Vp Share Discussion Threads

[wirralowl] 25/2/2003 15:48

Brokers are expecting £7.5m pre-tax profits for 2003, and £8.3m in 2004 for VP. A £2m shortfall paid over 10 years shouldn't therefore be too great a problem for them. Also, dividends are well covered (about 2.5x I think) so would also be pretty safe I'd have thought.

Also, with reference to the weather effecting VP its not all negative - Groundforce has been seen to benefit whenever there are floods, with an increased need from water authorities to deal with emergency sewage outflow. In 2000/01 figures were boosted on the back of the late 2000 floods.

Green Sand - are you still around ?

[faz] 25/2/2003 15:25

Thanks PU - I Was aware of what Maxwell could and couldn't do but if this deficit has now to be made good by VP, many other companies could be affected. So what I don't see is why the deficit has to be made good now. As equities are only losses or profits when liquidated into cash where is the imperative to liquidate now? Running costs of the pension shceme must surely be much smaller than the total value of the pension

On a separate point I'm thinking of setting up my own acturial audit function - if they got paid in April 99 for suggesting annual inflation would run at 13% then obviously as a village idiot I'm well qualified for the task

[pugugly] 25/2/2003 14:40

faz:>
1. Maxwell should have not been able to if the Auditors and Directors ahd been doing their jobs. The board of Trade enquiry found that he was not a fit and proper person to be a Director of a plc. (polite city way of saying he was a crook)

2. The pension (defined benefit) is I am virtually sure a pension being a set percentage of final salary (as oposed to money purchase - which is what thepot will buy) Thus the company is obliged under your contract of employment to top up the pot. (I am sure if I am wrong someone will correct me)

Hence it would appear that unless (unlikely imo) equity markets recovery quickly VP will have to make large extra contributions which will mean less to pay dividends and fund working capital..

[diogenesj] 24/2/2003 21:57

Pug: well spotted. The equity portion of the fund was therefore worth £4.39m at March 2002, when there was a £528k deficit. If it has fallen another 35% or so with the market, it will now be worth £2.86m and the deficit will now be about £2.1m.

I'm afraid it's unlikely ever to recover: this is the point at which amateur investors and pension funds start to panic and sell. The effect is that they have added £2m to their gearing: not a total disaster, but paying it off over the next ten years or so will make a small dent in profits.

[pugugly] 24/2/2003 20:25

Thebarrelboy. Agreed but we are all dead in the long term. Also they(shares) can go sideways for very many years - I would not like to offer odds on when we see a recovery. Indeed some commentators reckon that the bubble still has more unwinding to do.

[thebarrelboy] 24/2/2003 19:09

Well spotted - however over the long term, shares can go UP as well as down- pensions are long term.

[pugugly] 24/2/2003 18:57

Think I may have located one of the possible problems. Pension liabilities. Pasted from the 2002 accounts below. Equities comprised 78% -MARKET AS WE ALL KNOW HAS FALLEN SIGNIFICANTLY SINCE THEN Subject to what shares they were invested in there could be a VERY BIG HOLE.

FRS 17 Transitional Disclosure Accounts 31st March 2002,
The Group and Company continues to account for pension costs in accordance with Statement of Standard Accounting Practice 24 'Accounting
for Pension costs'. Under FRS17, 'Retirement benefits', the following transitional disclosures are required for the Group and Company.
Vp Pension Scheme is an arrangement with distinct defined benefit and defined contribution categories. The following relates solely to the defined
benefit section. The last full actuarial valuation of the scheme was carried out by a qualified independent actuary as at 6 April 1999. This valuation
was updated on an FRS17 basis as at 31 March 2002. The major assumptions used by the actuary were:
Inflation 13% per annum
Salary increases 14% per annum
Rate of discount 16% per annum
Pension in payment increases 13% per annum
Revaluation rate for deferred pensioners 13% per annum
The assets of the scheme at 31 March 2002 were split as follows:
Equities 78%
Bonds 17%
Other 15%
The expected long term rate of return over the following year is 6.25% for equities and 5% for bonds.
The following amounts at 31 March 2002 were measured in accordance with the requirements of FRS17:
Total market value of assets £5,637,000
Present value of scheme liabilities £6,165,000
Deficit £528,000
The amount of the net deficit would have a consequential effect on the reserves of the Group and the Company.

