hold these.

[tudes100] 27/10/2017 01:48

VP don't seem to be getting any benefit at all from rumoured construction friendly budget in November, housebuilders v.strong in the last month.

[felix1] 10/8/2017 02:48

I stand corrected. My knowledge of the business goes back to 2003 (@ 94p I now realise!). Recent comments from Mgt that they had been looking for the right overseas acquisition for some time gave me the impression that this was the first major non-U.K. buy. Nonetheless I like their considered style and can't imagine them overextending themselves again.