4th Mar 2008 07:02
Lavendon Group PLC04 March 2008 4th March 2008 Lavendon Group plc ("the Company" or the "Group") Preliminary Results for the year ended 31st December 2007 Lavendon Group plc, Europe's market leader in the rental of powered accessequipment, today announces its Preliminary Results for the year ended 31stDecember 2007. Financial highlights • Revenues £186.0m (2006: £124.7m), increase of 49% • EBITDA £64.1m (2006: £38.3m), increase of 67% • Operating profit* £28.7m (2006: £12.7m), increase of 126% • Profit before tax £21.4m (2006: £7.7m), increase of 178% • Earnings per share* 42.11p (2006: 18.09p), increase of 133% • Dividend for year proposed at 9p (2006: 4.5p), increase of 100% • Cash generated from operating activities £48.6m (2006: £29.6m), increase of 64% • EBITDA and Operating Profit margins improved considerably Operational highlights • Broad geographic spread across the Group achieved: UK; Germany; Spain; France, Middle East; and Belgium • Merger of Gardemann and Zooom completed - significant synergies delivered • Acquisition of the Platform Company for £46m announced today • Acquisition of DK Rental for £64.3m in December 2007 - entry into Belgium, strengthened market positions in France and Spain • UK market position strengthened during period through acquisitions of: Rise Hire Ltd (UK); Wizard Workspace Ltd (UK) Higher Platforms Group Ltd (UK) • Market conditions remain favourable * Prior to exceptional items John Gordon, Chairman, said: "The Company has delivered an excellent financial performance in 2007 withstrong profit growth and an exceptional cash performance. Most importantly, 2007was a year in which strong foundations have been laid for future growth. Wehave a first rate management team and Group systems which will strengthenorganic growth and which has enabled further acquisitions, one of which has beenannounced today. "We now have strong market positions across a wide geographical reach includingthe Middle East, France, Spain, UK, Belgium and Germany and we are profitable inall territories for the first time. "The drivers for the use of powered access equipment remain as compelling asever. Trading since the year-end is in line with our expectations and whilst weare aware of perceived uncertainty about economic conditions in the UK, we haveseen no impact on our end user markets. As such the Board looks to 2008 withconfidence." For further information please contact:Lavendon Group plcKevin Appleton, Chief Executive On 4 March T: +44(0)207 831 3113Alan Merrell, Group Finance Director Thereafter T: +44(0)1455 558874 Financial DynamicsJonathon Brill/Billy Clegg/Caroline Stewart T: +44(0)207 831 3113 CHAIRMAN'S STATEMENT Overview The Group has made significant progress during the year, with revenues, profits,margins and earnings per share all growing strongly. Lavendon is firmlyestablished as the European market leader in the rental of powered accessequipment. Whilst acknowledging buoyant market conditions, this improvement in theperformance of the Group stems from the development, in recent years, of a solidoperational base capable of delivering enhanced financial performance fromorganic investment, whilst at the same time, making and integratingacquisitions, both in the UK and overseas, to strengthen the Group's marketposition, management pool and operational scale. This approach has enabled theGroup's financial results to improve, and also provided the necessary managementand operating infrastructure to deliver further growth and enhanced returns inthe coming years. The improvement in the trading performance is also reflected in the Group's cashflows, which continue to strengthen and comfortably support the increased levelof indebtedness following the substantial investment and acquisition programmeundertaken during the year. These strong cash flows will continue to provide thenecessary financial flexibility to support the Group's future development. Financial Results Revenues for the year increased by 49% to £186.0 million (2006: £124.7 million),with operating profits, prior to exceptional costs, increasing to £28.7 million(2006: £12.7 million) and margins improving to 15.4% (2006: 10.2%). Operatingprofits after exceptional costs were £26.2 million (2006: £12.7 million) andmargins were 14.1% (2006: 10.2%). The exceptional costs of £2.5 million (2006: £nil) relate to the integrationcosts incurred on the merger of the Group's German operations and the costs ofmerging the