[pugugly] 24/2/2003 18:13

WirralOwl. Thanks - Will probably wait and see what happens to weather in the next month. Volume however has been low (in general) for last 6 months - decline for last 3 days (ok I know micromanaging) has been on daily increasing volume)

[wirralowl] 24/2/2003 17:17

Pugugly, you could be right - however in the NW the weather has been pretty good - we've had a relatively dry (though cold) winter and on my travels I've seen quite a few Vibroplant vans buzzing around the place. Also fall has been on low volume - would have thought if it'd been informed selling would have been greater volumes. I'm tempted to top up at these levels.

[pugugly] 24/2/2003 17:00

I suspect that the selling could be informed. Weather seems to have been very bad - snow rain floods - which could well (imo) have impacted on both VP's and their plant hire customers work flow. And hence vP's profitability.

Any views from those living in the North East?

[faz] 24/2/2003 15:10

Small trading activity letting this one fall - good company well worth watching.

[green sand] 21/12/2002 21:22

Broke with my usual MO and forked out a few quid to buy the house note, which in my opinion explains why VP is drifting south and will offer a nice buying opportunity shortly.

They have put forward a very minor increase in their estimate for 2003, increasing eps from 12.2 to 12.3p! Accompanied with words such as prudent and conservative. This based on a view that the forecast growth in H2 would return to a more normal level following the excellent H1 result. However they remain confident that the group can continue to deliver eps growth at or in excess of management's 10% pa target.

The note rates VP a buy with a 12 month target price of 130p and claim that with a 14% ROCE, VP should trade at a premium to the competition and in excess of the £1.05 NAV.

They state seasonal reasons for not being able to maintain H1 growth. I agree that H1 will not be matched in H2, however I do expect at least 10% on last years H1, which means VP will easily outperform the house forecast and should make 130p inevitable. I am staying with my watching brief, holding present stake, and intend to buy more on the present weakness.

Good Luck

GS

[green sand] 02/12/2002 22:02

WirralOwl

Dividend paid "to shareholders registered as at 6th December".

Not sure about the trades reported today. The estimates show twice as many buys as sells. However the 28k 95p "buy" at the close was a single protected transaction that could have been started earlier in the day. This could help to explain the 5% downturn.

I am with you WirralOwl the market will get there. However I am not sure what effect having 80%+ of the shares tightly held is having?

I am keeping a watching brief, any movement below 90p will be very tempting.

Good Luck

GS

[green sand] 30/11/2002 23:24

Not doing too well with things to look forward to!

No press coverage, and the good old IC only rates VP as "Fairly Priced" their logic being "a heavily concentrated share ownership makes a takeover unlikely and, on a forward PE of 8, VP trades in line with peers."

I have to agree that VP is in line on a PE of 8, what I don't agree with is the "forward" bit. In my experience this usually refers to the next year's forecasts i.e. 2004.

VP reported interim 2003 earnings of 6.34p. The question is what will the second half bring?

Since rationalisation VP has been growing EPS at > 10% per 6 months and there are very good reasons to believe that this will be the case for the second half of this year.

However if they only grow the second half by 5%, which is in line with their stated commitment to a minimum year on year EPS increase of >10% it will give an EPS for the year of 13p at PE of 8 = 104.

IF, and I have no reason to doubt, VP stay with 10% growth for 2004 we should expect EPS of 14.3 with a PE of 8 = 114. Which could be said to be a fair price for VP today. We will not however get movement without either company news or broker updates. The IC refers to a house broker forecast that does not appear to have been revised since July!

If the price drifts, especially after ex div date, I will take advantage and get some more. The interim report reads well. I am confident that they have taken the actions required to get Hire Station in line with the group aims. As this unit is the largest and represents some 46% of turnover any increase in performance will greatly enhance the bottom line. The effective "swapping" of Airpack Onshore for the 2 acquisitions again fits the model of niche market areas.

According to the construction press there are some £8bn worth of rail infrastructure projects waiting to be placed!

Good Luck

GS

[green sand] 21/11/2002 20:03

Things to look forward to: -

1. Possible press coverage tomorrow?
2. Even more chance of coverage in the weekend press
3. Possible tip in the Kiss of Death, sorry IC next week
4. Broker upgrade, house + at least one.
5. 5% dividend

Level trades today I can understand the sales, profit has been hard come by this year and there can never be anything wrong in taking a profit.

However I believe there is more to come and the 4 points above could all help. Anybody got any to add to the list?

