RNS Number:2656P
Lavendon Group PLC
02 September 2003
2 September 2003
Lavendon Group plc
Interim Results for the Six Months ended 30 June 2003
Lavendon Group is Europe's market leader in the rental of powered access
equipment. Powered access provides a high degree of flexibility, thereby
reducing labour costs and saving both time and money. The equipment is quick,
safe, convenient and highly manoeuvrable. Consequently, it is now used to
provide temporary aerial access in a variety of applications and is fast
becoming industry's favoured option when compared to traditional access methods
such as scaffolding, ladders and aluminium towers. It is also ideal for a wide
range of other applications including industrial and building maintenance,
construction, sign erection, outside broadcasting, telecommunications, tree
surgery and highway maintenance.
Highlights:
* Results in line with market expectations
* Turnover increased by 5% to #50.0m (2002: #47.6m)
* Due to an increase in depreciation charges, operating profits before
exceptional costs were #2.5m (2002: #3.6m)
* Earnings per share reduced to a loss of 1.23p (2002: Earnings of 1.21p)
* Dividend unchanged at 2.25p
* EBITDA stable at #15.5m
* Strong cash flow from all Group operations during the period
Trading:
* Average UK customer spend levels increased by 5%
* Stabilisation of hire rates seen in Germany
* French business has grown revenues by 54% to #2.4m (2002: #1.6m)
* Spanish business has increased revenues by 70% to #1.7m (2002: #1.0m)
* Austria's revenues almost doubled year on year to #0.7m (2002: #0.4m)
* Middle East's revenues grown by 58% to #2.9m (2002: #1.9m)
Outlook
David Price, Executive Chairman, said today: "Although conditions in our major
markets remain difficult, we believe that the powered access markets in which we
operate will deliver long-term trend growth considerably in excess of economic
growth generally. This is primarily because of an increasing shift away from
traditional access products (scaffolding, ladders and towers) in favour of
powered access solutions, which is clearly demonstrated in the growth of our
active customer base from 15,000 at the end of 1999 to over 32,000 today.
Current US market penetration levels highlight the European potential and give
an interesting indication of the opportunity available. The fleet population in
the US is estimated to be around 0.5 million units, which equates to 1,832 units
per million of population. The machine fleet in the UK - the largest of the
European markets - is around 25,000 units, which is just 424 units per million
of population. Nevertheless, it is clear that current economic circumstances
have compounded to cause the market growth rate to be close to zero."
For further information please contact:
Lavendon Group plc
Kevin Appleton, Chief Executive On 02.09.03: 020 7067 0700
Alan Merrell, Group Finance Director Thereafter: 01455 558874
Weber Shandwick Square Mile
Peter Corbin / Nick Dibden 020 7067 0700
Chairman's Statement
Financial Overview
The Group's results for the six months ended 30 June 2003 showed a 5% increase
in turnover to #50.0m (2002: #47.6m) with operating profits prior to exceptional
costs reducing to #2.5m (2002: #3.6m) due to the increase in depreciation
charges resulting from the investment programme in 2002. Exceptional costs
relating to restructuring in Germany and the Group Head Office totalled #0.25m.
Operating profits after exceptional costs were #2.3m (2002: #3.6m).
Interest costs remained at #3.0m (2002: #3.0m), which, when combined with the
reduced operating profits, produced a loss before tax and exceptional costs of
#0.5m (2002: profit of #0.6m). After exceptional costs the loss before tax was
#0.8m (2002: profit of #0.6m). The loss per share before exceptional costs for
the six months ended 30 June 2003 was 0.81p and after exceptional costs was
1.23p (2002: earnings per share of 1.21p).
Despite the decline in operating profits the Group's earnings before interest,
tax, depreciation and amortisation (EBITDA) remained stable at #15.5m (2002:
#15.5m). The requirements for working capital reduced significantly during the
period, and this enabled the Group's net cash inflow from operating activities
to increase by 12% to #15.1m (2002: #13.5m). All of the Group's operations had
positive operating cash flows for the period.
The Group invested a total of #2.3m in fixed assets during the period (2002:
#6.7m), of which #1.7m (2002: #5.7m) related to the rental fleet and wholly
represented deliveries of outstanding orders from 2002. Investment will continue
to be at a low level until the spare capacity in our rental fleet is absorbed,
and demand levels warrant further expansion in the rental fleet. The net cash
outflow from capital expenditure and financial investment of #3.1m (2002:
#15.2m) relates in the main to the settlement of amounts owing to equipment
suppliers brought forward from 2002.