Nationwide and Wizard businesses in the UK. Net interest costs increased to £7.2 million (2006: £4.9 million) following theGroup's investment programme during the year, which included four acquisitions.Whilst interest costs increased, the improved trading performance enabled theGroup's profit before tax and exceptional costs to increase by £13.7 million to£21.4 million (2006: £7.7 million). Profit before tax after exceptional costsincreased by 145% to £18.9 million (2006: £7.7 million). The effective tax rate for the year was 21%, higher than the rate of 12% in2006, but still below the UK's headline rate of 30%, mainly due to benefitsavailable from tax losses in the Group's European operations. Following thecharge for taxation, the Group's profit after tax more than doubled to £15.1million (2006: £6.9 million). Earnings per share, before exceptional costs,increased 133% to 42.11 pence (2006: 18.09 pence) despite a 10% increase in theaverage number of shares in issue. Earnings per share after exceptional costs,almost doubled to 36.10 pence (2006: 18.09 pence). Earnings before interest, tax, depreciation and amortisation (EBITDA), beforeexceptional costs, increased by 67% to £64.1 million (2006: £38.3 million), withmargins improving to 34% (2006: 31%). After exceptional costs, EBITDA increasedby 61% to £61.6 million (2006: £38.3 million), and margins improved to 33%(2006: 31%). Cash generated from operations increased by 58% to £58.5 million(2006: £36.9 million) and after payment of interest and taxation, net cashgenerated from operating activities increased by 64% to £48.6 million (2006:£29.6 million). A total of £50.0 million was invested during the year in the maintenance andexpansion of the Group's rental fleet and operating infrastructure. In addition,four acquisitions were completed for a total consideration of £77.2 million,satisfied with £64.2 million in cash (paid or deferred) and £13.0 million inshares. The combination of this investment activity increased the Group's netdebt to £185.7 million at the year end (2006: £99.0 million), with correspondingdebt to equity and debt to pre-exceptional EBITDA ratios - which reflect thecost of acquiring DK Rental in December 2007, but none of the associated profits- of 156% and 2.90 times respectively (2006: 105% and 2.58 times respectively).The debt to pre-exceptional EBITDA ratio calculated on a pro-forma basis(assuming 12 months EBITDA contribution from DK Rental) is 2.45 times, a smallimprovement over 2006. These debt levels are well supported by the Group'sstrong cash flows and significant additional credit lines are available tosupport the future growth of the business. Dividend Due to the considerable improvement in the Group's financial performance, anincreased final dividend of 6.25 pence per share is being proposed (2006: 3.00pence), making the total dividend for the year 9.00 pence per share, an increaseof 100 % over 2006 (2006: 4.50 pence). The final dividend, if approved at theCompany's Annual General Meeting on 23 April 2008, will be paid on 6 May 2008 toshareholders on the register at the close of business on 25 March 2008. Acquisitions During the year, the Group completed three acquisitions in the UK - Rise HireLimited, Wizard Workspace Limited and Higher Platforms Group Limited - for anaggregate consideration of £12.9 million, payable in cash. The acquisition ofRise Hire Limited enabled the Group to move into the fast-growing market for therental of van-mounted platforms, whilst Higher Platforms Group Limited offeredan excellent addition to the Group's network of more locally focussedbusinesses. Wizard Workspace Limited, due to its similar fleet and customer mix,has been fully integrated into the UK's largest operation, Nationwide Access. In December 2007, the Group completed its largest acquisition to date, that ofthe DK Rental group of companies, with operations in Belgium, France and Spain.The total consideration was £64.3 million, payable in a combination of cash andshares. This acquisition not only significantly strengthens our existing marketposition and operational capabilities in France and Spain, but also enables theGroup to enter the Belgian powered access rental market as market leader. As aconsequence of this, and the prior year acquisition of Gardemann, we now havewell established profitable businesses and highly experienced management teamsin each of our European markets, which represents a marked development in theresilience of