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Share Name Share Symbol Market Type Share ISIN Share Description
Vp Plc LSE:VP. London Ordinary Share GB0009286963 ORD 5P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.0% 698.00 672.00 706.00 706.00 706.00 706.00 200,125 16:35:09
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Support Services 382.8 33.6 65.2 10.7 280

Vp PLC Interim Results

04/12/2019 7:00am

UK Regulatory (RNS & others)


TIDMVP.

RNS Number : 5629V

Vp PLC

04 December 2019

 
 Press Release              4 December 2019 
 

Vp plc

('Vp' or the 'Group')

Interim Results

Vp plc, the equipment rental specialist, today announces its Interim Results for the six months ended 30 September 2019 (the 'period').

Highlights

 
 --   Profit before tax, amortisation and exceptional items 
       maintained at GBP25.9 million (H1 2019: GBP25.9 million)(1) 
 --              Revenues reduced by 3% to GBP186.6 million (H1 2019: GBP193.2 
                  million) 
 --              EPS, pre amortisation and exceptional items, increased 
                  to 52.5 pence per share (H1 2019: 52.3 pence per share) 
                  (1) 
 --              Interim dividend increased by 3% to 8.45 pence per share 
                  (H1 2019: 8.20 pence per share) 
 --              Return on average capital employed robust at 14.5% (H1 
                  2019: 14.5%)(1) 
 --              EBITDA increased slightly to GBP51.8 million (H1 2019: 
                  GBP51.6 million) (1) 
 --              Capital investment in rental fleet down 28% at GBP26.6 
                  million (H1 2019: GBP36.7 million) 
 --              Statutory profit before tax of GBP23.4 million (H1 2019: 
                  GBP23.9 million) (1) and statutory earnings per share 
                  of 47.3 pence (H1 2019: 48.3 pence) 
 

Jeremy Pilkington, Chairman of Vp plc, commented: "The Group made good progress in the first half of the year against a subdued market backdrop. Despite the ongoing political and economic uncertainty in the UK, our focus on quality of earnings has delivered enhanced operating margins during the period.

The Board remains confident of a positive full year outcome and looking ahead, we believe we will continue to deliver very satisfactory results for all stakeholders."

Analyst Briefing:

An analyst briefing given by Jeremy Pilkington (Chairman), Neil Stothard (Chief Executive) and Allison Bainbridge (Group Finance Director), will be held at 0930hrs today at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN.

- Ends -

For further information:

 
 Vp plc 
 Jeremy Pilkington, Chairman                  Tel: +44 (0) 1423 533 
                                                                400 
 Neil Stothard, Chief Executive                       www.vpplc.com 
 Allison Bainbridge, Group Finance Director 
 
 Media enquiries: 
 Buchanan 
 Henry Harrison-Topham / Jamie Hooper          Tel: +44 (0) 20 7466 
  / Tilly Abraham                                              5000 
 Vp@buchanan.uk.com                             www.buchanan.uk.com 
 

Notes on alternative performance measures:

(1.) Following the adoption of IFRS 16 Leases with effect from 1 April 2019, as the Group has adopted the accounting standard using the modified retrospective approach to transition and has accordingly not restated prior periods, the results for the six months ended 30 September 2019 are not directly comparable with those reported in the prior period under the previous applicable accounting standard, IAS 17 Leases. To provide meaningful comparatives, the results for the six months ended 30 September 2019 have therefore also been presented under IAS 17. Further, as the decision makers currently allocate resource and assess performance primarily on an IAS 17 basis, the alternative performance measures will be disclosed based on IAS 17 until the transition to an IFRS 16 basis in the financial year ending 31 March 2021. See Note 5(b) for a reconciliation of the IAS 17 alternative performance measures to the equivalent IFRS 16 measures. The adoption of IFRS 16 did not have a significant impact on profit before taxation (GBP0.2 million impact). The balance sheet impact has been disclosed in note 5(a).

-- All performance measures stated as before amortisation are also before impairment of intangibles and exceptional items.

-- Basic earnings per share pre amortisation and exceptional items is reconciled to basic earnings per share in note 9.

-- Profit before tax, amortisation and exceptional items is reconciled to profit before tax in the Consolidated Income Statement.

-- Return on average capital employed is based on profit before tax, interest, amortisation and exceptional items divided by average capital employed on a monthly basis using the management accounts. Profit before tax, interest, amortisation and exceptional items is reconciled to profit before interest and tax in the Consolidated Income Statement.

CHAIRMAN'S STATEMENT

I am pleased to report a solid set of results for the Group which reflect the strength of Vp's fundamentals and the market leading quality of our earnings.

For the six month period to 30 September 2019, profits before tax, amortisation and exceptional items were unchanged at GBP25.9 million (H1 2019: GBP25.9 million) on reduced revenues of GBP186.6 million (H1 2019: GBP193.2 million). Statutory profit before taxation was GBP23.4 million (H1 2019: GBP23.9 million). Earnings per share pre-amortisation and exceptional items rose marginally to 52.5 pence per share (H1 2019: 52.3 pence per share). Return on average capital employed ('ROACE') was maintained at a robust 14.5% (H1 2019: 14.5%) and well ahead of our cost of capital.

