Lavendon ahead of expectations, boosted by Middle East

published 12 July 2012

Equipment rental firm Lavendon Group has performed ahead of its own expectations with revenue growth feeding through to improved profitability, margins and return on capital employed.

Overall revenues grew by five per cent in the first half of 2012 compared with the same period of prior year. In the second quarter, group revenues increased by five per cent compared with 2011 on the same basis.

Regionally, the UK contributed 48% of total group revenue, up one per cent first half. The Middle East saw the most growth, up 30% over the six months to contribute 15% of total revenue.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Rental revenue fell two per cent in Germany, contributing a total of 21%, France grew 19% to contribute nine per cent and Belgium grew three per cent to contribute seven per cent of group revenue.

Overall group revenue grew by six per cent in the first quarter and four per cent in the second.

The firm said: "A reduction in the level of capital deployed in our German business has been a particular area of focus, and is being addressed through the ongoing disposal of surplus equipment as part of our wider performance improvement plan for the business.

"We have also deployed additional capital into the Middle East as the market outlook remains encouraging, and we believe the attractive returns available should enable the region to become an even more important contributor to the group's performance in the near term."

Group debt at June 30th was £101m, a reduction of £5.0m over the six month period.

Broker Northland Capital Partners described the statement as a "strong trading update".

"The steady performance in Europe is reassuring considering the economic difficulties currently being experienced. The Middle East should continue to offer growth opportunities as the level of infrastructure spending increases across the region," the broker said.

House broker Peel Hunt was predictably upbeat and said the board's confidence that full year results would be better than previously expected was "underpinned by the

Middle East performance and the annualised operational efficiency profit improvement of £5m through 2013 (£2.1m secured in 2011)."

The broker has upgraded its 2012 profit before tax forecast by £1m to £26.5m. Market consensus prior to Thursday's trading statement was for profit before tax in 2012 of £25.75m.

The share price rose 7.14% to 120p by 15:51.