Vp Debt surged on 73.1% and EBITDA surged on 16.0%

05 Jun 2018 • About Vp ($VP.) • By InTwits

Vp reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:

Vp is a growth stock: FY2018 revenue growth was 22.1%, 5 year revenue CAGR was 12.7% at FY2018 ROIC 10.9%
Vp has high CAPEX intensity: 5 year average CAPEX/Revenue was 24.2%. At the same time it's a lot of higher than industry average of 2.4%.
CAPEX is quite volatile: $5m in FY2018, $7m in FY2017, $10m in FY2016, $2m in FY2015, $3m in FY2014
The company has business model with average profitability: ROIC is 10.9%
It operates with high leverage: Net Debt/EBITDA is 2.1x while industry average is 1.5x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Vp's Revenue surged on 22.1%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin jumped on 23.8 pp from -6.7% to 17.0% in FY2018. During FY2014-FY2018 EBITDA Margin topped in FY2017 at 28.6%.

Gross Margin decreased on 2.5 pp from 26.9% to 24.4% in FY2018. During the last 5 years Gross Margin topped in FY2016 at 28.3% and was declining since that time. SG&A as a % of Revenue showed almost no change in FY2018. SG&A as a % of Revenue followed a declining trend at -0.62 pp per annum in the last 5 years.

Net Income margin decreased slightly on 1.5 pp from 9.5% to 8.0% in FY2018. During the last 5 years Net Income margin topped in FY2016 at 10.7% and was declining since that time.

Investments (CAPEX, working capital and M&A)

In FY2018 Vp had CAPEX/Revenue of 23.6%. Vp's CAPEX/Revenue decreased on 2.2 pp from 25.7% in FY2015 to 23.6% in FY2018. For the last three years the average CAPEX/Revenue was 24.5%. To secure its fast growth the company invested a large share of EBITDA (86.6%) to CAPEX.

Return on investment

The company operates at good ROE (16.7%) while ROIC is low (10.9%). ROIC decreased on 2.9 pp from 13.8% to 10.9% in FY2018. ROE decreased slightly on 1.6 pp from 18.3% to 16.7% in FY2018. During the last 5 years ROIC topped in FY2015 at 14.9% and was declining since that time. During the last 5 years ROE topped in FY2016 at 19.2% and was declining since that time.

Leverage (Debt)

Debt level is 2.1x Net Debt / EBITDA and 2.4x Debt / EBITDA. Net Debt / EBITDA surged on 0.8x from 1.4x to 2.1x in FY2018. Debt surged on 73.1% while cash surged on 20.7%.

Vp has no short term refinancing risk: cash is higher than short term debt (209.3%).

Financial and operational results

FY ended 31 Mar 2018

Vp ($VP.) key annual financial indicators

mln. £	2014	2015	2016	2017	2018	2018/2017
P&L
Revenue	183.1	205.6	208.7	248.7	303.6	22.1%
Gross Profit	49.6	56.8	59.0	66.9	74.2	10.8%
SG&A	28.9	29.7	29.4	33.7	39.9	18.5%
EBITDA	44.3	53.8	59.3	71.2	82.7	16.0%
Net Income	15.7	19.9	22.4	23.7	24.4	3.0%
Balance Sheet
Cash	9.0	5.2	4.5	15.1	18.2	20.7%
Short Term Debt	0.0	0.0	0.9	5.0	8.7	74.2%
Long Term Debt	62.0	72.0	89.8	108.2	187.1	73.0%
Cash flow
Capex	39.5	52.9	50.2	64.6	71.6	10.7%
Ratios
Revenue growth	9.6%	12.3%	1.5%	19.2%	22.1%
EBITDA growth	8.2%	21.3%	10.2%	20.2%	16.0%

Gross Margin	27.1%	27.6%	28.3%	26.9%	24.4%	-2.5%
EBITDA Margin	24.2%	26.2%	28.4%	28.6%	27.2%	-1.4%
SG&A, % of revenue	15.8%	14.5%	14.1%	13.5%	13.1%	-0.4%
Net Income Margin	8.6%	9.7%	10.7%	9.5%	8.0%	-1.5%
CAPEX, % of revenue	21.6%	25.7%	24.1%	26.0%	23.6%	-2.4%

ROIC	12.3%	14.9%	14.5%	13.8%	10.9%	-2.9%
ROE	15.0%	18.1%	19.2%	18.3%	16.7%	-1.6%
Net Debt/EBITDA	1.2x	1.2x	1.5x	1.4x	2.1x	0.8x

Peers in Support Services

Below we provide Vp benchmarking against other companies in Support Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Mortice Ltd ($MORT)	11.0%	18.9%	51.1%	36.1%
Rws Hldgs ($RWS)	20.9%	1.8%	28.1%	34.5%
Empresaria Group ($EMR)	-3.3%	-0.3%	44.4%	32.1%
Norish ($NSH)	3.7%	16.4%	16.7%	31.4%
Capital Drilling Ltd ($CAPD)	-15.0%	-20.4%	18.7%	28.0%
Median (47 companies)	5.1%	6.9%	3.5%	6.9%	8.1%
Vp ($VP.)		12.3%	1.5%	19.2%	22.1%

