LONDON (Alliance News) - Lavendon Group PLC hiked its interim dividend on Friday and expressed confidence in its outlook for the second half of 2015, as margin improvements drove a rise in interim pretax profit despite revenue only rising modestly.
The equipment rental company also said it will hike its capital expenditure plans in order to pursue further growth.
Lavendon said it will pay an interim dividend of 1.70 pence per share, up from 1.40 pence a year earlier, as its pretax profit increased to GBP13.7 million from GBP10.8 million year-on-year in the six months to the end of June.
Revenue for the company was up to GBP119.1 million from GBP117.4 million, though rental revenue was broadly flat at GBP112.2 million against GBP112.3 million.
But the profit was driven higher as the group's operating margin improved to 14.1% from 12.7%, with a particular improvement in the UK business, where its operating margin rose by 220 basis points. The UK business saw revenue decline in the first half, but Lavendon said improving trends were seen towards the end of the period.
Middle East and European revenues both rose in the first half, with the Middle East performing well against increasingly tough comparators, while the European business managed to deliver a revenue rise despite tough market conditions.
The group's return on capital employed in the first half was sharply higher, up 210 basis points to 12.7%, prompting Lavendon to hike its capital expenditure plans for the full year to the tune of GBP20.0 million, meaning it now intends to spend GBP75.0 million on expanding its operations in the Middle East, the UK and France in 2015.
"Trading since the half year has remained in line with our expectations and, whilst mindful of the re-emergence of some uncertainty in the economic outlook, the board remains confident that the group is well positioned to deliver its expectations for 2015 and continue to create substantial shareholder value over the medium term," said Lavendon Chief Executive Don Kenny.
Lavendon shares were 7.7% to 178.85 pence on Friday.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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