As budgeted, capital investment in fleet was reduced to GBP26.6 million (H1 2019: GBP36.7 million). Borrowings at the period end stood at GBP183.7 million (H1 2019: GBP188.2 million). EBITDA increased to GBP51.8 million (H1 2019: GBP51.6 million).

Against a backdrop of political and economic uncertainty, we consider these results to be a very satisfactory performance and the Board is therefore declaring a 3% increase in the interim dividend to 8.45 pence per share (H1 2019: 8.2 pence per share) payable on 17 January 2020 to shareholders registered as at 13 December 2019.

UK Division

The UK Division delivered a solid first half with operating profits before amortisation and exceptional items moving ahead marginally to GBP27.2 million (H1 2019: GBP26.9 million) on reduced revenues of GBP170.0 million (H1 2019: GBP175.3 million). Statutory operating profit was GBP26.9 million (H1 2019: GBP25.1 million).

Infrastructure and housebuilding have remained supportive but commercial construction and civil engineering activity has been a little softer, primarily in the South East market. In response to this backdrop, we have addressed cost lines and scaled back fleet capital investment accordingly. We are pleased to see operating margins improving from 15.3% to 16.0% as a result of these measures.

In May, we acquired Sandhurst Limited for GBP3.3 million. Sandhurst rents specialist excavator attachments to the construction and civil engineering sectors from five locations across the UK and now works alongside the Groundforce piling business. Early results from Sandhurst have been encouraging as it integrates into the Group and we look forward to its contribution going forward.

International Division

Operating profits before amortisation and exceptional items eased slightly to GBP1.1 million (H1 2019: GBP1.3 million) on revenues marginally down at GBP16.6 million (H1 2019: GBP17.9 million). Statutory operating profit was GBP0.9 million (H1 2019: GBP1.1 million).

Whilst TR made reassuring progress in Malaysia and New Zealand, demand from the Australian market was a little quieter.

Within the petro-chemical segment, there have been some early encouraging signs of improvements in workloads and future prospects and we have committed capital investment into these opportunities.

Update on Regulatory Review

There is nothing further to report regarding the Competition and Markets Authority (CMA) provisional determination of 9 April 2019, which I highlighted in my last Chairman's statement, other than that we have now formally responded to the CMA with regard to the alleged breaches.

Outlook

Despite the domestic political uncertainty and a more subdued economic back-drop, we are reassured to have delivered market leading, and improving, earnings quality. Trading for the Group continues in line with the Board's expectations and we remain confident of a positive full year outcome.

Looking further ahead, we believe that the combination of our financial strength and our exceptional team of people will continue to deliver very satisfactory results for all stakeholders.

Jeremy Pilkington

Chairman

4 December 2019

Condensed Consolidated Income Statement

For the period ended 30 September 2019

 
                                      Six months          Six months         Full year 
                                      to 30 Sept          to 30 Sept         to 31 Mar 
                                           2019*                2018              2019 
                                     (unaudited)         (unaudited)         (audited) 
                             Note         GBP000              GBP000            GBP000 
                                   -------------  ---  -------------  ---  ----------- 
 
   Revenue                     3         186,585             193,211           382,830 
 Cost of sales                         (142,328)           (146,101)         (295,539) 
                                   -------------  --- 
 
 Gross profit                             44,257              47,110            87,291 
 Administrative expenses                (16,504)            (20,917)          (48,968) 
                                   -------------  ---  -------------  ---  ----------- 
 
 Operating profit 
  before amortisation 
  and exceptional 
  items                        5          30,250              28,178            51,571 
 Amortisation and 
  impairment                             (1,833)             (1,985)           (4,632) 
 Exceptional items                         (664)                   -           (8,616) 
                                   -------------       -------------       ----------- 
 
 Operating profit             3           27,753              26,193            38,323 
 Net financial expense        5          (4,478)             (2,325)           (4,742) 
 
 Profit before taxation, 
  amortisation and 
  exceptional items            5          25,772              25,853            46,829 
 Amortisation and 
  impairment                             (1,833)             (1,985)           (4,632) 
 Exceptional items            4            (664)                   -           (8,616) 
                                   -------------       -------------       ----------- 
 Profit before taxation       5           23,275              23,868            33,581 
 Taxation                     6          (4,735)             (4,752)           (7,759) 
                                   -------------  ---  -------------  ---  ----------- 
 
 Profit attributable 
  to owners of the 
  parent                                  18,540              19,116            25,822 
                                   -------------  ---  -------------  ---  ----------- 
 
                                           Pence               Pence             Pence 
 Basic earnings per 
  share                       9            46.84               48.26             65.20 
 Diluted earnings 
  per share                   9            45.70               46.38             63.66 
 Dividend per share          10             8.45                8.20             30.20 
 

*IFRS 16 was adopted on 1 April 2019 for statutory reporting without restating prior year figures. As a result, the primary

statements are shown on IFRS 16 basis for the six months to 30 September 2019 and on an IAS 17 basis for the six months to 30 September 2018 and full year to 31 March 2019. Note 5(b) provides the impact on the consolidated income statement for the period ended 30 September 2019, including the GBP1.9 million positive impact on operating profit before amortisation and exceptional items (GBP28.3 million pre-IFRS 16), GBP2.1 million adverse impact on net financial expense (GBP2.4 million pre-IFRS 16) and GBP0.2 million adverse impact on profit before taxation, amortisation and exceptional items (GBP25.9 million pre-IFRS 16).

