Vp plc: Equity Development
Vp’s full year update highlights sector-leading results, once again benefiting from the diversity of its end markets and the quality of its specialist businesses. With results expected to be broadly in line with expectations, we trim our FY24 PBT forecast by c.5% to £39.0m, a shade below the FY23 outturn (£40.2m). We consider this an impressively resilient performance set against a mixed market backdrop. Under new leadership, a strategic refresh is underway and management is confident in long term prospects. In our view, the valuation is compelling (FY25E P/E of c7x). We reiterate our Fair Value estimate of 1090p per share.
Resilient performance in challenging markets
Results in FY24 have again been underpinned by the diversity of Vp’s end markets, with supportive conditions in Infrastructure, notably the rail, transmission and water sectors. It comes as no surprise that general construction remains challenging, which has impacted the performance of Brandon Hire Station. An operational review of this division is well advanced, and the new management team is focused on actions to drive margin improvements alongside medium-term strategic objectives.
Strategy refresh – further details in June
To recap, Anna Bielby became CEO on 1st September, having joined Vp as CFO in January ‘23. Keith Winstanley then joined the Group as CFO in January ‘24 to complete the new leadership team. The strategy is being refreshed with further details to follow at the full year results in June. It is clear that the new team is ambitious to build on Vp’s strong foundations and deliver long term growth.
Industry data showing tentative signs of recovery
Construction industry conditions have been subdued for some time, but the latest PMI surveys (typically a good forward indicator) show tentative signs of improvement. UK construction companies highlighted a renewed increase in total activity in March, ending a six-month period of decline and, encouragingly, new orders expanded at the fastest pace since May 2023.
Modest forecast changes, compelling valuation
We trim our forecasts (see p. 2) to reflect challenges within the general construction sector but consider this an impressive performance in the context of the wider market. We expect a return to profit growth in FY25 with significant potential thereafter. A P/E rating of c7x is compelling, in our view.
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