07.09.2004

Lavendon confirm Interim results

Lavendon the largest powered access company in Europe and owner of Nationwide Access in the UK, Zooom across continental Europe and Rapid Access in the Middle East has confirmed its interim results See Vertikal.Net July 2nd.

Group revenues held firm at just over £50 million while cost of sales increased by £750,000, operating expenses jumped by £1.5 million and exceptional expenses, rose by £1.3 million. (Exceptionals included restructuring charges in Germany, the UK and at the Lutterworth Headquarters as well as costs involved with the refinancing announced earlier in the year).

The additional costs were slightly offset by a £158,000 reduction in interest payments. but the net effect was to turn a loss of £800,000 in the first half of 2003 into a loss of £4.2 million this year.

The company lists the main highlights in the first half as:

• Results in line with market expectations
• Net debt reduced to £98.7m (2003: £116.7m)
• Capital expenditure maintained at a low level
• Return to revenue growth in the UK
• Continued strong performance in the Middle East
• Loss before tax and exceptional costs of £2.6m (2003: loss of £0.5m)
• Loss before tax £4.2m (2003: loss of £0.8m)
• Dividend unchanged at 2.25p

The UK increased revenues but higher costs almost halved operating income, the extra costs are involved with a number of incentives that the company claims will pay off in the second half and beyond. Nationwide Access the UK business has started the roll out of a new order entry system which provides local hire desk staff with a level of information available at their fingertips only parralelled by major car hirers or airlines. The net effect should dramatically improve customer service, speed order entry time and improve rental yield per unit.

In Germany the company is still struggling with the highly fragmented competition and a market that is improving only very slowly. After seeing rates improve in late 2003 smaller competitors targeting the companies marketing position forced it to react with rate reductions in order to retain market share.

A review of the German business is now underway “Whilst we remain committed to maintaining a strong market position in Germany, it is now clear that the prospects in the short to medium term no longer support our current scale and cost structure. Consequently, we are presently involved in a detailed review of our German operation to reshape the business to a scale that is more attuned to the current market opportunities available. This review will be concluded during the second half of the year” said Lavendon chief executive Kevin Appleton.

France saw a small decline in revenues but held its operating income to last years levels, while Spain marginally increased. its revenues but with a slightly weaker profit.

As already reported the star of the operation for the first half was Rapid Access in the Middle East which saw increased revenues and profits.

Outlook

“Although trading conditions remain extremely tough, we are pleased with the return to revenue growth in the UK and the continued strong performance of our Middle East operation.
“However, these performances are offset by the ongoing poor results that we experience in Germany. “Capital expenditure is being maintained at a low level and this, coupled with our strong cash generation, will enable us to maintain our focus on paying down our debt in the coming months.” said Appleton.