Condensed Consolidated Statement of Comprehensive Income

For the period ended 30 September 2019

 
                                            Six months     Six months   Full year 
                                                    to             to          to 
                                          30 Sept 2019   30 Sept 2018      31 Mar 
                                                                             2019 
                                           (unaudited)    (unaudited)   (audited) 
                                                GBP000         GBP000      GBP000 
 Profit for the period                          18,540         19,116      25,822 
 Other comprehensive income/(expense): 
 Items that will not be reclassified 
  to profit or loss 
 
  Actuarial gains on defined 
  benefit pension scheme                             -              -         536 
 Tax on items taken to other 
  comprehensive income                               -              -         (1) 
 Items that may be subsequently 
  reclassified to profit or 
  loss 
 Foreign exchange translation 
  difference                                       644            667       (493) 
 Effective portion of changes 
  in fair value of cash flow 
  hedges                                         (357)          (194)       (614) 
 
 Other comprehensive income/(expense)              287            473       (572) 
 
 
   Total comprehensive income 
   for the period                               18,827         19,589      25,250 
                                         -------------  -------------  ---------- 
 

Condensed Consolidated Statement of Changes in Equity

For the period ended 30 September 2019

 
                                 Note     Six months    Six months     Full year 
                                                  to            to            to 
                                        30 Sept 2019       30 Sept   31 Mar 2019 
                                                              2018 
                                         (unaudited)   (unaudited)     (audited) 
                                              GBP000        GBP000        GBP000 
 
   Total comprehensive income 
   for the period                             18,827        19,589        25,250 
 
   Tax movements to equity                     (309)         1,060           944 
 
   Share option charge in 
   the period                                  1,151         1,339         2,395 
 
   Net movement relating 
   to shares held by Vp 
   Employee Trust                            (1,998)       (2,029)       (3,297) 
 
   Dividends to shareholders                 (8,705)       (7,606)      (10,853) 
 Change in equity during 
  the period                                   8,966        12,353        14,439 
 
   Equity at the start of 
   the period                                168,885       154,446       154,446 
 Effect of changes in 
  accounting standards             5         (2,151)             -             - 
 
   Equity at the end of 
   the period                                175,700       166,799       168,885 
                                       -------------  ------------  ------------ 
 

There were no movements in issued share capital, the capital redemption reserve or share premium in the reported periods.

Condensed Consolidated Balance Sheet

At 30 September 2019

 
                                    Note         30 Sept        31 Mar        30 Sept 
                                                    2019          2019           2018 
                                                                            Restated* 
                                             (unaudited)     (audited)    (unaudited) 
                                                  GBP000        GBP000         GBP000 
 Non-current assets 
 
   Property, plant and equipment      7          252,319       248,651        249,683 
 Goodwill                                         63,975        62,495         63,386 
 Intangible assets                                25,361        27,175         29,167 
 Right of use assets                 5            74,857             -              - 
 Employee benefits                                 2,674         2,732          2,230 
                                          --------------  ------------  ------------- 
 Total non-current assets                        419,186       341,053        344,466 
                                          --------------  ------------  ------------- 
  Current assets 
 
   Inventories                                     7,825         7,809          7,975 
 Trade and other receivables                      87,977        80,433         82,334 
 Cash and cash equivalents           11           14,907        29,044         15,508 
 Income tax receivable                               245             -              - 
 Total current assets                            110,954       117,286        105,817 
                                          --------------  ------------  ------------- 
 
   Total assets                                  530,140       458,339        450,283 
                                          --------------  ------------  ------------- 
 
   Current liabilities 
 
   Interest bearing loans 
   and borrowings                     11         (4,310)      (17,659)        (7,784) 
 Income tax payable                                    -       (2,184)        (3,447) 
 Lease liabilities                   5          (18,911)             -              - 
 Trade and other payables                       (69,543)      (81,720)       (67,794) 
                                          --------------  ------------  ------------- 
 Total current liabilities                      (92,764)     (101,563)       (79,025) 
                                          --------------  ------------  ------------- 
 
   Non-current liabilities 
 
   Interest bearing loans 
   and borrowings                     11       (194,343)     (179,485)      (195,960) 
 Lease liabilities                   5          (58,937)             -              - 
 Deferred tax liabilities                        (8,396)       (8,406)        (8,499) 
                                          --------------  ------------  ------------- 
 Total non-current liabilities                 (261,676)     (187,891)      (204,459) 
                                          --------------  ------------  ------------- 
 
   Total liabilities                           (354,440)     (289,454)      (283,484) 
                                          --------------  ------------  ------------- 
 
 Net assets                                      175,700       168,885        166,799 
                                          --------------  ------------  ------------- 
 
 Equity 
 
   Issued share capital                            2,008         2,008          2,008 
 Capital redemption reserve                          301           301            301 
 Share premium                                    16,192        16,192         16,192 
 Foreign currency translation 
  reserve                                          (136)         (780)            380 
 Hedging reserve                                   (680)         (323)             97 
 Retained earnings                               157,988       151,460        147,794 
                                          --------------  ------------  ------------- 
 Total equity attributable 
  to equity 
  holders of parent                              175,673       168,858        166,772 
 
 Non-controlling interest                             27            27             27 
 Total equity                                    175,700       168,885        166,799 
                                          --------------  ------------  ------------- 
 

* The restatement of the prior year consolidated balance sheet reflects the fair value adjustments in regards to prior year acquisitions as described in Notes 7 and 8.

