LVD.L Regulatory News (LVD)

28 June 2010

Lavendon Group plc

Pre-close trading update

Lavendon Group plc (the "Group"), Europe's market leader in the rental of powered access equipment, is pleased to provide an update on trading for the six months ending 30 June 2010, prior to the announcement of its interim results on Friday 27 August 2010:-

"Group revenues, excluding ex-fleet equipment sales, for the five months ended 31 May 2010 have declined by 10% on both an actual and constant currency basis compared to the same period last year. This rate of year on year revenue decline has been reducing on a monthly basis throughout the period, and whilst market conditions remain difficult, a number of the Group's operations have encouragingly returned to generating year on year revenue growth in recent weeks. Current trading indicates that this trend will continue over the balance of the year, and whilst the timing of this recovery will undoubtedly weight the Group's profitability significantly more towards the second half of the year than previously, the Board continues to believe that it will achieve its expectations for the year as a whole.

Cash generation, through the tight control of costs, working capital and capital expenditure, remains a key objective for the year to ensure that our planned debt reduction targets are achieved. The Group's borrowing levels are reducing in line with our plans, with net debt as at 31 May 2010 at £176.3 million (31 December 2009: £182.1 million). We expect that the rate of net debt reduction to accelerate in the second half of the year. The Group remains fully compliant with its banking covenants.

In the UK, the rate of revenue decline has continued to reduce month by month throughout the period, with revenues for the first five months declining by 7% compared to last year. Volume levels are now consistently above those of last year and hire rates are showing early signs of improvement, which has enabled a return to year on year revenue growth in recent weeks.

The rate of year on year revenue decline in Germany has slowed to 16% for the five-month period (compared with 20% for the first of quarter of the year), as the impact of the severe winter weather is slowly absorbed. It is expected that further progress will be made towards returning the business to revenue growth in the coming months, as the business moves into its traditionally stronger trading period in the second half of the year.

The combined revenues of France and Belgium have grown by 5% in the first five months of the year compared to 2009, with our French operation in particular making strong progress which should enable the overall rate of growth for the year to be increased during the second half.

Spanish revenues declined by 22% in the first five months compared to the prior year. The cost base of the business continues to be tightly managed against a backdrop of an extremely difficult market environment, which has allowed the business to remain broadly breakeven and generate positive cash flows.

In the Middle East rental revenues have declined by 8% for the period, with total revenues, including sales of equipment, declining by 13%. Whilst the comparative period last year was relatively strong, the recovery of revenues in the period, particularly in Saudi Arabia and Abu Dhabi, has been slower than previously anticipated due to delays in the timing of requirements for our equipment on a number of large-scale projects in the region. These projects are expected to start to require equipment in the coming weeks, and this increase in activity will accelerate the rate of revenue recovery over the second half of the year.

All overseas revenue growth percentages are stated on a constant currency basis." 

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