Due to the reduced level of investment, the Group generated #2.3m of 'free cash'
(1) which was used to reduce the debt levels of the Group. However, due to a #4.9m
increase in net borrowings on translation due to the continued strengthening of
the Euro, the Group's net debt position at the half year shows an increase of
#2.6m over the position at the end of 2002, to a total of #116.7m with a
corresponding debt to equity ratio of 130% compared to 125% at the previous
year-end. During the second half of the year, additional 'free cash' should be
generated from our operations and this will be used to reduce the Group's debt
levels further. All of the Group's debt facilities remain in place and all
associated covenants have been complied with.
Dividend
The directors are declaring an unchanged interim dividend of 2.25p per share
(2002: 2.25p). This will be paid on 3 November 2003 to shareholders on the
register at the close of business on 12 September 2003.
Business Review
Trading has been adversely affected by the deteriorating economic conditions in
all of the major European economies. Germany has had a particularly difficult
first half of 2003 and the UK and French governments have both reduced growth
estimates to below the levels of last year. Industrial investment (a major
driver for the types of projects which require powered access) continues to fall
across most of Europe with the construction sectors in France and Germany
showing output falls against the previous year, and with the commercial and
industrial construction sectors in the UK contracting. In addition, there has
been shrinkage in demand for powered access from the UK telecommunications
sector, as the pre-launch build of 3G networks comes to a close and the industry
now awaits indications of consumer demand before making further significant
investment. Against this uncertain climate, growth in demand for powered access
has slowed, and in some regions declined, and this, coupled with the significant
growth in capacity in the market during the last four years, has led to further
downward pressure on powered access hire rates in all European markets.
(1) Free Cash is defined as net cash inflow from continuing operating activities
less interest, taxation, capital expenditure before inception of new hire
purchase agreements and dividends paid.
A challenging economic environment was largely anticipated at the start of the
year and in response we implemented a programme of cost control, cash management
and debt reduction. Our control of working capital and virtual cessation of new
capital commitments means we are well positioned to reduce debt significantly in
the second half of 2003 and beyond. Our overall strategy has been to continue to
develop our operational efficiency and effectiveness during this challenging
time to be better able to convert revenue growth into earnings growth when
positive economic momentum returns.
UK: The UK business has experienced difficult market conditions in the
telecommunications and the commercial/industrial construction sectors, together
with a continuing subdued level of demand from the manufacturing sector,
throughout the period. However, despite these unfavourable conditions, revenues
have remained stable year on year at #28.5m (2002: #28.6m) as average customer
spend levels increased by 5% to offset the reduced number of active trading
customers. Operating profits, prior to exceptional costs, declined to #4.0m
(2002: #5.4m) mainly due to the additional depreciation charges incurred
following the investments made in the rental fleet during 2002. After
exceptional costs, the operating profit was #3.9m (2002: #5.4m).
Germany & Austria: The general economic environment in Germany remained
depressed throughout the first half of the year. We have, nevertheless, invested
in our operating and IT infrastructure, which, whilst essential for our
recovery, has been a further pressure on management and staff during an already
difficult period. With revenues declining by 2.5% to #13.8m (2002: #14.1m)
during the period, the operating loss, prior to exceptional costs, increased to
#2.2m (2002: #1.6m), although #0.2m of this increase was a direct consequence of
the strengthening of the Euro between the two reporting periods. The operating
loss after exceptional costs was #2.3m (2002: #1.6m). We do, however, take a
little encouragement from some recent stabilisation in hire rates after a number
of years of successive decline and there are early very tentative indications
that rates have even begun to harden in certain areas. Similarly, activity
levels, which although down in total on the same period last year, have shown a
recent trend improvement consistent with the normal seasonality of the business.
Austria's revenues have almost doubled year on year to #0.7m (2002: #0.4m) and
further progress should be made in the remainder of the year as the business
starts to maximise the opportunities that the current network of four depots
present.
Germany's IFO index of business confidence has now recorded four successive
months of improvement and there is some belief that the worst of the German
economic news is in the past. Whilst there is no tangible evidence of an
imminent upturn in these markets, if there is an increase in demand, coupled
with a strengthening in hire rates, the improved operational and management
infrastructure in the German and Austrian businesses will ensure we are well
placed to take advantage.
France and Spain: Our French business has grown its revenues by 54% to #2.4m
(2002: #1.6m) and reduced its operating loss to #0.3m (2002: #0.5m). The French
operation has now reached sufficient scale to enable it to operate profitably,
as activity levels increase further and as hire rates start to improve following
a substantial reduction in the French market capacity during the last six
months.
The Spanish business has increased revenues by 70% to #1.7m (2002: #1.0m) during
the period, but the drag effect associated with the expansion of both the fleet
and depots during the second half of 2002 reduced operating profits to #0.1m
(2002: #0.2m). However we expect these costs to be fully absorbed as revenues
increase further during the traditionally busier second half of the year.