Condensed Consolidated Statement of Cash Flows

For the period ended 30 September 2019

 
                                         Note    Six months    Six months    Full year 
                                                         to            to           to 
                                                    30 Sept       30 Sept       31 Mar 
                                                       2019          2018         2019 
                                                (unaudited)   (unaudited)    (audited) 
                                                     GBP000        GBP000       GBP000 
 Cash flows from operating 
  activities 
 
  Profit before taxation                             23,275        23,868       33,581 
 Adjustment for: 
 Share based payment charges                          1,151         1,339        2,395 
 Depreciation                             7          23,525        23,451       49,768 
 Depreciation of right of use                        11,007             -            - 
  assets 
 Amortisation and impairment 
  of intangibles                                      1,833         1,985        4,632 
 Net financial expense                                4,478         2,325        4,742 
 Profit on sale of property, 
  plant and equipment                               (5,224)       (3,084)      (7,583) 
                                               ------------  ------------  ----------- 
 Operating cash flow before 
  changes in working capital 
  and provisions                                     60,045        49,884       87,535 
 Decrease in inventories                                 49           617          853 
 Increase in trade and other 
  receivables                                       (7,069)      (11,462)      (9,518) 
 (Decrease)/increase in trade 
  and other payables                               (13,607)       (3,560)       13,818 
                                               ------------  ------------  ----------- 
 Cash generated from operations                      39,418        35,479       92,688 
 Interest paid                                      (2,319)       (2,336)      (4,696) 
 Interest element of finance 
  lease payments                                       (63)         (117)        (221) 
 Interest received                                       28            91           88 
 Income tax paid                                    (7,204)       (3,451)      (7,948) 
                                               ------------  ------------  ----------- 
 Net cash flows from operating 
  activities                                         29,860        29,666       79,911 
 
   Cash flows from investing 
   activities 
 Proceeds from sale of property, 
  plant and equipment                                10,839         9,850       19,969 
 Purchase of property, plant 
  and equipment                                    (29,386)      (39,194)     (74,588) 
 Acquisition of businesses 
  and subsidiaries (net of cash                     (3,325)             -            - 
  and overdrafts) 
                                               ------------  ------------  ----------- 
 Net cash flows used in investing 
  activities                                       (21,872)      (29,344)     (54,619) 
 
 
   Cash flows from financing 
   activities 
 Purchase of own shares by 
  Employee Trust                                    (1,998)       (2,029)      (3,297) 
 Repayment of loans                                 (7,000)             -     (44,000) 
 New loans                                           22,000         9,000       37,000 
 New finance leases                                       -           108          108 
 Payment of lease liabilities                      (13,457)         (880)      (1,551) 
 Dividends paid                           10        (8,705)       (7,606)     (10,853) 
                                               ------------  ------------  ----------- 
 Net cash flows used in financing 
  activities                                        (9,160)       (1,407)     (22,593) 
 
   Net (decrease)/increase in 
   cash and cash equivalents                        (1,172)       (1,085)        2,699 
 Effect of exchange rate fluctuations 
  on cash held                                           30           249         (70) 
 Cash and cash equivalents 
  at beginning of period                             12,132         9,503        9,503 
                                               ------------  ------------  ----------- 
 Cash and cash equivalents 
  at end of period                        11         10,990         8,667       12,132 
                                               ------------  ------------  ----------- 
 

Notes to the Condensed Financial Statements

   1.            Basis of Preparation 

Vp plc (the "Company") is incorporated and domiciled in the United Kingdom. The Condensed Consolidated Interim Financial Statements of the Company for the half year ended 30 September 2019 consolidate the financial information of the Company and its subsidiaries (together referred to as the "Group").

This interim announcement has been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority and the requirements of IAS34 ("Interim Financial Reporting") as adopted by the EU. With the exception of the new standard disclosed in note 5, the accounting policies applied are consistent for all periods presented and are in line with those applied in the annual financial statements for the year ended 31 March 2019, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU.

A new accounting standard became applicable for the current reporting period and the Group changed its accounting policies as a result of adopting IFRS 16 Leases. The impact of the adoption of this standard and the new accounting policies are disclosed in note 5.

The interim announcement was approved by the Board of Directors on 4 December 2019.

The Condensed Consolidated Interim Financial Statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

The comparative figures for the financial year ended 31 March 2019 are extracted from the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies.

The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 March 2019.

The Group continues to be in a healthy financial position with total banking facilities at the period end of GBP207.5 million, including an overdraft facility. Since the year end net debt has increased by GBP15.6 million to GBP183.7 million, which is GBP4.5 million lower than 30 September 2018. The Group has a revolving credit facility of GBP65 million which matures in May 2020. The process to refinance this facility is well advanced with the intention that a new facility be in place early calendar year 2020. The Board has evaluated the banking facilities and the associated covenants on the basis of current forecasts, taking into account the current economic climate, the refinancing and an appropriate level of sensitivity analysis. Having reassessed the principal risks the Directors consider it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.

