4th Mar 2009 07:00
4th March 2009
Lavendon Group plc ("the Company" or the "Group")
Preliminary Results for the twelve months ended 31st December 2008
Lavendon Group plc, Europe's market leader in the rental of powered access equipment, today announces its Preliminary Results for the twelve months ended 31st December 2008.
Financial highlights
- Revenues £248.4m (2007: £186.0m), increase of 34%
- EBITDA £97.3m* (2007: £64.1m), increase of 52%
- Operating profit £46.4m* (2007: £30.5mm), increase of 52%
- Operating profit margin 18.7%* (2007: 16.4%)
- Profit before tax £30.4m* (2007: £23.2mm), increase of 31%
Earnings per share 53.89p* (2007: 46.41p), increase of 16%
* Figures for 2008 and 2007 are prior to amortisation charges and exceptional costs
Strengthened cash flows during the year; continues to be extremely cash generative:
- Cash generated from operations £57.1m (2007: £48.6m), increase of 17%
- Debt at year end £305.0m after reflecting a £42m adverse currency movement in
Euro denominated debt (2007: £185.7m)
- Board comfortable with debt, which is well supported by cash flows and the
Group remains fully bank covenant compliant
Final dividend reduced to 1.67 pence per share (2007: 6.25 pence), reducing potential cash outflow - Board seeking to conserve cash and reduce debt levels
Operational highlights
- The Platform Company successfully integrated with Nationwide Access to form
Nationwide Platforms and regional businesses successfully integrated under the
Panther brand
- Increased scale enabling Group to drive large, single-sourced arrangements with
major customers
- 52% of operating profits and EBITDA now derived from outside the UK
- Further integration across the business in the UK, Germany, Belgium, France and
Spain has delivered larger scale depots and increased operational efficiencies.
- Middle East operations continue to deliver strong results and is small yet exciting
growth opportunity
Current trading
John Gordon, Chairman of Lavendon Group plc said:
"The Board was pleased that the Group performed in line with its expectations and grew revenues, profits and earnings per share. This was a good result despite the challenging economic environment.
"During the year the Group focused on strengthening market positions and integrating the acquisitions to streamline its operations, which has made a more efficient business with increased scale in each of our geographical markets. The strengthened cash flows in the year will continue to underpin the financial stability of the Group.
"Despite the progress made during the year, trading conditions in the UK and European operations became more challenging, particularly in the final quarter of 2008. Although we have developed a more diverse geographical spread of profit and cash flows, the current market conditions in these markets makes future demand patterns extremely difficult to predict. The Middle East still presents a small, yet exciting growth opportunity for the Group.
"The Board remains cautious about the outlook for the Group. The Board will continue to work to offset the impact of the challenging market conditions by reducing capital investment, focusing on making the operations more cost efficient and generating free cash flow to reduce debt levels.
"I will be stepping down at the AGM and have thoroughly enjoyed working with the Board over the last 13 years, and wish it all the best for the future."
For further information please contact:
|
Lavendon Group plc Kevin Appleton, Chief Executive Alan Merrell, Group Finance Director |
Today T: +44(0)207 831 3113 Thereafter T: +44(0)1455 558874 |
|
Financial Dynamics Jonathon Brill/Billy Clegg/Caroline Stewart |
T: +44(0)207 831 3113 |
CHAIRMAN'S STATEMENT
The Group has delivered a good performance in 2008 in line with our expectations, with revenues, profits and earnings per share all increasing, despite a widespread deterioration in the economic environment.
This increase has been driven by the Group's strategic focus on developing its operational scale, both in the UK and overseas, through organic investment and acquisition. The efficiencies that have been derived from this greater scale were enhanced during the year by the merger of a number of operating units and the realisation of significant synergy savings. These operational benefits, together with the Group's improved geographic spread of profits and cash flows (52% of operating profits and EBITDA are now derived from outside the UK, compared to 4% and 30% respectively in 2006) have enabled operating margins to improve.
The Group's operating cash flows have also strengthened during the year, underpinning the financial stability of the Group and providing increased comfort for the more difficult market conditions that undoubtedly lie ahead. These cash flows, as with the Group's revenues and profits, have been favourably impacted by the strengthening of the Euro and US$-pegged currencies during the year although, at the same time, the sharp appreciation of the Euro in the last quarter has increased the Group's reported level of borrowings, in Sterling, over that expected from the investments made in the year. Despite the fluctuation in foreign exchange rates, net debt levels are fully serviceable by the underlying cash flows, and the Group remains fully compliant with its bank covenants.
Financial Results
Revenues increased by 34% to £248.4 million (2007: £186.0 million), reflecting both organic and acquisition-led growth as well as movements in exchange rates. Using consistent exchange rates with 2007, revenues increased by 26% to £233.9 million. Operating profits prior to amortisation of intangible assets and exceptional costs increased by 52% to £46.4 million (2007: £30.5 million), with margins improving to 18.7% from 16.4% in the prior year. At consistent exchange rates, operating profits prior to amortisation and exceptional costs increased by 47% to £44.8 million. Operating profits after amortisation and exceptional costs were £38.5 million (2007: £26.2 million).
Exceptional costs of £3.6 million (2007: £2.5 million) were incurred during the year, and relate to the integration costs arising from the merger of the Group's UK businesses into two operating units, and from the integration and restructuring of the Group's French, German and Spanish operations.
Whilst net interest costs increased to £16.0 million (2007: £7.2 million), following the investment programme undertaken in the last 18 months, the Group's increased trading performance enabled the Group's profit before tax, amortisation charges and exceptional costs to increase by 31% to £30.4 million (2007: £23.2 million). There is no material difference to the Group's profit before tax if consistent exchange rates with 2007 are used, as movements in interest costs broadly match the movement in operating profits. Profit before tax after amortisation charges and exceptional costs increased to £22.5 million (2007: £18.9 million).
With an effective tax rate of 23% (2007: 21%), the Group's profit after tax increased to £17.4 million (2007: £15.1 million). Following a 9% increase in the average number of shares in issue, the Group's earnings per share, prior to amortisation charges and exceptional costs, increased by 16% to 53.89 pence (2007: 46.41 pence). Earnings per share after amortisation charges and exceptional costs increased to 38.09 pence (2007: 36.10 pence).
