To our website to access our analysts' research on Vp. There will be a Q&A session with Anna and Keith at the end of the formal presentation, and if you do have any questions for the management team, there is a Q&A box at the bottom of your screen, and if you could post questions in there, we will endeavour to answer them. I will now hand you over to Anna and Keith, and they will run through the presentation.
Thank you, Rachel. Good morning, everybody, and welcome to the Vp final results for the year ended March 2025. I'm Anna Bielby, and I'm joined today by our CFO, Keith Winstanley. I'll start with a brief introduction to the business. Keith will then cover the financials. I'll then talk through our operational performance and an update on our strategy. As Rachel mentioned, there will be time for Q&A at the end of the presentation. I'll start with a summary of our business. We're leaders in equipment rental with a real focus on being specialist. We operate in four end markets, the two largest of which are infrastructure and construction. We have a strong track record of consistent financial performance and high returns.
We operate a number of specialist divisions, which you can see on the bottom of this slide, but we increasingly talk about our business in relation to the end markets that we serve. Next slide, please, Rachel. Moving on to our performance for FY 2025. Overall, in some varied market conditions, our performance has been resilient, with results in line with market expectations. Our return on average capital employed remains industry leading at 14.2%, demonstrating the quality of our earnings. We remain in a strong financial position with well-controlled net debt, and that has allowed us to invest GBP 65 million in fleet CapEx during the year. From a market conditions perspective, we have seen some differing conditions. In our two largest markets, infrastructure has been supportive, notwithstanding a slower start to CP7 in rail. Construction has been more challenging, but we have seen good positive momentum in specialist construction.
We've made good progress on our strategy during FY 2025, which is focused on driving profitable growth. This includes the acquisition of CPH in October, the launch of Vp Rail in November, and the continued evolution of our operating model. Moving on to our investment case. Put very simply, we buy assets, we rent them out, and we sell them end of life. We believe that our key differentiator is being specialist, and this is something that's served Vp very well over the years. We believe that this specialism drives strong relationships and customer loyalty due to the deep understanding that we've got of both our markets and the assets that we have. We also think this helps provide high barriers to entry. It means we're less susceptible to fluctuations in market and able to deliver a consistent financial performance. We're very excited about the growth prospects that we have.
We believe we are aligned to markets with strong growth potential, particularly in areas like infrastructure, where large multi-year spend programs exist. Underpinning our differentiators, we believe we have a strong financial profile, and that gives us reasons to be optimistic as we move forward. Next slide, please. Moving on to our markets, we operate in four main end markets. In infrastructure, where activity is typically aligned to large multi-year spend programs, conditions have been favorable, which gives us confidence to invest. In construction, conditions have been less supportive, with a fall in U.K. construction output in 2024, albeit modest growth is expected in 2025. In Ireland, where we made the acquisition of CPH during the year, conditions have been more positive from a construction perspective.
In-house building output has contracted during 2024. However, we are optimistic that activity levels will increase, and we're encouraged by the government targets and a rise in new home applications. In energy, where we mainly operate in oil and gas, the market has been solid, and there's been a good level of project activities. I'll talk about the performance in each of these end markets in more detail later on in the presentation, but I'll now hand over to Keith to cover some of the financials.
Good morning, everybody. We'll get straight into our financial highlights. Pleasingly, revenue has grown 3% in the year. Even when adjusting now for the impact of our CPH acquisition, revenue still grew 2%. This demonstrates the resilience of our diversified business model against a mixed market backdrop. Despite the increase in revenues, EBITDA was broadly flat, and that's predominantly due to investments in our people and technology. Our adjusted profit metric is our key profit metric, and that's profit before tax, exceptional items, and most intangible amortization. Adjusted profit reduced from GBP 39.9 million to GBP 36.7 million, and that includes the impact of those items I've just mentioned, alongside increased depreciation as a result of additional fleet investment and a small increase in interest costs. Exceptional items total GBP 10.9 million, and they predominantly cover two areas.