   2.            Risks and Uncertainties 

The principal risks and uncertainties facing the Group and the ways in which they are mitigated are described on page 20 and 21 of the 31 March 2019 Annual Report and Accounts. The principal risks and uncertainties are market, competition, investment / product management, people, safety, financial, contractual and legal and regulatory requirements, which remain the same for this interim financial report.

   3.            Summarised Segmental Analysis 
 
                                Revenue                Operating Profit Before Amortisation 
                                                               and Exceptional Items 
                         Sept      Sept       Mar          Sept          Sept            Mar 
                         2019      2018      2019          2019          2018           2019 
                       GBP000    GBP000    GBP000        GBP000        GBP000         GBP000 
 
 UK                   170,016   175,338   350,308        29,133        26,912         49,838 
 
 International         16,569    17,873    32,522         1,117         1,266          1,733 
 
                      186,585   193,211   382,830        30,250        28,178         51,571 
                     --------  --------  --------  ------------  ------------  ------------- 
 
 Amortisation 
  and impairment                                        (1,833)       (1,985)        (4,632) 
 Exceptional items                                        (664)             -        (8,616) 
                                                   ------------  ------------  ------------- 
 Operating Profit                                        27,753        26,193         38,323 
                                                   ------------  ------------  ------------- 
 
 
 
                               Assets                            Liabilities 
                  Sept 2019   Mar 2019         Sept   Sept 2019   Mar 2019         Sept 
                                               2018                                2018 
                                          Restated*                           Restated* 
                     GBP000     GBP000       GBP000      GBP000     GBP000       GBP000 
 
 UK                 486,700    421,840      410,924     345,316    283,832      277,343 
 
 International       43,440     36,499       39,359       9,124      5,622        6,141 
 
                    530,140    458,339      450,283     354,440    289,454      283,484 
                 ----------  ---------  -----------  ----------  ---------  ----------- 
 
 
                             Net Assets 
                      Sept   Mar 2019   Sept 2018 
                      2019 
                    GBP000     GBP000      GBP000 
 
 UK                141,384    138,008     133,581 
 
 International      34,316     30,877      33,218 
 
                   175,700    168,885     166,799 
                  --------  ---------  ---------- 
 

*The restatement of prior year balances is disclosed in Note 8.

   3.            Summarised Segmental Analysis (continued) 

Below summarises the disaggregation of revenue from contracts with customers from the total revenue disclosed in the Condensed Consolidated Income Statement:

 
                                       Sept 2019             Sept 2018             Mar 2019 
                                          GBP000                GBP000               GBP000 
           Equipment hire                138,323               146,070              286,913 
           Services                       33,512                30,680               61,023 
           Sales of goods                 14,750                16,461               34,894 
           Total revenue                 186,585               193,211              382,830 
                            --------------------  --------------------  ------------------- 
 
   4.            Exceptional Items 

During the period the Group incurred GBP664,000 of exceptional costs in relation to continued restructuring costs regarding severance payments within Hire Station.

During the year ended 31 March 2019, the Group incurred GBP8,616,000 of exceptional costs in relation to regulatory review costs; integration of the Brandon Hire Group Holdings Limited acquisition; together with restructuring costs in relation to severance payments and depot closure costs within Hire Station and Airpac Bukom.

The Competition and Markets Authority (CMA) announced on 9 April 2019 that it is investigating three major suppliers of groundworks products to the construction industry. The CMA has provisionally found that the three businesses, including a part of the Group's excavation support system business (Groundforce), were involved in suspected anti-competitive behaviour. The CMA's findings are, at this stage in its investigation provisional and do not necessarily lead to a decision that the companies have breached competition law. At this point in the process we cannot make an accurate estimate of the likely cost that may subsequently arise in the event that the CMA were to decide in the future that a breach of competition law has taken place. However, accounting standards IAS 37 required us to provide an amount in the 31 March 2019 Annual Report and Accounts and accordingly we included a figure of GBP4.5 million which we have materially brought forward to these accounts. This figure is in the midpoint of a range of possible outcomes (GBP0 to GBP9.0 million) that we have calculated based upon previous cases and CMA published guidance and without any admission of culpability. As commented on in the Chairman's Statement, the CMA process is still ongoing.

These are analysed as follows:

 
                                                Sept 2019             Sept 2018             Mar 2019 
                                                   GBP000                GBP000               GBP000 
           Restructuring costs                        664                     -                1,112 
           Regulatory review costs                      -                     -                4,500 
           Integration costs                            -                     -                3,004 
                                                      664                     -                8,616 
                                     --------------------  --------------------  ------------------- 
 

Exceptional costs are excluded from the profit measures reported in the strategic report on the basis that they are non-recurring in nature.

   5.            Changes in Accounting Policies 

This note explains the impact of the adoption of IFRS 16 Leases on the Group's consolidated financial statements and discloses the new accounting policies that have been applied from 1 April 2019.

