Interim Results

RNS Number : 7328R

Lavendon Group PLC

27 August 2010

 

27th August 2010

 

Lavendon Group plc ("the Company" or the "Group")

 

Interim Results for the six months ended 30th June 2010

 

Lavendon Group plc, Europe's market leader in the rental of powered access equipment, today announces its Interim Results for the six months ended 30th June 2010.

 

Financial highlights

 

·; Revenues £106.0m (2009: £114.0m)

·; EBITDA £30.5m* (2009: £40.5m)

·; Operating profit £7.1m* (2009: £14.1m)

·; Profit before tax £1.0m* (2009: £5.3m)

·; Earnings per share 0.45p* (2009: 8.66p)

·; Cash generation and debt reduction programme continue to progress well:

- Net debt at half year reduced to £167.6m, down from £182.1m at year end

- Debt to EBITDA is 2.40 times

- Cash generated from operations £20.9m (2009: £32.6m)

·; Interim dividend 0.33 pence per share (2009: 1.00 pence per share)

 

* Prior to amortisation charges and, in case of the prior year figures, exceptional items. Amortisation charges totalled £1.3m (2009: £2.1m) and no exceptional items were incurred in the period (2009: £43.2m).

 

Operational highlights

 

·; Trading performance in first half impacted by continuation of difficult market conditions and adverse weather conditions experienced across Europe at start of year; however trading progressively improved in period

 

·; In UK & Germany, revenue mix continues to shift away from construction sector

 

·; UK and German exposure to public sector is limited, providing some protection against the direct effect of future spending cuts

 

·; Expanded network & depots in France; maintained market share against tough conditions in Belgium

 

·; Tight cash & cost control offset revenue decline caused by the continued weak market in Spain

 

·; The Middle East performance impacted by delay of substantial number of major projects; however Group made good progress in building up infrastructure, management and equipment in region and is well positioned for growth as large petrochemical projects come on stream

 

Current trading

 

·; The Company sees an improving trend in trading in a number of its markets, although revises full year profit expectations downwards due to slower than anticipated pick up in Germany and continued delays in project ramp-ups in the Gulf

 

·; The Company remains on track to deliver debt reduction targets due to good operating cash flow and careful management of capital expenditure

  

Kevin Appleton, Chief Executive of Lavendon Group plc said:

 

"Difficult market conditions impacted our trading performance in Europe in the first half, with these being further exacerbated by the extreme adverse weather at the start of the calendar year. However, we have seen progressive improvement in revenue levels through the second quarter, and our European operations, excepting Germany, are all now recording year-on-year revenue growth on a weekly basis.

 

"The recovery of business levels in Germany, after the effects of a prolonged winter, has proven more protracted than we had anticipated, whilst in the Middle East recent further delays to large projects, particularly in the petrochemical sector, are reducing our rate of volume growth compared to our earlier forecasts."

 

"Whilst we are confident that the recovery in the Group's trading performance will gather momentum during the second half of the year, we now believe that the timing and rate of recovery being experienced in our German and Middle East markets will be insufficient to enable the Group to meet its overall profit expectations for the year. Nonetheless, we are confident that, due to traditionally strong second half cash flows and our ability to control capital expenditure, the Group is still on track to meet its year end net debt expectations."

 

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 Billy Clegg/Caroline Stewart/Alex Beagley	T: +44(0)207 831 3113

 

 

CHAIRMAN'S STATEMENT

 

The Group's trading performance during the first half of the year reflects, as anticipated, the continuation of difficult market conditions, and also, more specifically, the extreme adverse weather experienced in much of Europe at the start of the year and the delay to a number of major projects in the Middle East.

 

During the second quarter, trading has progressively improved, with a number of territories returning to year on year revenue growth on a consistent weekly basis by the end of June. However, since our trading update in June, our German business is proving slower to recover than expected and our Middle East operation continues to be affected by further delays to the start of anticipated projects. Consequently, our full year profitability will be lower than our original expectations, although our focus on cash generation has ensured that debt levels are reducing in line with our plan and we remain on course to meet our debt reduction targets for the year.

 

Financial Overview

 

Group revenues for the six months to 30 June 2010 declined by 7% to £106.0 million (2009: £114.0 million), on an actual basis and by 6% on a constant currency basis. Underlying operating profits* were £7.1 million (2009: £14.1 million), with margins at 6.7% (2009: 12.4%).

 

With net interest costs reflecting the Group's lower net debt levels and reducing to £6.1 million (2009: £8.8 million), the Group's underlying profit before tax was £1.0 million (2009: £5.3 million), with corresponding underlying basic earnings per share of 0.45 pence (2009: 8.66 pence).

 

After amortisation charges totalling £1.3 million (2009: £2.1 million), the Group produced an operating profit of £5.8 million (2009: operating profit of £12.0 million prior to exceptional items and an operating loss of £31.2 million after exceptional items) and a loss before tax of £0.3 million (2009: profit before tax of £3.2 million prior to exceptional items and a loss before tax of £40.0 million after exceptional items), with a corresponding basic loss per share of 0.14 pence (2009: loss of 77.20 pence).

