Lavendon sees deterioration in biggest end markets

Lavendon said full year results will be in line with expectations, although trading is getting tougher in some of its key markets, as borne out by slightly weaker results for the third quarter.

Don Kenny, Chief Executive of Lavendon, said: "Trading in the year to date has been as expected, and whilst mindful of the continuing economic uncertainties, the board is confident that the group will deliver another year of good progress in 2012 with full year results in line with its expectations."

However, it is these very economic uncertainties that seem to be impacting trading for the company, which rents out motorised platforms to enable easy access for street lights and buildings. In the UK, its largest market, and Germany, its second largest market, third quarter revenues fell year-on-year by 3% and 11% respectively, on a constant currency basis. For the ten months to October 31st UK revenues grew 1% while German revenues shrank 5%.

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That worrying trend aside, for the ten months to 31st October 2012 group revenues were ahead of the previous year by 5% on a constant currency basis (there was no mention of what it was on an actual basis).

This was driven by growth in the Middle East, which during the ten months to October 31st saw year-on-year rental revenue growth of 32%.

Broker commentBroker N+1 Singer remains upbeat and reiterated its 'buy' recommendation and 185p price target. Analyst James Woodrow, commented: "Lavendon continues to make good progress in delivering improvements in margins and return on capital employed. Encouragingly, the Middle East is continuing to deliver strong growth which should have a disproportionately positive impact on profits as revenue grows and helps to offset any weakness in the European businesses, in our view. We continue to believe the combination of Middle East growth and self-help offers significant upside for investors."

CM