our Group. Today, we have also announced the proposed acquisition of The Platform Company(Holdings) Limited in the UK, for a total consideration of £46.1 million,payable in a combination of cash and shares. This acquisition increases thescale of our UK operation and offers considerable scope for cost synergies. Itwill also provide an opportunity for the Group to reduce its planned capitalexpenditure requirements for 2008, as the acquisition will deliver significantadditional fleet capacity. Completion of this acquisition, subject toshareholder approval, is expected by the end of March 2008. Summary The main drivers behind the use of powered access equipment - safety, efficiencyand cost effectiveness remain as compelling as ever, underpinned by theever-improving awareness and adherence to the Work At Height legislation whichis present throughout the European Union. These market fundamentals have contributed to the buoyant levels of demand thatthe Group has enjoyed throughout the year; particularly evident during the firstquarter of the year, where the mild winter conditions did not suppress activitylevels to the extent traditionally experienced. Through a combination of organicgrowth and acquisitions, the Group has been able to increase its revenuessignificantly during this period and, through its operating leverage, convertthis revenue growth into attractive incremental profit margins. To support this rate of growth in the scale of the business and to ensure thatthese performance improvements are sustainable, we have improved the depth andquality of our management, through recruitment, acquisition and internaldevelopment during the year, as well as making the necessary resources availableto support further development of our IT and operational capabilities. We believe that this process of building scale through both organic investmentand acquisition, and then creating operational leverage through sound businessprocesses and management, can continue to provide the necessary scope to deliverconsiderable performance improvement. Having increased our size significantlythrough a number of acquisitions in the last 18 months, our focus will be on theintegration of these businesses, realising the benefits of increased scale anddelivering strong shareholder returns. Trading since the year-end is in line with our expectations and whilst we arealert to the current economic conditions, we have experienced no noticeableimpact on our end user markets and are confident of reporting further progressin the year ahead. 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 2007 2006 2007 2006 UK 105.9 81.3 17.1 12.2Germany 48.5 21.8 5.2 (1.9)France and Belgium 8.6 7.1 0.1 (0.5)Spain 6.5 4.2 1.2 0.4Middle East* 16.5 10.3 5.1 2.5 186.0 124.7 28.7 12.7* Middle East includes theresults of operations inBahrain, Qatar, Saudi Arabiaand the United Arab Emirates All figures shown in the above table are before exceptional costs 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 continues to be our largest market, although its share of total Grouprevenues reduced from around 65% in 2006 to 57% in the year, as a result of theexpansion of the Group's overseas operations. During the year we completed the acquisitions of Rise Hire Limited (April),Wizard Workspace Limited (June) and Higher Platforms Group Limited (August).Rise Hire has moved the business into a leading position in the developingmarket for the rental of van-mounted work platforms, which are used frequentlyby local authorities and their contractors to undertake streetlight and signmaintenance. Wizard Workspace occupied a similar, although smaller scale,market position to that of our UK legacy business, Nationwide Access, and hasnow been fully integrated into the Nationwide Access network. Higher Platformsis a well-established business operating in a small number of locations, andrepresented an excellent fit with our network of more locally focusedbusinesses. The newly acquired businesses immediately benefited from our establishedinter-company re-hire process (whereby our operations have access to each of theother's fleets when they cannot supply the machine requested themselves). Thisprocess has contributed to increased asset utilisation throughout the year.Asset utilisation has been further enhanced by the replacement of poorlyutilised fleet with new, high demand, equipment types through our on-going capexprogramme. Overall UK revenues increased by 30% to £105.9 million (2006: £81.3 million),with like for like growth of over 11%. Operating profits increased by 40% to£17.1 million (2006: £12.2 million) with margins improving from 15% to 16%. Our energies are now focused on finalising the process of bringing our acquiredregional businesses (Panther, Kestrel, AMP and, now, Higher Platforms) onto ourcommon IT platform and, in the course of 2008, aligning the identity of thesebusinesses with a new overall Group corporate identity. The acquisition,announced today and subject to shareholder approval, of The Platform Company(Holdings) Limited, will give us the scope to conclude our drive for enhanceddepot scale and improved margins in the UK going forward. Following thisacquisition we will continue to strive for an ever-clearer focus on deliveringan excellent, reliable service for our customers, ensuring that the LavendonGroup of companies remain their aerial access supplier of choice. We believe that the outlook for the UK access rental market remains favourable;with use of powered access in the UK relative to the US and, even, some mainlandEuropean countries, still offering scope for market growth through substitutionand increased usage penetration. Our UK business is well positioned to benefitfrom these market conditions and we are anticipating further progress being madein the year ahead. Germany Our German businesses (both Zooom, our original business, and Gardemann,acquired in December 2006) have made considerable progress in the year. Arecovering German construction sector, together with a strengthened marketposition has facilitated utilisation improvements and, more importantly, pricingincreases to drive an overall revenue growth of 123% to £48.5 million (2006:£21.8 million), of which some 14% has been like-for-like growth. This strong revenue growth combined with a tightly controlled, and largelyfixed, cost base, has returned the business to profit, converting an operatingloss of £1.9 million in 2006 to a profit of £5.2 million in 2007 with anoperating margin of 11%. In the final quarter of the year, we announced our intention to merge the twooperations, with effect from 1 January 2008, with the businesses moving onto acommon IT platform. This merger is expected to deliver annual cost savings ofaround £2.5 million, at a one-off cost of £2.2 million. The new, combined,business will retain the Gardemann name, although in a format aligned with ournewly developed Lavendon corporate identity. We believe that the German market offers sustainable demand for powered accessplatforms, which is matched by current market capacity. German industrial andcommercial construction, as well as repair and maintenance activity, hascontinued to recover during the year, and independent forecasts are for thisprogress to continue. However, irrespective of the macro economic outlook, wehave considerable scope to realise synergies in our cost base, following themerger of our businesses, and we expect this to underpin performanceimprovements as we go through 2008. France and Belgium Zooom, our existing French business, saw its revenues decline by 4% to £6.8million (2006: £7.1 million), principally as a result of reducing the number ofdepot locations at the end of 2006 in order to reduce the cost base. Theserevenues were supplemented by the acquisition of DK Rental Belgium in December2007, which added £1.8 million to the revenue for the year. A combination ofthese factors, has enabled the business to generate a profit of £0.1 million forthe year, compared to a loss of £0.5 million in 2006. The historic issue with our French business has been one of depot operatingscale, which has been an intractable problem to solve without adding morecapacity to a market that has only recently been showing signs of recovery fromearlier oversupply. With the acquisition of DK Rental in France and Belgium inDecember 2007, we have taken a significant step towards resolving this issue forthe future. DK Rental operates a fleet of around 1,700 machines through anetwork of five depots - taking our total fleet in the region to 2,600. We arein the process of consolidating two depot locations in France and redeployingfleet within the region. This will have the effect of reducing the combinedcost base and should move the region into profitability. The acquisition of DK Rental has also strengthened our management depth in theregion and brought with it some twenty years' experience of operating in theFrench and Belgian markets. The