14.07.2016

Lavendon upbeat

UK based international rental company Lavendon, has issued a preliminary trading statement, and reported a strong pick up in rental revenues for the first half year, to the end of June.

In the UK rental revenues were seven percent higher, with a slightly stronger pick up in the second quarter, due to the heavy investment at the end of last year and, according to the company, due to more efficient transport and maintenance. This follows the company bringing machine deliveries back in house, following an earlier outsourcing move.

In the Middle East Rapid posted further substantial growth, with revenues 22 percent higher compared to the same period last year.
Solid growth in the UAE, Kuwait, Oman and Qatar where the fleets have been expanded, was partially offset by a decline in the higher margin Saudi Arabian business.

In Continental Europe rental revenues increased by three percent with 10 percent growth in France and two percent in Belgium offset by a two percent fall in Germany. The restructuring of the Gardemann operation continues and is due to be fully completed by the end of the year. The costs of this restructuring along with the cost of bringing the UK transport operation back in house will result in a £2.5 million charge to the 2016 accounts.

Net debt has increased from £119 million at the start of the year to £138 million at the half way point. Although given that a part of this is held in Euros and dollars, the debt will be closer to £150 million when the current weakness of Sterling is taken into consideration. However the currency weakness will have a positive impact on overseas revenues and profits.

Chief executive Don Kenny said: "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."

Vertikal Comment

Overall this is a very positive report from Lavendon, it claims to have gained market share in the UK, if so it is probably more accurate to say that it has recaptured some of the business it lost in the past year or two. Certainly axing the failed attempt to outsource all deliveries is paying off. In the Middle East the team continue to excel, its performance is even more impressive than the numbers suggest, given the challenges in Saudi Arabian market and the effect of the lower oil price.

France is clearly on a roll to the point where it is consistently defying the overall market, the business seems to be in a really good place now and should continue at similar levels into next year. The DK operation in Belgium looks to have fully stabilised and is set to grow again. The big question is Germany. Will the latest restructuring and new leadership finally get the business into a shape where it can start recapturing lost market share.

The company will certainly gain substantially in the short term from a weak sterling and ought to have a stronger year overall than originally forecast.