 

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were £30.5 million (2009: £40.5 million), with margins at 28.8% (2009: 35.5%). Cash generated from operations, including the sale and purchase of rental fleet assets, was £20.9 million (2009: £32.6 million). Net cash generated from operating activities, after the payment of interest and tax, was £13.2 million (2009: £20.3 million).

 

The Group's capital expenditure during the first half of the year was £7.7 million (2009: £4.8 million), and disposal proceeds from the sale of retired assets were £5.7 million (2009: £5.2 million). With the amounts owing to equipment suppliers, between the start and end of the period, reducing by £0.5 million (2009: £5.3 million), the overall net cash outflow relating to capital expenditure was £2.5 million for the period (2009: £4.9 million). It is anticipated that the Group's capital expenditure plans for the remainder of the year will be largely funded by further disposals of retired assets, and consequently the net cash outflow relating to capital expenditure is not expected to increase materially in the second half of the year.

 

The final deferred consideration obligation of £7.8 million, relating to the acquisition of The Platform Company in 2008 and which impacts the Group's debt levels, was settled during the period, and this was partly financed by a £1.0 million issue of shares.

 

The Group's operating cash flows combined with a reduced capital investment programme (in large part financed by the disposal of retired assets), and a favourable foreign exchange movement of £12.9 million on Euro-denominated borrowings, has enabled net debt levels to reduce from £182.1 million at the previous year end to £167.6 million at 30 June 2010. It is expected that the reduction in net debt levels will accelerate in the second half of the year. The corresponding debt to equity ratio was 99% with the net debt to EBITDA ratio, calculated on a rolling 12 month basis, at 2.40 times, compared to 104% and 2.22 times respectively at the previous year end. The Group remains fully compliant with its banking covenants.

 

* Underlying operating profits, profit before tax, basic earnings per share and EBITDA are stated before amortisation charges and, in case of the prior year figures, exceptional items.

 

Dividend

 

The directors are declaring an interim dividend of 0.33 pence per share (2009: 1.00 pence per share). This will be paid on 15 October 2010 to shareholders on the register at the close of business on 10 September 2010.

 

Business Review

 

Where revenues and revenue growth percentages are given in the business review, they relate to revenues excluding those derived from the sale of ex-rental fleet assets.

 

UK

 

Our UK business has showed an improving trend during the first half of the year, once the poor weather conditions in the months of January and February had subsided. Demand from non-construction sectors has steadily improved whilst industrial and commercial construction sector activities appear to have stabilised, albeit at levels significantly below those previously experienced. The shift in demand away from the construction sector over the past two years has reduced the proportion of our UK revenues derived from this sector to around 35%, considerably less than the levels seen in previous years.

 

We estimate that our direct exposure to public sector activities (excluding the Olympic Park development) is limited, and consequently we believe that our business has a degree of resilience to direct public sector budget cuts that may follow the UK Government's autumn spending review. We do, however, recognise that this spending review could impact confidence in the wider economy and influence the rate of recovery in demand for our services in the shorter term.

 

Although volume and pricing pressures are still present in the construction sector, overall weekly revenues returned to year on year growth by June, through a combination of improved activity levels and some early progress being made in improving pricing outside of the construction sector. Given a similar demand environment, we anticipate further progress in this area in the second half of the year in line with our expectations, allowing us to substantially offset the weaker revenues derived from the weather affected early months of the year.

 

Revenues for the first six months declined by 6% to £47.6 million (2009: £50.6 million). This revenue decline, partly offset by savings from the integration of the UK operations in the prior year, resulted in underlying operating profits falling to £2.5 million (2009: £4.4 million), with margins at 5.2% (2009: 8.7%).

 

Germany

 

Germany experienced an exceptionally harsh winter, with snow and frozen ground conditions persisting into April in some parts of the country. This had a significant impact on all areas of outdoor work, particularly construction. Whereas our expectation was that our German volume levels would recover to those of the prior year through the third quarter, this return to growth is yet to emerge, and consequently we have revised down our expectations for this market in the short term.

 

Construction-related revenues, which represented around 43% of total first half revenues, declined by 30% when compared to the prior year, with the decline particularly pronounced in the first quarter. This sharp decline was in contrast with non-construction related revenues, which grew marginally in the first half. In terms of pricing, our relatively strong competitive position in the non-construction sector has allowed us to avoid price attrition even in these difficult market circumstances, partially offsetting the decline in volumes. We believe that our performance is at least in line with that of our competitors in this market.

 

German public sector activities are estimated to contribute less than 10% of our local revenues. Consequently, a further tightening of public sector spending is unlikely to have a substantial direct effect on our business, which is more sensitive to movements in the general economy and in particular to the performance of the non-residential construction sector.

