Today’s upbeat FY21 prelims from equipment rental specialist Vp provided further evidence of its industry leading status, especially in terms of earning quality, ROCE and cashflow. Posting a better than expected adjusted PBT (pre IFRS16) & diluted EPS of £23.3m & 45.9p on sales of £308m, alongside providing a “positive” outlook. Indeed in our opinion, the group’s through-cycle durability justifies a sector premium, thanks to its consistent returns, adoption of all-things digital and exposure to systemically important verticals such as water, power, renewables, telecoms & rail.
Despite the 3rd national lockdown, prospects have improved dramatically over the past 6 months, with current trading described as “strong”, which we have interpreted as being just below pre-covid levels with Groundforce awaiting the usual upswing once AMP7 (water) becomes fully operational.
Consequently we have upgraded are FY22 forecasts to adjusted PBT of £36.9m (vs £33.5m B4) on turnover of £355.7m (£345m) – ending the year with £123m of net debt. The latter factoring in continued working capital control, offset by greater fleet capex (£50m).
Similarly our valuation ticks up from £11.00 to £11.30/share. Meaning the shares at 870p trade on modest 11.9x PER, 11.4x EV/EBIT and 5.3x EV/EBITDA multiples vs peer group averages.