   5.            Changes in Accounting Policies (continued) 

The Group has applied IFRS 16 using the modified retrospective approach from 1 April 2019 where the cumulative effect of initially applying the standard has been recognised as an adjustment to the opening balance of retained earnings and comparatives have not been restated. Under IFRS 16, the Group will experience a different pattern of expense within the Income Statement, with the IAS 17 operating lease expense replaced by depreciation and interest expense. There is no impact on the Group's underlying cash flows except to present cash outflows as financing instead of operating.

(a) Adjustments recognised on adoption of IFRS 16

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which have previously been classified as 'operating leases' under IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the Group's weighted average incremental borrowing rates as of 1 April 2019. The weighted average incremental borrowing rate applied to lease liabilities at 1 April 2019 was 5.3%.

 
                                                                                 1 April 
                                                                                    2019 
                                                                                  GBP000 
           Operating lease commitments disclosed as at 31 March 
            2019                                                                  80,776 
           Discounted using the incremental borrowing rate 
            at 1 April 2019                                                     (11,680) 
           (Less): short-term leases recognised on a straight-line 
            basis as expense                                                       (104) 
           (Less): low-value leases recognised on a straight-line 
            basis as expense                                                       (191) 
           Add: adjustments as a result of a different treatment 
            of extension and termination options(1)                               14,522 
           Lease liability recognised at 1 April 2019                             83,323 
                                                                     ------------------- 
 

Note:

(1) Previously, lease commitments only included non-cancellable periods in the lease agreements. Under IFRS 16, the lease term includes periods covered by options to extend the lease where the Group is reasonably certain that such options will be extended.

The recognised lease liabilities relate to the following types of assets:

 
                                                          Sept 2019             Mar 2019 
                                                             GBP000               GBP000 
           Property                                          55,236               58,538 
           Equipment                                         10,956               11,919 
           Vehicles                                          11,656               12,866 
           Total lease liabilities                           77,848               83,323 
                                               --------------------  ------------------- 
           Of which are: 
               Current lease liabilities                     18,911                 19,948 
               Non-current lease liabilities                 58,937                 63,375 
                                               --------------------  --------------------- 
                                                             77,848                 83,323 
                                               --------------------  --------------------- 
 
 

The associated right of use assets were measured on a retrospective basis as if the new standard has always been applied. Onerous lease contracts have been adjusted through the right of use assets.

The recognised right of use assets relate to the following types of assets:

 
                                                  Sept 2019             Mar 2019 
                                                     GBP000               GBP000 
           Property                                  52,405               55,972 
           Equipment                                 10,635               11,627 
           Vehicles                                  11,817               12,889 
           Total right of use assets                 74,857               80,488 
                                       --------------------  ------------------- 
 
   5.            (a) Adjustments recognised on adoption of IFRS 16 (continued) 

The change in accounting policy affected the following items in the balance sheet:

 
                                                                         1 April 
                                                                            2019 
                                                                          GBP000 
           Right of use assets - increase                                 80,488 
           Lease liabilities - increase                                 (83,323) 
           Trade and other payables - decrease                               202 
           Deferred tax liabilities - decrease                               482 
           Net impact on retained earnings at 1 April 2019               (2,151) 
                                                             ------------------- 
 

(b) Impact on Consolidated Income Statement, EBITDA, segment disclosures and earnings per share

Basic earnings per share before the amortisation of intangibles and exceptional items decreased by 0.41 pence for the period to 30 September 2019 as a result of the adoption of IFRS 16. The financial impact of the transition on the Group's Consolidated Income Statement and EBITDA is set out below:

 
                                                              Sept 2019             Sept 2019             Sept 2019 
                                                              Excluding               IFRS 16 
                                                                IFRS 16                Impact              Reported 
                                                                 GBP000                GBP000                GBP000 
           Operating profit before amortisation 
            and exceptional items                                28,315                 1,935                30,250 
           Operating profit                                      25,818                 1,935                27,753 
           EBITDA                                                51,840                12,942                64,782 
           Net financial expense                                (2,383)               (2,095)               (4,478) 
           Profit before taxation, amortisation 
            and exceptional items                                25,932                 (160)                25,772 
           Profit before taxation                                23,435                 (160)                23,275 
 

Operating profit before amortisation and exceptional items, segment assets and segment liabilities all increased as a result of the change in accounting policy. The IFRS 16 adjustments that have been posted to each segment for the half year ending 30 September 2019 are as follows:

Operating Profit before Amortisation and Exceptional Items

 
                          Pre       IFRS 16       Per 
                      IFRS 16    Adjustment    Note 3 
                       GBP000        GBP000    GBP000 
 
 UK                    27,245         1,888    29,133 
 
 International          1,070            47     1,117 
 
                       28,315         1,935    30,250 
                    ---------  ------------  -------- 
 
 
 
                                    Assets                                    Liabilities 
                       Pre   IFRS 16 Adjustment   Per Note 3       Pre   IFRS 16 Adjustment   Per Note 3 
                   IFRS 16                                        IFRS 
                                                                    16 
                    GBP000               GBP000       GBP000    GBP000               GBP000       GBP000 
 
 UK                414,579               72,121      486,700   270,783               74,533      345,316 
 
 International      40,666                2,774       43,440     6,452                2,672        9,124 
 
                   455,245               74,895      530,140   277,235               77,205      354,440 
                 ---------  -------------------  -----------  --------  -------------------  ----------- 
 
   5.            Changes in Accounting Policies (continued) 
   (c)   Practical expedients applied 

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

-- The use of a single discount rate to a portfolio of leases with reasonably similar characteristics

   --    Reliance on previous assessments on whether leases are onerous 

-- The accounting for certain operating leases with a remaining lease term of less than 12 months as at 1 April 2019 as short-term leases

-- The exclusion of initial direct costs for the measurement of the right of use asset at the date of initial application, and

-- The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease

The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17.

