6th Mar 2007 07:05
Lavendon Group PLC06 March 2007 6 March 2007 Lavendon Group plc Preliminary Results for the year ended 31 December 2006 Lavendon Group is Europe's market leader in the rental of powered accessequipment. Powered access provides a high degree of flexibility, therebyreducing labour costs and saving both time and money. The equipment is quick,safe, convenient and highly manoeuvrable. Consequently, it is now used toprovide temporary aerial access in a variety of applications and is fastbecoming industry's favoured option when compared to traditional access methodssuch as scaffolding, ladders and aluminium towers. It is also ideal for a widerange of other applications including industrial and building maintenance,construction, sign erection, outside broadcasting, telecommunications, treesurgery and highway maintenance. Highlights: • Excellent top line growth delivered both organically and by acquisition o Three acquisitions made in the UK for an aggregate consideration of up to £20.4m o Acquisition of the Gardemann group of companies in Germany for a total consideration of £34.8m• UK profits and margins growing• Significant reduction in operating losses in Germany• Continued strong market in Middle East• Well positioned for continued growth Financial: • Revenues up by 25% to £124.7m (2005: £100.0m) • EBITDA up by 29% to £38.3m (2005: £29.8m) • Operating profit up by 74% to £12.7m (2005: £7.3m) • Profit before tax increased 166% to £7.7m (2005: £2.9m) • Earnings per share increased over seven-fold to 18.09p (2005: 2.40p) • Debt at comfortable level relative to strongly improving cash flows • Proposed final dividend of 3.00 pence per share, making a total dividend for the year of 4.50 pence per share (2005: 2.25p) OutlookJohn Gordon, Chairman, said today: "2006 was a positive year for the Group, as we achieved significant top linegrowth both organically and via some excellent strategic acquisitions. "With a strengthened market position in Germany and the UK, and furtherstrategic investment in the Middle East, we believe that we are able to generatethe necessary momentum in the business to deliver an improved performance in2007 and continue to enhance shareholder returns." For further information please contact: Lavendon Group plcKevin Appleton, Chief Executive On 06.03.07: 020 7067 0700Alan Merrell, Group Finance Director Thereafter: 01455 558874 Weber Shandwick FinancialNick Dibden 020 7067 0700 CHAIRMAN'S STATEMENT Summary The Group has made very good progress during the year and produced a resultahead of our earlier expectations. Our strategy of seeking growth through bothorganic investment and market consolidation through acquisition, is serving tostrengthen our position in the various markets in which we operate. Thisstrategy also provides us with the necessary operational scale to deliverfurther improvements in trading performance. We have achieved this whilstmaintaining the Group's indebtedness at a comfortable level relative to ourstrongly improving cash flows. It is this financial robustness that willunderpin the Group's future development plans, providing us with the necessaryflexibility to react to market consolidation opportunities as they arise, whilstcontinuing to invest in a modern, reliable fleet of equipment for our existingbusinesses. Financial Results The Group's turnover for the year increased by 25% to £124.7 million (2005:£100.0 million), due to organic growth from existing operations and throughacquisition. Operating profits increased strongly by 74% to £12.7 million (2005:£7.3 million), with margins improving to 10.2% (2005: 7.3%). As a result of investments made during the year, including acquisitions,interest charges increased by £0.5 million to £4.9 million (2005: £4.4 million).Despite these higher interest costs, the improved trading performance ensuredthat the Group's profit before tax rose by £4.8 million to £7.7 million (2005:£2.9 million). With an effective tax rate of 12% (2005: 69%), below the UKstatutory rate of 30% due to the increased scope for the utilisation of ourGerman tax losses following acquisitions made in the year, the Group's profitafter tax increased to £6.9 million (2005: £0.9 million). Although the shares inissue increased by 10% during the year, to assist in financing the acquisitions,earnings per share still reflected the improvement in profitability, increasingover seven-fold to 18.09 pence (2005: 2.40 pence). Earnings before interest, tax, depreciation and amortisation ("EBITDA")increased by 29% to £38.3 million (2005: £29.8 million), with cash generatedfrom operations increasing by 18% to £36.9 million (2005: £31.2 million). Afterpayment of interest and taxation, net cash generated from operating activitiesincreased by 17% to £29.6 million (2005: £25.3 million). During the year, the Group made four acquisitions at a total cost of £55.2million, and invested a further £35.5 million in the maintenance and