market outlook, for the sectors on which we depend, is forecast to berelatively positive. We now have a strong market position in Belgium and thenorth and east of France. We are confident that this larger scale businessgives us a good basis from which to move towards delivering acceptable returnsand, thereafter, a solid platform for future growth. Spain Revenues in our Spanish business grew by 55% to £6.5 million (2006: £4.2million), of which some 17% was attributable to organic growth in our legacybusiness, with the balance being provided from the acquisition of DK Rental inNovember 2007. This combination of organic and acquisitive growth allowed us toachieve operating profits of £1.2 million (2006: £0.4 million), representing amargin of 19% (2006; 9%). The acquisition of DK Rental added two large-scale depots in the industrialheartland of Catalonia, extending our geographic coverage in Spain to fivedepots and increasing our rental fleet to over 1,400 machines. Through theacquisition, the management team in the region has been strengthened and this,combined with the increased scale, gives us a solid base from which to considerfurther expansion opportunities. During 2008, the two Spanish companies will bebrought onto a common IT system, and the corporate identity will be aligned withthe new Group model. The short-term outlook for the Spanish market is somewhat uncertain, as therehave been a number of years of significant capacity addition. However, themarket is believed to be the second largest market for powered access equipmentrental in Europe (after the UK) and its medium-term prospects remain attractive. Our expanded and improved Spanish business gives us the opportunity to benefitmore significantly from growth in this market in the future. Middle East The region's revenues increased by 60% to £16.5 million (2006: £10.3 million)after absorbing an 8% decline in the US dollar, to which local currencies arepegged. The region's revenues have now more than doubled in less than two years.This revenue growth was driven by the continued redeployment of used equipmentfrom our European fleets into the region, as well as by exceptionally strongdemand from end users to purchase new and used access equipment. Our fleet, byyear-end, had reached 940 units, up from 740 a year ago and from 450 two yearsago. This strong revenue growth enabled operating profits to increase by 96% to £5.1million (2006: £2.6 million), with an operating margin of 31% (2006: 25%). Theseprofits were achieved after absorbing transport, clearance and duty costs of£0.4 million relating to the transfer of ex-European fleet equipment into theregion. We remain confident about prospects for our Middle East business, especially inlight of the extended period of high oil prices. The continued development ofour operations outside of the UAE, together with the number of long-terminfrastructure projects across the region, should ensure that demand for poweredaccess equipment remains strong for the foreseeable future. The region has astrong management team and a solid operational base, which will be supported byadditional significant investment during 2008. Future Developments(Extracted from the Operating and Financial Review) This is now the third year in succession when we have been able to report solidfinancial progress. Through acquisitions made in Belgium, France, Germany and Spain we havestrengthened our senior management team and, we believe, eliminated many of theroot causes of underperformance in our continental European businesses. Thisabsence of "drag" from underperforming businesses should help underpin theGroup's financial performance over the coming years and, to a degree, provideshelter from any economic turbulence in any one of our operating territories. Our UK business has continued to demonstrate an ability to convert growingrevenues, organic and through acquisition, into improvements in margin. However,we believe there is scope to extract further synergies and efficiencies over thecoming years to improve the financial performance of the Group's largestbusiness, and that this potential should offer some mitigation against adverseeconomic circumstances should they arise. This will be clearly facilitated bythe proposed acquisition of The Platform Company (Holdings) Limited. In summary, we have a Middle East business which is showing spectacular growthin revenues and earnings, a solid and improving UK business with scope toimprove margins