 

Euro revenues for the first half declined by 12% however, after adjusting for exchange rate movements, revenues in Sterling fell by 15% to £21.2 million (2009: £24.8 million). This revenue decrease caused the business to generate an underlying operating loss of £1.0 million (2009: profit of £1.1 million), with margins declining to negative 5% (2009: positive margin of 4 %). Despite this operating loss, the business remained cash generative, producing an EBITDA for the period of £4.7 million (2009: £6.9 million).

 

France and Belgium

 

A strong increase in construction-related activities in France has enabled the overall region to increase its first half revenues.

 

Our focus in France during the first half has been on increasing the scale of our existing depots and expanding our network with the addition of a location serving the industrial areas of Aix and Marseilles. This strategy has enabled us to be price competitive and yet still make progress in improving overall margins in France towards the end of the first half. Our more established Belgian network has striven successfully to maintain market share in a tough environment, particularly with pricing pressures within the construction sector.

 

The shift in revenue mix away from Belgium (at higher margins) towards France (with lower margins due to depot opening and expansion costs) has squeezed the region's profitability compared to last year. This performance should improve through the second half of the year, in line with our expectations, as the French expansion costs are fully absorbed.

 

In the first half, combined Euro revenues increased by 11% compared to the same period last year, and after adjusting for exchange rate movements, revenues in Sterling increased 9% to £13.3 million (2009: £12.2 million). Underlying operating profits for the first half fell to £0.8 million (2009: £1.9 million), with margins declining to 5.8% (2009: 15.4%).

 

Spain

 

Spain remains a weak market, with the supply of powered access equipment continuing to be well ahead of demand, although our business has proved to be more resilient than expected to these pressures.

 

Our Spanish business has focused on tight cost and cash control, the transfer of surplus fleet into other Group operations (most notably to France to facilitate the opening of a new depot) and repositioning the business away from construction-related users (which represented almost 50% of revenues in the first half). As the first half developed, hire rates showed signs of improvement in non-construction related sectors and this, combined with cost reduction programmes, has enabled the business to limit its operating loss and continue to generate good cash inflows for the period. Improving trends in utilisation and hire rates give a degree of confidence that second half performance will strengthen, subject to no further deterioration in the general economy.

 

Local currency revenues for the first half declined by 22%, and, after adjusting for movements in exchange rates, revenues in Sterling reduced by 24% to £3.7 million (2009: £4.9 million). This fall in revenue, whilst substantially offset by cost-saving actions, has produced an underlying operating loss for the first half of £0.2 million (2009: break-even), while EBITDA (a proxy for cash generation) of £0.8 million was produced (2009: £1.5 million).

 

Middle East

 

As previously reported, the recovery of revenues in the Middle East during the first half, particularly in Saudi Arabia and Abu Dhabi, has been slower than anticipated, due to the continued delay of a substantial number of strategic petrochemical infrastructure related projects, that have either yet to commence or have yet to reach the stage of requiring powered access equipment. In volume terms, specific projects planned by our customers to begin this quarter across the region are behind that original schedule. It now appears likely that the majority of these projects will not contribute materially to our business until 2011, and consequently we have adjusted our expectations downwards to take account of these delays.

 

In the short-term, our build up of infrastructure, management depth and equipment capacity in the region, to service the anticipated growth in demand, is ahead of that currently required. This investment has led to a reduction in margins during the first half, although they remain at a healthy level. Whilst timing of project starts has proven hard to predict, the cost of this investment will be fully recovered as revenue growth accelerates once delayed projects commence.

 

Even allowing for price attrition, which is particularly evident in the UAE and Qatar, the level of quantifiable demand provides credible support for our belief that the medium term outlook for the region remains strong, outside of the commercial construction sector in Dubai.

 

Revenues in the region have fallen by 8% in local currencies, and on translation to Sterling by 11% to £14.7 million (2009: £16.5 million). Underlying operating profits have decreased to £5.1 million (2009: £6.8 million), with margins declining to 34.3% (2009: 40.9%).

 

Summary and Outlook

 

For the first time since the middle of 2008 there is greater visibility of demand patterns in most of the Group's markets. As we entered the second half, we have seen year-on-year growth in weekly revenues returning in a number of our European territories, with the notable exception of Germany, and we remain very positive about the fundamental strength and position of our business in the Middle East, despite the frustrations of delays in projects which still form part of our capacity planning for the region.

 

The restructuring that we put in place across the Group during 2008 and 2009 has given us a lean and efficient organisation, that is proving highly effective at winning business in the marketplace and that is capable of dealing with growth as it resumes.

 

Through aggressive fleet resizing and a strong presence in the market, the Group is now starting to achieve good levels of equipment utilisation. The next stage is to use the scarcity of supply that this creates to improve pricing yields and, thereby, operating margins. This process is now underway, and there are encouraging signs in a number of our markets that yields are progressively improving.

 

Throughout the first half, we have maintained a clear focus on cash generation, by closely managing costs and tightly controlling capital expenditure, ensuring that investment in the rental fleet is largely funded by the disposal of retired assets. This focus on cash generation and debt reduction will continue during the second half of the year.

