29th August 2008

Lavendon Group plc ("the Company" or the "Group")

Interim Results for the six months ended 30th June 2008

Lavendon Group plc, Europe's market leader in the rental of powered access equipment, today announces its Interim Results for the six months ended 30th June 2008.

Financial highlights

• Revenues £116.4m (2007: £83.3m), increase of 40%

• EBITDA £43.9m (2007: £27.4m), increase of 60% 

• Operating profit £18.4m (2007: £11.6m), increase of 59%

• Profit before tax £11.9m (2007: £8.3m), increase of 43%

• Earnings per share 20.36p (2007: 15.42p), increase of 32%

• Cash generated from operations £33.5m (2007: £24.2m), increase of 38%

• Interim dividend of 3.33 pence, increase of 21%

Operational highlights

• Good progress in the first half, with revenues, profits and EPS all increasing significantly

• Completed transformational acquisition of The Platform Company and integration programme under way in UK

• Increased scale of operating units producing improved EBITA margins in all territories

• Increasing EBITDA margins improving operating cash flows

• Restructuring completed in Germany and France

• Continued strong trading in Middle East supported by increased investment 

• Programme of equipment disposal, building on DK Rental expertise, producing encouraging results

John Gordon, Chairman, said:

"The Group has continued to make good progress in the first half, strengthening revenues, profits and operating margins.

"The acquisition of The Platform Company has strengthened our UK market position and is performing well as part of the Group. Our UK operations have experienced solid demand in the year so far, and our focus for the year is to continue to drive the cost and revenue synergies from our acquired businesses.  

"In our international markets, with the exception of Spain, we are seeing no marked change in demand levels, and there is currently little sign that our main markets are materially over-supplied with equipment. However we will continue to concentrate on the areas which we can influence; ensuring that integration cost synergies are maximised and operations are made more efficient in that process, whilst controlling and focusing our capital expenditure on our expanding Middle East business and other areas which offer the greatest growth opportunities.  

"Following the acquisition of The Platform Company we have been able to reduce our capital expenditure programme for the year by £20m and we remain comfortable with our levels of debt. The Group continues to trade in line with our expectations and looks forward to reporting further progress in the coming months."

For further information please contact:

 CHAIRMAN'S STATEMENT

Financial Overview

The Group has continued to make good progress in the six months ended 30 June 2008.

Revenues for the Group increased by 40% to £116.4 million (2007: £83.3 million), through a combination of organic growth and the acquisitions completed in 2007 and the first half of 2008. This revenue growth, together with enhanced operating margins, enabled operating profits, before amortisation of intangible assets, to increase by 71% to £20.7 million (2007: £12.1 million), with margins improving significantly to 17.8% (2007: 14.6%). After amortisation charges, operating profits increased by 59% to £18.4 million (2007: £11.6 million), with margins improving to 15.8% (2007: 13.9%).

Although net interest costs increased to £6.5 million (2007: £3.3 million) following the investment programme undertaken in the past 18 months, the Group's profit before tax increased by 43% to £11.9 million (2007: £8.3 million). Despite a 9% increase in the average number of shares in issue, earnings per share before amortisation increased by 52% to 25.40 pence (2007: 16.70 pence), and after amortisation increased by 32% to 20.36 pence (2007: 15.42 pence).

Earnings before interest, tax, depreciation and amortisation ("EBITDA") increased by 60% to £43.9 million (2007: £27.4 million), with margins improving significantly to 37.7% (2007: 32.9%). Cash generated from operations increased by 38% to £33.5 million (2007: £24.2 million), and after payment of interest and taxation charges, net cash generated from operating activities increased by 41% to £25.4 million (2007: £18.0 million).

Dividend

The directors are declaring an interim dividend of 3.33 pence, an increase of 21% over 2007 (2007: 2.75 pence). This will be paid on 17 October 2008 to shareholders on the register at the close of business on 12 September 2008.

Acquisitions and Investment

During the first half of the year, the Group acquired The Platform Company (Holdings) Limited ("The Platform Company") for a total consideration of £46.8 million, payable in a combination of cash and shares over three years. This acquisition has increased the scale of the Group's UK operation, enabling it to strengthen its market position, and provides considerable scope for cost synergies going forward. Since acquisition, The Platform Company has performed well and in line with our expectations.

This acquisition has also enabled the Group to reduce its capital expenditure programme for the current year by £20.0 million, and this is reflected in the Group's investment of £39.2 million in its rental fleet and infrastructure during the first half of the year (2007: £26.5 million), of which £24.9 million remains payable at 30 June 2008. This expenditure represents the majority of the Group's planned capital programme for the year, and consequently investment during the second half of the year will reduce to approximately £14.0 million.

As a result of the acquisition of The Platform Company and the investment in the maintenance and expansion of existing operations, together with an adverse foreign exchange movement of £10.1 million, the Group's net debt levels at the half year increased to £258.7 million from £185.7 million at the previous year end, with a corresponding debt to equity ratio of 190% compared to 156% at 31 December 2007. As anticipated, the Group's net debt to EBITDA ratio at the half year increased to 3.21 times compared to 2.90 times at the previous year end, although the pro-forma net debt to EBITDA ratio (assuming 12 months EBITDA contribution from both the DK Rental and The Platform Company acquisitions) was 2.49 times - this is a better indication of the underlying position as it provides a more accurate reflection of the Group's ongoing cash flows.

