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Trading statements

Lavendon revenues up

15 November 2016 07:56

Lavendon's board is confident of delivering results for the full year marginally ahead of its original expectations.

Group total and rental revenues for the nine months to the end of September increased by 9% with UK rental revenues for the nine months up by 8%; Middle East rental up by 20% and Continental Europe rental revenues increasing by 2%. The group said restructuring in Germany was complete and the revised business structure was now operational.

An update says: "In the UK (47% of total Group rental revenues), market share gains continued to drive strong volume growth that combined with an improving pricing environment to generate an 8% year on year increase in rental revenues in Q3.

"Fleet utilisation levels reached 74% in Q3 and have continued to improve into Q4, 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.

"Our Middle East business (25% of total Group rental revenues) has continued to deliver strong revenue growth, despite increasingly more difficult comparators, with rental revenues increasing by 17% in Q3. Fleet utilisation levels reached 77% in the quarter and have further improved in Q4 to a current level of 80%. Revenue growth from our operations in the UAE, Kuwait, Oman and Qatar has continued to more than absorb a decline in our higher margin Saudi Arabian business.

"As previously reported, we have moderated our capital investment in the region for 2016, compared to recent years, and have directed this towards those markets demonstrating strong growth. Given this more modest investment and a continued focus on working capital management, the level of free cash generated from the region is increasing significantly in 2016.

"Rental revenues in Continental Europe (28% of total Group rental revenues) increased by 1% in Q3, with continued volume growth driving revenues higher in France (+13%) and Belgium (+3%) which more than offset a weaker performance in Germany (-7%). The previously announced programme to restructure our German business is complete and the revised business structure is now operational. Whilst this restructuring process undoubtedly disrupted the ability of the German business to gain traction in terms of revenue, the previously reported operating losses in the first half have been eliminated and the business is now profitable year to date.

"In summary, the Group has continued to deliver strong rental revenue growth reflecting the benefits of the investment in additional fleet and operational processes to improve fleet availability. As expected, this revenue growth has absorbed the cost of these investments and reflecting the benefit of the translational impact of Sterling's weakness on our overseas earnings, the Board now expects the Group's results for the year to be marginally ahead of its original expectations.

"The Group's ROCE remains firmly above its weighted average cost of capital notwithstanding the increase in the Group's capital employed as we expanded the fleet and continued our self-funded fleet replacement programme."

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Related Company: LVD

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