(d) Accounting for leasing activities under IFRS 16

The Group holds leases for various properties, equipment and vehicles. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Until 1 April 2019, leases of property, plant and equipment were classified as either operating leases or finance leases. Payments made under operating leases were charged to the Consolidated Income Statement on a straight-line basis over the lease term.

From 1 April 2019, leases are recognised as a right of use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit over the lease period. The right of use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Lease liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of fixed payments less any incentives receivable, variable lease payments that are based on a specified index or a rate, the exercise price of a purchase option if the Group is reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option. A separate provision for onerous leases is therefore no longer required. The lease payments are discounted using the incremental borrowing rate. This rate is the interest rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value over a similar term and with similar security to the right of use asset in a similar economic environment.

Right of use assets (at cost comprising of the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, initial direct costs and restoration costs) are measured as if IFRS 16 has been applied since the lease commencement date, discounted by the Group's incremental borrowing rate as at 1 April 2019. Payments associated with short term leases and leases of low value assets are recognised on a straight-line basis as an expense in the Consolidated Income Statement. Short term leases are certain leases with a lease term of 12 months or less. Low value assets comprise certain IT equipment and small items of office equipment.

Extension and termination options are included in a number of leases across the Group. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is

   5.            (d) Accounting for leasing activities under IFRS 16 (continued) 

reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects the assessment and that is within the control of the Group. This reassessment could result in a recalculation of the lease liability and a material adjustment to the associated balances.

   6.            Income Tax 

The effective tax rate is 20.3% in the period to 30 September 2019 (H1 2019: 19.9%). The effective rate for the period reflects the current standard tax rate of 19% (H1 2019: 19%), as adjusted for estimated permanent differences for tax purposes offset by gains covered by exemptions. This is the best estimate of the weighted average annual income tax rate expected for the full financial year.

   7.            Property, Plant and Equipment 
 
                                                        Sept 2019             Mar 2019              Sept 2018 
                                                                                                    Restated* 
                                                           GBP000               GBP000                 GBP000 
           Opening carrying amount                        248,651              239,739                239,739 
           Additions                                       30,467               71,389                 39,935 
           Acquisitions                                     1,798                    -                  (115) 
           Depreciation                                  (23,525)             (49,768)               (23,451) 
           Disposals                                      (5,615)             (12,386)                (6,766) 
           Effect of movements in exchange 
            rates                                             543                (323)                    341 
                                             --------------------  -------------------  --------------------- 
           Closing carrying amount                        252,319              248,651                249,683 
                                             --------------------  -------------------  --------------------- 
 

The value of capital commitments at 30 September 2019 was GBP11,353,000 (31 March 2019 GBP10,758,000).

*The restatement of prior year balances reflects the completed fair value assessment of the Brandon Hire acquisition for GBP1,643,000 as disclosed in Note 8 and a correction of the fair value classification of other acquisitions related to a decrease in land and buildings of GBP556,000.

   8.            Business Combinations 

On 9 May 2019 the Company acquired 100% of the issued share capital of Sandhurst Limited ("Sandhurst") for a cash consideration of GBP3.3 million. Sandhurst is engaged in the rental of specialist excavator attachments to the construction and civil engineering sectors. The acquisition will complement the Group's piling division within Groundforce and expand product range. During the measurement period, the fair value of the assets acquired and liabilities assumed are provisional while management finalise the fair value assessment, including the identification of intangible assets acquired. Preliminary details of the acquisition is provided below:

   8.            Business Combinations (continued) 
 
                                            Sept 2019 
                                               GBP000 
 Property, plant and equipment                  1,798 
 Current assets                                   540 
 Tax, trade and other payables                  (471) 
                                           ---------- 
 Fair value of assets acquired                  1,867 
 Goodwill on acquisition                        1,458 
                                           ---------- 
 Cost of acquisitions                           3,325 
                                           ---------- 
 Satisfied by 
 Cash consideration                             3,325 
                                           ---------- 
 Analysis of cash flow for acquisitions 
 Cash consideration                             3,325 
 Net (cash)/overdraft in acquisition                - 
                                           ---------- 
                                                3,325 
                                           ---------- 
 

The Group acquired Brandon Hire during the year ended 31 March 2018 and the fair value assessment of the acquired net assets for the Brandon acquisition was completed within the measurement period during the prior financial year in line with IFRS 3 (revised). The fair value of assets acquired generally reflects the book value of assets in the acquired company/business, however the key adjustment to the acquired Brandon Hire Group Holdings Limited assets was to bring the value of the hire fleet in line with the depreciation policy used within Hire Station Limited, our existing tool hire business. The restatement of the prior year balances noted in the consolidated balance sheet reflects the completed fair value assessment for GBP2,284,000 related to reductions in property, plant and equipment (GBP1,643,000); inventories (GBP42,000); trade and other receivables (GBP43,000) and increase in trade and other payables (GBP556,000). In addition, a correction of the fair value classification of other acquisitions of GBP556,000 has been adjusted in the prior year balances related to a decrease within land and buildings.