and three businesses in continental Europe which are now of ascale to contribute strongly to the overall development of the Group's financialperformance as well as providing a solid base for integration of futureacquisition opportunities. In the next two years, we will harmonise the "look and feel" of the businesswith a new corporate identity, aimed at supporting development of a common ethosacross the Group companies. We will also focus on implementing an enhanced ITsystem into both our legacy and acquired businesses, to ensure we can maximisethe operating efficiencies available from the increased scale of the Group. Consolidated income statementFor the year ended 31 December 2007 Unaudited Audited 2007 2006 £000 £000 Revenue 186,000 124,740 Cost of sales (99,403) (69,588)Gross profit 86,597 55,152Operating expenses before exceptional expenses (57,908) (42,487)Exceptional operating expenses (2,508) -Total operating expenses (60,416) (42,487)Operating profit 26,181 12,665Interest receivable 323 152Interest payable (7,570) (5,070)Profit before taxation 18,934 7,747Taxation on profit (3,882) (892)Profit after taxation 15,052 6,855 Earnings per ordinary share - basic 36.10p 18.09p - diluted 35.58p 17.67p All of the Group's trading activities relate to continuing operations. Consolidated balance sheetAs at 31 December 2007 Unaudited Audited 2007 2006 £000 £000AssetsNon-current assetsIntangible assets 9,967 3,399Goodwill 72,412 32,920Property, plant and equipment 274,893 187,102 357,272 223,421Current assetsInventories 3,576 1,556Trade and other receivables 48,339 32,099Financial assets - derivative financial instruments 216 323Cash and cash equivalents 16,721 10,349 68,852 44,327LiabilitiesCurrent liabilitiesFinancial liabilities - borrowings (41,027) (24,874)Trade and other payables (69,971) (37,039)Current tax liabilities (7,808) (4,790) (118,806) (66,703)Net current liabilities (49,954) (22,376)Non-current liabilitiesFinancial liabilities - borrowings (161,420) (84,449)Deferred tax liabilities (26,503) (17,703)Other non-current liabilities - (4,645) (187,923) (106,797)Net assets 119,395 94,248 Shareholders' equityOrdinary shares 440 407Share premium 95,347 79,787Shares to be issued - 1,688Capital redemption reserve 4 4Other reserves (3,362) (414)Retained earnings 26,966 12,776Total equity 119,395 94,248 Group cash flow statementFor the year ended 31 December 2007 Unaudited Audited 2007 2006 £000 £000Cash flows from operating activities:Profit after taxation 15,052 6,855Taxation charge 3,882 892Net interest expense 7,247 4,918Amortisation and depreciation 35,436 25,664Gain on sale of property, plant and equipment (1,087) (283)Other non-cash movements 511 650Net increase in working capital (2,538) (1,810)Cash generated from operations 58,503 36,886Net interest paid (7,020) (4,237)Taxation paid (2,837) (3,045)Net cash generated from operating activities 48,646 29,604Cash flows from investing activities:Acquisition of subsidiaries (net of cash acquired) (47,554) (24,574)Proceeds from sale of property, plant and equipment 7,014 6,862Purchase of property, plant and equipment (21,663) (9,886)Net cash used by investing activities (62,203) (27,598)Cash flows from financing activities:Drawdown of loans 42,303 13,538Repayment of principal under hire purchase agreements (20,445) (12,973)(Repayment)/issue of loan notes (1,000) 1,400Equity dividends paid (2,395) (1,421)Proceeds from ordinary shares issued 930 8Net cash generated from financing activities 19,393 552Net increase in cash and cash equivalents before exchange differences 5,836 2,558Effects of exchange rates 536 (189)Net increase in cash and cash equivalents after exchange differences 6,372 2,369Cash and cash equivalents at start of period 10,349 7,980Cash and cash equivalents at end of period 16,721 10,349 Shareholders' funds and statement of changes in equity For the year ended 31 December 2007 (Unaudited) 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 407 79,787 1,688 4 (4,075) 323 3,338 12,776 94,2482007Profit for the year - - - - - - - 15,052 15,052Share based payments - - - - - - - 511 511Tax in relation to share - - - - - - - 1,022 1,022based paymentsCash flow hedges - - - - - (107) - - (107)- fair value losses inthe yearDeferred tax on cash - - - - - (15) - - (15)flow hedgesShares issued 27 13,878 - - - - - - 13,905Shares to be issued (i) 6 1,682 (1,688) - - - - - -Dividends paid in the - - - - - - - (2,395) (2,395)yearCurrency translation - - - - 2,547 - (5,373) - (2,826)differencesBalance at 31 December 440 95,347 - 4 (1,528) 201 (2,035) 26,966 119,3952007 For the year ended 31 December 2006 (Audited) 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 370 70,449 - 4 (2,232) (9) 1,810 6,671 77,0632006Profit for the year - - - - - - - 6,855 6,855Share based payments - - - - - - - 383 383Deferred tax movement on - - - - - - - 288 288share based paymentsCash flow hedges - - - - - 332 - - 332- fair value gains inthe yearShares issued 37 9,338 - - - - - - 9,375Shares to be issued (i) - - 1,688 - - - - - 1,688Dividends paid in the - - - - - - - (1,421) (1,421)yearCurrency translation - - - - (1,843) - 1,528 - (315)differencesBalance at 31 December 407 79,787 1,688 4 (4,075) 323 3,338 12,776 94,2482006 (i) Shares to be issued reflect the fair value of the 630,322 shares issued on28 February 2007 as part consideration for the acquisition of Gardemann. Notes 1. Reconciliation of net cash flow movement to movement in net debt Unaudited Audited 2007 2006 £000 £000 Net increase in cash 6,372 2,369 Inflow from increase in debt (25,303) (31,943)Change in net debt resulting from cash flows (18,931) (29,574)Non-cash items:Debt acquired with subsidiary businesses (38,690) 13,400New hire purchase and finance lease agreements (22,245) (22,629)Currency translation differences on cash and net debt (6,886) 1,525Movement in net debt in the period (86,752) (37,278)Net debt at 1 January (98,974) (61,696) Net debt at 31 December (185,726) (98,974) 2. Primary segmental analysis - geographical segmentsYear ended 31 December 2007 (Unaudited) UK Germany Belgium France Spain Middle Group £'000 £'000 £'000 £'000 £'000 East £'000 £'000Revenue 105,894 48,508 1,762 6,844 6,476 16,516 186,000Operating profit/(loss) before 17,115 5,130 204 (78) 1,217 5,101 28,689exceptional expensesExceptional operating expenses (300) (2,208) - - - - (2,508)Operating profit/(loss) 16,815 2,922 204 (78) 1,217 5,101 26,181Interest receivable 323Interest payable (7,570)Profit before taxation 18,934Taxation on profit (3,882)Profit for the year after 15,052taxation Total assets 206,263 90,369 65,230 15,653 43,147 5,462 426,124 Total liabilities (223,736) (34,558) (25,049) (4,099) (17,865) (1,412) (306,729)Net assets/(liabilities) (17,473) 55,811 40,181 11,554 3,920 4,050 119,395Capital expenditure 27,287 12,641 187 274 3,061 6,505 49,955Depreciation 17,498 9,483 230 1,854 1,486 3,090 33,641Amortisation of intangible 817 726 134 30 87 1 1,795assets 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 segments (continued)Year ended 31 December 2006 (Audited) UK Germany France Spain Middle Group £'000 £'000 £'000 £'000 East £'000 £'000Revenue 81,342 21,799 7,054 4,200 10,345 124,740Operating profit/(loss) 12,176 (1,940) (493) 372 2,550 12,665Interest receivable 152Interest payable (5,070)Profit before taxation 7,747Taxation on profit (892)Profit for the year after taxation 6,855 Total assets 138,449 83,657 16,017 12,435 17,190 267,748Total liabilities (133,673) (32,015) (4,609) (2,396) (807) (173,500)Net assets 4,776 51,642 11,408 10,039 16,383 94,248Capital expenditure 19,831 8,246 1,754 1,459 4,239 35,529Depreciation 14,386 5,332 1,887 1,248 2,114 24,967Amortisation of intangible assets 424 216 37 10 10 697 3. Acquisition of subsidiary companies During the year the Group acquired four businesses as detailed below: (i) Rise Hire Limited, formerly Hoperole Limited ("Rise Hire") On 25 April 2007, the Group acquired 100% of the share capital of Rise HireLimited (formerly Hoperole Limited). The initial consideration was £1.1 millionsatisfied in cash. Additional consideration of between £0.45 and £0.65 millionis payable in cash by Lavendon dependent upon Rise Hire's financial performancefor the 12 months to 31 March 2008. (ii) Wizard Workspace Limited ("Wizard") On 1 June 2007, the Group acquired 100% of the share capital of Wizard WorkspaceLimited. The initial consideration paid on completion was £1.7 million,satisfied in cash. Additional consideration of £0.45 million will be payable incash on 1 June 2008. (iii) Higher Platforms Group Limited ("Higher Platforms") On 3 August 2007, the Group acquired 100% of the share capital of HigherPlatforms Group Limited. The initial consideration payable was £7.6 million,satisfied in cash. Additional consideration of £1.3 million will be payable incash on 3 August 2008. (iv) DK Rental DK Rental S.A. ("DK Spain") On 13 November 2007, the Group acquired 100% of the