The first of those is our CPH acquisition, and this includes the accounting for future deferred and earn-out payments, the accounting for an in-year gain on purchase, and acquisition-related costs such as legal fees. Together, these total around GBP 1.7 million. The second area is costs relating to Brandon Hire Station. As Anna has just touched on, the general construction remarket remains challenging, and that significantly impacts performance of our Brandon Hire Station division. After considering this performance, we've recorded a non-cash impairment of GBP 5.4 million within exceptional items and a further GBP 0.9 million impairment of intangible assets recorded separately on the income statement. Alongside these impairments, we've incurred around GBP 3 million of branch closure costs as we continue to right-size the physical footprint of this division. We will specifically cover Brandon Hire Station later on in the presentation. Moving on to the balance sheet.
Our balance sheet remains strong and robust, and that positions us well for future opportunities and investments. In fact, we increased the gross investment in our fleet from GBP 63 million to GBP 65 million this year. We had to navigate some challenges in the credit environment during the year, but I'm pleased to say that our focus here resulted in improvements to both DSO and a lower bad debt write-off level. Driven by the acquisition of CPH, our net debt increased, and I'll cover that off in a bit more detail over the next few slides. This chart gives a breakdown of the roughly GBP 13 million increase in net debt over the year. In terms of inflows, cash generation remains strong and consistent with last year. In terms of outflows, we remain disciplined in how we allocate our capital.
The highlighted section of the chart shows our total of our net fleet CapEx, so this is fleet CapEx less disposal proceeds and our CPH acquisition. This is our investment for growth, and I'll give some more detail of where we're targeting that investment in a couple of slides' time. Outside of this investment, our cash is spent on other CapEx. We pay our interest and our taxes, and we continue to return funds to our shareholders via our dividend, which is uninterrupted for over 30 years. I just wanted to spend a minute reminding everybody of our finance facilities. Including our overdraft, we have around GBP 190 million of facilities, and these include two fixed-rate low-cost private placements, the first of which matures in 2027. We also have a GBP 90 million revolving credit facility, which we extended in November for a third year, and this now matures in November 2027.
Our loans are subject to two financial covenants around interest cover and a net debt to EBITDA gearing ratio. We operate well within these covenants. At the year end, our net debt to EBITDA gearing ratio was 1.5 times, comfortably within our stated target of two times. We continue to operate with significant headroom and well within our covenants. We have the funds available, but we'll continue to allocate those with discipline. We remain committed to maintaining a young and well-invested rental fleet, and as I mentioned earlier, we increased that investment from GBP 63 million to GBP 65 million this year. The table on the left shows that investment alongside the proceeds of our disposed fleet and our CPH acquisition. I'm going to give you some more detail where we're targeting this total investment. We allocate our capital to markets that we believe will maximise growth, principally being infrastructure and specialist construction.
Included in these two markets are two locations of particular interest to us. The first of these is the Republic of Ireland, where construction output is expected to grow over 8% for the next few years. Our investment here totaled GBP 15 million, and that's a mixture of rental fleet investment and the acquisition of CPH. As a reminder, back in October, we were pleased to acquire CPH for an initial consideration of around GBP 10 million. CPH is a specialist powered access business operating principally in clean rooms. Post-acquisition, CPH has been trading in line with our plans. The previous owners remain with the business, and we continue to look to take advantage of opportunities to grow both our existing customer base and more widely across the growing Irish market.
Taking advantage of Irish growth opportunities isn't limited to just CPH, and we also continue to explore opportunities across the wider group. To that point, I'm pleased to announce the post-year acquisition of another Irish business, Excel Tool Hire. This is a small bolt-on acquisition operating principally in specialist construction. The second location of interest is Germany, where the upgrade of the German transmission network represents a significant opportunity for the group. During the year, we invested around GBP 8 million in the German rental fleet, the vast majority being steel panels to provide temporary access solutions to network locations. Investments across Ireland and Germany total around 45% of our total net investment, and we expect our growth in these two countries to outperform our U.K. growth in both the short and medium term.
Outside Ireland and Germany, the remaining 55% of investment is spread across all our other divisions, but this has been weighted to opportunities in infrastructure and specialist construction. Moving on to our returns and our dividends. I've used these two charts in previous presentations, but I think they do a really good job of summarizing the financial strength of Vp. The top graph shows our ability to deliver remarkably consistent and strong returns over several years. The bottom graph shows our dividend story, with an uninterrupted dividend stretching back over 30 years. Despite some challenges in some of our end markets, we're proposing an increased final dividend of GBP 0.28, reflecting our confidence in the future. Before I hand you back to Anna, just to quickly summarize this section. Against a mixed market backdrop, we've seen resilient overall performance with top-line growth.