[oldolie] 21/11/2002 09:05

sorry I hadn`t realised there was a thread open for this belter,when I opened another, wondered why there was no interest, little interest in a share paying divis. and making profit is a sad reflection of a bb I fear, my target is £1.50 for 12 months, public spending increases will find their way through to this sector soon

AIMOHO

[wirralowl] 21/11/2002 09:03

Hi steady - welcome aboard !

Successive 6 monthly EPS read as follows : 3.88p, 4.72p, 5.50p and now 6.34p ! With this kind of consistent growth we should expect at least 7p for the final 6 months this year, giving current full year EPS of 13.3p+ putting them on a PE of around 7. Yet they have no debt, a 5% and increasing dividend and show conssitent year on year growth. Surely this kind of company should merit a PE of at least 9, which would give a share price in 6 months of approx. of £120p. A PE of 10 gives : 133p !! All IMHO of course, but looks very good.

[green sand] 21/11/2002 08:50

Well done to Jeremy Pilkington and his colleagues! The model is working well and still has legs. I reckon there is at least 20% to be had from holding VP over the next 12 months.

I like the quite resolve of this company! They do not even bother to highlight the 34% eps growth in the headlines!

The resolve is also illustrated with the changes implemented at Hire Station. I am sure the rewards will follow. I have not had chance to study in detail, but every marker appears to be going in the right direction, excellent cash flow, low gearing, no crazy intangibles and a couple of "nice" sounding acquisitions after the period end, more wonderful growth. Must go HRH says I can't play any longer.

Good Luck

GS

[steadyeddy] 21/11/2002 08:49

This share definately needs a re-rating, excellent results. I'm in.

[wirralowl] 21/11/2002 08:13

Wow ! They've done it again ! What a great set of results ! 6.34 EPS for the 6 months. Profits 40% up, Gearing down to 17%, increased dividend and confident outlook - think we'll see some broker estimates revised upwards after this :


RNS Number:0848E
Vp PLC
21 November 2002


Date : Embargoed until 7.00 a.m. Thursday 21 November 2002
Contacts : Jeremy Pilkington, Chairman & Chief Executive
Neil Stothard, Group Finance Director
Tel : 01423 533405

Vp plc : Interim Results



Vp plc, the specialist equipment rental group, announces its interim results for
the six months ended 30 September 2002.


* Turnover of #37.1m (2001 : #31.9m)


* Group profit before tax of #4.0m (2001 : #2.9m), an increase of 40%


* Earnings per share of 6.34p (2001 : 4.72p)


* Recommended interim dividend increased to 1.5p per share (2001 : 1.4p)


* Net debt of #8.2m (31 March 2002 : #10.6m) representing gearing of 17%





Jeremy Pilkington, Chairman & Chief Executive, comments :

"The performance of the Group in the period has been very encouraging and
positions us well for further development.

Financially, the business remains in sound health with strong cash flow and low
gearing. We have both the financial and management resources to embrace
opportunities as they arise where the key criteria of price, compatibility with
our core businesses and potential for growth are satisfied.

Whilst the broader economic environment contains uncertainties and remains
challenging, the Group is well positioned to make further progress."



CHAIRMAN'S STATEMENT

The performance of the Group in the six months to 30 September 2002 has been
very encouraging.

Turnover rose 16% to #37.1m (2001 : #31.9m) and operating profit before goodwill
amortisation improved 35% to #4.5m (2001 : #3.4m). Profit before taxation
increased to #4.0m (2001 : #2.9m) and earnings per share rose 34% to 6.34p (2001
: 4.72p).

Cash inflow from operating activities was #7.9m (2001 : #7.3m). Net debt at 30
September 2002 was #8.2m (31 March 2002 : #10.6m). This represents gearing of
17% on shareholders' funds of #48.6m.

The results for the first six months indicate that we have made satisfactory
progress towards our goals of improved return on capital employed, earnings
growth and market share gain.

The markets within which we operate have been challenging in the period and this
makes the achievement of the result all the more impressive and a credit to the
employees of the Group businesses.

In recognition of the progress made by the Group, your Directors are pleased to
recommend payment of an increased interim dividend of 1.5p (2001 : 1.4p) per
share payable on 6 January 2003 to shareholders registered as at 6 December
2002.