 

Since the half year, trading in our European markets, outside of Germany, has continued to improve, and our Middle East business has seen a steady increase in activity levels in the run-up to Ramadan. Whilst we are confident that the Group's trading performance will make greater than normal progress during the second half of the year, we now believe that the timing and rate of recovery being seen in our German and Middle East markets will be insufficient to enable the Group to meet its overall profit expectations for the year. However, we are confident that due to our traditionally strong second half cash flows and our ability to control capital expenditure, net debt levels will reduce significantly over the balance of the year in line with expectations.

 

 

Group income statement (unaudited)

 

	6 months ended 30 June 2010			6 months ended 30 June 2009			Year ended 31 December 2009
	Underlying £'000	Exceptional Items and Amortisation £'000	Total £'000	Underlying £'000	Exceptional Items and Amortisation £'000	Total £'000	Underlying £'000	Exceptional Items and Amortisation £'000	Total £'000
Revenue	105,967	-	105,967	114,008	-	114,008	226,886	-	226,886
Cost of sales	(70,308)	-	(70,308)	(71,015)	(10,615)	(81,630)	(140,022)	(16,108)	(156,130)
Gross profit	35,659	-	35,659	42,993	(10,615)	32,378	86,864	(16,108)	70,756
Operating expenses	(28,570)	(1,330)	(29,900)	(28,858)	(34,677)	(63,535)	(55,809)	(39,702)	(95,511)
Operating profit/(loss)	7,089	(1,330)	5,759	14,135	(45,292)	(31,157)	31,055	(55,810)	(24,755)
Interest receivable	4	-	4	8	-	8	45	-	45
Interest payable	(6,087)	-	(6,087)	(8,832)	-	(8,832)	(17,168)	(5,874)	(23,042)
Profit/(loss) before tax	1,006	(1,330)	(324)	5,311	(45,292)	(39,981)	13,932	(61,684)	(47,752)
Taxation of profit/(loss)	(265)	357	92	(1,217)	4,681	3,464	(3,183)	7,487	4,304
Profit/(loss) for the period	741	(973)	(232)	4,094	(40,611)	(36,517)	10,749	(54,197)	(43,448)
Earnings/(loss) per share - basic	0.45p		(0.14p)	8.66p		(77.20p)	19.16p		(77.45p)
- diluted	0.45p		(0.14p)	8.42p		(77.20p)	18.69p		(77.45p)

 

All of the Group's trading activities relate to continuing activities.

The earnings per share for 30 June 2009 have been restated for the bonus element of the capital raising on 8 December 2009.

 

 

Group statement of comprehensive income (unaudited)

 

	6 months ended 30 June 2010 £'000	6 months ended 30 June 2009 £'000	Year ended 31 December 2009 £'000
Loss for the period	(232)	(36,517)	(43,448)
Other comprehensive income:
Cash flow hedges net of tax	(71)	(471)	(476)
Currency translation differences	(4,214)	(6,390)	(6,092)
	(4,285)	(6,861)	(6,568)
Total comprehensive income for the period attributable to owners of the company	(4,517)	(43,378)	(50,016)

 

Group balance sheet (unaudited)

	Notes	As at 30 June 2010 £'000	As at 30 June 2009 £'000	As at 31 December 2009 £'000
Assets
Non-current assets
Goodwill	8	77,349	79,172	81,483
Other intangible assets	8	5,978	8,653	7,436
Property, plant and equipment	9	262,766	306,111	290,410
		346,093	393,936	379,329
Current assets
Inventories	10	7,056	10,610	10,992
Trade and other receivables		55,036	50,600	48,139
Cash and cash equivalents		5,884	10,441	75,986
		67,976	71,651	135,117
Liabilities
Current liabilities
Financial liabilities - borrowings		(46,046)	(52,250)	(44,181)
Trade and other payables		(31,214)	(36,421)	(42,089)
Current tax liabilities		(11,809)	(10,327)	(11,399)
		(89,069)	(98,998)	(97,669)
Net current (liabilities)/assets		(21,093)	(27,347)	37,448
Non-current liabilities
Financial liabilities - borrowings		(127,487)	(231,331)	(213,867)
Financial liabilities - derivative financial instruments		(2,777)	(2,735)	(2,741)
Deferred tax liabilities		(24,597)	(27,279)	(25,748)
		(154,861)	(261,345)	(242,356)
Net assets		170,139	105,244	174,421
Shareholders' equity
Ordinary shares		1,643	473	1,629
Share premium		104,327	103,184	103,258
Capital redemption reserve		4	4	4
Other reserves		(6,024)	(2,032)	(1,739)
Retained earnings		70,189	3,615	71,269
Total equity		170,139	105,244	174,421

 

The condensed consolidated interim financial information on pages 7 to 22 was approved by the Board of Directors on 27 August 2010 and signed on its behalf by:

David Hollywood Chairman	Alan Merrell  Finance Director

Group statement of cash flows (unaudited)