   9.            Earnings Per Share 

Earnings per share have been calculated on 39,581,748 shares (H1 2019: 39,608,968 shares) being the weighted average number of shares in issue during the period. Diluted earnings per share have been calculated on 40,569,647 shares (H1 2019: 41,215,948 shares) adjusted to reflect conversion of all potentially dilutive ordinary shares. Basic earnings per share before the amortisation of intangibles and exceptional items was 52.10 pence (H1 2019: 52.32 pence) and was based on an after tax add back of GBP2,081,000 (H1 2019: GBP1,608,000) in respect of the amortisation of intangibles and exceptional items. Diluted earnings per share before amortisation of intangibles and exceptional items was 50.83 pence (H1 2019: 50.28 pence).

   10.          Dividends 

The Directors have declared an interim dividend of 8.45 pence (H1 2019: 8.20 pence) per share payable on 17 January 2020 to shareholders on the register at 13 December 2019. The dividend declared will absorb an estimated GBP3,342,000 (H1 2019: GBP3,247,000) of shareholders funds. The dividend proposed at the year-end was subsequently approved at the AGM in July 2019 and GBP8,705,000 was paid in the period (H1 2019: GBP7,606,000 was paid). The cost of dividends in the Statement of Changes in Equity is after adjustments for the interim and final dividends waived by the Vp Employee Trust in relation to the shares it holds for the Group's share option schemes.

   11.          Analysis of Net Debt 
 
                                     As at       Cash       As at 
                                     1 Apr       Flow      30 Sep 
                                      2019                   2019 
                                    GBP000     GBP000      GBP000 
 Cash and cash equivalents          29,044   (14,137)      14,907 
 Bank overdraft                   (16,912)     12,995     (3,917) 
 Revolving credit facilities 
  / loans                        (179,000)   (15,000)   (194,000) 
 Finance leases excluded 
  under IFRS 16                    (1,232)        496       (736) 
                                ----------  ---------  ---------- 
                                 (168,100)   (15,646)   (183,746) 
                                ----------  ---------  ---------- 
 

The Group's committed revolving credit bank facilities comprise a GBP65 million facility which expires in May 2020 and a GBP135 million facility which expires in December 2021, together with overdraft facilities totalling GBP7.5 million. The process to refinance the GBP65 million facility is well advanced with the intention that a new facility be in place early calendar year 2020.

   12.          Related Party Transactions 

Transactions between Group Companies, which are related parties, have been eliminated on consolidation and therefore do not require disclosure. The Group has not entered into any other related party transactions in the period which require disclosure in this interim statement.

   13.          Contingent Liabilities 

In an international group a variety of claims arise from time to time in the normal course of business. Such claims may arise due to actions being taken against group companies as a result of investigations by fiscal authorities or under regulatory requirements. Provision has been made in these consolidated financial statements against any claims which the directors consider are likely to result in significant liabilities.

   14.          Forward Looking Statements 

The Chairman's Statement includes 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.

   15.          Alternative Performance Measures 

(i) All performance measures stated as before amortisation are also before impairment of intangibles and exceptional items.

(ii) Basic earnings per share pre amortisation and exceptional items is reconciled to basic earnings per share in note 9.

(iii) Profit before tax, amortisation and exceptional items is reconciled to profit before tax in the Consolidated Income Statement.

(iv) Return on average capital employed is based on profit before tax, interest, amortisation and exceptional items divided by average capital employed on a monthly basis using the management accounts. Profit before tax, interest, amortisation and exceptional items is reconciled to profit before interest and tax in the Consolidated Income Statement.

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

-- the condensed consolidated set of interim financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

   --    the interim management report includes a fair review of the information required by: 

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

4 December 2019

The Board

The Directors who served during the six months to 30 September 2019 were:

Jeremy Pilkington (Chairman)

Neil Stothard (Chief Executive)

Allison Bainbridge (Group Finance Director)

Steve Rogers (Non-Executive Director)

Phil White (Non-Executive Director)

Independent review report to Vp plc

Report on the Condensed Consolidated Interim Financial Statements

Our conclusion

We have reviewed Vp plc's Condensed Consolidated Interim Financial Statements (the "interim financial statements") in the Interim Report 2019/2020 of Vp plc for the 6 month period ended 30 September 2019. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

   --    the Condensed Consolidated Balance Sheet as at 30 September 2019; 

-- the Condensed Consolidated Income Statement and Condensed Consolidated Statement of Comprehensive Income for the period then ended;

   --    the Condensed Consolidated Statement of Cash Flows for the period then ended; 
   --    the Condensed Consolidated Statement of Changes in Equity for the period then ended; and 
   --    the explanatory notes to the interim financial statements. 

The interim financial statements included in the Interim Report 2019/2020 have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Interim Report 2019/2020, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report 2019/2020 in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the Interim Report 2019/2020 based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Interim Report 2019/2020 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Leeds

4 December 2019

- Ends -

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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