However, challenges in the general construction market have led to exceptional restructuring costs and impairments in our Brandon Hire Station division. We have a strong balance sheet, and we operate well within our finance facilities. We have increased investment back into the business, both organically and inorganically, but this has been targeted to where we see the largest growth opportunities. We have just seen our consistent and strong returns alongside our increased final dividend.
Thank you, Keith. I will now cover a bit more detail on our operational review in the four end markets that I touched on briefly in the intro. Starting with infrastructure, the work we do here principally supports the rail, water, and transmission sectors, and our customers are typically key contractors alongside water companies and Network Rail. The majority of our activity in infrastructure is around the repair, maintenance, and renewals of infrastructure assets, but we also are involved in new projects. Infrastructure is around 40% of the group's revenue, and it is an area where we see most opportunity for growth because of those good, strong, large multi-year investment programs. We are able to generate returns in infrastructure that are typically higher than our target return on average capital employed of 15%.
In FY 2025, almost half of our CapEx was spent around the area of infrastructure, and that was in areas such as the transmission opportunity in Germany that Keith referred to. During the year, our performance in infrastructure has been strong, aside from a slower start to rail in CP7. As we look forward to FY 2026, we've made a good start to infrastructure so far, and we're confident in our ability to drive growth. In rail, we remain optimistic about prospects. We expect CP7 to pick up in the second half of our financial year, and we hope that our rail revenues will be further boosted by the launch of Vp Rail, which has made a good start and which we expect to deliver more revenue as we move forward into FY 2026 and beyond. Next slide, please. Moving on to construction.
In construction, we categorize our activities as specialist and general. In specialist construction, our customers are typically key contractors, and our activities are focused around site redevelopment alongside providing access equipment into areas such as clean rooms, for example, data centers, pharmaceuticals, and food and beverage. In this area, our returns are typically slightly higher than our target return on average capital employed. During the year, we invested both fleet CapEx and also M&A, with our acquisition of CPH demonstrating our confidence in the Irish market. FY 2025 performance in specialist construction was strong, and looking ahead, we are optimistic about future prospects. In general construction, conditions have been tough, largely caused by wider economic headwinds. For Vp, that mainly relates to the group's Brandon Hire Station division, and I'll talk about that in a bit more detail on the next slide.
In Brandon Hire Station, we've made changes, and we have taken a number of actions in both FY 2025 and FY 2024. However, we have not seen the improvement in financial performance that we had hoped for. The actions that we have taken have included reducing the number of branches and refining both our offering and the customers that we target. We've also made improvements to process, to control, and also around pricing. I think it's important to point out that alongside its individual divisional performance and serving its own customers, the assets in Brandon Hire Station play another role supporting the wider group. A good proportion of the assets in Brandon Hire Station are general in nature and generate strong returns, and that's assets, for example, what we call non-mechanical plant, so scaffolding tower and fence panels and the like.
What these assets do is complement and enhance the specialist offering of our divisions, and that allows us to best support our major customers and some of the complex projects that we serve. It is increasingly important as we look to see our divisions collaborating more and going through a group go-to-market strategy. Overall, we are disappointed in the performance of Brandon Hire Station, and in terms of next steps, work is ongoing, and further decisive actions will be taken and materially completed within FY 2026. Moving on to our two smaller end markets. In house building, where we provide materials handling solutions to major house builders, the market has been stable but subdued. In response to this, we have taken further cost actions to right-size our UK Forks business.
Despite the challenging market conditions, we remain optimistic about the government's house building targets, and we are well positioned to take advantage of market improvements. In energy, the majority of our activities relate to oil and gas, and conditions continue to be good. We support a number of upstream and downstream projects, both in the U.K. and overseas, and performance in FY 2025 has also benefited from a number of industrial shutdown projects, which we expect to continue in FY 2026. Moving on to our strategy, we set out our refresh strategy last year, and I want to provide an update on the progress that we're making. The key areas of our strategy are delivering growth and driving operational excellence, and I'll talk about our growth plans in a bit more detail on the following slides.
