LVD.L Regulatory News (LVD)

13 January 2017

Lavendon Group plc

Full Year Trading Update 2016

Results Expected to be Ahead of Board Expectations

Lavendon Group plc ("Lavendon" or the "Group"), the market leader in the rental of powered access equipment in Europe and the Middle East, today issues the following Trading Update for the year ended 31 December 2016:

Summary

· Board expects results for the full year to be ahead of its expectations

· Group total and rental revenues for the year increased by 8%

· Group profitability and operating margins continue to improve

· UK rental revenues for the year increased by 9%

· Middle East rental revenues for the year increased by 16%

· Continental Europe rental revenues for the year increased by 2%

The Group's total and rental revenues for the year ended 31 December 2016, on a constant currency basis and excluding ex-fleet equipment sales, increased by 8% compared with the prior year. At actual exchange rates, the Group's total and rental revenues (excluding ex-fleet equipment sales) increased by 15% over the prior year. The rental revenue growth rates, at constant currency, across the Group's regions for 2016 by quarter are given below:

Percentages shown are on a constant currency basis and are rental revenues only (excluding revenues from the sale of new and ex-fleet equipment)

In the UK (46% of total Group rental revenues), market share gains have driven strong volume growth across the year which combined with an improving pricing environment to generate a 9% year on year increase in rental revenues. In Q4, the rate of year on year revenue growth increased to 12% as fleet utilisation levels reached 77% (averaging 72% for Q4). This revenue growth, supported by fleet investment and better availability from the increased efficiency of our transport and maintenance operations, has delivered the expected year on year improvement in profitability and operating margins.

Our Middle East business (26% of total Group rental revenues) has delivered strong rental revenue growth of 16% for 2016, despite increasingly difficult comparators as the year progressed. In Q4, fleet utilisation levels reached 81% (averaging 79% for Q4) as growth from our operations in the UAE, Kuwait, Oman and Qatar continued to more than offset a decline in our higher margin Saudi Arabian business. As expected, the level of free cash generated by the region has increased significantly in 2016, as we moderated our fleet investment compared to recent years and, through focused management, improved our working capital profile in the second half.

Rental revenues in Continental Europe (28% of total Group rental revenues) increased by 2% for the year, with volume growth driving revenues higher in France (+11%) and Belgium (+1%) which more than offset a weaker performance in Germany (-3%). Although the performance of our German business was undoubtedly disrupted by the restructuring programme undertaken during the year, it successfully recovered the operating losses reported in the first half and the business returned to profit for the year as a whole.

In summary, the Group has delivered strong rental revenue growth in 2016 reflecting the benefits of our investment in additional fleet and improved operational processes. As expected, this revenue growth has driven increased profitability and improved margins. This strong trading performance has also benefited from the translational impact of Sterling's weakness on our overseas earnings, and consequently the Board now expects the Group's results for the year to be ahead of its expectations.

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

As expected the Group's net debt level at 31 December 2016 increased to £141 million, on a constant currency basis, relative to £119 million at 31 December 2015. At actual exchange rates, the Group's reported net debt position at 31 December 2016 was £157 million reflecting Sterling's relative weakness against the Euro and US Dollar since the UK's vote to leave the European Union (EU). Whilst the Group's net debt level has increased, our strong operational cash generation underpins our ability to operate within our previously stated target leverage range of up to 1.75 times EBITDA.

Whilst it continues to be too early to assess fully the wider economic implications of the UK's decision to leave the EU, we recognise the uncertainty in the macroeconomic outlook. However we do believe the Group remains well positioned to manage this uncertainty, with over 50% of its revenues and profits being derived from outside the UK. As we have seen in 2016, it remains the case that if there is a prolonged period of Sterling weakness, the Group's reported results benefit from the translational impact on its overseas earnings which may offer some mitigation should there be any adverse economic consequences on the Group arising from the UK's decision.

Don Kenny, Chief Executive of Lavendon, commented:

"The Group has delivered a strong performance in 2016 with growth in revenues driving increased profitability and margins. As a consequence, the Board now expects the Group's results for 2016 to be ahead of its expectations.

As we move into 2017, whilst recognising the uncertainty in the macroeconomic outlook, the Group is well placed to build on the momentum developed during the past few years and to make further progress in the year ahead."

Ends

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Notes to Editors

Lavendon is the European and Middle East market leader in the rental of powered access equipment. The quality and diversity of its hire fleet, coupled with the professionalism and accessibility of its depot network, provides an exceptional product range for customers.

Powered access equipment is designed to enable people to work safely, productively and comfortably at height. It can be used in a comprehensive range of applications, both inside and outside buildings and structures.

The Group has operations in the United Kingdom, Germany, Belgium, France, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The equipment rental fleet totals c.22,000 units and the Group employs c.1,900 people.