15.11.2016

Strong growth continues at Lavendon

UK international rental company Lavendon, owner of Nationwide Platforms in the UK and Rapid Access in the Middle East has reported a strong third quarter in all of its operations, bar Germany.

The company has issued a trading statement this morning indicating an eight percent rise in revenues for the quarter, taking year to date revenues nine percent higher than at this time last year. The statement does not provide any specific revenue or profit numbers, but as usual at this period has indicated the overall performance of the group operations in percentage growth terms.

The UK – almost half the business – is eight percent up on the year and the quarter with the company saying that it is seeing strong rental volume growth, combined with an “improved pricing environment” with utilisation levels reaching 74 percent in the quarter, continuing into the fourth quarter.

The company said: “We are benefiting from the strategic investment made in 2015 to improve the scale and mix of the fleet, together with the better fleet availability from the increased efficiency of our transport and maintenance operations. This performance is now delivering the expected year-on-year improvement in operating margins.”

In the Middle East revenues at Rapid Access were 17 percent up on the same quarter last year, with utilisation reaching 77 percent and edging even higher in the fourth quarter to the current level of 80 percent. Higher revenues in the UAE, Kuwait, Oman and Qatar have managed to more than offset the declines in Saudi Arabia - although the Saudi business generates the highest margins - so there is likely to be an impact on margin levels. The company has reigned in its capital investment in the region, compared to last year, and directed what it is spending towards countries where growth is strongest. The lower capex is also having a benefit on cash flow in the region.

In Continental Europe revenues were up one percent on the quarter - two percent higher for the nine months - with France rising 13 percent and Belgium three percent, just managing to offset a seven percent fall in German revenues. Although the company says that the restructuring of the Gardemann business is now complete and that while the process has disrupted revenues, it has managed to take the business into profit for the year, following two quarters of losses.

Group debt at the end of September increased from £119 million at the end of December to £158 million partly due to Sterling's weakness against the Euro and dollar and partly due to pulling capital expenditure forward. As a result of the third quarter the company expects to end the year well ahead of its previous expectations.

Chief executive Don Kenny said: "The group's trading performance has continued to deliver strong revenue growth through the third quarter. This growth reflects the benefits of our strategic investment programmes in both 2015 and 2016 to strengthen our market positions in all regions, together with the further operational improvements we have made to support the delivery of our growth plans.”

“The board is encouraged by the trading performance to date, and as a consequence of the favourable translational impact on our overseas earnings from the continuing weakness of Sterling, we expect the group's results to be marginally ahead of our original expectations for 2016."

Vertikal Comment

This is a very positive trading statement with the UK utilisation and rental rate indications sounding very promising - small to medium sized companies should take note if they have not already done so.

The utilisation numbers in the UK and Middle East - three quarters of its business and a greater percentage of its profits - are amazingly at the maximum sensible levels, this after the hefty spending plans enacted this year. If this level of business looks to be sustainable it may well need to update its original investment plans for 2017 - possibly front end loading its fleet additions, to begin with, rather than increasing overall spending plans.

Hopefully the Gardemann operation in Germany will start to grow again now from its smaller profitable base? If so 2017 could be a truly fantastic year for the company.