On operational excellence, we've been making progress with our operating model through the centralization of certain functions and their areas such as our rehire function, providing central account management to our major customers, property, and procurement. This is to ensure that we've got the right balance between our agile specialist divisions and efficient group functions. Alongside growth and operational excellence, our strategy is underpinned by people, by digital, and by ESG. On people, we continue to invest in our teams to ensure that Vp is a great place to work. This includes recruiting the right people, for example, graduates and apprentices, and ensuring that our people are supported, developed, and fairly rewarded so that they can grow their careers with us. On digital, we are progressing our digital roadmap, which will improve our efficiency and also unlock opportunities for growth.
On ESG, we continue to work closely with our customers to help them achieve their own ESG objectives. We aim to grow sustainably with a positive impact on society. Going back to growth and a little bit around where we see the growth in Vp coming from. On divisional growth, our specialist divisions remain a key part of how we operate, and we will continue to invest in our divisional growth plans. This has been a successful growth engine for Vp over the years. In Ireland and Germany, as Keith mentioned earlier, we see significant potential as we operate in supportive markets, and we've invested heavily. We expect our growth in these two countries to outperform our U.K. growth in both the short and medium term. On Brandon Hire Station, as I've just mentioned, we'll be taking further decisive actions to improve profitability and returns.
On Vp's group go-to-market strategy, we believe we can drive growth with both existing and new customers. One final area I want to touch on is our M&A strategy, where Ireland and Germany are of particular interest, alongside smaller bolt-on acquisitions to existing divisions. We will also continue to review the performance and returns of each of our divisions and will consider divestments where appropriate. Next slide, please, Rachel. I want to talk a bit more about our group go-to-market strategy, which complements our specialist divisional offering. We see a real opportunity to drive performance through our divisions working more closely together and a group-wide approach to major customers and contracts. Major customers, we are responding to customer feedback by providing central account management and simple access to all of Vp's specialist divisions. We believe this approach will improve the customer experience and also increase our share of wallet.
Around GBP 50 million of our revenue, so about 13%, is now managed centrally in this way, and we will transition more customers during FY 2026. Alongside this, the Vp group go-to-market strategy allows us to tender for contracts and projects with a true Vp group offering. To date, we have won one contract, and we have three major bids in the pipeline. Finally, we spoke about Vp Rail in our interims. This is a one-stop solution, giving rail customers simple access to all of Vp's rail capability. Vp Rail has made a good start and has won two contracts so far. In summary, we have reported a resilient performance in FY 2025 despite challenges in some of our end markets.
We're continuing to progress our strategy, including improving divisional collaboration and end-set focus with the launch of Vp Rail, progressing our M&A strategy with the acquisition of CPH, and continuing to evolve our operating model. We remain optimistic about future growth opportunities, and we have a strong track record of navigating difficult markets. We've made a solid start to FY 2026 with strong momentum in infrastructure and specialist construction, and we expect performance in FY 2026 to be in line with current market expectations. Thank you very much for listening, and Keith and I will now take any questions that you may have.
Thank you, Anna and Keith. We do have a number of questions that have come in, so let me just run through those. First up, prospects in Ireland and Germany look exciting. Are you looking at any other European countries to boost international scale?
I think when I look at our strategy from a geographic perspective, longer term, I see us as a principally U.K. business, but also very interested in adjacent markets to the U.K. where risks are low and we have good market opportunity. I think at the moment, Germany and Ireland are the ones that spring to mind, and I think before we look more broadly than that at other European countries, we'd want to exploit and take advantage of the opportunities that we see in those areas. I think in Ireland, we've always operated in Ireland through our Groundforce division. The acquisition of CPH increased our presence there, and as Keith mentioned, we bought a small business earlier on in this financial year, so we believe there's plenty of opportunity to go out in that geography.
Similarly, over in Germany, there's a real transmission opportunity that we want to exploit. I think certainly in the short to medium term, we will try and get the benefit of growth from those two before looking more broadly than Ireland and Germany.
Great. Thank you very much. Let me see. I think there is another question around that. What are your top three priorities, either businesses or countries, to boost capacity in?
