26 February 2015

Lavendon Group plc

Preliminary Results

Full Year Results At Top End of Board's expectations

Lavendon Group plc ("the Group"), Europe and the Middle East's market leader in the rental of powered access equipment, today announces its preliminary results for the year ended 31 December 2014.

Notes

(i)         Underlying results stated before amortisation of intellectual property and intangibles recognised on acquisitions and also prior to exceptional items

(ii)         Underlying and statutory measures are the same

(iii)        Stated before the exceptional impairment charge made in the year

·              Rental revenues up 3% to £231.9m; strong UK, Middle East & France performance

·              Underlying operating profits increased by 11% to £39.3m

·              Underling operating margins up 110bps to 16%

·              Underlying PBT increased by 14% to £34.1m, after FX headwinds of c.£1.3m

·              Underlying EPS increased by 9% to 15.65p

·              Exceptional items of £11.1m; primarily a goodwill impairment charge of £8.8m in Belgium

·              Substantial capex programme funded from annual cash flows

·              Net debt reduced to £89.7m (2013: £97.0m); net debt/EBITDA 1.13x (2013: 1.27x)

·              ROCE up 130bps to 11.9% (2013: 10.6%) ahead of 11% WACC

·              Full year dividend up 30% to 4.60p reflecting strong financial performance

Don Kenny, Chief Executive of Lavendon Group plc said:

"The Group delivered a very good performance in 2014, producing results at the top end of our expectations. Our two key regions of the UK and Middle East performed strongly, driving the Group's ROCE ahead of its WACC for the first time since 2008. Moreover, these results were delivered despite significant exchange rate headwinds adversely impacting our overseas earnings. The dividend increase of 30% reflects these strong results and the Board's confidence in the Group's long term future." 

"As we move into 2015, our primary focus is to build on the momentum established during 2014 by adding scale to our business and enabling our inherent operating leverage to drive further improvements to the Group's profitability."

"Since the year end, further growth in the Middle East is offsetting the impact of a year on year revenue decline currently being seen in the UK. Our overall margins are continuing to improve such that the Board expects the Group to perform slightly ahead of its profit expectations for the year as a whole."

A meeting for investors and analysts will be held today at 10.30am at the offices of Canaccord Genuity Limited, 88 Wood Street, London EC2V 7QR.  A copy of the presentation and audio webcast will be available at www.lavendongroup.com later today.

For further information please contact:

Lavendon Group plc

Don Kenny, Group Chief Executive                                  Today T: +44(0) 203 727 1000

Alan Merrell, Group Finance Director                               Thereafter T: +44(0)1455 558 874

FTI Consulting

Jonathon Brill/ Alex Beagley                                             T: +44(0) 203 727 1000

Next Trading Update

The Group's next scheduled announcement of financial information will be its first quarter Interim Management Statement on 16^th April 2015.

Notes to Editors

Lavendon Group 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 Bahrain, Belgium, France, Germany, Kuwait, Oman, Qatar, Saudi Arabia, the United Kingdom and the United Arab Emirates. The equipment fleet totals almost 20,000 units and the Group employs over 1,650 people. 

CHAIRMAN'S STATEMENT

The Group's results for 2014 were at the top end of the Board's expectations.

The growth in our revenue has delivered improved profitability which, alongside self-funded investment, has driven the Group's return on capital employed (ROCE) ahead of our weighted average cost of capital (WACC) for the first time since the economic downturn in 2008 - an important strategic milestone for the Group.

Our performance in the year, in particular, reflects the actions taken to re-energise our UK business towards the end of 2013 and our strategic decision to continue to deploy additional capital into our Middle East operations. The strength of the improvement in performance of these two key regions in 2014 has more than compensated for the significant exchange rate headwinds on our overseas earnings.

The dividend increase of 30% reflects these strong results and the Board's confidence in the Group's long term future.

As in recent years, we completed another substantial fleet investment programme in 2014, adding capacity to our Middle East operations to meet growing demand while continuing to refresh our European rental fleet. The ability of the Group to increase the scale of its investment activity in order to strengthen and develop our market positions, without having to re-leverage our balance sheet, is a reflection of our robust financial position and our capability to generate strong operational cash flows. This was again demonstrated during the year, as the operational cash flows fully funded our investment programme and also enabled a further modest reduction to be made to the Group's net debt level.