share capital of DK RentalS.A. The consideration paid on completion was €14.6 million in cash plus608,123 new ordinary shares of 1p each in Lavendon Group plc. The issue ofshares represent a consideration of €6.0 million, being calculated on Lavendon'saverage closing share price for the five days ended 9 November 2007 of 682.0pence per share. Additional cash consideration of €1.8 million is payable after12 months and a further €1.8 million is payable after 24 months. DK Rental N.V. ("DK Belgium") On 13 December 2007, the Group acquired 100% of the share capital of DK RentalN.V. The consideration paid on completion was €41.7 million in cash plus1,294,249 new ordinary shares of 1p each in Lavendon Group plc. The issue ofshares represent a consideration of €12.7 million, being calculated onLavendon's average closing share price for the five days ended 9 November 2007of 682.0 pence per share. Additional cash consideration of €4.5 million ispayable after 12 months and a further €4.5 million is payable after 24 months. DK Rental France In addition to the above, on 13 December 2007, the Group also acquired certainassets of the DK Rental subsidiary in France for a consideration of €250,000.No disclosure is made in relation to this acquisition, as it is immaterial. 3. Acquisition of subsidiary companies (continued) Rise Hire Wizard Higher DK Rental DK Rental Total Platforms Spain Belgium £'000 £'000 £'000 £'000 £'000 £'000Cost of investmentCash paid on acquisition 1,058 1,674 7,636 10,573 30,087 51,028Shares issued at acquisition - - - 4,147 8,827 12,974Guaranteed deferred consideration - - - 1,273 3,316 9,096Deferred Consideration 450 450 1,275 1,326 3,181 2,175Acquisition Costs 75 160 75 300 1,270 1,880 Total cost 1,583 2,284 8,986 17,619 46,681 77,153 Fair value of net (liabilities)/ (272) 1,547 5,761 6,793 17,111 30,940assets acquired Goodwill and intangibles 1,855 737 3,225 10,826 29,570 46,213 Split as follows: Goodwill 1,785 633 2,910 8,344 24,445 38,117 Intangible assetsBrand name 70 104 104 - 769 1,047Customer relationships - - 211 2,482 4,356 7,049 Total intangibles recognised at 70 104 315 2,482 5,125 8,096acquisition The goodwill above is attributable to the workforce of the acquired businessesand the significant synergies expected to arise after their acquisition by theGroup. The attributed fair values above are provisional. 4. The consolidated accounts of the Group are prepared under thehistorical cost convention and in accordance with those parts of the CompaniesAct 1985 that are applicable to listed public companies, and applicable EUendorsed International Financial Reporting Standards. 5. Earnings per share calculations are based on: a. the profit for the year, after deducting taxation, of £15,052,000 (2006:£6,855,000); and b. the weighted average of 41,721,830 ordinary shares in issue during the year(2006: 37,932,369) 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 £5.50 (2006:£2.80). The effect of this dilution is to increase the weighted average numberof ordinary shares to 42,275,437 (2006: 38,824,734). 2007 Unaudited 2006 Audited Profit Weighted average Per share Profit Weighted Per share £000 number of shares amount £000 average number amount (in millions) pence of shares (in pence millions)Basic earnings per shareProfit attributable to shareholders 15,052 41.7 36.10 6,855 37.9 18.09Effect of dilutive securities Deferred shares - - 0.6 Options 0.6 - 0.3 Diluted earnings per share 15,052 42.3 35.58 6,855 38.8 17.67 Earnings per share before exceptionalcostsBasic 17,560 41.7 42.11 6,855 37.9 18.09 Diluted 17,560 42.3 41.51 6,855 38.8 17.67 Note: Earnings per share before exceptional costs is presented to show theeffect on the reported earnings per share had the exceptional costs not beenincurred. No tax effect has been included in respect of these exceptional costs. 6. The financial information set out in this announcement does notconstitute the Group statutory accounts for the year ended 31 December 2007 or31 December 2006. The statutory accounts for 2007 will be finalised on the basisof the financial information presented by the Directors in this preliminaryannouncement and will be delivered to the Registrar of Companies in due course. 7. The Annual General Meeting of Lavendon Group plc will be held atDresdner Kleinwort, 30 Gresham Street, London EC2P 2XY on 23 April 2008 at 10:30. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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