LVD.L Regulatory News (LVD)

14 April 2016

Lavendon Group plc

Q1 2016 Trading Update

Encouraging Start to the Year - Revenue Growth Accelerating

Lavendon Group plc ("Lavendon" or the "Group"), the market leader in the rental of powered access equipment in Europe and the Middle East, releases the following Trading Update, covering the period from 1 January 2016 to date, prior to its Annual General Meeting to be held later today:

Summary

· Board remains confident of delivering its expectations for the year 

· Group's total revenue for the quarter increased by 13%, with rental revenues up 9%

· UK rental revenues increased by 6%

· Middle East rental revenues increased by 21%

· Continental Europe rental revenues increased by 3%

· Short-term impact on margins from investment expected to unwind over the year

· German regionalisation programme on track to be fully operational during Q4

The Group's total revenue for the quarter ended 31 March 2016, on a constant currency basis and excluding ex-fleet equipment sales, increased by 13% compared with the prior year, with rental revenues increasing by 9%.

In the UK (46% of total Group rental revenues), strong growth in volumes together with further improvements in the mix of fleet on hire saw rental revenues in the quarter increase 6% year on year. The accelerated rate of revenue growth in the quarter reflects the benefits of the additional investment in 2015 to increase the scale of the fleet and improve its mix and availability. While the cost of this investment has constrained margins in the quarter, we expect this cost to be absorbed as the year progresses and for further year on year margin improvement to be delivered.

Increased utilisation of an enlarged fleet in the Middle East (27% of total Group rental revenues) has driven an acceleration in the rate of revenue growth in the region to 21% year on year for the first quarter. The continued revenue growth in the UAE, Kuwait, Oman and Qatar has more than absorbed a decline in our higher margin Saudi Arabian business. As previously reported, our planned investment in the region for 2016 has moderated compared to recent years, and is directed towards those markets demonstrating strong growth. With a more modest investment spend and an improving working capital profile, we expect to increase the level of free cash generated from the region during the year.

Rental revenues in Continental Europe (27% of total Group rental revenues) increased by 3% year on year, with continued volume growth driving revenues in France (+11%) and Belgium (+1%) more than offsetting a slightly weaker performance in Germany (-1%). The previously announced regionalisation programme in Germany is progressing as planned and is on track to be fully operational during the fourth quarter of this year.

In summary, the Group has delivered accelerated rental revenue growth in the first quarter reflecting the benefits of the additional fleet investment and operational resource made available during 2015. While the cost of these investments has constrained operating margins in the short term, we expect this impact to unwind in the coming months and for further profit improvement to be delivered as we move into the second half of the year. 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 is expanded and our self-funded fleet replacement programme continues.

As expected the Group's net debt level at 31 March 2016 increased to £147 million, on a constant currency basis, relative to the £119 million at the 31 December 2015. This increase reflects the purchase of additional equipment to support our growth plans and the payment of c.£19m owing to equipment suppliers from the previous year end. At actual exchange rates, the Group's reported net debt position at 31 March 2016 was £148 million. We expect the Group's net debt levels to return to a declining trend across the second half of the year with our planned investment programme for 2016 being largely funded from the Group's strong operational cash flows.

Don Kenny, Chief Executive of Lavendon, commented:

"Building on the momentum established towards the end of 2015, we have seen an encouraging start to the year with our continued focus on revenue growth delivering results. This growth reflects the benefits of the strategic investment programme we undertook in 2015, to strengthen our market positions across all our regions. Whilst recognising some uncertainty in the economic outlook, the Board remains confident of making further progress during the year and delivering on its expectations for 2016."

Ends

Conference call

A conference call will be held for analysts at 8.00am (UK time) today (14 April 2016), the details of which can be obtained from FTI Consulting. A replay of the call will be available on the company's website after the event at www.lavendongroup.com.

Next Update

Lavendon will release its Half Year Trading Update in July 2016.

For further information, please contact:

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.21,000 units and the Group employs c.1,900 people.