Top companies by Gross margin, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Inspired Energy ($INSE)	78.7%	76.2%	80.5%	83.1%
Ienergizer Ltd ($IBPO)	76.8%	72.7%	71.3%	71.2%
Spectra Systems Corp ($SPSY)	51.4%	47.6%	68.3%	71.1%
Vianet Group ($VNET)	58.8%	69.2%	70.1%	69.7%	69.9%
Grafenia ($GRA)	56.1%	70.8%	66.3%	63.0%
Median (41 companies)	29.2%	28.4%	27.0%	28.7%	18.7%
Vp ($VP.)	27.1%	27.6%	28.3%	26.9%	24.4%

Top companies by EBITDA margin, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Northgate ($67GX)	40.6%	39.4%	38.3%	35.9%	35.4%
Spectra Systems Corp ($SPSY)	12.3%	6.0%	19.7%	34.0%
Inspired Energy ($INSE)	1.5%	35.4%	34.4%	32.4%
Rws Hldgs ($RWS)	22.8%	23.1%	26.4%	25.5%
Ienergizer Ltd ($IBPO)	23.6%	17.1%	22.9%	22.9%
Median (47 companies)	6.7%	6.9%	4.9%	5.7%	8.2%
Vp ($VP.)	24.2%	26.2%	28.4%	28.6%	27.2%

Top companies by CAPEX/Revenue, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Augean ($AUG)	12.3%	12.3%	11.0%	10.0%
Petards Group ($PEG)	0.5%	0.9%	1.7%	10.0%
Capital Drilling Ltd ($CAPD)	13.9%	10.1%	13.7%	9.0%
Billing Services Group ($BILL)	2.1%	4.1%	3.0%	4.5%
Falkland Islands Hldgs ($FKL)	12.9%	11.9%	4.8%	4.4%
Median (47 companies)	1.0%	0.9%	1.0%	0.9%	2.0%
Vp ($VP.)	21.6%	25.7%	24.1%	26.0%	23.6%

Top companies by ROIC, %


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Sthree ($STHR)	38.1%	50.2%	46.2%	43.4%
Mortice Ltd ($MORT)	19.6%	21.9%	14.5%	23.2%
Petards Group ($PEG)	24.7%	23.9%	22.7%	20.3%
Rws Hldgs ($RWS)	24.5%	23.3%	23.5%	20.2%
Latham(James) ($LTHM)	17.5%	16.8%	19.2%	19.3%	17.4%
Median (48 companies)	10.0%	10.4%	7.8%	7.6%	5.4%
Vp ($VP.)	12.3%	14.9%	14.5%	13.8%	10.9%

Top companies by Net Debt / EBITDA


Top 5	FY2014	FY2015	FY2016	FY2017	FY2018
Nakama Group ($NAK)	5.2x	1.4x	3.1x	48.5x
21St Century Technology ($C21)	-0.8x	-0.2x		11.2x
Ceps ($CEPS)	6.6x	3.8x	13.9x	5.8x
Ibex Global Solutions ($IBEX)	2.7x	1.0x	1.7x	4.5x
Menzies(John) ($68HN)	2.0x	2.4x	1.2x	3.0x
Median (42 companies)	0.1x	-0.1x	0.1x	0.2x	1.3x
Vp ($VP.)	1.2x	1.2x	1.5x	1.4x	2.1x

Vp stock price chart

Vp financials

mln.	FY2010	FY2011	FY2012

Revenue	134.2	141.0	161.5
EBITDA	37.168	34.441	38.669
Net income	10.245	9.783	12.227
CAPEX	16.744	21.911	34.596
Debt	49.710	46.021	46.001
Cash	1.385	5.509	5.582

About Vp

Vp plc provides equipment rental and associated services to the civil engineering, rail, oil and gas exploration, construction, outdoor events, and industrial markets in the United Kingdom and internationally. The company operates through Groundforce, UK Forks, Airpac Bukom, Torrent Trackside, TPA, and Hire Station segments. It provides trench boxes and sheets, hydraulic bracing systems, piling equipment, formwork, pipe stoppers, and pumps, as well as excavation support systems, temporary bridges, and trenchless technology for the water, gas, civil engineering, and construction industries; and rents telescopic handlers, rough terrain straight mast fork lift trucks, and associated products and services to the housebuilding, general construction, and industrial markets. The company also offers equipment and services, including compressors, steam generators, heat exchangers, sand filters, and operators to the oil and gas exploration and development markets. In addition, it provides rail infrastructure portable plants; and trackside lighting, traffic management, and training services to the railway maintenance and renewal contractors. Further, the company offers portable roadway access solutions to the outdoor events, transmission, construction, and utility sectors, as well as access solutions utilizing aluminum panels, plastic panels, and matting to temporary roadways, pedestrian walkways, barriers, bridges, and pitch cover requirements. Additionally, it provides small tools, specialist equipment, and allied services for industry and construction markets; and press fitting and fusion equipment to the mechanical and electrical industries, as well as offers climate, lifting, safety, survey, and pressfitting equipment. The company was formerly known as Vibroplant and changed its name to Vp plc in 2000. Vp plc was founded in 1954 and is headquartered in Harrogate, the United Kingdom. Vp plc is a subsidiary of Ackers P Investment Company Limited.