During the year we reviewed our debt financing arrangements to ensure that they properly reflected the strengthened financial position of the Group. As a result, we have extended the maturity and reduced the cost of our bank facilities while also increasing the overall size of the facilities available. These facilities provide the Group with a medium to long term diversified financing package with significant liquidity to support the growth plans of the Group in the coming years.

Our strategic focus on developing our strong market positions with a differentiated service offering to drive both revenue growth and better margins is delivering the expected improvement in the Group's financial performance. We have underpinned our ability to maintain this momentum going forward by ensuring that additional capital is readily available to support both our immediate growth plans and to respond to attractive opportunities as they develop in the market place. We have also strengthened the breadth and depth of our management teams, particularly in the UK and the Middle East, and substantially completed the roll out of the Group's standardised IT platform.

We are confident the continued delivery of revenue growth, combined with our improved operational efficiency established in recent years, will generate substantial shareholder value in the medium term.

Return on Capital Employed

The Group's ROCE for the year was 11.9%, a marked improvement over the 10.6% reported for 2013.

The calculation of ROCE is based on the Group's operating profit before exceptional items and the average of the opening and closing capital employed for the year of £313.7 million (2013: £300.8 million). The ROCE of 11.9% is stated on a like for like basis with the prior year, and therefore ignores this year's favourable impact on the Group's capital employed arising from the impairment of the carrying value of the goodwill in the Group's Belgian business. The impact of this impairment reduces the Group's capital employed and increases the reported ROCE for 2014 to 12.1% (2013: 10.6%).

Dividend

Given the Group's strong financial performance and cash flows in the year, the Board is proposing a final dividend of 3.20 pence per share, making the total dividend for the year 4.60 pence, an increase of 30% over the previous year (2013: a total dividend of 3.55 pence). The final dividend, if approved, will be paid on 23 April 2015 to shareholders on the register at the close of business on 6 March 2015.

The proposed increase in the dividend not only reflects the financial performance of the Group in the year but also the Board's confidence in the Group's future and the continued recognition that dividends are an important means of delivering shareholder value.

Dividend cover, based on the proposed total dividend for 2014 and underlying earnings per share, has reduced to 3.4 times (2013: 4.0 times) in line with our stated intention to maintain dividend distributions within a range that is covered three to four times by earnings. The actual dividend cover in any one year will be balanced against the Group's investment needs and funding requirements as we move through the business cycle.

Financial Results

Group total revenues increased by 7% to £253.1 million at constant currency rates (2013: £237.5 million), with rental revenues increasing by 6% to £238.3 million on the same basis (2013: £225.3 million). At actual exchange rates, total revenues and rental revenues increased by 4% and 3% to £246.3 million and £231.9 million respectively.

This revenue growth, combined with our improved operational efficiency, increased the Group's underlying operating profits by 15% to £40.6 million (2013: £35.3 million) at constant currencies, with margins improving to 16% (2013: 15%). At actual exchange rates, underlying operating profits increased by 11% to £39.3 million, with margins improving to 16%. This improved performance has been delivered despite the impact of year on year foreign exchange rate movements that have reduced the Group's underlying operating profits by c.£1.3 million in 2014.

The improved trading performance and a marginal reduction in the Group's net interest costs to £5.2 million (2013: £5.3 million) enabled the Group's underlying profit before tax to increase by 18% to £35.3 million (2013: £30.0 million) at constant currencies. At actual exchange rates, the Group's underlying profit before tax increased by 14% to £34.1 million.

Although the Group's underlying effective tax rate increased to 23% (2013: 20%), underlying profit after tax increased by 13% to £27.3 million (2013: £24.1 million) and earnings per share increased by 12% to 16.21 pence per share (2013: 14.42 pence) at constant currencies. At actual exchange rates, the Group's underlying profit after tax and earnings per share increased to £26.4 million and 15.65 pence per share respectively.

