19.11.2009

Lavendon sees stability returning

UK based international powered access rental group, Lavendon, has issued an interim management statement for the period to 18th November.

Total revenues, excluding equipment sales, for the 10 months to the end of October have declined 11 percent compared to the same period last year. On a constant exchange rate the fall is 17 percent.

Ongoing cash generation has enabled the company to reduce its net debt levels to £267 million, through cutting costs and limiting capital expenditure while stepping up sales of used equipment from its fleet. The group has sold 1,468 units so far this year, generating £7.8 million in cash.

The company has reported the following overviews of its operations.

UK
Lavendon’s UK business – Nationwide Platforms, EPL-Skylift and Panther - saw revenues decline by 22 percent – 28 percent on a like for like basis. The company says that conditions remain challenging with new construction projects not fully offsetting project completions. It does adds though that project in East London, most of which are related to the 2012 Olympics, have yet to reach their peak and will help offset any further market declines in 2010.

On the other hand it says that non-construction business – which it claims now represents 60 percent of its revenues, is showing definite signs of stabilising.

Germany

Gardemann saw revenues over the first 10 months decline by 13 percent, translating to a two percent decline in Sterling. While it is still struggling with rates and a slower market, it says that cost savings have helped boost margins during the second half of the year.

France and Belgium

Revenues at what was DK rental and Zooom France, declined 19 percent, which translates to a nine percent decline in sterling. However Lavendon says that conditions are showing some signs of improvement after a very quiet summer holiday period.

Spain

Lavendon Spain which incorporates DK Rental Spain and Zooom Spain, saw revenues fall by 41 percent – 33 percent in sterling- and conditions remain “extremely difficult”.

Middle East

The Middle East remains the bright spot with revenues up by 20 percent this year, an increase of 45 percent when translated back to sterling. In spite of the positive result Lavendon says that it has seen some delays in new project starts, particularly in Saudi Arabia, slowing its anticipated growth and reducing margins. It does add though that things are now picking up again.

Summary

The company says that given the ongoing challenges it will retain its short term focus on debt reduction and will continue to limit capital expenditure, while reducing its fleet though used equipment sales.

It now expects full year profits to come in at the lower end of its forecasts, while beating its debt reduction projections.

It adds that 2010 will remain challenging and that future demand levels will continue to be unpredictable.

Vertikal Comment

There are no big surprises here apart, perhaps from the ongoing growth levels of the Middle East operations. Today’s capital raising will put Lavendon in a strong position to set itself up for a more rapid market pickup in 2011 – 2012 and beyond.

The company will need to keep an eye on its fleet composition and age though, which it is now showing signs of doing. It is likely to have several options next year to reduce the average age of its fleet. These will include some bargain acquisitions of younger struggling fleets or some highly discounted deals from manufacturers looking to both clear out residual inventory and secure production commitments to smooth what promises to be a better but unpredictable year in 2010.