The strength of the Group's cash flows is illustrated by the growth in EBITDA (earnings before interest, tax, depreciation and amortisation) which, prior to exceptional costs, increased by 52% during the year to £97.3 million (2007: £64.1 million), with margins increasing to 39% (2007: 34%). Net cash generated from operations, after movements in working capital and payments of interest and tax, increased by 17% to £57.1 million (2007: £48.6 million).
A total of £105.4 million was invested during the year, in the acquisition of The Platform Company (Holdings) Limited and in the maintenance and expansion of the Group's existing asset base. This investment, together with the significant foreign exchange movement of £42.4 million arising on the conversion of €220.6 million of Euro denominated borrowings into Sterling at the year-end, increased the Group's borrowings at the year-end to £305.0 million (2007: £185.7 million). The corresponding net debt to equity ratio was 206% (2007: 156%), with a net debt to pre-exceptional EBITDA ratio of 3.13 times. Calculating the debt to EBITDA ratio in accordance with our new banking arrangements (assuming 12 months EBITDA contribution from The Platform Company and using consistent currency conversion rates), reduces the ratio to 2.65 times, well within the Group's covenant level of 3.00 times.
Dividend
The Board believes that preserving cash and reducing debt levels are important measures of success in the current economic climate, and therefore the Group is proposing to pay a final dividend of 1.67 pence per share (2007: 6.25 pence), making a total dividend for the year of 5.00 pence (2007: 9.00 pence). The final dividend, if approved at the Company's Annual General Meeting on 23 April 2009, will be paid on 6 May 2009 to shareholders on the register at the close of business on 13 March 2009.
Acquisition
In April 2008, the Group completed the acquisition of The Platform Company, for a total consideration of £46.5 million payable in a combination of cash and shares over a three-year period. This acquisition increased the scale of the Group's UK operations and provided considerable scope for cost synergies. Prior to the year-end, The Platform Company was successfully merged with Nationwide Access (the Group's largest UK business) to form Nationwide Platforms, the clear UK market leader in the rental of powered access equipment. Although this merger has already delivered around £3.0 million of cost synergies on an annualised basis, the full benefit of this integration, over and above the initial cost synergies, will be seen more clearly once the economic climate becomes more favourable and the improved operational leverage of the merged businesses can be demonstrated. In addition to the cost savings, the acquisition also enabled the combined 2008 capital expenditure programmes for the Group and that of The Platform Company to be reduced by a total of £50 million, thereby limiting the supply of new equipment into the market. In the short term, given current economic conditions, this lower level of equipment supply may prove to be a significant benefit of the transaction.
Board Changes
John Gordon's term as Chairman of the Board will come to an end at the Group's Annual General Meeting on 23 April 2009 and he will retire from the Board with effect from that date. John Gordon's successor will be David Hollywood, currently the Group's Chairman of the Audit Committee and a non-executive director.
Summary and Outlook
During 2008, the Group strengthened its market position in the UK through the acquisition of The Platform Company and successfully completed integration activities both in the UK and overseas, to deliver larger and more efficient operating units. Through this process the number of trading brands and IT systems across the Group reduced from sixteen to seven. These actions, alongside the development of a more diverse geographical spread of profit and cash flows, has provided the Group with a greater degree of resilience to changes in demand, although the current economic climate makes future demand patterns very difficult to predict.
During the final quarter of 2008, trading conditions across our UK and European operations became noticeably more difficult, and these trends have continued into the new year.
Consequently, until the economic outlook becomes clearer and the underlying drivers behind the use of powered access (safety, regulation, efficiency and convenience) are able to mitigate more fully the downward economic pressures, we will continue to concentrate on the areas that we can influence. Our operational plans for 2009 are focused on cash generation, reviewing and resizing our businesses where necessary to meet market realities, and at the same time making further improvements to our IT systems and operational processes. In particular, our capital expenditure programme for the year has been reduced by £30 million to a revised level of £20 million, with the commitment of this reduced investment plan reviewed on a regular basis. Our fleet age, together with our industry leading equipment maintenance programmes, mean that we have the capability to reduce our capital investment requirements for a considerable period of time, as we have done in the past, without materially impacting the revenue generation ability of the business.
Our financial strength is firmly underpinned by the Group's strong cash flows and ability to reduce debt levels through the control of investment; attributes which allow us to lower the risk profile of the Group through difficult trading periods, and enable the benefits of the Group's operational leverage to be magnified when economic conditions improve.
Our expectations for 2009 reflect the declining economic conditions that are mitigated by our increased scale and efficiency. Trading since the year-end has been in line with these expectations.
Review of Performance by Country
(Extracted from the Operating and Financial Review)
A summary of the revenues and operating profit by each business unit is given below:-
|
Revenues |
Operating Profit* |
|||
|
£' millions |
||||
|
2007 |
2008 |
2007 |
2008 |
|
|
UK |
105.9 |
131.4 |
17.9 |
21.6 |
|
Germany |
48.5 |
52.8 |
5.9 |
7.9 |
|
France and Belgium |
8.6 |
28.3 |
0.3 |
7.4 |
|
Spain |
6.5 |
13.3 |
1.3 |
2.2 |
|
Middle East** |
16.5 |
22.6 |
5.1 |
7.3 |
|
|
186.0 |
248.4 |
30.5 |
46.4 |
* All figures shown in the above table are before amortisation charges and exceptional costs.
** Middle East includes the results of operations in Bahrain, Qatar, Saudi Arabia and United Arab Emirates.
We have structured the Group so that each country of operation is viewed as a separate reporting profit centre, supported by central Group service functions. Each operation has its own management team responsible for delivering agreed performance targets.
The performance of each operation is summarised below, with all financial figures being quoted before amortisation charges and exceptional costs.
UK
Whilst the UK increased its revenues and continues to be our largest market, its share of total Group revenues is reducing as the Group's overseas operations develop. The UK now represents 53% of total revenue compared to 57% last year and 65% in 2006.
Whilst the business has no direct exposure to house building, we experienced a slow down in demand as the second half of the year progressed, most noticeably in the commercial and industrial construction sectors and in particular during the final quarter of the year.
