Lavendon says demand holding up and manufacturers being 'responsible'
By Murray Pollok29 August 2008
The company - Europe's largest renter of aerial platforms - said it "remained watchful" of economic conditions and praised manufacturers for not oversupplying the market; "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". Lavendon Group's fleet investment this year of around £53 million will be £20 million less than in 2007.
The company's chairman, John Gordon, said Lavendon had made good progress in the first six months of the year, with the acquisition of The Platform Company strengthening its UK operation and performing well; "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."
Mr Gordon said Lavendon's lower investment, and the fact that manufacturers were cutting production, "should allow the underlying growth drivers behind powered access (safety, regulation, efficiency and convenience) to mitigate any downward economic pressures on demand."
Revenues for the six months increased by 40% to £116.4 million, through a combination of organic growth and acquisitions, with operating profits increasing by 71% to £20.7 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 60% to £43.9 million.
Lavendon said Spain showed "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." The company now operates from four large depots, having closed the Galicia depot in July this summer. The company is removing surplus fleet through disposal or transfer to other operations. Revenues increased by 169% to £7.0 million - after acquisitions - and operating profits increased to £1.4 million from £0.4 million.
In the UK, revenues grew 32% to £62 million - boosted by the Platform Company acquisition - and benefitted 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."
Revenues fell by 5% in Germany, to £24.7 million, although after adjusted for currency changes revenues grew by 9%. The fall was the result of the integration of Lavendon's two businesses in Germany - the former Zooom and Gardemann - which, however, cut annual costs by €3.5 million and helped boost operating profits to £3.2 million from £2.3 million last year.
At Lavendon's French and Belgian business, revenues more than trebled to £13.7 million (largely as a result of the DK Rental acquisition) and operating profits were £2.8 million after a £0.3 million loss in 2007. The integration of the Lavendon and DK Rentals businesses resulted in the closure of two of seven depots in the period.
The Middle East remains one of Lavendon's fastest expanding areas in terms of organic growth, with revenues in the period up 14% to £9.0 million. "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", said the company, "However, our position in other parts of the region [including Saudi Arabia] continues to strengthen, and it is these areas that are delivering the greatest revenue growth and offer the most significant future opportunities."