Amortisation* charges for the year were £2.0 million (2013: £3.3 million) and exceptional items totalled £11.1 million (2013: £3.3 million). The exceptional items relate to an £8.8 million non-cash impairment charge on the carrying value of the goodwill associated with the Group's Belgian business, a non-cash provision of £1.3 million to cover the closure costs of the Group's Indian operation and fees of £1.0 million associated with the Group's refinancing of its bank facilities in August 2014.

After amortisation* charges and exceptional items, the Group's operating profits were £27.2 million (2013: £28.7 million), profit before tax was £21.0 million (2013: £23.4 million) and profit after tax was £13.9 million (2013: £19.1 million), with earnings per share of 8.23 pence per share (2013: 11.41 pence).

* Amortisation of intellectual property and intangibles recognised on acquisitions

Review of financial performance by region

A summary of the revenues and underlying operating profit by each business unit is given below:-

All figures shown in the above table are before amortisation of intellectual property and intangibles recognised on acquisitions and also prior to exceptional items. Revenues are total revenues including rental revenue and revenue derived from the sale of new and ex-rental fleet equipment.

We have structured the Group so that each country business unit is viewed as a separate profit centre within the combined geographic region, supported by central Group service functions. Each business unit or region has its own management team responsible for delivering agreed performance targets.

The performance of each region in the year is described below with all financial figures being underlying trading stated before amortisation charges and exceptional items. Where revenues and revenue growth percentages are given, they relate to rental revenues only and exclude revenues derived from the sale of new and ex-rental fleet equipment. For the Group's overseas operations, figures are quoted in local currencies, unless otherwise stated, to remove the impact of movements in foreign exchange rates and ensure a like for like comparison with the previous year (for the Middle East, the US dollar has been used as a proxy for the basket of Middle East currencies). The split of revenues by country between rental revenues and revenues from the sale of new and ex-rental fleet equipment is given in 'Segmental Analysis'.

UK (48% of Group rental revenues)

The UK performed strongly in the year with rental revenues increasing by 7% to £111.1 million (2013: £103.4 million). This revenue growth, delivered from a more efficient cost base, drove a 24% increase in operating profits to £20.4 million (2013: £16.5 million), with margins improving to 17.0% (2013: 15.0%).

The strength of the revenue growth in the year reflects the combined effects of a c.6% year on year pricing improvement and a more favourable mix of fleet on hire that more than absorbed the expected marginal decline in volumes seen in the year. As previously reported, the decline in volumes over the prior year is a reflection of the shift in the mix of fleet on hire, away from smaller units with a lower average hire rate towards larger construction orientated machines that produce higher average revenues per hire. The influence of the change in fleet mix was most prevalent during the second half of the year, although it is expected to diminish as the business moves through the first half of 2015.

The results for 2014 reflect actions towards the end of 2013, to restructure the business to better align our sales processes with our customers and to place greater emphasis on our differentiated service offering. We strengthened the UK management team as we moved into 2014 to re-energise the business and support the delivery of our revenue growth targets. During the year, the operational leverage derived from our strong revenue growth was enhanced by securing further efficiencies through better procurement processes. The process of identifying opportunities to deliver a more efficient service or cost structure continues to be an area of managerial focus, illustrated by our recent decision to outsource the UK's transport function to a third party provider in order to improve our service to customers. As in recent years, the UK's fleet replacement programme continued with a further 9% of the rental fleet being refreshed during the year, thereby improving the fleet mix and our capacity to generate increased revenues.

The combination of a well invested fleet and a customer service offering that goes beyond that of pure rental of equipment is underpinning our strong market position, ensuring the UK business is well placed to make further progress in the coming year.

Middle East (21% of Group rental revenues)

Our Middle East region performed very strongly in the year, delivering a 15% growth in rental revenues to $79.5 million (2013: $69.1 million) and increasing operating profits to $25.9 million (2013: $21.9 million) with margins improving to 31.7% (2013: 30.7%). On conversion to Sterling, rental revenues increased by 9% to £48.2 million (2013: £44.1 million) and operating profits were £15.7 million (2013: £14.0 million).