In April 2008, we further strengthened our market position in the UK with the acquisition of The Platform Company, which was merged towards the end of the year with our largest UK operation to form Nationwide Platforms - the clear market leader in the UK powered access rental market. At the same time, the process of merging our regional businesses (Panther, Kestrel, AMP and Higher Platforms) was completed under the Panther identity. These merger activities have enabled some £3.0 million of cost synergies to be extracted from the businesses, providing a degree of margin resilience in an environment of weaker demand.
Following the mergers, the increased scale, coverage and management depth of the business has improved our ability to offer and support large, single-source arrangements with major customers, thereby enhancing our relative competitive position.
Overall UK revenues increased by 24% to £131.4 million (2007: £105.9 million), with like for like growth made difficult to estimate due to the merger of several operating units in the year. Operating profits* increased by 21% to £21.6 million (2007: £17.9 million) with margins broadly stable at 16.5%.
Germany
The outlook for the German economy in general has become more pessimistic in the last six months, although forecasts for the commercial, industrial and infrastructure construction sectors remain relatively resilient at this stage.
Our German businesses (Zooom and Gardemann) were merged together at the start of 2008, which whilst leading to some revenue disruption during the year, reduced the overall cost base by some €3.5 million. This integration has produced a more streamlined business, capable of generating improved margins and providing a stable platform from which it can develop and strengthen its market position. At the same time, the business has the operational structure, with the necessary management experience to adapt quickly to any changes in the economic climate.
Euro revenues for the year declined by 6%, but after adjusting for currency movements, revenues in sterling increased by 9% to £52.8 million (2007: £48.5 million). Operating profits* increased to £7.9 million (2007: £5.9 million), with operating margins improving to 15% (2007: 12%).
France and Belgium
The French and Belgian businesses, which operate as one business unit under common management, have made good progress in the year, against a slightly weakening market environment in the second half of the year.
The scale of the business was increased significantly following the acquisition of dk Rental in December 2007, and following a period of restructuring and integration work, this scale has turned a previously loss making operation for the Group into a high margin profitable business in 2008. The business now has a stable structure and management team, capable of being leveraged to further develop the business into the future.
Revenues for the year, following the acquisition of dk Rental increased more than three fold to £28.3 million (2007: £8.6 million). Operating profits* increased to £7.4 million (2007: £0.3 million), with margins improving to 26% (2007: 3%).
Spain
As widely reported, the Spanish economy, and in particular the construction sector, slowed significantly during the year with the rate of slowdown accelerating in the second half of the year. As a consequence, a number of companies, operating in the powered access market, are in financial distress following their major fleet acquisition programmes undertaken in recent years.
The scale of our business in Spain increased significantly in December 2007, following the acquisition of dk Rental's Spanish business. Following the merger of this business with our existing operation, we have responded to the change in economic climate by pursuing our strategy of creating larger individual depots (we now operate from four locations, having exited Galicia in July 2008), and also removing surplus equipment from the business. These actions will lower our break-even point and to a degree protect our margins, and importantly provide greater positive operational leverage for when market demand recovers.
Revenues for the year increased to £13.3 million (2007: £6.5 million), and operating profits* increased to £2.2 million (2007: £1.3 million), with margins declining to 17% from 20% in the previous year.
Middle East
The outlook for longer-term projects in many parts of the region appears solid, although there are clear signs that the UAE market is entering a more challenging phase, particularly in Dubai where competition is increasing and demand levels softening. Our position elsewhere in the region was strengthened during the year, through fleet expansion, and we believe that it is these areas that offer the greatest scope for future development and profitable growth.
The business has continued to grow its fleet during the year, and now operates 1,400 rental units from a network of six depots, an increase of over 450 units since the start of the year. These additional units were mainly used machines and supplied either from the Group's European fleet or purchased from the secondary market. Where the machines were supplied from the Group's European fleet, all transportation and duty costs are charged against profits in the year the machines were transferred; a total of £1.2 million was expensed in 2008 (2007: £0.4 million).
Revenues for the year increased by 37% to £22.6 million (2007: £16.5 million), with underlying rental revenues (excluding the lower margin and less predictable revenues from new equipment sales) growing by 45% to £19.1 million (2007: £13.2 million). Operating profits*, after absorbing the transportation and duty costs of £1.2 million, increased to £7.3 million (2007: £5.1 million), with margins improving to 32% from 31% in the prior year.
Equipment Sales
The acquisition of dk Rental at the end of 2007 brought an established and skilled used equipment trading capability into the Group. We have developed this capability during the year and have raised the level of focus on disposal of older and surplus equipment as a way of both balancing our fleet and of realising additional cash. Across the Group some 1,500 units of used equipment (6.0% of the year-end fleet) were sold in the year, through a variety of channels, generating some £9.3 million in cash proceeds. Although market conditions for used equipment sale are becoming more difficult, we continue to see this a key route for reducing fleet and generating cash during periods of tougher rental market conditions.
Future Developments
This is the fourth year in succession when we have been able to report solid financial progress, and whilst the results for 2008 represented a record level of achievement for the Group they were delivered against a backdrop of a worsening economic environment, which looks set to persist through 2009 and possibly well into 2010. Once this outlook became clear, our efforts during 2008 were focused on positioning the Group to weather the economic downturn in the best possible shape.
Our acquisition of The Platform Company in the UK at the start of April, and our subsequent cancelling of around £50 million of orders for new equipment, restricted the level of new equipment coming into the market, helping reduce the potential pricing pressure caused by further over-capacity. The subsequent integration of The Platform Company with Nationwide Access to form Nationwide Platforms, as well as the integration of our four regional businesses under the Panther banner, allowed us to lower our cost base in the UK by some £3.0 million.
We have significantly reduced our 2009 investment plans for the Group, anticipating spending a maximum of £20 million, compared to £105 million in 2008 (including the acquisition of The Platform Company). This reduction in our investment programme, combined with a focus on cost control and management of working capital should enable the business to generate significant free cash flow in the coming year.