expansionof the Group's rental fleet, operating systems and infrastructure. Thisinvestment activity, whilst partly funded from operating cash flow and the issueof equity, has increased the Group's level of net debt to £99.0 million at theyear-end, from £61.7 million at the end of 2005. The corresponding debt toequity and debt to EBITDA ratios, which reflect the cost of the acquisition madein December 2006 but not any associated profits, were 105% and 2.58 timesrespectively, compared to 80% and 2.07 times at the previous year-end. Thisincreased level of debt is well supported by the Group's cash flows, andsignificant additional credit lines remain available to finance future growth. Acquisitions In the first half of the year, the Group completed three acquisitions in the UK- Panther Work Platforms Limited, Kestrel Powered Access Limited and A.M.P.Access Limited, for an aggregate consideration of up to £20.4 million, payablein cash and shares. As well as providing increased fleet capacity, theseacquisitions have extended our UK coverage in specific market and customersectors presently experiencing robust growth. Since acquisition, all threeoperations have performed well and are benefiting from access to both the largerrental fleet and the depot network available from the Group's existing UKoperation. In December 2006, the Group completed the acquisition of the Gardemann group ofcompanies in Germany for a total consideration of £34.8 million, payable in cashand shares. This acquisition doubles the size of our German business in terms ofrevenues, and establishes the Group as the clear market leader in Europe'slargest economy, at a time when the market is demonstrating visible signs ofrecovery. Since acquisition, Gardemann has performed in line with ourexpectations, and the first stage of our integration plan is underway. Dividend Due to the continued improvement in the Group's trading performance, anincreased final dividend of 3.00 pence per share is being proposed (2005: 2.25pence), making the total dividend for the year 4.50 pence per share (2005: 2.25pence). The final dividend, if approved at the Company's Annual General Meetingon 25 April 2007, will be paid on 4 June 2007 to shareholders on the register atthe close of business on 16 March 2007. Board Changes As announced previously, John Heywood retired from the Board as a non-executivedirector on 28 April 2006. On the same date, the Board welcomed David Hollywoodas a non-executive director. David became a member of both the Audit Committeeand the Remuneration and Nomination Committee upon his appointment, and willassume the role of Chairman of the Audit Committee from John Standen with effectfrom the Group's Annual General Meeting on 25 April 2007. John Standen willcontinue as the Group's Senior Non-Executive Director. Outlook The underlying drivers of growth in the use of powered access - safety,efficiency and changing construction methods - remain compelling arguments forconfidence in the future of this market. Further stringent Health and Safetylegislation across the European Union, together with the increasing demand forcompressed timescales in major construction and maintenance projects mean thatthese drivers are unlikely to diminish in importance. This favourable backgroundenvironment should ensure that, into the medium term, demand growth for poweredaccess exceeds general economic activity. As we moved through 2006, it became clear that our main markets were recoveringand demand levels increasing. To ensure that the Group is well positioned tobenefit from this market recovery, our investment programme is directed towardsimproving our rental fleets' configuration and location to maximise incrementalreturns from revenue growth. We will continue to undertake further marketconsolidation where opportunities to strengthen our position, and secure earlyfinancial benefits, become available. We believe that the Group has beensuccessful in implementing this strategy during 2006 and are encouraged by theimproved financial performance it delivered, together with the scope it offersfor enhanced shareholder returns in the future. Since the usual turn-down around Christmas and year-end, activity levels havereturned strongly in all our main markets, and trading performance has beenencouraging. We are confident about being able to report further improvements inthe Group's performance during 2007. John GordonChairman 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 givenbelow:- Revenues Operating Profit/(Loss)£' millions 2006 2005 2006 2005UK 81.3 61.1 12.2 8.3Germany 21.8 21.1 (1.9) (3.2)France 7.1 6.7 (0.5) (0.5)Spain 4.2 3.6 0.4 -Middle East* 10.3 7.5 2.5 2.7 ____ _____ ____ ____ 124.7 100.0 12.7 7.3 ==== ===== ==== ====* Middle East includes the results ofoperations in Bahrain, Qatar, SaudiArabia and the United Arab Emirates We have structured the Group so that each country of operation is viewed as aseparate reporting