Our top three priorities from a kind of growth perspective, pursuing those Irish and German opportunities that are there would be very much up there. We have invested quite a lot of CapEx in those areas, and we need to make sure that that investment comes through into our returns. I think ensuring that our group go-to-market strategy is pursued effectively is a good opportunity for growth. I think we have long held strong relationships in our divisions, and I think managing some of those major customers from a group perspective so that our customers can access all of our specialist capabilities is a real opportunity. As I mentioned, there is further work for us to do in our Brandon Hire Station division where performance and returns are lower than our target of 15%, and there is an opportunity to drive performance and profitability in that area as well.
Great. Thank you. You mentioned Vp Rail, which you announced at the interims. Are you happy with the initial impact that that's had on group profile and contract wins?
Yeah, very much so. I think the conversations we've been having with our main contacts in the rail industry, which is principally the big rail contractors, has been very positive. I think people in rail knew our trackside business very well, which is our business that's solely focused on rail. I think what not everybody knew was how much rail capability we had in our other divisions. By having Carl Abraitis leading that team as Director of Vp Rail, he can bring to our key customers all of our capability and provide simple access to that capability through one central team. It's gone down very well. We've won our first two contracts, and the conversations have been encouraging.
Great. Maybe leading on from that, how are divisional heads responding to central account management? Has Vp Rail been supported well internally?
It has, yes. I think from a divisional perspective, we've now got Carl and his team going out there representing and selling the services of our individual businesses. It is almost another sales and marketing arm for the division. It has gone down well internally. Our business model is absolutely based on specialist businesses where we have people who understand and have an awareness of products and markets. We are not undermining that by having a more group-wide approach. It is a complementary approach, and we absolutely expect our divisional teams to be having a lot of contact points with our major customers. It is about making us easier to do business with as a division in terms of business, in terms of simple access to all of our capability through one central team, rather than having to engage differently with individual divisions.
Great. Thank you. If we can move on to M&A, obviously, you've touched upon that within the presentation itself, but clearly, you've got the ambition and the firepower to make more acquisitions. I guess that comes down to the question, are there many prospective sellers, and how are vendor price expectations in these volatile markets?
Yeah. I mean, we're still seeing quite a lot of opportunities come our way in a lot of different areas and a lot of different geographies. It's about finding the ones that sit in our sweet spot. We need to make sure that any acquisition that we make is of the right risk profile and has the right growth potential, is appropriately specialist, and has good growth opportunity. I think the CPH acquisition that we made was a really good example of what we look for in a business, which is something that we can buy to then scale it. That gives us access to a geography or a product that we're not already in.
Whilst we remain open to opportunities, it's a delicate balance between M&A opportunities and also continuing to invest in things like CapEx, where we believe we can drive growth by increasing the number of assets in certain of our divisions.
Great. Thank you. Keith, I'm going to turn to you now so you do not get off too lightly. We've got a number of questions, so I'll try and group them together. Talking a bit about inflation, and maybe Anna, you can help on this one, but could you say how easy it is or not to pass through inflationary costs, both in labor and materials, to customers via price increases? I mean, I guess to what extent are you seeing inflationary pressures still, and can you pass those on?
The big one for us was the National Insurance changes and Minimum Wage changes that kicked in from the 1st of April. We've said before that in total, that's going to cost us around GBP 4 million. Now, passing those on is not necessarily particularly easy. Most of our customers are U.K. customers, and they're experiencing the same issues. We do continue to look at our pricing, though. It's a more sophisticated approach. We're looking at what things are being highly utilised and where we might be able to kind of pass prices on for those kind of in-demand assets. We're also investing in a new piece of software. We've just entered into a partnership with Salesforce for a kind of, it's called a configure price and quote tool. Now, this does a couple of things.
It helps kind of front-end experiences for customers, but also in terms of the back, one of the things it will do for us is kind of prevent price leakage, where we're mistakenly charging less than we ought to. We are working on a few things, but as I say, it's not as simple as just going, "Our costs have gone up," and therefore, we'll push them on to you.
Yeah. I think the other point to add there is where we're under contracts with customers, we're probably not going to be able to make increases during those contracts. There is a time lag between when you might want to pass on some of those increased costs and when contracts come to an end, but it's certainly something that's front of mind.
Great. Thank you. Can you explain the jump in administrative expenses shown on the income statement as the exceptional items only partially answer this?