The performance of the Middle East market, outside Dubai, remains solid and our leading
market position will be again supported by the transfer of equipment from our European fleet during the coming year. However the reduced scale of this fleet increase will provide a reduction in the level of one-off transportation and duty costs, and therefore the strength of margins earned in the region will be underpinned. The healthy margins, together with strong local currencies, should enable the region to deliver another year of strong financial performance.
It is clear that the economic outlook is uncertain and the scale of any downturn unknown at this time. However, it is important that we concentrate on areas which we can impact, and consequently we will continue to review and reduce the cost base of the Group, and look to maximise our cash generation to reduce debt levels. By increasing cost efficiency and financially de-leveraging the business, the Group will be well positioned, once market conditions improve, to resume the strategic development of the business.
|
Consolidated income statement |
||
|
For the year ended 31 December 2008 |
||
|
2008 |
2007 |
|
|
|
£'000 |
£'000 |
|
Revenue |
248,370 |
186,000 |
|
Cost of sales |
(139,966) |
(99,403) |
|
Gross profit |
108,404 |
86,597 |
|
Operating expenses before exceptional expenses |
(66,260) |
(57,908) |
|
Exceptional operating expenses |
(3,599) |
(2,508) |
|
Total operating expenses |
(69,859) |
(60,416) |
|
Operating profit |
38,545 |
26,181 |
|
Interest receivable |
254 |
323 |
|
Interest payable |
(16,292) |
(7,570) |
|
Profit before taxation |
22,507 |
18,934 |
|
Taxation on profit |
(5,140) |
(3,882) |
|
Profit attributable to equity shareholders |
17,367 |
15,052 |
|
Earnings per ordinary share |
||
|
- basic |
38.09p |
36.10p |
|
- diluted |
36.41p |
35.58p |
All of the Group's trading activities relate to continuing operations.
|
Consolidated balance sheet |
||
|
As at 31 December 2008 |
||
|
2008 |
2007 |
|
|
|
£'000 |
£'000 |
|
Assets |
||
|
Non-current assets |
||
|
Goodwill |
114,149 |
71,944 |
|
Intangible assets |
14,723 |
9,967 |
|
Property, plant and equipment |
363,072 |
274,893 |
|
491,944 |
356,804 |
|
|
Current assets |
||
|
Inventories |
3,930 |
3,576 |
|
Trade and other receivables |
60,152 |
48,339 |
|
Financial assets - derivative financial instruments |
- |
216 |
|
Cash and cash equivalents |
14,674 |
16,721 |
|
78,756 |
68,852 |
|
|
Liabilities |
||
|
Current liabilities |
||
|
Financial liabilities - borrowings |
(54,854) |
(41,027) |
|
Trade and other payables |
(51,258) |
(69,971) |
|
Current tax liabilities |
(9,999) |
(8,371) |
|
(116,111) |
(119,369) |
|
|
Net current liabilities |
(37,355) |
(50,517) |
|
Non-current liabilities |
||
|
Financial liabilities - borrowings |
(264,772) |
(161,420) |
|
Financial liabilities - derivative financial instruments |
(2,081) |
- |
|
Deferred tax liabilities |
(32,518) |
(25,472) |
|
Other non-current liabilities |
(7,448) |
- |
|
(306,819) |
(186,892) |
|
|
Net assets |
147,770 |
119,395 |
|
Shareholders' equity |
||
|
Ordinary shares |
462 |
440 |
|
Share premium |
101,961 |
95,347 |
|
Capital redemption reserve |
4 |
4 |
|
Other reserves |
4,829 |
(3,362) |
|
Retained earnings |
40,514 |
26,966 |
|
Total equity |
147,770 |
119,395 |
|
Consolidated cash flow statement |
||
|
For the year ended 31 December 2008 |
||
|
2008 |
2007 |
|
|
|
£'000 |
£'000 |
|
Cash flows from operating activities: |
||
|
Profit attributable to equity shareholders |
17,367 |
15,052 |
|
Taxation charge |
5,140 |
3,882 |
|
Net interest expense |
16,038 |
7,247 |
|
Amortisation and depreciation |
55,114 |
35,436 |
|
Gain on sale of property, plant and equipment |
(1,887) |
(1,087) |
|
Other non-cash movements |
745 |
511 |
|
Net increase in working capital |
(14,410) |
(2,538) |
|
Cash generated from operations |
78,107 |
58,503 |
|
Net interest paid |
(13,503) |
(7,020) |
|
Taxation paid |
(7,473) |
(2,837) |
|
Net cash generated from operating activities |
57,131 |
48,646 |
|
Cash flows from investing activities: |
||
|
Acquisition of subsidiaries (net of cash acquired) |
(28,742) |
(47,554) |
|
Proceeds from sale of property, plant and equipment |
11,397 |
7,014 |
|
Purchase of property, plant and equipment, and software |
(16,193) |
(21,663) |
|
Net cash used by investing activities |
(33,538) |
(62,203) |
|
Cash flows from financing activities: |
||
|
Drawdown of loans |
183,870 |
71,531 |
|
Repayment of loans |
(159,765) |
(29,228) |
|
Repayment of principal under hire purchase agreements |
(38,383) |
(20,445) |
|
Settlement of loan notes |
(5,068) |
(1,000) |
|
Repayment of guaranteed debt |
(3,959) |
- |
|
Equity dividends paid |
(4,288) |
(2,395) |
|
Proceeds from ordinary shares issued |
136 |
930 |
|
Net cash (used by)/generated from financing activities |
(27,457) |
19,393 |
|
Net (decrease)/increase in cash and cash equivalents before exchange differences |
(3,864) |
5,836 |
|
Effects of exchange rates |
1,817 |
536 |
|
Net (decrease)/increase in cash and cash equivalents after exchange differences |
(2,047) |
6,372 |
|
Cash and cash equivalents at start of period |