profit centre, supported by central Group service functions.Each operation has its own management team responsible for delivering agreedperformance targets. UK The UK remains our most important market, generating over 65% of Group revenuesin 2006. The acquisition of Panther Work Platforms Limited ("Panther"), KestrelPowered Access Limited ("Kestrel") and A.M.P. Access Limited ("AMP"), has givenus greater flexibility to direct current fleet and new capital investment tothose areas of our business that are best placed to serve the most buoyantend-customer sectors. Each of the acquired businesses, together with ourexisting business, Nationwide Access, continues to operate as separate brandswithin the market place. To help realise the benefits of operating a large "fluid fleet", we havedeveloped inter-company re-hire processes (the internal cross-hiring of assetsowned by one division but required in the short-term by the customers ofanother), which has improved asset utilisation across the UK group andcontributed some £1 million of margin improvement in the year. Overall UKrevenue was £81.3 million, an increase of 33% over the previous year, driven bythe acquisitions and increased utilisation of the combined fleets. The process of refreshing the fleet of Nationwide Access - seeking to removeolder, more expensive and lower-demand units, and replace these with equipmentmore suited to current demand patterns, commenced in 2006. By the end of theyear, Nationwide Access was operating with a fleet some 10% smaller than a yearago, but with an equivalent - or greater - revenue-generating capacity. Thiswill continue to assist margin improvement in the existing UK business goingforward. The combined effect of these actions has been an improvement in operatingprofits in the UK from £8.3 million in 2005 to £12.2 million in 2006, withoperating margins improving from 14% to 15%. We will continue to pursue the twin-track strategy in the UK of a major nationalbrand (Nationwide) focused largely on national accounts and major projects, andthe development of a regional network of businesses (such as Panther, Kestreland AMP) focusing more heavily on local service and maintenance sectors. In thecourse of 2007, we will complete the task of bringing all our UK businesses ontoa common IT platform, thereby easing the administrative burden of inter-companytrading, allowing faster response to customers, and enabling the production of awide range of comparable management information. The UK market continues to hold considerable potential for further growth and weare satisfied that the business, and its management, is in good shape to makethe most of these opportunities. Germany Our existing German business, Zooom, came into 2006 having undertaken a processof restructuring, re-engineering and re-invention in the previous twelve months,and it is pleasing that further financial progress has been made in the year,with the business making a significant reduction in operating losses. The German market has now started to show signs of recovery, particularly in thesecond half of the year, with demand levels stronger than for some considerabletime. Against this background, and benefiting from an improved cost base andbusiness process, Zooom was able to achieve full year revenue growth of 3% to£21.8 million (2005: £21.1 million) and a reduction in operating losses from£3.2 million in 2005 to £1.9 million in 2006. Staff retention levels haveimproved and this, in turn, has contributed to an enhanced service reputationand higher ratings in our regular, customer satisfaction surveys. The main focus for Zooom as it exited the year has been to ensure that webenefit from the strengthening market by seeking to improve pricing levels. Thisarea will remain a key focus throughout the year ahead. The outlook for our German operation was further strengthened by theacquisition, completed in December 2006, of the Gardemann group of companies("Gardemann"). The addition of Gardemann brings a further 1,750 rental units tothe Zooom fleet of 2,780 machines and almost doubles our German revenues.Through the acquisition, our combined exposure to the construction sector isreduced. Gardemann has been active in the powered access market since the earlySeventies and has developed a strong user base for truck-mounted platforms(typically used for maintenance activities), which have tended to benefit from aless pressured pricing environment than self-propelled platforms, which aretypically used in the construction sector. The creation of this larger German group will enable us to make more efficientuse of combined overheads, and strengthen our commercial position. The Germanbusiness will also move to a common IT systems platform during 2007 and thiswill provide a solid base for further growth in what we believe is a recoveringmarket environment. France Our French business reduced its operating losses marginally during the year,although