Middle East: The region has continued the improving trend established towards
the end of 2002. Revenues have grown by 58% to #2.9m (2002: #1.9m), with
operating profits increasing to #0.9m (2002: #0.2m). Activity levels are
expected to improve further as a number of large scale projects are about to
commence across the region, and it is this robust demand for powered access that
should ensure that the excellent trading results delivered in the period are
continued throughout the second half of the year.
Outlook
Although conditions in our major markets remain difficult, we believe that the
powered access markets in which we operate will deliver long-term trend growth
considerably in excess of economic growth generally. This is primarily because
of an increasing shift away from traditional access products (scaffolding,
ladders and towers) in favour of powered access solutions which is clearly
demonstrated in the growth of our active customer base from 15,000 at the end of
1999 to over 32,000 today. Current US market penetration levels highlight the
European potential and give an interesting indication of the opportunity
available. The fleet population in the US is estimated to be around 0.5 million
units, which equates to 1,832 units per million of population. The machine fleet
in the UK - the largest of the European markets - is around 25,000 units, which
is just 424 units per million of population. Nevertheless, it is clear that
current economic circumstances have compounded to cause the market growth rate
to be close to zero. Our operational and financial gearing is presently biting
hard into the Group's financial performance, given the present tough economic
environment.
During these periods of reduced business confidence, much necessary work is
simply being deferred. When that backlog of deferred expenditure is eventually
released (repair and maintenance work cannot be deferred indefinitely), the
benefits to the Group will be substantial. Until then, we will remain focussed
on managing costs, securing operational improvements and reducing debt levels.
Given the present fragility of the main economies and market sectors in which we
operate, particularly Germany, which remains disappointingly subdued, and the
UK, where conditions continue to be difficult for many of our major user groups,
we remain cautious about prospects for the remainder of the year. However, we
have seen some increase in demand levels during the Summer but this will need to
be continued throughout the balance of the year, which includes our most
important trading months, to ensure that we meet our expectations for the year
as a whole.
David Price
Chairman
1 September 2003
Group profit and loss account
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December
2002
#000 #000 #000
-------------------------------------------------------------------------------------
Turnover - continuing
operations 50,049 47,547 103,033
Cost of sales (29,744) (27,772) (57,368)
-------------------------------------------------------------------------------------
Gross profit 20,305 19,775 45,665
Net operating expenses (17,762) (16,182) (33,661)
Exceptional items (254) - (1,199)
-------------------------------------------------------------------------------------
Net operating expenses (18,016) (16,182) (34,860)
-------------------------------------------------------------------------------------
Operating profit -
continuing operations 2,289 3,593 10,805
Investment income 13 4 8
-------------------------------------------------------------------------------------
Profit on ordinary
activities before interest 2,302 3,597 10,813
Interest payable (3,054) (2,966) (6,009)
-------------------------------------------------------------------------------------
(Loss) / profit on ordinary
activities before taxation (752) 631 4,804
Taxation on (loss) / profit
on ordinary activities 296 (184) (1,263)
-------------------------------------------------------------------------------------
(Loss) / profit on ordinary
activities after taxation (456) 447 3,541
Dividends (833) (833) (2,572)
-------------------------------------------------------------------------------------
(Loss) / profit retained
for the period (1,289) (386) 969
-------------------------------------------------------------------------------------
(Loss) / earnings per
ordinary share
- basic (1.23)p 1.21p 9.57p
- diluted (1.23)p 1.20p 9.55p
-------------------------------------------------------------------------------------
Statement of total recognised gains and losses for the period
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December
2002
#000 #000 #000
--------------------------------------------------------------------------------
(Loss) / profit on ordinary
activities after taxation (456) 447 3,541
Currency translation
differences 265 263 301
--------------------------------------------------------------------------------
Total recognised (losses) /
gains for the period (191) 710 3,842
--------------------------------------------------------------------------------
Reconciliation of movement in shareholders' funds
As at As at As at
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
------------------------------------------------------------------------------------
(Loss) / profit for the period (456) 447 3,541
Dividends (833) (833) (2,572)
Currency translation differences 265 263 301
------------------------------------------------------------------------------------
(1,024) (123) 1,270
Opening equity shareholders' funds 90,920 89,650 89,650
------------------------------------------------------------------------------------
Closing equity shareholders' funds 89,896 89,527 90,920
------------------------------------------------------------------------------------
Group balance sheet
As at As at As at
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
-------------------------------------------------------------------------------
Fixed assets
Intangible assets 909 981 957