 

	Notes	6 months ended 30 June 2010 £'000	6 months ended 30 June 2009 £'000	Year ended 31 December 2009 £'000
Cash flows from operating activities:
Loss for the period		(232)	(36,517)	(43,448)
Taxation credit	5	(92)	(3,464)	(4,304)
Net interest expense	4	6,083	8,824	22,997
Amortisation and depreciation	8, 9	24,694	28,446	52,904
Impairment of fleet, goodwill and other intangibles	8, 9	-	39,643	42,668
Gain on sale of non-fleet property, plant and equipment		(127)	(196)	(568)
Other non-cash movements		133	401	9
Purchase of rental fleet		(4,582)	(1,498)	(4,747)
Net (increase)/decrease in working capital		(4,994)	(3,085)	11,179
Cash generated from operations		20,883	32,554	76,690
Net interest paid		(7,575)	(11,955)	(19,339)
Taxation paid		(81)	(349)	(1,118)
Net cash generated from operating activities		13,227	20,250	56,233
Cash flows from investing activities:
Acquisition of subsidiaries (payment of deferred consideration)		(6,788)	(7,194)	(7,122)
Purchase of non-rental fleet property, plant and equipment and intangibles		(835)	(1,870)	(2,473)
Proceeds from sale of non-rental fleet property, plant and equipment		167	306	1,943
Net cash used by investing activities		(7,456)	(8,758)	(7,652)
Cash flows from financing activities:
Drawdown of loans		11,852	10,529	13,235
Repayment of loans		(65,442)	(1,000)	(25,388)
Repayment of principal under hire purchase agreements		(20,517)	(22,797)	(43,423)
Settlement of loan notes		-	(1,160)	(1,160)
Repayment of guaranteed debt		-	-	(5,617)
Equity dividends paid	7	(978)	(773)	(1,246)
Proceeds from equity shares issued		72	76	80,955
Fees from capital raising		(656)	-	(4,198)
Net cash (used by)/generated from financing activities		(75,669)	(15,125)	13,158
Net (decrease)/increase in cash and cash equivalents before exchange differences		(69,898)	(3,633)	61,739
Effects of exchange rates		(204)	(600)	(427)
Net (decrease)/increase in cash and cash equivalents after exchange differences		(70,102)	(4,233)	61,312
Cash and cash equivalents at the start of the period		75,986	14,674	14,674
Cash and cash equivalents at the end of the period		5,884	10,441	75,986

 

 

Analysis of changes in net borrowings (unaudited)

during the six months ended 30 June 2010

 

	At 1 January 2010 £'000	Cash flows £'000	Non  cash items £'000	Currency translation differences £'000	At 30 June  2010 £'000
Cash and cash equivalents	75,986	(69,898)	-	(204)	5,884
Bank debt due within one year	(7,193)	3,334	(4,352)	790	(7,421)
Bank debt due after one year	(146,729)	50,256	4,352	8,808	(83,313)
Guaranteed deferred consideration	(4,060)	-	-	-	(4,060)
Hire purchase and finance lease agreements	(100,066)	20,517	(2,675)	3,485	(78,739)
	(258,048)	74,107	(2,675)	13,083	(173,533)
Net borrowings	(182,062)	4,209	(2,675)	12,879	(167,649)

 

Statement of changes in equity (unaudited)

 

For the six months ended 30 June 2010

 

	Attributable to owners of the Company
	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Translation reserve £'000	Cash flow hedge reserve £'000	Net investment hedge reserve £'000	Retained earnings £'000	Total £'000
Balance at 1 January 2010	1,629	103,258	4	17,856	(1,929)	(17,666)	71,269	174,421
Comprehensive income:
Loss for the period	-	-	-	-	-	-	(232)	(232)
Cash flow hedges, net of tax	-	-	-	-	(71)	-	-	(71)
Currency translation differences	-	-	-	(3,978)	-	(236)	-	(4,214)
Total comprehensive income	-	-	-	(3,978)	(71)	(236)	(232)	(4,517)
Transactions with owners:
Share based payments	-	-	-	-	-	-	133	133
Tax movement on share based payments	-	-	-	-	-	-	(3)	(3)
Shares issued	14	1,069	-	-	-	-	-	1,083
Dividends paid in the period	-	-	-	-	-	-	(978)	(978)
Total transactions with owners	14	1,069	-	-	-	-	(848)	235
Balance at 30 June 2010	1,643	104,327	4	13,878	(2,000)	(17,902)	70,189	170,139

 

For the six months ended 30 June 2009

 