the fact that the business is not yet profitable remains adisappointment. Revenues overall increased by 6% to £7.1 million (2005: £6.7 million), producingan operating loss of £0.5 million (2005: £0.5 million). Market conditions havebeen relatively benign, although illogical pricing behaviours continue to be anoccasional characteristic of this market. During the second half of the year, the number of depot locations was reducedfrom nine to six to provide the remaining sites with sufficientrevenue-generating scale to consistently cover their direct costs of operation. The French business has the resources and depot configuration required to movetowards profitability. We will hold the business at its current scale, and deferany further investment, until this has been achieved. Spain Our Spanish business has made good progress this year, taking advantage ofimproving market conditions to move from a break-even result in 2005, to anoperating profit of £0.4 million in 2006. This was achieved though a combinationof increased activity levels and an increase in average hire rates of around11%, which produced a revenue increase of 17% over the previous year to £4.2million (2005: £3.6 million). Our business is centred on two large-scale depot operations in Madrid and Murcia, with a satellite operation in Galicia, which allows us to emulate the market and cost profile of a niche regional player. Providing market conditions remain favourable, we anticipate further progress in2007. Middle East Our operations in the region generated strong revenue growth of 37% to £10.3million (2005: £7.5 million). This revenue growth was mainly driven by anincrease in our fleet numbers in the region, in response to strengthening marketdemand, from 450 machines at the start of the year, to 740 by the year-end. Thisfleet has mainly been provided from our existing European fleets andconsequently, we have had to bear all transport and duty costs within the year,a total of £0.5 million, which has depressed the profitability of the region to£2.5 million (2005: £2.7 million). The costs relating to these assets are"one-off" in nature and only incurred at the point the fleet size is increased. Our strategic review of this region, concluded in April 2006, gave us confidenceto invest sensibly in further development of the Middle-Eastern business, and weare currently increasing our fleet by a further 300 units. Ahead of this, wehave invested in improving our systems infrastructure and in boosting ourengineering and technical support resources to deal with increased demandlevels. We believe we have a strong management team, operational infrastructure andmarket presence in the region. This is being supported by substantial investmentin its revenue-generating capability and we would expect to see furtherfinancial progress in 2007. Future Developments (Extracted from the Operating and Financial Review) This is the second year in succession that we have been able to report solidprogress for the Group, with the past year witnessing the start of a transitionfrom a necessary period of internally-focused operational and balance sheetimprovement, to one where the fundamental strengths of the businesses can beused to our advantage in the different marketplaces. Our view, that thisbusiness has the ability to generate strong cash flows to underpin continuedgrowth and, at the same time, convert even modest revenue increases intoincremental margins, has been vindicated by the results of the year. However, westill have operations that produce a drag on our earnings, although the mostsignificant cause of this drag -our German operation - should improve itsperformance significantly over the coming years, following the acquisition ofthe Gardemann group of companies. This acquisition comes at a time when thelevel of demand for powered access in the German market appears to berecovering. Our UK acquisitions have proved, without exception, to be a strong addition tothe Group; not only for their financial performance, but also for the sharpcommercial skills, which they continue to demonstrate. Over the coming twelvemonths, the move towards standard systems, a better-configured fleet and commonreporting platforms, should increase our ability to enhance the performance ofour UK companies. With a strengthened market position in Germany and the UK, and further strategicinvestment in the Middle East, we believe that we are able to generate thenecessary momentum in the business to deliver an improved performance in 2007and enhance shareholder returns. Consolidated income statementFor the year ended 31 December 2006 2006 2005 £000 £000________________________________________________________________________________ Revenue 124,740 100,009Cost of sales (69,588) (58,652)________________________________________________________________________________Gross profit 55,152 41,357Operating expenses (42,487) (34,013)________________________________________________________________________________Operating profit 12,665 7,344Interest receivable 152 46Interest payable (5,070) (4,491)________________________________________________________________________________Profit before taxation 7,747 2,899Taxation on profit (892) (2,010)________________________________________________________________________________Profit after taxation 6,855 889________________________________________________________________________________ Earnings per ordinary share- basic 18.09p 2.40p- diluted 17.67p 2.38p All of the Group's trading activities relate to continuing operations. Consolidated balance sheetAs at 31 December 2006 2006 2005 £000 £000________________________________________________________________________________AssetsNon-current assetsIntangible assets 3,399 1,107Goodwill 32,920 -Property, plant and equipment 187,102 143,292________________________________________________________________________________ 223,421 144,399Current assetsInventories 1,556 749Trade and other receivables 32,099 23,406Financial assets - derivative financial instruments 323 -Cash and cash equivalents 10,349 7,980________________________________________________________________________________ 44,327 32,135LiabilitiesCurrent liabilitiesFinancial liabilities- borrowings (24,874) (14,162)- derivative financial instruments - (9)Trade and other payables (37,039) (15,879)Current tax liabilities (4,790) (1,879)________________________________________________________________________________ (66,703) (31,929)________________________________________________________________________________Net current (liabilities)/assets (22,376) 206________________________________________________________________________________Non-current liabilitiesFinancial liabilities - borrowings (84,449) (55,514)Deferred tax liabilities (17,703) (12,028)Other non-current liabilities (4,645) -________________________________________________________________________________ (106,797) (67,542)________________________________________________________________________________Net assets 94,248 77,063________________________________________________________________________________ Shareholders' equityOrdinary shares 407 370Share premium 79,787 70,449Shares to be issued 1,688 -Capital redemption reserve 4 4Other reserves (414) (431)Retained earnings 12,776 6,671________________________________________________________________________________Total equity 94,248 77,063________________________________________________________________________________ Group cash flow statementFor the year ended 31 December 2006 2006 2005 £000 £000________________________________________________________________________________Cash flows from operating activities:Profit after taxation 6,855 889Taxation charge 892 2,010Net interest expense 4,918 4,445Amortisation and depreciation 25,664 22,428Gain on sale of plant, property and equipment (283) (307)Other non-cash movements 650 178Net (increase)/decrease in working capital (1,810) 1,582________________________________________________________________________________Cash generated from operations 36,886 31,225________________________________________________________________________________Net interest paid (4,237) (4,852)Taxation paid (3,045) (1,035)________________________________________________________________________________Net cash generated from operating activities 29,604 25,338________________________________________________________________________________Cash flows from investing activities:Acquisition of subsidiaries (net of cash acquired) (24,574) -Proceeds from sale of subsidiary - 2,665Proceeds from sale of property, plant and equipment 6,862 4,113Purchase of property, plant and equipment (9,886) (1,657)________________________________________________________________________________Net cash (used by)/generated from investing activities (27,598) 5,121________________________________________________________________________________Cash flows from financing activities:Drawdown/(repayment) of loans 13,538 (18,220)Repayment of principal under hire purchase agreements (12,973) (11,802)Issue of loan notes 1,400 -Equity dividends paid (1,421) -Proceeds from ordinary shares issued 8 37________________________________________________________________________________Net cash generated from/(used by) financing activities 552 (29,985)________________________________________________________________________________Net increase in cash and cash equivalents beforeexchange differences 2,558 474Effects of exchange rates (189) (28)________________________________________________________________________________Net increase in cash and cash equivalents after exchangedifferences 2,369 446________________________________________________________________________________Cash and cash equivalents at start of period 7,980 7,534________________________________________________________________________________Cash