This strong performance has been mainly volume driven although some further modest pricing improvement was secured across the year, particularly in our main market of Saudi Arabia. We continued to expand our rental fleet, adding c.400 units during the year, in order to support our revenue growth plans and further strengthen our market leading position in the region.

Whilst the decline in the oil price over the last 12 months may temper the pace of investment in oil and gas related projects in the region going forward, we are not currently experiencing any direct impact on our activity levels. The main sectors in the region driving current demand for our equipment are the infrastructure and non-oil and gas related construction markets. Several key long term projects in these markets are already underway and will progress through 2015, offering a degree of resilience against any oil price pressures. Whilst we are planning to allocate additional capital into the region in the coming year, this will continue to be done in a controlled manner to ensure we retain flexibility and are able to respond accordingly to changes in market conditions should they occur.

As a Group we have operated in the region since 1996, developing the business organically over the past 18 years, and we firmly believe that the outlook for the Middle East region remains very encouraging. We have strengthened our management team and infrastructure during the year to underpin our short and medium term growth plans, ensuring we are well placed to benefit from the continuing opportunities as they emerge across the region.

In order to concentrate our resources on delivering the potential available in the Gulf States, the Board has decided to close our Indian operation. The closure costs are estimated at £1.3 million and have been provided as an exceptional charge in 2014.

Continental Europe (31% of Group rental revenues)

Against generally difficult market conditions, our overall rental revenues in the region declined in the year by 2% to €90.0 million (2013: €91.6 million), with the strong revenue growth in France proving insufficient to absorb the revenue declines seen in Belgium and Germany. Operating profits for the region were €11.3 million (2013: €11.8m) with operating margins at 11.9% (2013: 12.3%). The decline in overall profitability was due to the trading performance in Belgium which more than offset the improved profitability reported in France and Germany. It is notable that the profitability of our German business improved despite the decline in revenues and that reflects the establishment of a more efficient cost base from which better margins are now being generated.

On conversion to Sterling, Continental Europe's rental revenues declined by 7% to £72.6 million (2013: £77.8 million) and operating profits were £9.1 million (2013: £10.1 million).

The individual performances of the countries within our Continental Europe region are discussed below:

Germany

German rental revenues for the year declined by 3% overall to €48.5 million (2013: €50.0 million) although revenues returned to year on year growth in the final quarter of 3%. Despite the revenue decline in the year, by tightly controlling the cost base, particularly reducing the reliance on rehiring equipment from third parties, the business improved its operating leverage and delivered an operating profit of €4.8 million (2013: €4.5 million) with a margin of 9.4% (2013: 8.5%). On conversion to Sterling, rental revenues declined by 8% to £39.1million (2013: £42.5 million) and operating profits were stable at £3.8 million (2013: £3.8 million).

Market conditions remained competitive throughout the year, leading to overall volume and pricing declines of almost 2% and 4% respectively mitigated in part by a more favourable mix of fleet on hire. It is encouraging that in the final quarter of the year, both volumes and pricing returned to year on year growth, albeit against relatively weak comparators.

In the second half of the year, the business was reorganised into local reporting units, so that a more focused approach to customer service and asset management could be adopted. There are early signs that this revised organisational structure is proving more effective, supporting our drive to increase market share and revenues in order to leverage our more efficient cost base and so deliver a better financial performance.

France

Our French business grew strongly across the year with rental revenues increasing by 8% to €27.4 million (2013: €25.3 million).

The revenue performance was principally driven by growth in volumes across the first half and modest pricing improvements secured in the second half of the year. Our success in growing our revenue base over recent years strengthens our belief that we are continuing to build local share in a market that is yet to show any signs of a sustained recovery.

During the year, management successfully implemented the Group's standard IT platform, and continued to invest in additional resources to support the business' ability to secure and service revenue growth. Whilst this increase in the cost structure of the business has no doubt constrained margins to a degree in the short term, the strong revenue growth that this investment supports has enabled operating profits in the year to increase to €4.3 million (2013: €3.8 million) with margins improving to 15.1% (2013: 14.5%).

We intend to continue to provide additional capital to our French business to ensure that it is well positioned to achieve both its growth ambitions in 2015 and ultimately to benefit from any future recovery in market conditions.