16,721 |
10,349 |
|
Cash and cash equivalents at end of period |
14,674 |
16,721 |
Shareholders' funds and statement of changes in equity
|
For the year ended 31 December 2008 |
|||||||||
|
Net |
|||||||||
|
Shares |
Capital |
Cash flow |
investment |
||||||
|
Ordinary |
Share |
to be |
redemption |
Translation |
hedge |
hedge |
Retained |
||
|
shares |
premium |
issued |
reserve |
reserve |
reserve |
reserve |
earnings |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Balance at 1 January 2008 |
440 |
95,347 |
- |
4 |
(1,528) |
201 |
(2,035) |
26,966 |
119,395 |
|
Profit for the year |
- |
- |
- |
- |
- |
- |
- |
17,367 |
17,367 |
|
Share based payments |
- |
- |
- |
- |
- |
- |
- |
745 |
745 |
|
Taxation movement on share based payments |
- |
- |
- |
- |
- |
- |
- |
(276) |
(276) |
|
Cash flow hedges - fair value losses in the year |
- |
- |
- |
- |
- |
(2,297) |
- |
- |
(2,297) |
|
Deferred tax on cash flow hedges |
- |
- |
- |
- |
- |
643 |
- |
- |
643 |
|
Shares issued |
22 |
6,614 |
- |
- |
- |
- |
- |
- |
6,636 |
|
Dividends paid in the year |
- |
- |
- |
- |
- |
- |
- |
(4,288) |
(4,288) |
|
Currency translation differences |
- |
- |
- |
- |
27,061 |
- |
(17,216) |
- |
9,845 |
|
Balance at 31 December 2008 |
462 |
101,961 |
- |
4 |
25,533 |
(1,453) |
(19,251) |
40,514 |
147,770 |
|
For the year ended 31 December 2007 |
|||||||||
|
Net |
|||||||||
|
Shares |
Capital |
Cash flow |
investment |
||||||
|
Ordinary |
Share |
to be |
redemption |
Translation |
hedge |
hedge |
Retained |
||
|
shares |
premium |
issued |
reserve |
reserve |
reserve |
reserve |
earnings |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Balance at 1 January 2007 |
407 |
79,787 |
1,688 |
4 |
(4,075) |
323 |
3,338 |
12,776 |
94,248 |
|
Profit for the year |
- |
- |
- |
- |
- |
- |
- |
15,052 |
15,052 |
|
Share based payments |
- |
- |
- |
- |
- |
- |
- |
511 |
511 |
|
Taxation movement on share based payments |
- |
- |
- |
- |
- |
- |
- |
1,022 |
1,022 |
|
Cash flow hedges - fair value losses in the year |
- |
- |
- |
- |
- |
(107) |
- |
- |
(107) |
|
Deferred tax on cash flow hedges |
- |
- |
- |
- |
- |
(15) |
- |
- |
(15) |
|
Shares issued |
27 |
13,878 |
- |
- |
- |
- |
- |
- |
13,905 |
|
Shares to be issued (i) |
6 |
1,682 |
(1,688) |
- |
- |
- |
- |
- |
- |
|
Dividends paid in the year |
- |
- |
- |
- |
- |
- |
- |
(2,395) |
(2,395) |
|
Currency translation differences |
- |
- |
- |
- |
2,547 |
- |
(5,373) |
- |
(2,826) |
|
Balance at 31 December 2007 |
440 |
95,347 |
- |
4 |
(1,528) |
201 |
(2,035) |
26,966 |
119,395 |
|
Note: |
|||||||||
|
(i) Shares to be issued reflect the fair value of the 630,322 shares issued on 28 February 2007 as part consideration for the acquisition of Gardemann Arbeitsbuhnen GmbH in December 2006. |
|||||||||
Notes
|
1. Reconciliation of net cash flow movement to movement in net debt |
||
|
2008 |
2007 |
|
|
|
£'000 |
£'000 |
|
Net increase in cash |
(2,047) |
6,372 |
|
Decrease/(increase) in debt |
18,237 |
(21,858) |
|
Change in net debt resulting from cash flows |
16,190 |
(15,486) |
|
Non-cash items: |
||
|
Unsecured loan notes reclassified and issue of guaranteed deferred consideration |
(4,060) |
(2,909) |
|
Debt acquired with subsidiary businesses |
(33,791) |
(38,690) |
|
New hire purchase and finance lease agreements |
(53,361) |
(22,245) |
|
Currency translation differences on net debt |
(44,204) |
(7,422) |
|
Movement in net debt in the period |
(119,226) |
(86,752) |
|
Net debt at 1 January |
(185,726) |
(98,974) |
|
Net debt at 31 December |
(304,952) |
(185,726) |
|
2. Primary segmental analysis - geographical segments |
||||||
|
Year ended 31 December 2008 |
||||||
|
UK £'000 |
Germany £'000 |
Belgium & France £'000 |
Spain £'000 |
Middle East £'000 |
Group £'000 |
|
|
Revenue |
131,355 |
52,797 |
28,344 |
13,312 |
22,562 |
248,370 |
|
Operating profit before exceptional expenses |
20,135 |
7,479 |
5,602 |
1,664 |
7,264 |
42,144 |
|
Exceptional operating expenses |
(2,358) |
(740) |
(237) |
(264) |
- |
(3,599) |
|
Operating profit |
17,777 |
6,739 |
5,365 |
1,400 |
7,264 |
38,545 |
|
Interest receivable |
254 |
|||||
|
Interest payable |
(16,292) |
|||||
|
Profit before taxation |
22,507 |
|||||
|
Taxation on profit |
(5,140) |
|||||
|
Profit attributable to equity shareholders |
17,367 |
|||||
|
Total assets |
358,956 |
83,934 |
67,590 |
47,837 |
12,383 |
570,700 |
|
Total liabilities |
(336,826) |
(28,546) |
(31,487) |
(22,306) |
(3,765) |
(422,930) |
|
Net assets |
22,130 |
55,388 |
36,103 |
25,531 |
8,618 |
147,770 |
|
Goodwill recognised on acquisition |
23,415 |
- |
- |
- |
- |
23,415 |
|
Capital expenditure |
23,629 |
13,839 |
7,171 |
4,593 |
9,723 |
58,955 |
|
Depreciation |
24,936 |
10,718 |
6,670 |
3,662 |
4,850 |
50,836 |
|
Amortisation of intangible assets |
1,456 |
455 |
1,802 |
560 |
5 |
4,278 |
Notes:
The assets and depreciation charge shown for the Middle East operation includes rental equipment owned by the UK operation, but which is used by and costed to the Middle East operation. The inclusion of the assets and depreciation charge in the Middle East more accurately reflects the commercial nature of the arrangement.