and cash equivalents at end of period 10,349 7,980________________________________________________________________________________ Shareholders' funds and statement of changes in equity For the year ended 31 December 2006 Ordinary Share Shares Capital Translation Cash flow Net Retained Total shares premium to be redemption reserve hedge investment earnings £'000 £'000 £'000 issued reserve £'000 reserve hedge £'000 £'000 £'000 £'000 reserve £'000 _____________________________________________________________________________________________________________Balance at 1 January 2006 370 70,449 - 4 (2,232) (9) 1,810 6,671 77,063Profit for the year - - - - - - - 6,855 6,855Share based payments - - - - - - - 383 383Deferred tax movement on share based payments - - - - - - - 288 288Cash flow hedges - fair value gains in the period - - - - - 332 - - 332Shares issued 37 9,338 - - - - - - 9,375Shares to be issued (i) - - 1,688 - - - - - 1,688Dividends paid in the period - - - - - - - (1,421) (1,421)Currency translation differences - - - - (1,843) - 1,528 - (315)_____________________________________________________________________________________________________________Balance at 31 December 2006 407 79,787 1,688 4 (4,075) 323 3,338 12,776 94,248_____________________________________________________________________________________________________________ (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. For the year ended 31 December 2005 Ordinary Share Capital Translation Cash flow Net Retained Total shares premium redemption reserve hedge investment earnings £'000 £'000 £'000 reserve £'000 reserve hedge £'000 £'000 £'000 reserve £'000 _____________________________________________________________________________________________________________Balance at 1 January 2005 370 70,412 4 (841) - - 5,455 75,400Profit for the year - - - - - - 889 889Share based payments - - - - - - 178 178Deferred tax movement on share based payments - - - - - - 149 149 Cash flow hedges - fair value losses in the period - - - - (9) - - (9)Proceeds from shares issued - 37 - - - - - 37Currency translation differences - - - (1,391) - 1,810 - 419_____________________________________________________________________________________________________________Balance at 31 December 2005 370 70,449 4 (2,232) (9) 1,810 6,671 77,063_____________________________________________________________________________________________________________ Notes 1. Reconciliation of net cash flow movement to movement in net debt 2006 2005 £000 £000________________________________________________________________________________ Net increase in cash 2,369 446(Inflow)/outflow from (increase)/decrease in debt (18,543) 30,022________________________________________________________________________________Change in net debt resulting from cash flows (16,174) 30,468________________________________________________________________________________Non-cash items:New hire purchase and finance lease agreements (22,629) (5,374)Currency translation differences on cash and net debt 1,525 2,219________________________________________________________________________________Movement in net debt in the period (37,278) 27,313Net debt at 1 January (61,696) (89,009)________________________________________________________________________________ Net debt at 31 December (98,974) (61,696)________________________________________________________________________________ 2. Primary segmental analysis - geographical segmentsYear ended 31 December 2006 ________________________________________________________________________________ UK Germany France Spain Middle Group £'000 £'000 £'000 £'000 East £'000 £'000________________________________________________________________________________Revenue 81,342 21,799 7,054 4,200 10,345 124,740________________________________________________________________________________Operatingprofit/(loss) 12,176 (1,940) (493) 372 2,550 12,665Interestreceivable 152Interestpayable (5,070)________________________________________________________________________________Profit beforetaxation 7,747Taxation onprofit (892)________________________________________________________________________________Profit for theyear aftertaxation 6,855________________________________________________________________________________ Total assets 138,449 83,657 16,017 12,435 17,190 267,748 Totalliabilities (133,673) (32,015) (4,609) (2,396) (807) (173,500)________________________________________________________________________________Net assets 4,776 51,642 11,408 10,039 16,383 94,248________________________________________________________________________________Capitalexpenditure 19,831 8,246 1,754 1,459 4,239 35,529________________________________________________________________________________Depreciation 14,386 5,332 1,887 1,248 2,114 24,967________________________________________________________________________________Amortisation ofintangibleassets 424 216 37 10 10 697________________________________________________________________________________ Notes:The assets and depreciation charge shown for the Middle East includes rentalequipment owned by the UK operation, but which is used by and costed to theMiddle East operation. The inclusion of the assets and depreciation charge inthe Middle East more accurately reflects the commercial nature of thearrangement. The information disclosed for the UK operation, includes centralised Groupcosts, assets and liabilities which may relate to the operation and financing ofoverseas subsidiaries. 