Business Review

UK 

The UK operation has benefited from solid demand levels in the first half of the year, but marginally below those experienced in 2007. The business has no direct exposure to the house-building sector and the outlook for major infrastructure projects is strong.

During April, we completed the acquisition of The Platform Company, a significant step in delivering our strategic aim of consolidating the UK powered access market. This business is now in the process of being merged with our existing UK business, Nationwide Access, to create a clear market leader in the sub-sector dealing with major projects and nationally operating customers. At the same time, the process of merging our acquired regional businesses (Panther, Kestrel, AMP and Higher Platforms) under the Panther identity is proceeding well and will be complete by the year-end. 

The merger of these national and regional businesses offers considerable scope for both cost and revenue synergies to be realised. These benefits are already starting to be seen in the enhanced operating margins earned in the period. For the balance of the year, our focus will continue to be on the delivery of additional synergies, whilst minimising the costs to secure these benefits, and to ensure that the overall business is streamlined, with a cost base that can adapt quickly to any changes in demand levels should the economic climate worsen.

Revenues for the first six months increased by 32% to £62.0 million (2007: £47.1 million), with like-for-like revenue growth difficult to estimate given the ongoing merger of a number of businesses. Operating profits, prior to amortisation charges, increased by 38% to £10.2 million (2007: £7.4 million), with operating margins improving to 16.5% (2007: 15.8%).  

Germany

Our two German businesses, which were of roughly equivalent size, were fully integrated at the start of the year, reducing our underlying cost base by around €3.5 million per year, but leading to some short-term loss of revenues. The more efficient cost base has enabled operating margins to improve in the period, and this increased operating leverage offers further scope for margin enhancement as revenues increase in the traditionally stronger second half of the year.

Euro revenues for the first half declined by 5%, however after adjusting for exchange rate variations, revenues in sterling grew by 9% to £24.7 million (2007: £22.7 million). These revenues combined with the reduced cost base allowed operating profits, prior to amortisation charges, to increase to £3.2 million (2007: £2.3 million), with operating margins improving to 13.2% (2007: 9.9%).

France and Belgium

The French and Belgian businesses, which have been run under common management since the acquisition of DK Rental at the end of 2007, have made good progress in the period. Our main focus has been to derive benefit from the increased scale of the business in France by consolidating depots (two of seven French depots have been closed in the period), whilst keeping central overhead costs under tight control.  

Revenues in the combined businesses have increased by 328% to £13.7 million (2007: £3.2 million) whilst operating profits, prior to amortisation charges, have improved to £2.8 million (2007: loss of £0.3 million), with an operating margin of 20.5% (2007: negative margin of 8.9%).

Spain

The Spanish market is showing signs of weakness as a slowing demand environment proves insufficient to absorb the substantial fleet additions made by a number of players over the last few years. Following the acquisition of DK Rental at the end of 2007, we have concentrated on creating larger individual operating units (we now operate from four locations, having exited Galicia in July 2008), and are in the process of removing surplus fleet through either disposal or transfer to other Group operations. These actions will provide greater positive operational leverage when market demand returns. 

With the acquisition of DK Rental, the revenues of the business increased by 169% to £7.0 million (2006: £2.6 million) and, despite a challenging market environment, operating profits increased to £1.4 million (2007: £0.4 million) with operating margins improving to 19.8% (2007: 17.5%).

Middle East

The scale of our Middle East business continues to increase as additional equipment, either from our own fleet or externally purchased, is delivered into the region. The outlook for longer-term projects remains robust, although there are signs that the UAE market is becoming more mature, with an increasing number of competitors in the area. However, our position in other parts of the region continues to strengthen, and it is these areas that are delivering the greatest revenue growth and offer the most significant future opportunities.

Revenues in the region grew by 14.0% to £9.0 million (2007: £7.9 million), with underlying rental revenues (excluding the less predictable and lower margin revenues from new equipment sales) increasing by 33%. The leverage from a well-controlled cost base, as well as the shift in revenue mix away from equipment sales in favour of rental, allowed us to increase operating profits by 30% to £3.0 million (2007: £2.3 million), and deliver a significantly improved operating margin of 33.8% (2007: 28.8%).

Summary and Outlook

Whilst we remain watchful of the current uncertain economic environment, the Group is presently seeing no marked change, with the exception of Spain, in market demand levels.

There is currently little sign that our main markets are materially over-supplied with equipment. All major equipment manufacturers are currently demonstrating a responsible approach and are reducing costs and capacity, whilst we, along with others, have taken appropriate steps to reduce new capacity coming into the market (cutting our own 2008 capital expenditure budget by £20 million and cancelling substantial orders placed by companies that we acquired). This measured approach to capacity addition should allow the underlying growth drivers behind powered access (safety, regulation, efficiency and convenience) to mitigate any downward economic pressures on demand.  

In the near term, we will continue to concentrate on the areas which we can influence: ensuring that integration cost synergies are maximised and operations are made more efficient in that process, whilst controlling and focusing our capital expenditure on our expanding Middle East business and other areas which offer the greatest growth opportunities. This approach, we believe, will demonstrate the resilience of our business model if the economic climate becomes less favourable.

Trading since the end of the first half-year is in line with our expectations and we look forward to reporting continued progress in the months ahead.

All of the Group's trading activities relate to continuing operations.

The Group has declared an interim dividend of 3.33 pence per ordinary share which will be paid on 17 October 2008.