17.11.2011

Lavendon gathers pace

UK based international rental company Lavendon has issued a positive interim trading statement.

Third quarter revenue growth ranges from four percent in Germany to nine percent in Belgium, with percentage numbers down due to the comparison with improving numbers in 2010. The most positive results came from the Middle East where business growth has picked up again, particularly in Abu Dhabi and Saudi Arabia.

For the nine months to the end of September revenues increased as follows:
UK – nine percent
Germany – eight percent
Belgium – 15 percent
France – 13 percent
Middle East – one percent

The group overall saws revenues rise by eight percent, excluding Spain which is being closed down and sales of used equipment. Net debt, after allowing for the initial payment for the Blue Sky acquisition has been cut by over 11 percent since the start of the year.

The full statement is as follows:

"The Group's overall revenues for the nine months to 30 September 2011, on a constant currency basis (excluding ex-fleet equipment sales and the Group's discontinued Spanish business), increased by eight percent compared with the prior year. In the third quarter, Group revenues increased by seven percent compared with 2010 on the same basis.”

“During the third quarter, revenues from our UK and continental European businesses have continued the trend of growth over 2010, albeit at a lesser rate than in previous quarters due to progressively stronger comparatives. In the Middle East, despite demand patterns remaining somewhat unpredictable, the rate of rental revenue growth over the prior year has increased, driven primarily by the continued recovery in the Abu Dhabi and Saudi Arabian markets.”

“The rate of overall revenue growth to date, together with the benefits being derived from our actions to enhance operational and capital efficiency, is delivering the expected improvement in the group's profitability, margins and return on capital employed. We anticipate further progress in these key metrics in the coming months, as our plans to realign our German business and redeploy our Spanish fleet gather momentum.”

“Since the half-year, the group's net debt level has continued to reduce and as at 31 October 2011, following the acquisition of Blue Sky Access for an initial consideration of £3.4 million, stood at £124.3 million (compared to £140.3 million at the previous year-end). We expect this debt level to reduce further over the remainder of the financial year.”

“Trading in the fourth quarter to date has been in line with our expectations, and whilst we are alert to the increasing uncertainty in the macro economic climate, the board believes that the group will deliver a full year result in line with its expectations."

Vertikal Comment

This is quite a positive statement from Lavendon and suggests that efforts to improve rental rate discipline while promoting added value to major contractors is gathering pace.

A key factor going forward is what it decides to do in Germany and how it rolls out its programme to add more specialist or more niche powered access equipment to the fleet. With debt levels coming down rapidly the question will also arise as to what it plans to do next in terms of expansion.

All in all the company looks set to turn in a very positive result for the year, vindicating the management’s rejection of the hostile takeover bid at the start of the year.