The information disclosed for the UK operation, includes centralised Group costs, assets and liabilities which may relate to the operation and financing of overseas subsidiaries.
Inter segment trading is not significant and therefore has been eliminated in the analysis presented above, so that only trading between the Group and external third parties is represented.
|
2. Primary segmental analysis - geographical segments continued |
||||||
|
Year ended 31 December 2007 |
||||||
|
UK £'000 |
Germany £'000 |
Belgium & France £'000 |
Spain £'000 |
Middle East £'000 |
Group £'000 |
|
|
Revenue |
105,894 |
48,508 |
8,606 |
6,476 |
16,516 |
186,000 |
|
Operating profit before exceptional expenses |
17,115 |
5,130 |
126 |
1,217 |
5,101 |
28,689 |
|
Exceptional operating expenses |
(300) |
(2,208) |
- |
- |
- |
(2,508) |
|
Operating profit |
16,815 |
2,922 |
126 |
1,217 |
5,101 |
26,181 |
|
Interest receivable |
323 |
|||||
|
Interest payable |
(7,570) |
|||||
|
Profit before taxation |
18,934 |
|||||
|
Taxation on profit |
(3,882) |
|||||
|
Profit attributable to equity shareholders |
15,052 |
|||||
|
Total assets |
205,232 |
90,369 |
81,446 |
43,147 |
5,462 |
425,656 |
|
Total liabilities |
(222,715) |
(34,558) |
(29,711) |
(17,865) |
(1,412) |
(306,261) |
|
Net (liabilities)/assets |
(17,483) |
55,811 |
51,735 |
25,282 |
4,050 |
119,395 |
|
Goodwill recognised on acquisition |
5,672 |
- |
25,008 |
8,344 |
- |
39,024 |
|
Capital expenditure |
27,287 |
12,641 |
461 |
3,061 |
6,505 |
49,955 |
|
Depreciation |
17,498 |
9,483 |
2,084 |
1,486 |
3,090 |
33,641 |
|
Amortisation of intangible assets |
817 |
726 |
164 |
87 |
1 |
1,795 |
Notes:
The assets and depreciation charge shown for the Middle East operation includes rental equipment owned by the UK operation, but which is used by and costed to the Middle East operation. The inclusion of the assets and depreciation charge in the Middle East more accurately reflects the commercial nature of the arrangement.
The information disclosed for the UK operation, includes centralised Group costs, assets and liabilities which may relate to the operation and financing of overseas subsidiaries.
Inter segment trading is not significant and therefore has been eliminated in the analysis presented above, so that only trading between the Group and external third parties is represented.
3. Acquisition of subsidiary company
The Platform Company (Holdings) Limited ("The Platform Company")
On 1 April 2008, the Group acquired 100% of the share capital of The Platform Company (Holdings) Limited for a total consideration of £46.5 million.
The consideration paid on completion was £19.1 million in cash plus 1,999,972 new ordinary shares of 1 pence per share in Lavendon Group plc. The issue of shares represents a consideration of £6.5 million, being calculated using Lavendon's closing share price on 31 March 2008 of 325.0 pence per share.
Additional consideration of £8.3 million is payable on the first anniversary, which will be partly funded by the issue of 885,000 shares to the vendors on 1 April 2009. A further payment of £7.8 million is payable on the second anniversary of the acquisition, which will be partly funded by a further issue of 885,000 shares to the vendors. On the third anniversary of the acquisition, a cash payment of £4.1 million will be paid to the vendors. After the impact of discounting, the total deferred consideration is £19.3 million.
The effective date of the acquisition was 1 April 2008. Accordingly only nine calendar months of trading have been recorded in the current period results.
3. Acquisition of subsidiary company continued
Details of the acquisition are provided below:
|
£'000 |
|
|
Cost of investment |
|
|
Cash paid on acquisition |
19,087 |
|
Shares issued at acquisition |
6,500 |
|
Deferred consideration (to be satisfied in cash and shares) |
19,279 |
|
Acquisition costs |
1,603 |
|
Total cost |
46,469 |
|
Provisional fair value of assets and liabilities acquired |
|
|
Non-current assets |
|
|
- intangible assets |
18 |
|
- property, plant and equipment |
54,909 |
|
Current assets |
|
|
- inventories |
121 |
|
- trade and other receivables |
9,374 |
|
- cash and cash equivalents |
2,083 |
|
Current liabilities |
|
|
- financial liabilities - borrowings |
(11,597) |
|
- trade and other payables |
(6,683) |
|
- current tax liabilities |
(1,289) |
|
Non-current liabilities |
|
|
- financial liabilities - borrowings |
(22,194) |
|
- deferred tax liabilities |
(7,485) |
|
Provisional fair value of net assets acquired |
17,257 |
|
Goodwill and intangible assets |
29,212 |
|
Split as follows: |
|
|
Goodwill |
23,117 |
|
Intangible assets |
|
|
Brand name |
1,000 |
|
Customer relationships |
5,095 |
|
Total intangibles assets recognised at acquisition |
6,095 |
3. Acquisition of subsidiary companies continued
The fair value adjustments recorded in arriving at the fair value of assets and liabilities above were as follows:
|
£'000 |
|
|
Adjustment to property, plant and equipment to provisional fair value |
6,741 |
|
Deferred tax on fair value adjustments and intangible assets |
(3,594) |
|
Revenue generated for the group since acquisition to 31 October 2008 |
23,266 |
|
Profit before tax generated for the group since acquisition to 31 October 2008 |
4,474 |
The revenue and profit before tax stated are up to 31 October 2008. On 1 November 2008 The Platform Company merged with Nationwide Access to form Nationwide Platforms. Consequently the results from 1 November 2008 to 31 December 2008 cannot be separately identified.
