Sadly, the company is no longer called Vibratory Roller & Plant Hire (Northern) Ltd. The branding consultants have done their worst, first shortening the name to Vibroplant and then to VP.
Yet the Harrogate-based company, while vastly expanded, does much the same as 60 years ago: renting out machinery, tools and other equipment to the construction industry. It has had another thumping year, lifting revenues by 19 per cent to £248.7 million and profits before tax and amortisation by 17 per cent to £34.9 million.
Demand for everything from forklifts to spider access platforms is on the up and VP has found a nice new sideline, leasing out bracing equipment to the companies that dig out Londoners’ basements. It even sees signs of stability in the struggling oil and gas industry.
The problem for equipment leasers is not when the economy is motoring but when a downturn or full-blooded recession arrives. Saddled with high debts and struggling to offload the kit no one wants, they can be poleaxed.
VP looks less exposed than most. Its biggest customer segment, infrastructure, is focused on the rail, water and electricity transmission sectors, which are much more resilient than, say, housebuilding, in a downturn.
Its debts at £99 million are relatively modest, it has headroom of £127 million and it reckons it has built a grown-up relationship with its bankers HSBC and Lloyds. Its interest bill last year was £2.9 million. Interest cover is 13 times profits before interest, tax and amortisation. And, while wounded by the 2009-11 downturn, it never stopped making a profit.
For now, the company is positioned for further strong demand, lifting capital spending on equipment for hire to £57.6 million.
Some investors may not like the recent curious decision to expand by acquisition in Australia and New Zealand. Keeping tabs on offshoots 10,000 miles away won’t be easy. Some, too, may balk at the governance arrangements. VP is 50 per cent-owned by Jeremy Pilkington, the former chief executive who has been elevated to chairman, and his family. The purists may not like it, but at least listed companies with dominant family shareholders tend not to do anything too daft.
VP looks rather good value, even after the 4 per cent boost to the share price yesterday to the uncharted territory of 881p. Even now they trade on an inexpensive 11.5 times forecast 2018 profits and yield a prospective 2.8 per cent.
My advice Buy
Why Inexpensive, competent and conservatively positioned
Joules Group
Joules Group has barely put a foot wrong since floating on Aim at 160p a year ago. The shares jumped another 5 per cent to 301p yesterday after it reported strong sales momentum and said that it would beat market expectations for profit for the year to May 28.
Customers can’t get enough of the retailer’s colourful, quirky clobber, whether it is the spotted and striped wellington boots or new bestsellers like embroidered tops. In Middle England, it is out-Bodening Boden. Sales in the year rose 19.6 per cent to £157 million, with online orders putting in the best performance and 108 UK stores showing sales growth.
It claimed strong sales growth in the United States via a deal with Norsdtrom and through 500 independent stockists. The fashionistas might sneer at Joules’ wholesome products, but apparently it is going down a storm in Texas.
How long can this galloping growth go on? Joules reckons that it is miles from saturation point in Britain, while it is branching out more into homewares. It also thinks that its philosophy of not slavishly following mainstream fashion means that it both saves on design costs and is less exposed to faddiness. Those trademark wellies still account for 6 per cent of sales.
After an increase in pre-tax profit forecasts for the year just gone from £9 million to £10 million, the shares trade on a 30 times multiple and yield just 0.6 per cent. That’s very pricey.
A great little company, but just now the flipflops at £14.95 look better value than the shares.
My advice Take profit
Why Galloping growth already in the price
Carclo
Carclo is one of those unfortunate companies dwarfed by its pension fund. The company weighs in at just over £100 million, while the pension liabilities are almost double that.
Shareholders suffered a shock last September. The company had promised a 1.95p dividend, only to be forced into a U-turn after a fall in bond yields inflated the scheme deficit. Since then yields have rallied a little, but Carclo is in no hurry to resume dividends, announcing yesterday that it plans to do so in 2018-19. The caution seems wise. It was only eight months ago that it tapped shareholders in a small placing to help to pay off some debt and fund an acquisition.
The two core operating businesses are doing well. Carlco makes fancy headlights for the likes of Aston Martin, Bentley and other luxury marques and injection-moulded plastic components for medical products. Sales increased a healthy 10 per cent to £138 million while operating profits more than doubled.
The memory of Carclo’s failed attempt to get into touchscreen technology is fading. Operations are back on an even keel. But the pension issue will weigh on the company for years. One for patient investors.
My advice Hold
Why Strong operations facing a pensions headwind
And finally...
Producing quality bubbly takes patience and deep pockets. Lord Ashcroft is underwriting a fresh fundraising by Gusbourne, his Aim-listed Kent winery. It plans to raise £4.2 million by offering shareholders four new shares at 40p for every nine held. Gusbourne reported a loss before tax of £1.53 million for 2016, up from £1.43 million in 2015. Trading is in line with expectations, apart from minor frost damage. The former Tory deputy chairman owns 64 per cent of the business. The shares fizzled out by 6½p to 51½p.