2. Primary segmental analysis - geographical segmentsYear ended 31 December 2005 UK Germany France Spain Middle Group £'000 £'000 £'000 £'000 East £'000 £'000________________________________________________________________________________Revenue 61,106 21,153 6,661 3,614 7,475 100,009________________________________________________________________________________Operatingprofit/(loss) 8,313 (3,130) (521) (27) 2,709 7,344Interest receivable 46Interest payable (4,491)________________________________________________________________________________Profit beforetaxation 2,899Taxation on profit (2,010)________________________________________________________________________________Profit for the yearafter taxation 889________________________________________________________________________________ Total assets 86,250 40,600 19,050 11,732 18,902 176,534 Total liabilities (86,996) (6,381) (4,495) (960) (639) (99,471)________________________________________________________________________________Net(liabilities)/assets (746) 34,219 14,555 10,772 18,263 77,063________________________________________________________________________________Capital expenditure 4,785 761 2,479 38 127 8,190________________________________________________________________________________Depreciation 12,095 5,068 1,824 1,313 1,690 21,990________________________________________________________________________________Amortisation ofintangible assets 209 174 22 23 10 438________________________________________________________________________________ 3. Acquisition of subsidiary companiesDuring the year the Group acquired four businesses as detailed below: (i) Panther Work Platforms Limited (Panther)On 14 February 2006, the Group acquired 100% of the share capital of PantherWork Platforms Limited and its subsidiaries. The initial consideration was £7.0 million, with £5.0 million being satisfied incash and £2.0 million being satisfied by the issue of 865,800 new ordinaryshares of 1p each in Lavendon Group plc ('Ordinary Shares'). Additionalconsideration of between £0.8 - £3.1 million is payable in cash by LavendonGroup plc (Lavendon) dependent upon Panther's financial performance over the twoyears ending on 31 January 2008. (ii) Kestrel Powered Access Limited (Kestrel)On 21 February 2006, the Group acquired 100% of the share capital of KestrelPowered Access Limited. The initial consideration was £4.3 million, satisfied in cash. Additionalconsideration of between £0.6 - £2.6 million is payable in cash by Lavendondependent upon Kestrel's financial performance over the two years ending on 31January 2008. (iii) A.M.P. Access Limited (AMP)On 20 June 2006, the Group acquired 100% of the share capital of A.M.P. AccessLimited. The initial consideration was £3.0 million, satisfied in cash. Additionalconsideration of between £0.3 - £2.6 million is payable in cash by Lavendondependent upon AMP's financial performance over the two years ending 31 May2008. (iv) MVE Management GmbH (Gardemann)On 13 December 2006, the Group acquired 100% of the share capital of M.V.E.Management GmbH and its subsidiary companies. The consideration paid on completion was €22.4 million in cash plus 2,750,000new ordinary shares of 1p each in Lavendon Group plc. A further 630,322 ordinaryshares of 1p each in Lavendon Group plc were issued on 28 February 2007. Theissues of shares represent a consideration of €11.0 million and deferredconsideration of €2.5 million respectively, being calculated on Lavendon'saverage closing share price for the five days ended 7 November 2006 of 267.8pence per share. Additional cash consideration of €4.5 million is payable after12 months and €9.5 million is payable after 24 months. The effective date of the acquisition was 31 December 2006, accordingly notrading has been recorded in the current year results. 