16.01.2014

No Growth for Lavendon

Lavendon, the UK based international access rental group has posted a preliminary trading update for the full year 2012, showing revenues close to, or the same as, those of 2012.

Looking at the main regions, the Nationwide Platforms business in the UK, which represents 46 percent of group revenues, was down four percent for the full year, although the company says that the fourth quarter showed progress and came in at the same levels as 2012, stemming earlier declines. It adds that it is gathering momentum as it goes into 2014 and with rates continuing to improve.

The Gardemann business in Germany continues to decline with revenues down seven percent in the year, but dropping 13 percent in the fourth quarter, the company blames this on the new IT system stating that lower revenues “reflect the resolution of initial teething issues with the implementation of our new IT platform in the third quarter.”

The declines in Belgium halted in the fourth quarter with revenues coming in at 2012 levels, but the DK Rentals business ended the year six percent lower than in 2012. France on the other hand continues its upward trend in what is a tough market at the moment, improving six percent in the quarter and ending seven percent up for the full year.

In the Middle East which now represents 19 percent of revenue and getting on for half the group’s profits, Rapid finished the year 21 percent up on 2102, although the fourth quarter growth slipped to eight percent due to comparison with a strong quarter in 2012.

Net debt at the end of the year was £1 million lower to £96 million, on a constant currency basis (£98 million at current rates) after spending £44 million on capital expenditure.

The company statement said: “Our initial three year programme to deliver operational efficiencies has exceeded our expectations, and we plan to set out the next phase of our efficiency programme when we announce our preliminary results in February 2014. These efficiency gains together with a lower interest charge for the year, has enabled the group to make further progress in improving its profitability for the year.”

“As previously reported, the group's return on capital employed (ROCE) in 2013 is expected to be marginally below the 10.7 percent reported for 2012, principally due to a decline in the UK's relative contribution to the group's ROCE. Measures were taken in the fourth quarter to address this performance, and we remain confident that, over the business cycle, we will deliver a ROCE for the group greater than our average weighted cost of capital.”

Chief executive Don Kenny added: "During the year, we have again delivered strong revenue growth in France and the Middle East, and, importantly, seen an improving trend in our UK business through both increased volumes and an improved pricing environment. The board expects the group's results for 2013 to be in line with its expectations, and, whilst mindful of continuing economic uncertainties in our European markets, we are looking forward to making further progress in 2014."

Vertikal Comment

This is not a great set of numbers from Lavendon, given that the UK market overall has been good, with a number of companies making solid progress in both revenues and profits. Germany also picked up in the second half, but the Gardemann business continues to struggle and looks set for more restructuring, which will cause more disruption…..

The company is also facing some significant changes in senior operational management which may help or hinder. The UK saw a major management change in the fourth quarter while Andy Wright who was instrumental for recent growth in the Middle East, departed in September.

The company has a lot going for it, but it needs some stability now in terms of senior people and leadership.