TIDMLVD
RNS Number : 1290E
Lavendon Group PLC
14 July 2016
14 July 2016
Lavendon Group plc
First Half Trading Update 2016
Encouraging First Half Performance - Strong Revenue Growth In
Key Markets
Lavendon Group plc ("Lavendon" or the "Group"), the market
leader in the rental of powered access equipment in Europe and the
Middle East, today issues the following Trading Update for the six
months to 30 June 2016:
Summary
-- Board remains confident of delivering its expectations for the full year
-- Group total revenue for the first half increased by 11%, with rental revenues up 9%
-- UK rental revenues increased by 7%
-- Middle East rental revenues increased by 22%
-- Continental Europe rental revenues increased by 3%
-- Short-term impact on margins from investment expected to unwind over second half
-- German restructuring continues on track to be fully operational during Q4
The Group's total revenue for the six months ended 30 June 2016,
on a constant currency basis and excluding ex-fleet equipment
sales, increased by 11% compared with the prior year, with rental
revenues increasing by 9%. Based on actual exchange rates, the
Group's total revenue (excluding ex-fleet equipment sales)
increased by 15% with rental revenues increasing by 13% over the
first half.
In the UK (44% of total Group rental revenues), market share
gains drove strong volume growth that generated a 7% year on year
increase in rental revenues in the first half (8% in Q2). This
increased rate of revenue growth reflects the benefits of the
additional strategic investment made in 2015 to improve the scale
and mix of the fleet, together with better fleet availability
through the increased efficiency of our transport and maintenance
operations. During Q2, we also increased the level of investment in
the UK above that originally planned for 2016 by an additional GBP7
million, adding capacity on selected high demand units. While the
cost of these investment decisions has tempered margin progression
in the first half, we expect these costs to be fully absorbed over
the balance of the year and for the UK business to deliver another
year of margin improvement.
Our Middle East business (29% of total Group rental revenues)
has continued to deliver significant revenue growth, with increased
utilisation of an enlarged fleet delivering 22% year on year growth
in rental revenue across the first half (23% in Q2). Revenue growth
from our operations in the UAE, Kuwait, Oman and Qatar has
continued to more than absorb a decline in our higher margin Saudi
Arabian business. As previously reported, we have moderated our
planned investment in 2016 for the region, compared to recent
years, and this is being directed towards those markets
demonstrating strong growth. Given this more modest investment
spend and a broadly stable working capital profile, we expect to
increase the level of free cash generated from the region during
the year.
Rental revenues in Continental Europe (27% of total Group rental
revenues) increased by 3% year on year in the first half (3% in
Q2), with continued volume growth driving revenues higher in France
(+10%) and Belgium (+2%) which more than offset a weaker
performance in Germany (-2%). The previously announced programme to
restructure our German business continues to progress as planned
and is on track to be fully operational during the fourth quarter
of this year
In summary, the Group has delivered strong rental revenue growth
in the first half reflecting the benefits of the investment in
additional fleet and operational processes to improve fleet
availability. While the cost of these investments has constrained
our operating margins in the first half, our overall profitability
has continued to improve and we expect these investment costs to be
fully absorbed over the second half of the year. The Group's ROCE
remains firmly above its weighted average cost of capital
notwithstanding the increase in the Group's capital employed as we
expanded the fleet and our self-funded fleet replacement programme
continues.
During the first half, exceptional costs of c.GBP2.5m have been
incurred relating to the restructuring programme in Germany and the
re-integration of the previously out-sourced UK transportation
function.
As expected the Group's net debt level at 30 June 2016 increased
to GBP138 million, on a constant currency basis, relative to GBP119
million at the 31 December 2015. At actual exchange rates, the
Group's reported net debt position at 30 June 2016 was GBP150
million reflecting Sterling's relative weakness against the Euro
and US dollar at the half year following the UK's vote to leave the
European Union (EU). With the Group's strong operational cash flows
and planned investment programme for 2016, the Group continues to
operate comfortably within our previously stated target leverage
range of up to 1.75 times EBITDA.
While it is too early to fully assess the wider economic
implications of the UK's decision to leave the EU, we recognise the
increased uncertainty in the macroeconomic outlook. We do however
believe the Group remains well positioned, with over 50% of its
revenues, profits and cash flows being derived from outside the UK.
Should there be a pro-longed period of Sterling weakness, the
Group's reported results would benefit from the translational
impact on its overseas earnings which offers some mitigation should
there be any adverse economic consequences on the Group arising
from the UK's decision.
Don Kenny, Chief Executive of Lavendon, commented:
"The Group's trading performance in the first half has seen the
delivery of strong revenue growth building on the momentum
established towards the end of 2015. This growth reflects the
benefits of our strategic investment programme in 2015 to
strengthen our market positions in all regions, and the continued
operational improvements made during the first half to support the
delivery of our growth plans.
Given the encouraging trading performance in the first half,
together with the degree of resilience provided by our
international operations, the Board remains confident of making
further progress during the year and delivering on its expectations
for 2016."
Ends
Conference call
A conference call will be held for analysts at 8.00am (UK time)
today (14 July 2016), the details of which can be obtained from FTI
Consulting. A replay of the call will be available on the company's
website after the event at www.lavendongroup.com.
Next Update
Lavendon will release its Interim Accounts for the six months
ended 30 June 2016 on Friday 26 August 2016.
For further information, please contact:
Lavendon
Don Kenny, Chief Executive Today T: +44 (0)203
727 1000
Alan Merrell, Group Finance Director Thereafter
T: +44 (0)1455 206 736
FTI Consulting
Jonathon Brill T: +44 (0)203 727 1000
Adam Cubbage
James Styles
Notes to Editors
Lavendon is the European and Middle East market leader in the
rental of powered access equipment. The quality and diversity of
its hire fleet, coupled with the professionalism and accessibility
of its depot network, provides an exceptional product range for
customers.
Powered access equipment is designed to enable people to work
safely, productively and comfortably at height. It can be used in a
comprehensive range of applications, both inside and outside
buildings and structures.
The Group has operations in the United Kingdom, Germany,
Belgium, France, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the
United Arab Emirates. The equipment rental fleet totals c.21,000
units and the Group employs c.1,900 people.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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