On conversion to Sterling, rental revenues increased by 3% to £22.1million (2013: £21.5 million) and operating profits were £3.5 million (2013: £3.2 million).

Belgium

Belgian rental revenues declined by 13% in the year to €14.1 million (2013: €16.2 million), reflecting a year on year volume decline following the completion of a major project in the first quarter of the year, where activity on that project was at its peak in 2013. 

The difficult trading conditions seen in recent years continued through 2014, with pricing pressures influencing competitive behaviour. Our business saw pricing reduce by c.5% in the year albeit on an improving trend as the year progressed. In response to this market environment, we have actively managed both the fleet size, reducing it by c.15% across the year, and the operational cost base.

Despite the actions taken by management in the year to mitigate the impact of the revenue decline, operating profits reduced to €2.2 million (2013: €3.6 million) with margins declining sharply to 14.3% (2013: 19.7%). On conversion to Sterling, rental revenues declined by 17% to £11.4 million (2013: £13.8 million) and operating profits were £1.8 million (2013: £3.0 million).

Given this weaker trading performance, the Group's carrying value of the goodwill associated with the Belgium business has been reviewed for impairment at the year end and, as a consequence, an exceptional impairment charge of €11.0 million has been made in 2014.

Cash Flow

Underlying earnings before interest, tax, depreciation and amortisation ("EBITDA") increased by 8% to £82.1 million (2013: £76.2 million) at constant currencies with margins at 32% (2013: 32%). At actual exchange rates, EBITDA for the year increased to £79.6 million.

The Group's cash generated from operations improved to £26.8 million (2013: £25.5 million) despite the increased net cash outflow relating to the purchase and sale of rental fleet assets of £41.6 million (2013: £39.9 million). Net cash generated from operating activities, after payment of interest and tax, increased to £13.6 million (2013: £12.3 million).

Investment

In 2014, and as planned, the Group increased the level of investment in its rental fleet and operational infrastructure to £64.7 million (2013: £55.1 million). As in previous years, this was partly funded by the disposal of surplus or retired assets which generated £11.6 million in the year (2013: £10.5 million). After reflecting movements in amounts owing to equipment suppliers at the beginning and end of the year, this investment programme resulted in a net cash outflow for the year of £45.6 million (2013: £44.9 million) which was again fully funded from our operating cash flows. This ability to self-fund our investment programme demonstrates the extent of the Group's cash generation capabilities.

Due to the timing of fleet deliveries in the second half of the year, amounts owing to equipment suppliers at the end of 2014 showed a year on year increase of £7.5 million. This had a favourable impact on the Group's net debt level at the year end which will unwind during the first quarter of 2015.

Our investment programme has principally been directed towards replacing approximately 7% of the Group's rental fleet and adding further capacity to our Middle East operations to meet the continued growth in demand that we see in the region. Over the past three years, some 29% of the Group's rental fleet has been refreshed, ensuring that it remains well invested and highly competitive to support our strong market positions.

Refinancing

In August 2014 we refinanced the Group's existing bank facilities, originally scheduled to be renewed in July 2016, and extended them to July 2019 at a lower margin cost. In addition, the Group also issued two new loan notes on the US Private Placement market with a total value of €35 million. Following the refinancing, the Group's debt facilities total c.£175 million and comprise revolving bank facilities of £50 million and €60 million together with US Private Placements with a combined value of €95 million (being loan notes of €60 million, €17.5 million and €17.5 million maturing in July 2019, August 2021 and August 2024 respectively). These new debt facilities provide additional liquidity headroom of c.£28 million over the Group's previous funding structure.

Net Debt

With our strong operating cash flows being more than sufficient to fund the capital expenditure programme undertaken during the year, together with a favourable foreign exchange movement of £5.0 million on our Euro-denominated debt, the Group's net debt level at the year end reduced by £7.1 million to £90.6 million (2013: £97.7 million). Adjusting for the unamortised costs of £0.9 million relating to the Group's US Private Placements, the Group's reported net debt at 31 December 2014 was £89.7 million (2013: £97.0 million). The corresponding debt to equity ratio improved to 41% (2013: 46%) and our net debt to pre-exceptional EBITDA ratio reduced to 1.13 times (1.27 times). The Group continues to operate comfortably within our preferred leverage range of between 1.00 - 1.75 times EBITDA.