	Attributable to owners of the Company
	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Translation reserve £'000	Cash flow hedge reserve £'000	Net investment hedge reserve £'000	Retained earnings £'000	Total £'000
Balance at 1 January 2009	462	101,961	4	25,533	(1,453)	(19,251)	40,514	147,770
Comprehensive income:
Loss for the period	-	-	-	-	-	-	(36,517)	(36,517)
Cash flow hedges, net of tax	-	-	-	-	(471)	-	-	(471)
Currency translation differences	-	-	-	(11,956)	-	5,566	-	(6,390)
Total comprehensive income	-	-	-	(11,956)	(471)	5,566	(36,517)	(43,378)
Transactions with owners:
Share based payments	-	-	-	-	-	-	401	401
Tax movement on share based payments	-	-	-	-	-	-	(10)	(10)
Shares issued	11	1,223	-	-	-	-	-	1,234
Dividends paid in the period	-	-	-	-	-	-	(773)	(773)
Total transactions with owners	11	1,223	-	-	-	-	(382)	852
Balance at 30 June 2009	473	103,184	4	13,577	(1,924)	(13,685)	3,615	105,244

Statement of changes in equity (unaudited)

 

For the year ended 31 December 2009

 

	Attributable to owners of the Company
	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Translation reserve £'000	Cash flow hedge reserve £'000	Net investment hedge reserve £'000	Retained earnings £'000	Total £'000
Balance at 1 January 2009	462	101,961	4	25,533	(1,453)	(19,251)	40,514	147,770
Comprehensive income:
Loss for the year	-	-	-	-	-	-	(43,448)	(43,448)
Cash flow hedges, net of tax	-	-	-	-	(476)	-	-	(476)
Currency translation differences	-	-	-	(7,677)	-	1,585	-	(6,092)
Total comprehensive income	-	-	-	(7,677)	(476)	1,585	(43,448)	(50,016)
Transactions with owners:
Share based payments	-	-	-	-	-	-	9	9
Tax movement on share based payments	-	-	-	-	-	-	(38)	(38)
Shares issued	1,167	1,297	-	-	-	-	79,676	82,140
Dividends paid in the period	-	-	-	-	-	-	(1,246)	(1,246)
Fees of capital raising	-	-	-	-	-	-	(4,198)	(4,198)
Total transactions with owners	1,167	1,297	-	-	-	-	74,203	76,667
Balance at 31 December 2009	1,629	103,258	4	17,856	(1,929)	(17,666)	71,269	174,421

 

 

Under the authority given to the directors at the Extraordinary General Meeting on 7 December 2009, the Company issued 115,472,199 new ordinary shares by way of a Firm Placing and a Placing and Open Offer at a price of 70.0p per share. The Firm Placing and the Placing and Open Offer raised net proceeds of £76,633,000 after costs of £4,198,000. As part of the Firm Placing and the Placing and Open Offer, the Company entered into an arrangement with a subsidiary availing itself of statutory merger relief for not recording share premium under Section 612 of the Companies Act 2006. The nominal value of new ordinary shares issued of £1,155,000 was credited to share capital, the costs of £4,198,000 were charged to retained earnings and the remaining consideration of £79,676,000 was recorded as a merger reserve. This merger reserve was transferred to retained earnings following receipt of the share proceeds as qualifying consideration prior to the year end, resulting in a £nil balance on the merger reserve at 31 December 2009 (2008: £nil).

Notes to the interim financial information (unaudited)

 

1. This condensed consolidated interim financial information has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in the condensed consolidated interim financial information as applied in the Group's audited financial statements for the year ended 31 December 2009 which were prepared in accordance with IFRS's as adopted by the European Union, with the exception of new standards and interpretations that were only applicable from the beginning of the current financial year.

 

The new standards and interpretations applicable from the beginning of the year are as follows:

 

IFRS 3 (revised), 'Business combinations', and consequential amendments to IAS 27, 'Consolidated and separate financial statements' and IAS 31, 'Interests in joint ventures', are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. There is no impact on the condensed consolidated interim financial information for the period ended 30 June 2010.

 

The financial information for the year ended 31 December 2009 is extracted from the audited accounts for that period, which have been delivered to the Registrar of Companies. The Auditors' report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

The condensed consolidated interim financial information does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The condensed consolidated interim financial information for the six months ended 30 June 2010 and the comparatives to 30 June 2009 are unaudited, but have been reviewed by the Auditors.

 

The Group does not consider that any standards or interpretations issued by the International Accounting Standards Board (IASB), but not yet applicable, will have a significant impact on the financial statements for the year ending 31 December 2011.

 

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing this condensed consolidated interim financial information.

 

2. Segmental analysis

 

For internal reporting, Lavendon Group is organised into six operating segments based on the geographical locations of UK, Germany, Belgium, France, Spain and Middle East.

 

Lavendon Group's chief operating decision maker ("CODM") is the Group Executive Board. The Group Executive Board reviews the Group's internal reporting in order to monitor and assess performance of the operating segments for the purpose of making decisions about resources to be allocated. Performance is evaluated based on a combination of revenue and underlying operating profit.

