25.02.2016

Lavendon profit slip

The Lavendon Group, owner of Nationwide Platforms in the UK, Gardemann in Germany, DK Rental in Belgium and Rapid Access in the Middle East has published its preliminary profit and loss numbers for 2015.

The full report follows the release of preliminary revenue numbers in January, See Lavendon ends on a high with total revenues one percent higher at £248.6 million. Pre-tax profits however are 22 percent lower at £16.2 million, although ‘underlying’ pre-tax profits - without exceptionals and write downs etc – improved 13 percent to £38.5 million.

In the UK revenues were almost one percent higher at 121.1 million, while operating profits jumped 11 percent to £22.7 million. In the Middle East Rapid revenues increased 16 percent to £57.2 million, although over half of the increase was due to exchange rate factors, the improvement came from a larger fleet – now around 700 units – offset by a six percent fall in rental rates.

In continental Europe revenues fell just over eight percent to £70.3 million, although much of this was currency related, rental revenues in Germany were stable at €48.6 million, while rental revenues in France increased 11 percent to €30.3. Rental revenues in Belgium fell two percent to €13.8 million. Operating profits in the region were €7.4 million 18 percent lower than in 2014, however the half of this decline was currency related.

Net debt at the end of the year increased to £124 million compared to £119 million or £90 million at constant exchange rates.

Chief executive Don Kenny said: "I am encouraged by the group's performance in 2015 which was ahead of market expectations. We delivered the best underlying operating margin, profit before tax and return on capital in over 10 years despite tougher conditions across the group's markets. Our businesses experienced a strong finish to the year with all regions growing in the fourth quarter. The full year dividend increase of 17 percent reflects this strong performance and the board's confidence in the Group's long-term future."

“The strength of our cash flows and the healthy financial position of the group enabled us to increase fleet investment during the year, improving our market positions and ensuring we are well placed to capture growth opportunities in 2016."

“Our new management team in Germany are restructuring the business and this will be operationally complete by the end of 2016. We are confident the actions being taken will increase our market share, drive revenues and improve financial returns to the group”.

“Current trading to date in 2016 is in line with our expectations, and whilst we recognise the recent increased uncertainty in the economic outlook, the Board looks forward to delivering another year of progress in 2016."

Vertikal Comment

These results are pretty much in line with what we expected, and certainly better than it had looked it might have been at times during the year. A key element for 2016, will be for the company to maintain pricing discipline in the UK and - more of a challenge - the Middle East, while building momentum on
Germany and maintain the exceptional improvements in France.

As the results from the Middle East show, maintaining rental rates can be challenging, however in the UK the company has the potential to lead the market and establish an example that many will be happy to follow. The risk – as always - is overreacting to undercutting forays from small regional players which can so easily lead to national pricing degradation. The company has implemented some excellent systems in recent years which should help it take a more scientific approach to pricing and yield management.

Having brought its capital expenditure forward 2016 could be an excellent year for the group.