Board Changes

As previously reported, Jan Åstrand, who had been the Group's Senior Independent Director and Chairman of our Remuneration Committee since 2010, resigned from the Board with effect from 26 February 2014. Andrew Wood became the Group's Senior Independent Director with effect from the same date.

With effect from 1 March 2014, John Coghlan and John Wyatt were appointed to the Board as Non-Executive Directors, with John Coghlan becoming Chairman of the Group's Remuneration Committee.

Summary and Outlook

The Group has delivered a strong underlying performance in 2014, at the top end of the Board's expectations, with revenues, profits, margins and ROCE all increasing year on year. This progress has been delivered despite significant exchange rate headwinds of c.£1.3 million on our overseas earnings, clearly demonstrating the strength of the Group's overall financial performance in the year.

During 2014 we have seen particularly strong results from our key UK and Middle East regions; the major factors in driving the Group's ROCE ahead of our WACC for the first time since 2008. The achievement of this important strategic milestone demonstrates the clear progress that has been delivered in recent years towards our goal of maintaining the Group's average ROCE above its WACC over the business cycle.

The Group's investment programme in the year was primarily directed towards the continued refreshment of the Group's rental fleet and adding further revenue generating capacity to our Middle East operations to support the growth in demand that we are continuing to see in this region.

As we move into 2015, we are planning a net capital expenditure programme of c.£55 million, slightly ahead of that in 2014, and again directed towards the continued refreshment of our fleet and the further expansion of our Middle East operations. The Group's capability to generate strong operating cash flows, together with our robust balance sheet and increased debt facilities, provide the necessary flexibility for us to accelerate the scale and pace of this investment should attractive growth opportunities emerge or the conditions in our markets warrant the deployment of additional capital as the year progresses.

The Group's financial performance has benefited from revenue growth which, given our efficient cost base, has driven our improved profitability. The efficiency created within our cost structure in recent years is reflected within our employee base, where a 6% growth in employees since 2010 has delivered a 17% growth in revenues and driven a 63% growth in our operating profits. Our focus is to build on this momentum, add scale to the business, and continue the disciplined management of our processes to enable our inherent operating leverage to deliver attractive incremental margins and underpin the performance of the Group in the coming years.

Since the year end, further growth in the Middle East is offsetting the impact of a year on year revenue decline currently being seen in the UK. Our overall margins are continuing to improve such that the Board expects the Group to perform slightly ahead of its profit expectations for the year as a whole.

John Standen

Chairman

26 February 2015

(i) Non-underlying is defined as amortisation of intellectual property and intangibles recognised on acquisitions and exceptional items.

Group statement of comprehensive income

for the year ended 31 December 2014

Group statement of changes in equity

for the year ended 31 December 2014

During the year £7,000 (2013: £27,000) was debited from retained earnings, representing the nominal value of shares issued following the vesting of the 2011 Long Term Incentive Plan in the period.   

Group statement of changes in equity

for the year ended 31 December 2013

Notes

With the exception of long term borrowings before deferred issue costs, the carrying value of the Group's financial instruments are considered to be materially consistent with their carrying value. Long term borrowings has a carrying value of £106,926,000 (2013: £114,868,000) and a fair value of £116,626,000 (2013: £121,447,000).

2. Segmental analysis

The internal reporting arrangements for Lavendon Group plc comprises of five operating segments based on the geographical locations of the UK, the Middle East, Germany, France and Belgium and one non operating Corporate cost centre. The Corporate cost centre comprises the Group directorate, statutory compliance and Group functions and holds the Group's bank borrowing facilities.

The Group's chief operating decision maker ("CODM") is the Group Board. The Group Board reviews the Group's internal reporting in order to monitor and assess performance of the operating segments for the purpose of making decisions about allocation of resources. Performance is evaluated based on actual results compared to agreed targets and performance in prior periods.

Note: Inter segment trading has been eliminated in the analysis presented above, so that only trading between the Group and external third parties is represented.

