28.10.2003

Lavendon Group issue profits warning

The Lavendon Group plc, Europe’s largest powered access rental company, today issued a trading update warning that lower than expected revenues in Germany and the UK is likely to put pressure on the full-year earnings.

The company issued an interim statement in September that noted "caution regarding prospects for the rest of the year”. There has been an improvement in activity since the summer, but recent weeks have seen that trend fall below earlier expectations.

Given these more difficult trading conditions, management focus has centred on controlling costs, generating free cash and reducing debt levels.

In the UK, activity in the commercial/industrial construction, manufacturing and telecommunications sectors has remained subdued and is currently below that of last year, resulting in a year-on-year revenue decline of some 4 per cent, with consequential pressure on margins.

The company reports that activity in Germany continues to be depressed, causing a decline in year-on-year demand. The effect is now being partially offset by an improvement in hire rates, which has limited the revenue decline to 5 per cent in the period to mid-October this year.

The Group’s other European operations are together still showing year-on-year revenue growth and an improving trend in profitability. In the Middle East, growth in both revenues and margins are substantial and this is expected to continue for the remainder of the year.

The company is quoted as stating: "Whilst the performance of our operations in the UK and Germany has not met expectations during recent weeks, which will have a significant effect on the overall profitability of the Group for the year. Strong cash flows continue to be generated, allowing the Group to reduce debt levels month by month".

As of 16:00 today, (October 28th), the company's share price had fallen by 20p on the day (12.9%) to £1.39p.