Vp’s half year update highlights another resilient performance set against a backdrop of challenging macro-economic conditions. The current year outturn will be below previous expectations, given a slower than anticipated improvement in performance at Brandon Hire Station and a slower than expected rollout of projects under the new Network Rail Control Period (CP7).
At the same time, today’s acquisition of Charleville Hire and Platform Ltd (for an initial €12m) marks a return to M&A activity in a specialist area, highlighting the strategic ambitions of the new management team. The acquisition is expected to be immediately accretive to Group EPS, it provides a platform for growth and allows Vp to take advantage of opportunities that exist in the buoyant Irish market.
On our new forecasts, the shares trade on <10x P/E with a dividend yield of c.6%. In our view, this is an attractive valuation for a high-quality business with an excellent long term growth record and potential to benefit from market recovery.
Our revised Fair Value estimate is 1000p (from 1110p), reduced in line with the quantum of the earnings downgrade. We remain confident that Vp will be a significant beneficiary of any upturn in market activity and see attractive long-term value and growth potential in the Group.
