Lavendon increases profit, rental rates and ROCE in 2011
By Maria Hadlow29 February 2012
The Lavendon Group's end of year figures for 2011 show a 21% increase in operating profit with revenue up 4% on 2010 - profit was £30 million and revenue £225.4 million in 2011.
The company was also able to report an 8% rise in rental rates and a ROCE (return on capital expenditure) increase to 9% (2010: 6.6%), which the company said reflected improved trading and enhanced operational and capital performance.
Don Kenny, Chief Executive of Lavendon Group plc said, "The Group made good progress during 2011 in improving the financial performance of its operations. As we move into 2012, we are encouraged by the operational efficiency gains made to date and the impact that these will have on the Group's operating leverage as revenue growth is delivered. Our improvement plans for Germany are being implemented and our Middle East region is now demonstrating a sustained recovery in revenues. The increased level of capital investment in the Group's rental fleet planned for 2012 will be funded from our annual cash flows, still allowing free cash to be generated to reduce net debt levels further."
Rental revenues in the UK increased by 7% during the year to £108.4 million, principally driven by a 5% year on year pricing improvement and growth from the first eight months of the year. The UK experienced some softening in demand towards the end of the year as major projects were completed, but Lavendon believes its market share has increased, particularly with major users of powered access equipment in the construction sector.
In Germany total revenues increased by 8% during the year to £51.2 million, with rental revenues also improving by 8% to £49.7 million. Lavendon said that the growth was principally volume-driven, although towards the end of the year there were early signs of pricing starting to firm.
During the year, the German management team was strengthened and a detailed plan to improve performance was agreed and is being implemented. One of the actions is a controlled reduction in fleet size of by approximately 600 machines to bring the business more in line with its target markets.
Belgium's total revenues grew strongly by 18% to £15.7 million driven by an increase in rental revenues of 17% to £14.8 million. The performance reflected a robust level of activity throughout the year and a stable pricing environment. Towards the end of the year, the Belgian fleet was increased through the transfer of 225 machines following the closure of the Group's Spanish operation.
The French business also grew strongly in 2011, with total revenues increasing by 17% to £17.9 million and rental revenues improving by 16% to £17.4 million As with Belgium, the French fleet was increased towards the end of the year with approximately 350 machines being transferred from Spain.
Lavendon's Middle East revenues have progressively improved throughout the year with rates of year on year growth accelerating across the second half. The company said that growth was driven through increases in activity in the Saudi Arabia and Abu Dhabi markets, which have more than offset continued weakness in Dubai and Qatar. Although total revenues were slightly lower than in 2010, rental revenues increased 1%
During 2011 £16.9 million was invested in the Group's rental fleet and operational infrastructure, with £6.2 million coming from the disposal of surplus and retired assets. Lavendon said it has made progress in optimising its rental fleet mix, by removing under utilised machines and replacing them with a smaller number of higher yielding assets during the year. The result is a reduction in the Group's fleet of around 1000 machines to a total fleet size of 20000 units at the year end.
In October 2011, the Group acquired Blue Sky Access Limited for a total consideration of £7.1 million (net of cash acquired). Blue Sky designs and engineers products to improve efficiency and safety when using powered access equipment.