Improving conditions with more to come
The UK Construction PMI literally dropped off a cliff at the start of the Covid-19 lockdowns. But since then there has been a gradual recovery, with June’s 55.3 reading (vs 28.9 in May) being above expectations (47.0), and the highest for 2 years. How is Vp performing? Well, after enduring a sharp -45% decline in April, trading has significantly improved with revenues “now running at >80% of prior year levelsâ€, driven by increased homebuilding, construction & infrastructure activity. An upwards trajectory that is anticipated to remain as existing projects are completed, & new ones brought on stream. Encouragingly too, the group has generated £22m of positive cashflow over the past 3 months (>£12m in June alone) thanks to tight working capital management, deferral of VAT/rent/rates, staff furloughing and a material reduction in costs, salaries & fleet capex. With net debt closing June at £138m vs £159.8m in Mar’20. Meaning that over 2/3rds of Vp’s furloughed employees have returned to work with many previously mothballed sites also now open. Going forward, we reckon trading should fully recover sometime in 2021. And over a 2-3 year timeframe, there is a chance that profit margins and ROCE might even be able to climb further, on the back of a leaner organisational structure. With regards to valuation the shares at 700p appear attractively priced - equivalent to trailing FY20 multiples of 7.8x PER, 1.7x Price:Book and 4.3x EV/EBITDA. We hope to reinstate our forecasts and valuation later this year.
Herc Holdings is an equipment rental supplier. The company conducts its operations through subsidiaries, including Herc Rentals Inc. Operations are conducted under the Herc Rentals brand in the U.S. and Canada and under the Hertz Equipment Rental brand in other international locations. The company sells used equipment and contractor supplies such as construction consumables, tools, small equipment and safety supplies; provides repair, maintenance and equipment management services and safety training to certain of its customers; provides equipment re-rental services and provides on-site support to its customers; and provides ancillary services such as equipment transport, cleaning, refueling and labor.
Northbridge Industrial Services is engaged in the sales and hire of industrial equipment on a global basis for use in applications in the oil and gas, shipping, construction, and power and utility sectors. Co. has two main reportable segments: Crestchic loadbanks and transformers, which is involved in the manufacture, hire and sale of loadbanks and transformers; and Tasman oil tools and loadcells, which is involved in the hire and sale of oil tools and loadcells.
United Rentals is an equipment rental company that operates throughout the United States and Canada, and Europe. The company's general rentals segment includes the rental of construction, aerial and industrial equipment, general tools and light equipment, and related services and activities. This segment's customers include construction and industrial companies, manufacturers, utilities, municipalities and homeowners. The company's trench, power and fluid solutions segment includes the rental of construction products and related services. This segment consist of: Trench Safety region, Power and Heating, Ventilating and Air Conditioning region; and Fluid Solutions and Fluid Solutions Europe regions.
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