 

Six months ended 30 June 2010

 

	UK £'000	Germany £'000	Belgium £'000	France £'000	Spain £'000	Middle East £'000	Group £'000
Rental revenue	47,229	21,159	5,994	6,999	3,447	13,432	98,260
Sale of new equipment	354	-	285	-	243	1,308	2,190
Sale of ex-rental fleet equipment	3,895	571	129	185	283	454	5,517
Total revenue	51,478	21,730	6,408	7,184	3,973	15,194	105,967
Underlying profit	2,454	(1,000)	583	195	(194)	5,051	7,089
Amortisation	(747)	(255)	(306)	(3)	(16)	(3)	(1,330)
Exceptional items	-	-	-	-	-	-	-
Operating (loss)/profit	1,707	(1,255)	277	192	(210)	5,048	5,759
Interest receivable							4
Interest payable							(6,087)
Loss before taxation							(324)
Taxation							92
Loss for the period							(232)
Assets	206,384	75,462	42,936	25,754	17,024	46,509	414,069
Liabilities before group funding	(106,337)	(15,705)	(12,730)	(5,151)	(10,283)	(3,326)	(153,532)
Net assets before group funding	100,047	59,757	30,206	20,603	6,741	43,183	260,537
Group funding							(90,398)
Net assets							170,139
Capital expenditure	2,272	641	53	894	106	3,710	7,676
Depreciation	10,355	5,663	1,351	1,650	1,034	3,311	23,364
Exceptional impairment of property, plant and equipment	-	-	-	-	-	-	-
Amortisation of intangible assets	747	255	306	3	16	3	1,330
Exceptional impairment of goodwill and intangible assets	-	-	-	-	-	-	-

Note:

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 and the reporting to the CODM.

The information disclosed for the UK operation includes certain 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.

 

Group funding represents the value of external borrowing held by Lavendon Group plc on behalf of the Group.

Six months ended 30 June 2009

	UK £'000	Germany £'000	Belgium £'000	France £'000	Spain £'000	Middle East £'000	Group £'000
Rental revenue	50,214	24,816	5,875	5,994	4,650	15,069	106,618
Sale of new equipment	427	-	367	-	228	1,467	2,489
Sale of ex-rental fleet equipment	1,520	1,151	1,521	203	124	382	4,901
Total revenue	52,161	25,967	7,763	6,197	5,002	16,918	114,008
Underlying profit	4,392	1,050	1,652	236	42	6,763	14,135
Amortisation	(877)	(256)	(610)	(15)	(316)	(3)	(2,077)
Exceptional items	(10,608)	(9,388)	(9,711)	(416)	(13,092)	-	(43,215)
Operating (loss)/profit	(7,093)	(8,594)	(8,669)	(195)	(13,366)	6,760	(31,157)
Interest receivable							8
Interest payable							(8,832)
Loss before taxation							(39,981)
Taxation							3,464
Loss for the period							(36,517)
Assets	232,274	88,809	50,046	26,251	25,820	42,387	465,587
Liabilities before group funding	(134,887)	(21,538)	(20,549)	(5,690)	(16,681)	(2,266)	(201,611)
Net assets before group funding	97,387	67,271	29,497	20,561	9,139	40,121	263,976
Group funding							(158,732)
Net assets							105,244
Capital expenditure	2,756	1,493	176	99	30	238	4,792
Depreciation	12,284	5,803	1,136	2,174	1,486	3,486	26,369
Exceptional impairment of property, plant and equipment	7,474	-	-	402	985	-	8,861
Amortisation of intangible assets	877	256	610	15	316	3	2,077
Exceptional impairment of goodwill and intangible assets	-	9,016	9,711	-	12,055	-	30,782

 

Note:

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 and the reporting to the CODM.

The information disclosed for the UK operation includes certain 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.

 

Group funding represents the value of external borrowing held by Lavendon Group plc on behalf of the Group.

  

Year ended 31 December 2009

 

	UK £'000	Germany £'000	Belgium £'000	France £'000	Spain £'000	Middle East £'000	Group £'000
Rental revenue	100,719	50,717	12,279	12,184	8,518	28,364	212,781
Sale of new equipment	931	-	732	-	478	3,167	5,308
Sale of ex-rental equipment	4,727	1,470	1,369	240	402	589	8,797
Total revenue	106,377	52,187	14,380	12,424	9,398	32,120	226,886
Underlying profit	12,280	3,618	3,119	503	141	11,394	31,055
Amortisation	(1,769)	(513)	(870)	(30)	(331)	(6)	(3,519)
Exceptional items	(16,775)	(10,218)	(9,916)	(1,447)	(13,935)	-	(52,291)
Operating (loss)/profit	(6,264)	(7,113)	(7,667)	(974)	(14,125)	11,388	(24,755)
Interest receivable							45
Interest payable							(23,042)
Profit before taxation							(47,752)
Taxation							4,304
Loss for the year							(43,448)
Assets	217,765	90,665	52,865	27,222	21,981	38,834	449,332
Liabilities before group funding	(127,840)	(21,527)	(14,698)	(5,978)	(13,581)	(2,924)	(186,548)
Net assets before group funding	89,925	69,138	38,167	21,244	8,400	35,910	262,784
Group funding							(88,363)
Net assets							174,421
Capital expenditure	7,028	3,182	868	956	48	807	12,889
Depreciation	22,706	11,192	2,954	3,399	2,710	6,424	49,385
Exceptional impairment of property, plant and equipment	8,969	433	-	1,178	1,311	-	11,891
Amortisation of intangible assets	1,769	513	870	30	331	6	3,519
Exceptional impairment of goodwill and intangible assets	-	9,016	10,180	-	11,581	-	30,777

 

Note:

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 and reporting to the CODM.

