Questor share tip: Vp enjoys signs of recovery

The company is well diversified across construction, oil and gas and equipment hire. Revenues increased by 10pc to £183m, and pre-tax profits were up £2.5m, to £18.9m for the year ended March.

Jeremy Pilkington, chairman, said: “Economic indicators in the UK and mainland Europe now appear more positive than for some time and all businesses within the Group are identifying significant opportunities for growth and investment.”

Management’s confidence in the outlook has been demonstrated by a significant increase in investment in its fleet of vehicles and equipment. Capital investment in the fleet was £38m, up from £32m a year earlier, and significantly more than the charge to just replace old equipment that is about £20m.

Vp is focusing its investment on its forklift truck business UK Forks. The booming UK housing market is driving strong demand for its vehicles and the company is looking to take advantage of revenue up 16pc to £16.3m and profits up 19pc to £2.5m in the year just ended.

Investment is also going into its Airpac Bukom business that provides well testing equipment to the oil and gas sector. Neil Stothard, managing director, said the company is seeing strong global demand for its equipment especially from the gas industry.

The core division of groundforce had a strong year with revenue up 14pc to £42.3m and operating profits largely flat at £7.9m. Groundforce provides hydraulic rams to shore up the sides of huge works like foundations. The division has been boosted by infrastructure work with particular help from the water utility sector, but this work will see falling demand in the year ahead.

Elsewhere, the company is benefiting from increasing work on Britain’s railways and the tool hire operation reported a steady 7pc increase in revenue to £66.2m, and profits of £4.8m.

Vp is a well diversified business and should benefit from even a tentative recovery in the construction sector. The company is a solid operator but the shares on 17 times forecast earnings are no better than a hold.

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