Had the acquisition taken place on 1 January 2008 then reported revenues and profit before tax would be as follows:
|
£'000 |
|
|
Revenue |
32,887 |
|
Profit before tax |
5,761 |
The goodwill above is attributable to the workforce of the acquired business and the significant synergies expected to arise after its acquisition by the Group.
|
Reconciliation of costs at acquisition to cash flow movement |
|
|
£'000 |
|
|
Acquisition costs of The Platform Company |
46,469 |
|
Less: |
|
|
Shares issued at acquisition |
(6,500) |
|
Deferred consideration |
(19,279) |
|
Cash acquired with acquisition |
(2,083) |
|
|
18,607 |
|
From previous acquisitions: |
|
|
Payment of prior years acquisition costs |
1,573 |
|
Deferred consideration paid in the period |
8,562 |
|
Cash outflow flow for the period |
28,742 |
4. Accounting policies
The consolidated accounts of the Group are prepared under the historical cost convention and in accordance with those parts of the Companies Act 1985 that are applicable to listed public companies, and applicable EU endorsed International Financial Reporting Standards.
5. Earnings per share
|
2008 |
2007 |
|||||
|
Weighted |
Weighted |
|||||
|
average number |
Per share |
average number |
Per share |
|||
|
Profit |
of shares |
amount |
Profit |
of shares |
amount |
|
|
£'000 |
(in millions) |
pence |
£'000 |
(in millions) |
pence |
|
|
Basic earnings per share |
||||||
|
Profit attributable to equity shareholders |
17,367 |
45.6 |
38.09 |
15,052 |
41.7 |
36.10 |
|
Effect of dilutive securities |
||||||
|
Deferred shares |
1.8 |
- |
||||
|
Options |
0.3 |
0.6 |
||||
|
Diluted earnings per share |
17,367 |
47.7 |
36.41 |
15,052 |
42.3 |
35.58 |
|
Earnings per share before exceptional expenses |
||||||
|
Basic |
20,294 |
45.6 |
44.50 |
17,560 |
41.7 |
42.11 |
|
Diluted |
20,294 |
47.7 |
42.55 |
17,560 |
42.3 |
41.51 |
|
Earnings per share before amortisation charges and exceptional expenses |
||||||
|
Basic |
24,572 |
45.6 |
53.89 |
19,355 |
41.7 |
46.41 |
|
Diluted |
24,572 |
47.7 |
51.51 |
19,355 |
42.3 |
45.76 |
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume issue of all potential dilutive ordinary shares, based on the average market price of the Company's shares of £2.61 (2007: £5.50). The effect of this dilution is to increase the weighted average number of ordinary shares to 47,676,009 (2007: 42,275,437).
Earnings per share before exceptional expenses is presented to exclude the impact of exceptional expenses incurred in the year. The effect of current taxation of £672,000 (2007: nil) has been included in respect of these exceptional expenses, where it is expected to arise.
Earnings per share before amortisation charges and exceptional expenses is presented to exclude the impact of amortisation charges and exceptional expenses incurred in the year. The effect of current taxation of £672,000 (2007: nil) has been included in respect of both amortisation charges and exceptional expenses, where it is expected to arise.
The Directors believe that the EPS before exceptional expenses and the EPS before amortisation charges and exceptional expenses provide additional relevant information about the underlying business performance.
6. Dividends
|
2008 |
2007 |
|
|
|
£'000 |
£'000 |
|
Final dividend paid in respect of 2007 of 6.25p per 1p ordinary share (2006: 3.00p) |
2,749 |
1,238 |
|
Interim dividend paid in respect of 2008 of 3.33p per 1p ordinary share (2007: 2.75p) |
1,539 |
1,157 |
|
|
4,288 |
2,395 |
The directors are proposing a final dividend in respect of the financial year ended 31 December 2008 of 1.67 pence per ordinary share which will distribute an estimated £772,000 of shareholders' funds. It will be paid on 6 May 2009 to those shareholders who are on the register at 13 March 2009, subject to approval at the annual general meeting.
7. Operating expenses
|
2008 |
2007 |
|
|
|
£'000 |
£'000 |
|
Selling and distribution costs |
24,746 |
19,157 |
|
Administrative expenses |
41,514 |
38,751 |
|
Operating expenses before exceptional expenses |
66,260 |
57,908 |
|
Exceptional operating expenses |
3,599 |
2,508 |
|
Total operating expenses |
69,859 |
60,416 |
In 2008, exceptional expenses related to the integration costs incurred merging the Nationwide Access and The Platform Company operations in the UK, costs of merging the Group's German operations, and the integration of the dk Rental and Zooom operations in France and Spain.
In 2007, exceptional expenses related to the integration costs incurred merging the Nationwide Access and Wizard Workspace Limited operations in the UK, and the costs of merging the Group's German operations.
For 2007 and 2008 the exceptional operating expenses all relate to employee termination costs, property closure costs together with associated professional fees and rebranding costs. They are all administrative expenses resulting in total administrative expenses of £45,113,000 (2007: £41,259,000).
8. Taxation
Analysis of charge for the year:
|
2008 |
2007 |
|
|
|
£'000 |
£'000 |
|
Corporation taxation: |
||
|
- current year |
6,794 |
2,733 |
|
- adjustment in respect of prior years |
390 |
3,340 |
|
|
7,184 |
6,073 |
|
Deferred taxation |
(2,106) |
(2,191) |
|
Taxation movement on share based payments |
62 |
- |
|
Taxation |
5,140 |
3,882 |
In addition to the amount charged to the income statement, tax of £276,000 (2007: £1,022,000) in respect of share based payments was credited directly to reserves. This represents the reduction of a deferred tax asset which is in excess of the charge to the income statement for share based payments.
No provision has been made in the financial statements for any tax liability which may arise upon future distributions of profit to the United Kingdom from overseas subsidiaries.
