02.03.2004

Lavendon meets expectations, David Price now part time.

The Lavendon group, owners of Nationwide Access in the UK and Zooom in Germany, Austria, France and Spain and Rapid in the Middle East have announced preliminary results for 2003. They are roughly in line with market expectations, which were set by a warning statement in October. David Price, Chairman also confirmed that effective January first he had moved to being Part time and will be taking a lower salary as a result.

Highlights include a 4.7 percent increase in overall revenues to £107.8 million (£103 million in 2002.). Increases of £5.5 million in the Middle East, France, Austria and Spain plus a further exchange related increase in Germany, were offset by a £1.7 million fall in revenues in the UK.

Pre Tax Profit before exceptional expenses fell by 50 percent to three million pounds, pre tax profits after allowing for exceptional expenses were down 53 percent to £2.2 million.

Net operating Cash flow increased by 25 percent to £36 million while net debt was reduced by four percent to £109.5 million.

Earnings Before Interest, Tax, Depreciation and Amortization were roughly stable slipping marginally to £34.8 million (35.3m in 2002).

Spending on new machines, including hire purchase deals was £15.3 million down from £30.4 in 2002. The company said that Capital expenditure for 2004 will be held to minimal levels..

The company announced that they would be maintaining the dividend at 6.95 pence per share.

UK
UK revenues totalled £59.2 compared to £60.9 in 2002, due to lower activity and pressure on rates,operating profit was £8.8 million. The company reported a five percent fall in the number of customers served, partially offset by a three percent increase in the average spend per customer. In other words fewer, larger customers.

Margins in the UK dropped to 16 percent from last years 22, for a number of reasons, one being that a larger portion of the fleet was no longer covered by manufacturers warranty, and of course older, thus increasing the cost of repairs and maintenance.

Lavendon estimates that it could see at least a 25% increase in volumes before it needed to consider further fleet additions. The number of depots in the UK fell slightly last year to 45 through rationalisation, and these are now linking in to 19 hire desk centres, which leave the depots to concentrate on orders and operational logistics rather than the selling function.

Tommy Graham, long time managing director of Nationwide Access has moved to a new position, responsible for the Northern half of the UK along with a new Role which has not been disclosed. Kevin Appleton, CEO of Lavendon, has taken over the Managing Directors positon at Nationwide in the Interim.

According to Lavendon, the outlook in the UK is flat, with commercial and industrial construction expected to show no growth and Telcom still uncertain, the company is developing supplier contracts in such areas as ports and Aviation to counter this.

Germany:
Lavendon claim that this was one of the toughest starts to the year since unification, with construction down on previously low levels. Revenues in Euro terms fell by six percent but when transferred to sterling rose by 3.5 percent due the stronger Euro. Revenues were £31.3 million with a net loss of £1.9 million before exceptional costs and£2.2 million after allowing for them, most of this was the cost of a 15 percent reduction in staff earlier in the year.

During the year a new managing director, Fred Ostermayer, was appointed and the company’s latest IT system installed, the system is credited with a nine percent improvement in rental rates per unit from the third quarter on.

Lavendon expect the pick up in German construction to begin to have an effect in the second half and should then have a disproportionate effect on the company’s earnings due to the cost savings implemented in 2003 and the increase in rates achieved to date.

As in the UK regional hire desks are being rolled out across Germany, the company says that the first region completed in the north has shown significant benefits in terms of utilisation achieved. The plan is to have ten such sales centres covering the companies 44 branches in Germany.

Austria: Lavendons Austrian business grew by 67 percent to two million pounds, with a roughly break-even result. Further expansion will continue with machines being transferred from Germany

France:The business continued to grow with revenues up 35 percent and the net result improving marginally to an operating loss of £700,000, business softened in the second half due to a continuing weakness in the economy and an oversupply situation.

Spain:Revenues up 28 percent but operating income fell to £200,000 activity is high but rates highly competitive.

The Middle East: Yet another strong year with revenues up 65percent making this the largest operation outside of the UK and Germany and certainly the most profitable, achieving £2.4 milion.

David Price, Chairman of Lavendon, said today:
“We are confident that we can continue to generate excellent cash flows and reduce debt levels, as we have a relatively new and professionally maintained fleet of equipment. Our strong market position will leave us well placed when the upturn comes. Our immediate priority, nevertheless, remains an undiluted focus upon performance improvement and cash generation to reduce debt”.

“We believe that the use of powered access remains a growth market in the long term. Health and safety regulations are being more stringently applied across Europe, benefiting powered access over other means of access, whilst the demand for ever-faster turn-around of maintenance jobs and the growing trend towards modular, steel-frame construction techniques right across the developed world, will ensure a continued shift towards the use of powered access due to its inherent efficiency and cost effectiveness. In the USA, a fairly mature market, the powered access rental fleet equates to over 1,800 machines per million of population. In the UK, the most advanced of the European markets, is just over 400 units”.

"Although forecasts of economic growth in aggregate are, at this stage, more encouraging than for the past couple of years, the near term outlook for our single largest customer sector – commercial and industrial construction – remains poor right across Europe. Stagnation in this market produces downward pressure on hire rates, which, in turn, limits our ability to grow revenue. This situation is exacerbated by the unprecedented increase in the size of the European rental fleet in recent years, causing a demand/supply imbalance”.

"We believe, however, that in the UK and Germany, we have the competitive position to set and defend appropriate pricing levels. This, coupled with the ability of the business to generate significant levels of cash and reduce debt levels, even during periods of sluggish economic activity and reduced profitability, remain a key strength of our business.

Following completion of the German management reorganisation and implementation of the Group standard IT systems, I have now moved to a position of part-time Chairman with effect from 1 January 2004, as previously indicated, and with an appropriately reduced salary package.”