Yeah. There's a slight complication in kind of accounting rules, which I won't bore everybody with, but predominantly, it's people and technology. In terms of people, we've invested around GBP 8 million more in our people this year than we did last year. If you go all the way back to April 2024, we saw quite kind of high increases in minimum wage, and that kind of trickles down to kind of the whole workforce. We've also invested in kind of pockets of people in terms of teams. We've kind of created a centralised procurement team, a centralised property team. It takes a little time for this kind of investment to come back through. The other thing that you see in there is increased technology investment. Many moons ago when you're increasing in technology, this might have been the scene in CapEx.
As technology moves increasingly to as a software, as a service, these things get recorded within the P&L instead. So people and technology are the main two items.
Great. Thank you for that. Keith, is the spend on non-fleet CapEx such as IT likely to grow as a proportion of revenue going forward?
Most of that non-fleet CapEx is things like investments into our property portfolio, either through leasehold improvements or stuff that we've done to our own freehold properties alongside some of our vehicle fleet. Roughly, I would say it's going to stay about the same as what it is at the minute. We don't have a kind of backlog of improvements we need to do. So roughly about flat going forward.
Great. Thank you. I'm just seeing if there are any further financial questions. Can you explain how you calculate return on average capital and what the returns would be if you'd not taken the non-cash write-down of assets?
Return on average capital, it's on a you can never quite do it from our accounts because it's an internal metric that we use our management accounts for. It's very hard to kind of replicate. Effectively, it's an EBIT metric over our capital employed averaged over the year. Because the impairments this year were right at the very end of the year, they do not really kind of get encompassed into the number. What you do see this year, though, is the impact of impairments that we've recorded last year. The impact of that is about 1% or so.
Great. Thank you. We've had a couple of questions on this. Hopefully, this one picks them both up. Can you please give us a bit more color around simplifying the relatively complex corporate structure and brands while protecting the client-facing decision-making of those teams?
Yeah. From our perspective, having individual divisions is what makes Vp specialist. It is what has served us well over the years, and it is something that is fundamental to our plan as we go forward. We have no intention to change that. In terms of pursuing our strategy of going to market as Vp Group, we want to make sure that we have the capability of doing that. That is why we established Vp Rail. What Vp Rail is, is a very small team that provides access. What Vp Rail is not is a very large team and overhead with a large cost base. The majority of our people and costs sit alongside the divisions. We have a small central team that provides access to those specialist teams that sit in the divisions.
The enabler for this all to work is the investment that Keith referred to in technology, making sure that our systems work seamlessly and talk to one another and underline with customer systems. The team that sits centrally around central customer management, rehire centre, and areas such as Vp Rail, that's quite small in terms of number of people. It is such a central team that alongside technology coordinates all of the work that's happening in the divisions because that's where the value is. That's where the product knowledge is. That's where the market knowledge is and the customer relationships.
Great. Thank you. We are getting towards the end of the questions. We have just had a question drop in. I realize Scotland is in the U.K., but is that a country where you are looking at infrastructure projects around the power upgrades, the transmission upgrades, and the freeports that have been established there?
Yeah. I mean, I think wherever there is activity, particularly in infrastructure, it's areas that we want to be involved in. We are involved heavily in Scotland. Our oil and gas business, our energy business is headquartered out of Aberdeen. We do work in the water sector with Scottish Water up there. Through the Great British Grid system and transmission upgrades, things will be involved in a number of projects. I don't want to necessarily give names, but there are Scottish opportunities for us in those areas. When you refer to things like freeports, obviously, all of those areas where there are major spend programs are opportunities for us and things that we will look to be pursuing.
Great. Thank you. A final question. Do you have a date proposed yet for the AGM this year? Will it take place in Harrogate?
Yes, it will take place in Harrogate. Keith, correct me if I'm wrong, I believe it's the 23rd of July.
Sounds about right.
Yes, 23rd of July in Rudding Park, Harrogate.
In sunny Harrogate, I'm sure.
Sunny Harrogate, yes.
Wonderful. Thank you very much both for your time. That now concludes the presentation. I would like to thank everybody for joining. In due course, I will send round an email to attendees requesting feedback, and I know that management find it particularly helpful. If you do have any comments, please let us know. That is the end of the presentation. We look forward to seeing you in six months' time, which will either be right at the end of November or the beginning of December. Great. Many thanks, everybody. Goodbye.
Goodbye.