SERVICES


* Turnover #14.6m (2001 : #12.1m)


* Operating profit #2.0m (2001 : #1.3m)


* Investment in rental fleet #2.0m (2001 : #2.8m)



UK Forks

UK Forks experienced a satisfactory six months trading in line with management
expectations. The division achieved further successes within its targeted
customer base, particularly in the residential construction sector.

The securing of longer term commitments has been key to progress within UK
Forks, as has our proactive approach to the introduction of new models and
functionality in response to our customers increased awareness of site health
and safety issues.

Groundforce

After a quiet start to the financial year, Groundforce activity improved in the
second quarter, performing in line with the business budgets and ahead of prior
year. The release of a number of delayed AMP3 water related projects has
strengthened demand for our more specialist equipment. Several new product lines
have been introduced in the first half including a 250T hydraulic strut which
has already featured on three large prestigious excavations.

Overall performance at Groundforce has been assisted by the successful
development of the complementary Piletec business which offers the rental and
sale of piling hammers and pile breakers.

Airpac

The Offshore business performed well with activity in our core North Sea market
strong. A number of large contracts have been successfully completed in South
East Asia. The newly established base in Singapore is improving the mobilisation
efficiency of the fleet and provides facilities on which we can expand our
presence in this market.

Onshore, the markets have remained difficult and we have reduced excess fleet
capacity as and when opportunities have presented themselves.

Safeforce

The Safeforce business continues to develop well in safety equipment hire, sales
and asset management. The introduction of new products has helped us to grow our
customer base and increase average transaction values.

In October, post the end of the period under review, this business made two
acquisitions. The material acquisition was the purchase, for a cash
consideration of #1.28m, of the entire issued share capital of Stopper
Specialists Limited, the market leading provider of pipe stopper hire and sales
to the groundwork and construction market. Stoppers are a product line,
complementary to both the Groundforce and Safeforce customer base, that has been
offered by Safeforce for many years and this acquisition represents a
significant expansion of that activity. We also made a small acquisition of the
assets and live contracts of a laser and survey equipment hire business.

HIRE STATION


* Turnover #17.2m (2001 : #16.2m)


* Operating Profit #1.1m (2001 : #1.4m)


* Investment in rental fleet #2.9m (2001 : #2.9m)



The new management team at Hire Station has been very active during the period,
launching a number of initiatives designed to improve sales volume and margin.
These include a comprehensive staff training programme to strengthen our core
skills to enable us to deliver a sharper service offering. Other changes include
the reorganisation of the business into three geographical regions from four
which has permitted the elimination of a regional head office. The full benefit
of these initiatives will not be felt in full until next fiscal.

Whilst profits in the period are down compared with the same period last year,
this is due in part to the abnormally poor trading month in June as the country
focused on the World Cup and Jubilee celebrations, together with the costs of
regional restructuring. Additionally, the development of greenfield openings in
Glasgow and Edinburgh, whilst significantly improving the Hire Station offering
in Scotland, has imposed the drag effect of start up costs on the profit in the
period.

Hire Station One Call, the central hire desk reservation system for tool hire,
has successfully launched a "fast-track" warehouse facility in East London,
serving the demanding but busy London market. Plans are in place to extend this
offering in the second half of the year.

The acquisition of Plymouth Hire Centre in June improved our geographic coverage
in the South West and a further three Lifting Point locations were opened in the
period.

Hire Station will shortly be launching, on a national basis, a safety equipment
rental and sales service through selected outlets within the existing tool hire
branch network. Branded as Safeforce, this will add a retail dimension to our
existing Safeforce offering.

The market in general for tool hire remains relatively flat but we believe there
is considerable scope for further improvement in Hire Station's performance. We
remain confident that the tool hire market will be a rewarding one for the
Group.



TORRENT TRACKSIDE


* Turnover #5.3m (2001 : #3.6m)


* Operating Profit #1.4m (2001 : #0.7m)


* Investment in rental fleet #1.2m (2001 : #0.6m)



Torrent continues to perform extremely well, building further on its leading
position as a provider of non-operator plant and lighting services to the rail
infrastructure and maintenance market.

Further progress has been secured in the first half as Torrent has continued to
capture market share and has enjoyed an unusually strong summer trading period.
The extended offering of asset management contracts and training to the rail
maintenance sector has also given Torrent further impetus. Prospects for this
market remain good.



OUTLOOK

The performance of the Group in the period has been very encouraging and
positions us well for further development.