Reconciliation of taxation
The tax for the year is lower (2007: lower) than the standard rate of corporation tax in the UK of 28.5% (2007: 30%). The differences are explained below:
|
2008 |
2007 |
|
|
|
£'000 |
£'000 |
|
Profit before taxation |
22,507 |
18,934 |
|
Profit at standard rate of corporation taxation in the UK: 28.5% (2007: 30%) |
6,414 |
5,680 |
|
Adjustments to tax in respect of prior years |
(371) |
3,957 |
|
Effect of overseas tax rates |
(840) |
(822) |
|
Expenses not deductible for tax purposes |
433 |
104 |
|
Additional tax losses recognised |
(1,684) |
(3,472) |
|
Effect on deferred tax due to the tax rate change in the UK and Germany |
(35) |
(1,543) |
|
Tax losses not recognised |
1,223 |
(22) |
|
|
5,140 |
3,882 |
9. Intangible assets
|
Non-current intangible assets |
||||||
|
Other intangibles |
||||||
|
recognised |
||||||
|
Goodwill |
on acquisitions |
Computer software |
Trademarks |
Total other intangibles |
||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cost |
||||||
|
At 1 January 2008 |
71,944 |
10,740 |
3,183 |
200 |
14,123 |
|
|
Exchange movements |
18,790 |
3,102 |
444 |
- |
3,546 |
|
|
Recognised on acquisition |
23,415 |
6,095 |
18 |
- |
6,113 |
|
|
Additions |
- |
- |
537 |
- |
537 |
|
|
At 31 December 2008 |
114,149 |
19,937 |
4,182 |
200 |
24,319 |
|
|
Amortisation |
||||||
|
At 1 January 2008 |
- |
1,356 |
2,600 |
200 |
4,156 |
|
|
Exchange movements |
- |
747 |
415 |
- |
1,162 |
|
|
Charge for the year |
- |
3,897 |
381 |
- |
4,278 |
|
|
At 31 December 2008 |
- |
6,000 |
3,396 |
200 |
9,596 |
|
|
Net book amount |
||||||
|
At 31 December 2008 |
114,149 |
13,937 |
786 |
- |
14,723 |
|
Goodwill recognised on acquisition is a combination of that arising on acquisitions during the year, together with additional goodwill of £298,000 arising from increased deferred payments for acquisitions completed in prior years.
|
Non-current intangible assets |
||||||
|
Other intangibles |
||||||
|
recognised |
||||||
|
Goodwill |
on acquisition |
Computer software |
Trademarks |
Total other intangibles |
||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cost |
||||||
|
At 1 January 2007 |
32,920 |
2,643 |
2,895 |
200 |
5,738 |
|
|
Exchange movements |
- |
- |
29 |
- |
29 |
|
|
Recognised on acquisition |
39,024 |
8,097 |
35 |
- |
8,132 |
|
|
Additions |
- |
- |
224 |
- |
224 |
|
|
At 31 December 2007 |
71,944 |
10,740 |
3,183 |
200 |
14,123 |
|
|
Amortisation |
||||||
|
At 1 January 2007 |
- |
166 |
2,012 |
161 |
2,339 |
|
|
Exchange movements |
- |
- |
22 |
- |
22 |
|
|
Charge for the year |
- |
1,190 |
566 |
39 |
1,795 |
|
|
At 31 December 2007 |
- |
1,356 |
2,600 |
200 |
4,156 |
|
|
Net book amount |
||||||
|
At 31 December 2007 |
71,944 |
9,384 |
583 |
- |
9,967 |
|
10. Tangible fixed assets
|
Short leasehold properties |
Rental fleet |
Motor vehicles |
Office fixtures and equipment |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cost |
|||||
|
At 1 January 2008 |
1,290 |
415,384 |
3,623 |
9,324 |
429,621 |
|
Exchange movements |
- |
50,169 |
529 |
1,285 |
51,983 |
|
Recognised on acquisition |
- |
54,428 |
7 |
474 |
54,909 |
|
Additions |
92 |
55,590 |
1,662 |
1,074 |
58,418 |
|
Disposals |
- |
(31,136) |
(3,186) |
(85) |
(34,407) |
|
At 31 December 2008 |
1,382 |
544,435 |
2,635 |
12,072 |
560,524 |
|
Depreciation |
|||||
|
At 1 January 2008 |
748 |
147,023 |
1,488 |
5,469 |
154,728 |
|
Exchange movements |
- |
15,815 |
158 |
812 |
16,785 |
|
Charge for the year |
42 |
48,015 |
1,250 |
1,529 |
50,836 |
|
Disposals |
- |
(22,865) |
(1,972) |
(60) |
(24,897) |
|
At 31 December 2008 |
790 |
187,988 |
924 |
7,750 |
197,452 |
|
Net book value At 31 December 2008 |
592 |
356,447 |
1,711 |
4,322 |
363,072 |
|
Short leasehold properties |
Rental fleet |
Motor vehicles |
Office fixtures and equipment |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cost |
|||||
|
At 1 January 2007 |
748 |
314,732 |
3,733 |
6,164 |
325,377 |
|
Exchange movements |
- |
13,160 |
108 |
397 |
13,665 |
|
Recognised on acquisition |
- |
65,665 |
945 |
901 |
67,511 |
|
Additions |
542 |
46,872 |
342 |
1,975 |
49,731 |
|
Disposals |
- |
(25,045) |
(1,505) |
(113) |
(26,663) |
|
At 31 December 2007 |
1,290 |
415,384 |
3,623 |
9,324 |
429,621 |
|
Depreciation |
|||||
|
At 1 January 2007 |
748 |
130,906 |
2,158 |
4,463 |
138,275 |
|
Exchange movements |
- |
3,279 |
29 |
259 |
3,567 |
|
Charge for the year |
- |
31,961 |
786 |
894 |
33,641 |
|
Disposals |
- |
(19,123) |
(1,485) |
(147) |
(20,755) |
|
At 31 December 2007 |
748 |
147,023 |
1,488 |
5,469 |
154,728 |
|
Net book value At 31 December 2007 |
542 |
268,361 |
2,135 |
3,855 |
274,893 |
11. The financial information set out in this announcement does not constitute the Group statutory accounts for the year ended 31 December 2008 or 31 December 2007. The figures contained herein have been extracted from the Group's Annual Report 2008, including the audited consolidated Company financial statements for the year ended 31 December 2008, which will be delivered to the Registrar of Companies. The Annual Report 2007 for the year ended 31 December 2007 has been delivered to the Registrar of Companies. The auditors' reports on both these sets of financial statements were unqualified and did not contain a statement under section 237(2) or section 237(3) of the Companies Act.
12. The Annual General Meeting of Lavendon Group plc will be held at Financial Dynamics, 26 Southampton Buildings, London, EC2A 1PB on 23 April 2008 at 11:30am.
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