3. Acquisition of subsidiary companies Panther Kestrel AMP Gardemann Total £'000 £'000 £'000 £'000 £'000Cost of investmentCash on acquisition 5,000 4,350 2,960 15,023 27,333Shares issued at acquisition 2,000 - - 7,366 9,366Loan Notes 800 600 - - 1,400Deferred Consideration 2,225 900 980 9,426 13,531Deferred Consideration inshares (at fair value) - - - 1,688 1,688Acquisition Costs 272 163 195 1,280 1,910________________________________________________________________________________ Total cost 10,297 6,013 4,135 34,783 55,228________________________________________________________________________________ Fair value of assetsacquired Non-current assetsIntangible assets 17 2 - 15 34Property, plant and equipment 14,264 3,261 5,904 17,891 41,320Current assetsInventories - 25 107 546 678Trade and other receivables 2,428 569 1,104 2,471 6,572Cash and cash equivalents 1,451 218 853 3,386 5,908Current liabilitiesFinancial liabilities -Borrowings (2,016) (586) (1,117) (2,935) (6,654)Trade and other payables (6,961) (432) (981) (2,046) (10,420)Current tax liabilities (342) (404) (160) (2,786) (3,692)Non-current liabilitiesFinancial liabilities -Borrowings (4,225) - (2,521) - (6,746)Deferred tax liabilities (1,871) (581) (476) (4,407) (7,335)________________________________________________________________________________ Fair value of net assetsacquired 2,745 2,072 2,713 12,135 19,665________________________________________________________________________________ Goodwill and intangibles 7,552 3,941 1,422 22,648 35,563________________________________________________________________________________ Split as follows: Goodwill 6,883 3,546 1,270 21,221 32,920________________________________________________________________________________ Intangible assetsBrand name 108 150 137 303 698Customer relationships 561 209 - 1,124 1,894Long term hire - 7 - - 7Non-compete agreements - 29 15 - 44________________________________________________________________________________ Total intangibles recognisedat acquisition 669 395 152 1,427 2,643________________________________________________________________________________ The attributable fair values are provisional for AMP and Gardemann. 3. Acquisition of subsidiary companies The fair value adjustments recorded in arriving at the assets abovewere as follows: Panther Kestrel AMP Gardemann Total £'000 £'000 £'000 £'000 £'000 Adjustments to property, plantand equipment tocomply with Lavendon Groupaccounting policy 1,113 387 (62) 10,238 11,676Valuation of pensions inaccordance with IAS 19 - - - (67) (67)Provision for corporation tax (288) - (50) - (338)Adjustment to hire purchasecreditor (81) 15 - - (66)Deferred tax on fair valueadjustments and intangibleassets (709) (252) (198) (4,407) (5,566)________________________________________________________________________________ 35 150 (310) 5,764 5,639________________________________________________________________________________ Profit before tax generatedfor the group sinceacquisition to 31 December2006 2,187 495 248 - 2,930________________________________________________________________________________ Had the acquisitions taken place on 1 January 2006 then reported revenues andprofit before interest and tax for each acquisition would be as follows: £'000 £'000 £'000 £'000 £'000 Revenue 13,912 3,159 4,848 22,431 44,350________________________________________________________________________________ Profit before interest and tax 2,286 518 407 3,965 7,176________________________________________________________________________________ 4. The consolidated accounts of the Group are prepared under the historicalcost convention and in accordance with those parts of the Companies Act 1985that are applicable to listed public companies, and applicable InternationalFinancial Reporting Standards in the United Kingdom. 5. Earnings per share calculations are based on: a.the profit for the year, after deducting taxation, of £6,855,000 (2005: £889,000); and b.the weighted average of 37,932,369 ordinary shares in issue during the year (2005: 37,021,112) For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume issue of all dilutive potential ordinary shares,based on the average market price of the Company's shares of £2.800 (2005:£1.844). The effect of this dilution is to increase the weighted average numberof ordinary shares to 38,824,734 (2005: 37,370,394). 2006 2005 Earnings per Earnings per Profit share Profit share £000 pence £000 pence________________________________________________________________________________Profit / earnings per share 6,855 18.09 889 2.40________________________________________________________________________________ 6. The financial information set out in this announcement does notconstitute the Group statutory accounts for the year ended 31 December 2006 or31 December 2005, but is derived from these accounts. The statutory accounts forthe Group for the year ended 31 December 2006 and 2005 were reported on by theauditors without qualification and such reports did not contain any statementunder section 237(2) or (3) of the Companies Act 1985. The accounts for 2005have been delivered to the Registrar of Companies and those for 2006 will bedelivered in due course. 7. The Annual General Meeting of Lavendon Group plc will be held atDresdner Kleinwort, 30 Gresham street, London EC2P 2XY on 25 April 2007 at 10:30. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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