Tangible assets 210,506 210,683 216,471
-------------------------------------------------------------------------------
211,415 211,664 217,428
Current assets
Stocks 913 852 886
Debtors 28,835 25,268 27,152
Cash at bank and in hand 3,009 2,171 2,916
-------------------------------------------------------------------------------
32,757 28,291 30,954
Creditors - amounts falling
due within one year (32,810) (29,806) (38,619)
-------------------------------------------------------------------------------
Net current liabilities (53) (1,515) (7,665)
-------------------------------------------------------------------------------
Total assets less current
liabilities 211,362 210,149 209,763
Creditors - amounts falling
due after more than one year (107,434) (107,595) (104,842)
Provisions for liabilities
and charges (14,032) (13,027) (14,001)
-------------------------------------------------------------------------------
Net assets 89,896 89,527 90,920
-------------------------------------------------------------------------------
Capital and reserves
Called up share capital 370 370 370
Share premium account 70,412 70,412 70,412
Capital redemption reserve 4 4 4
Profit and loss account 19,110 18,741 20,134
-------------------------------------------------------------------------------
Equity shareholders' funds 89,896 89,527 90,920
-------------------------------------------------------------------------------
The interim financial statements on pages 4 to 9 were approved by the Board of
Directors on 1 September 2003 and were signed on its behalf by:
David Price Alan Merrell
Chairman Finance Director
Group cash flow statement
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
------------------------------------------------------------------------------------
Net cash inflow from continuing
operating activities 15,127 13,452 28,811
Net cash outflow from returns on
investments and servicing of finance (2,946) (2,962) (5,814)
Taxation paid (416) (380) (280)
Net cash outflow from capital
expenditure and financial investment (3,138) (15,236) (18,869)
Equity dividends paid (1,739) (1,739) (2,572)
------------------------------------------------------------------------------------
Net cash inflow / (outflow)
before management of liquid
resources and financing 6,888 (6,865) 1,276
Net cash (outflow) / inflow from
financing (6,738) 6,810 (394)
------------------------------------------------------------------------------------
Increase / (decrease) in cash 150 (55) 882
------------------------------------------------------------------------------------
Reconciliation of operating profit to net cash inflow from continuing operating
activities
6 months ended 6 months ended Year ended
30 June 2003 30 June 2002 31 December 2002
#000 #000 #000
------------------------------------------------------------------------------------
Operating profit 2,289 3,593 10,805
Amortisation 90 67 132
Depreciation on tangible fixed assets 13,130 11,788 24,314
Gain on sale of tangible fixed assets (178) (341) (292)
Net decrease in working capital (204) (1,655) (6,148)
------------------------------------------------------------------------------------
Net cash inflow from continuing
operating activities 15,127 13,452 28,811
------------------------------------------------------------------------------------
Analysis of changes in net debt during the six months
At Currency At
1 January Other non translation 30 June
2003 Cash flows cash items differences 2003
#000 #000 #000 #000 #000
---------------------------------------------------------------------------------------
Cash at bank and in
hand 2,916 (44) - 137 3,009
Bank overdrafts (194) 194 - - -
---------------------------------------------------------------------------------------
2,722 150 - 137 3,009
Bank debt due after
one year (80,028) - - (4,285) (84,313)
Hire purchase and
finance lease
agreements (36,773) 6,738 (4,552) (776) (35,363)
---------------------------------------------------------------------------------------
(116,801) 6,738 (4,552) (5,061) (119,676)
---------------------------------------------------------------------------------------
Total net debt (114,079) 6,888 (4,552) (4,924) (116,667)
---------------------------------------------------------------------------------------
Notes to the interim financial statements
1. The interim financial statements set out on pages 4 to 9 do not comprise
statutory accounts for the purpose of section 240 of the Companies Act 1985.
2. Exceptional operating costs during the period are administrative costs and
comprise #254,000 in relation to costs incurred in restructuring the Group's
trading operations, primarily in respect of the German business and the
Group's Head Office.
3. The taxation charge for the six months to 30 June 2003 has been calculated
by applying the estimated tax rate for the current financial year ending 31
December 2003.
4. Earnings per share are calculated on the 37,003,383 ordinary shares in
issue for the six months to 30 June 2003 being the weighted average number
of ordinary shares in issue (6 months 2002: 37,003,383; full year 2002:
37,003,383).
Diluted earnings per share assume conversion of all dilutive potential
ordinary shares which arise from share options granted to employees where
the exercise price is less than the average market price of the Company's
ordinary share capital during the six months. The effect of this dilution is
to increase the weighted average number of ordinary shares to 37,041,400 (6
months 2002: 37,120,853; full year 2002: 37,080,025).
This dilution cannot be applied to a loss for the period and the stated
diluted earnings per share is hence equal to the basic earnings per share
for the current period.
5. A copy of this interim statement is being sent to all shareholders and
copies are available from the Company's registered office at 1 Midland
Court, Central Park, Lutterworth, Leicestershire, LE17 4PN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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