Financially, the business remains in sound health with strong cash flow and low
gearing. We have both the financial and management resources to embrace
opportunities as they arise where the key criteria of price, compatibility with
our core businesses and potential for growth are satisfied.

Whilst the broader economic environment contains uncertainties and remains
challenging, the Group is well positioned to make further progress.





J.F.G. PILKINGTON

Chairman & Chief Executive

[wirralowl] 21/11/2002 08:13

Posted twice in error.

Marked up nicely at the open. These should make your target now Green Sand !

[green sand] 10/11/2002 11:22

Bird, no insider I am just a sado who likes the benefit that research brings. I take your point about a formula based approach taking the emotion out of investing providing you are still aware of emotions. Markets, prices are driven by very powerful emotions, greed and fear, they cannot be discounted. I have a list of punts that should, have performed predictably but have not! I don't know who said it but there is "Events move markets, events!"

My "formula" keeps me in the low gain low pain area. I had my fun with the techs, made a lot, lost a lot (but not all) I now work on value stocks, looking for small in the bank cash returns. In my humble opinion the world is too volatile to ignore short term gains.

I still like VP. just found some more interesting news on the company in Construction News. Two articles: -

Ukforks

"Telehandlers on Laing Homes sites will be equipped with the latest safety devices thanks to the extension of a deal under which hire specialist Ukforks supplies Laing with handlers and forklifts for 30 sites throughout the country.

The take up of the new visiblity-enhancing equipment comes only weeks after the
Vp subsidery announced that it would make the equipment available to its customers. The accessories include rear-view cameras, reversing alarms, boom mirrors, convex mirrors and high-vis decals.

Laing Homes has opted for rear-view CCTV cameras, reversing lights and alarms, chevrons, a boom-side mirror and a mirror on the left-hand side of the cab. The company is now considering the extension of its contract with Ukforks to cover a further 30 sites.

Laing Homes' health and safety advisor, Ken Chambers, said site safety was a paramount concern: "The issue is imperative for us and other house builders, as the Health and Safety Executive has said it is going to enforce the elimination of all blind spots on forklifts and 360-degree machines within 6 months." "

More sophistcated kit, higher rentals? more revenue, another 30 Laing sites? growth & more growth at Ukforks! And who gets paid to train the operators?

The second article is too long to post & I don't know how to cut and paste in here. It is by Richard Donald, managing director of Torrent Trackside, but it is written in his capacity as chairman of the Rail Plant Association!

"As an organisation we are directly involved in setting protocols for maintenance, the M&E people are the ones who we approve so we work closely with them"

"The association is also working closely with Railtrack and the Construction Industry Training Boatd to develope competency standards for rail machine operators. The process could ultimately lead to to a single smart card by which possession supervisors and project managers can electronically discover which on-track jobs a worker is qualified foe and which equipment he is able to operate.

The end product, says Mr Donald , will be a Certificate of Training Achievement (CTA) card with rail specification."

There is a lot more in the article but basically I see more growth for Vp. especially in the training and certification of operatives. Having the chairman of the association as your MD means you must be aware of the way the industry is going and its future needs.

The above again illustrates how the business model is progressing with more bolt on revenue enhancing elements. All to get to the stated aims in growth and ROCE.

Still looking forward to the 21st!

Good Luck

GS

[bird of dawning] 02/11/2002 22:37

Green Sand,
Thanks for your very clear and detailed answer. You have replied like an insider!? Another feature of the accounts information that really impressed me is the large positive difference between PTP and operational cash flow over the last 4 years. VP seems to generate cash. Clearly this appears to have much to do with VP's ability to increase dividends through this bear market.

I tend to use formulaic criteria as a template for fundamental anlysis (it tends to take that dangerous emotional factor out of investing). VP currently qualifies as a value investment using one of Ben Graham's criteria. That is using the medium term UK gilt yield as a base benchmark. By doubling this and obtaining an earnings yield which is then converted into its reciprocal P/E...currently just under 11 then a company such as VP that has a lower P/E satisfies Graham's (value ) test. Also the low gearing satisfies Graham's safety test...so there you have it!!....value c/w growth!

Incidentally, I operate in the building industry, providing architectural services c/w building contracting...converting larger houses/shops/offices into flats. I have noticed the trend to plant hire. The high cost of plant storage in London has contributed to this. I have noted with interest your comments on the on-line/mail order system.
Regards