UK infrastructure is currently running at c. 40% above pre-pandemic levels (Source: ONS), driven by multi-year projects such as HS2, Hinkley Point & off-shore wind (re Transmission). These are all areas of expertise for specialist equipment rental, Vp. At the same time Vp has to contend with the widespread material, labour & transport shortages, on top of surging input cost inflation.
This is causing disruption for most operators, but as evidenced by today’s improvement in H1’22 EBIT margins (12.8% vs 7.6% LY) and ROCE (13.5% vs 10.3%), neither profitability nor growth appears to have been too badly affected, regardless of some construction schemes are being pushed to the right. Here Vp has successfully managed the industry’s supply chain challenges via a combination of early fleet ordering, internal efficiencies, greater plant utilisation, fewer equipment disposals and improved pricing as 12 month contracts roll-over.
Meaning that all told, H1 revenues & adjusted PBT came in at £176.1m vs £182.8m H1’20 (or 96% of pre-Covid levels) & £20.2m (£8.6m) respectively. Consequently we reiterate our FY22 numbers and fair value of £11.30/share. With the stock (at 955p) being attractively priced both in absolute terms and vs peers - trading on FY22 multiples (pre IFRS16) of 14.0x PER, 12.3x EV/EBIT and 6.0x EV/EBITDA.