Included within the Middle East is external revenue of £29,141,000 (2013: 23,229,000) generated in Saudi Arabia.

* Exceptional finance expense relates to Corporate items.

Note: Inter segment trading has been eliminated in the analysis presented above, so that only trading between the Group and external third parties is represented.

3. Exceptional items and amortisation

Exceptional items and amortisation incurred during the year are set out below:

Notes

 (i) For the current year, exceptional operating expenses relate to the closure of the Group's operations in India and is primarily made up of provisions against fixed assets and receivables. For the previous year, the costs principally related to the completion of the restructuring exercise in Germany mainly involving depot closure and redundancy costs.

(ii) Exceptional impairment costs relate to the impairment of the carrying value of goodwill associated with the Group's Belgian business.

(iii) Fees incurred on bank refinancing.

4.  Earnings per share

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

Earnings per share are calculated on the 168,556,682 weighted average number of ordinary shares in issue for the year ended 31 December 2014 (year ended 31 December 2013: 167,014,501).

Diluted earnings per share assumes conversion of all potential dilutive ordinary shares which arise from share incentive scheme awards granted to employees, where the exercise price is less than the average market price of the Company's ordinary share capital during the year. The effect of this dilution is to increase the weighted average number of ordinary shares to 169,729,849 (year ended 31 December 2013: 168,158,046).

Underlying earnings per share is presented to exclude the impact of amortisation charges and exceptional items in the year and their associated tax effect. The directors believe that underlying earnings per share provides additional relevant information about underlying business performance.

5. Dividend

The directors are proposing a final dividend in respect of the financial year ended 31 December 2014 of 3.20 pence per ordinary share which will distribute an estimated £5,406,000 of shareholders' funds. It will be paid on 23 April 2015 to those shareholders who are on the register at 6 March 2015 subject to approval at the Company's Annual General Meeting.

6.  Taxation on profit

Analysis of taxation charge for the year:

The taxation charge on the underlying profit is £7,704,000, (2013: £5,936,000). The taxation credit on amortisation of intellectual property and intangibles recognised on acquisitions is £598,000 (2013: £1,570,000).

In addition to the amount of taxation charged to the income statement, net tax of £159,000 (2013: £55,000) was credited directly to reserves in respect of share based payments. This comprises a current tax credit of £191,000 (2013: £608,000) in respect of options exercised during the year and a deferred tax charge of £32,000 (2013: £553,000) representing the reduction (2013: reduction) in the deferred tax asset held in respect of share based payments.

Following a review of the potential for profit distributions from the Group's overseas subsidiaries, a deferred tax provision of £636,000 (2013: £nil) has been made in the financial statements for withholding tax liabilities that may arise upon any future distributions of profit to the United Kingdom from overseas subsidiaries.

Reconciliation of taxation

The tax charge for the year is higher (2013: lower) than the standard rate of corporation tax in the UK of 21.50% (2013: 23.25%). The differences are explained below:

The standard rate of corporation tax in the UK changed from 23% to 21% from 1 April 2014. Accordingly, the standard rate of corporation tax applied to the Group's UK profits for the accounting period is 21.50%.

The standard rate of corporation tax in the UK will be further reduced to 20% with effect from 1 April 2015. This change was substantively enacted on 2 July 2013 and is therefore reflected in deferred tax balances in the financial statements for the current and previous years.

7.  Property, plant and equipment

for the year ended 31 December 2014

for the year ended 31 December 2013

8. Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2014 or 2013 but is derived from those accounts. Statutory accounts for 2013 have been delivered to the Registrar of Companies, and those for 2014 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2014 or 2013.

The Group financial statements have been prepared in accordance with EU endorsed International Financial Reporting Standards ("IFRS's") and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Group financial statements have been prepared, on a going concern basis, on a consistent basis, under the historical cost convention as modified by financial assets and liabilities (including derivative instruments) at fair value through the profit or loss.

The Group has included the disclosures required by these standards and amendments in the financial statements.

9. Annual General Meeting

The Annual General Meeting of Lavendon Group plc will be held at FTI Consulting, 200 Aldersgate, Aldersgate Street, London EC18 4HD on 16 April 2015 at 11.30am.