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 Vp 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 / share 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.