 

The information disclosed for the UK operation includes certain 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.

 

Capital expenditure includes the property plant and equipment from the acquisition of the trade and certain assets of EPL Access Limited from administration.

Group funding represents the value of external borrowing held by Lavendon Group plc on behalf of the Group.

3. Exceptional items and amortisation

 

Exceptional items and amortisation incurred during the period are set out below:

 

	6 months ended 30 June 2010 £'000	6 months ended 30 June 2009 £'000	Year ended 31 December 2009 £'000
Exceptional costs of sale:
- plant and machinery impairment (i)	-	8,596	11,626
- restructuring costs (ii)	-	2,019	4,482
	-	10,615	16,108
Exceptional operating expenses:
- goodwill impairment (iii)	-	27,322	27,322
- other intangible assets impairment (iv)	-	3,460	3,455
- restructuring costs (ii)	-	1,553	5,141
- property impairment	-	265	265
	-	32,600	36,183
Exceptional interest payable:
- accelerated amortisation of bank arrangement fees (v)	-	-	5,874
Total exceptional items	-	43,215	58,165
Amortisation	1,330	2,077	3,519
Total exceptional items and amortisation	1,330	45,292	61,684

Notes:

(i) During 2009 a number of rental units in Belgium, France, Germany, Spain and the UK were identified for disposal and their net book values were written down to fair value less costs to sell with reference to current market prices at 31 December 2009.

(ii) Restructuring costs in 2009 related to the Group's trading operations in the UK, Germany and Spain, and principally relate to employee termination costs, transport and storage of rental machines, depot closure costs and associated professional fees.

(iii) The goodwill write down related to the impairment of the Group's goodwill for Belgium, Germany and Spain.

(iv) The other intangible asset write down related to the impairment of other intangible assets acquired on acquisition of dk Rental in Belgium and Spain.

(v) All capitalised issue costs were written off in the year ended 31 December 2009 in accordance with IAS 39 paragraph AG62.

 

4. Interest receivable and payable

 

	6 months ended 30 June 2010 £'000	6 months ended 30 June 2009 £'000	Year ended 31 December 2009 £'000
Interest receivable:
- bank interest	4	8	45
Interest payable:
- interest on bank loans and overdraft	(3,552)	(5,124)	(9,843)
- interest on hire purchase and finance lease agreements	(2,401)	(3,483)	(6,388)
- interest on discounted deferred consideration	(134)	(225)	(370)
- amortisation of bank arrangement fees	-		(567)
Total interest payable before exceptional items	(6,087)	(8,832)	(17,168)
Exceptional interest payable:
- accelerated amortisation of bank arrangement fees	-	-	(5,874)
Net interest payable	(6,083)	(8,824)	(22,997)

 

5. Taxation

Analysis of (credit)/charge for the period:

 

	6 months ended 30 June 2010 £'000	6 months ended 30 June 2009 £'000	Year ended  31 December 2009 £'000
Corporation taxation	354	551	1,798
Deferred taxation	(446)	(4,015)	(6,102)
Taxation	(92)	(3,464)	(4,304)

The tax credit is based on the effective rate for the whole year.

A number of changes to the UK corporation tax system were announced in the June 2010 Budget Statement. The Finance Act (No 2) 2010 which was substantially enacted on 20 July 2010 includes legislation reducing the main rate of corporation tax from 28% to 27% from 1 April 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 24% by 1 April 2014. The changes had not been substantively enacted at the balance sheet date and, therefore, are not included in this interim financial information.

 

The effect of the changes enacted in the Finance Act (No 2) 2010 would be to reduce the deferred tax liability provided at 31 December 2009 by £676,000. This £676,000 decrease in the deferred tax liability would increase profit for the year by £704,000 and decrease other comprehensive income by £28,000. This decrease in the deferred tax liability is due to the reduction in the corporation tax rate from 28% to 27% with effect from 1 April 2011.

 

The proposed reductions of the main rate of corporation tax by 1% per year to 24% by 1 April 2014 are expected to be enacted separately each year. The overall effect of the further changes from 27% to 24%, if these applied to the deferred tax balance at 31 December 2009, would be to reduce the deferred tax liability by approximately £2,028,000 (being £676,000 recognised in 2012, £676,000 recognised in 2013 and £676,000 recognised in 2014).

6. Earnings per share

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

	(Loss)/profit £'000	Weighted average number of shares (in millions)	Per share  amount  pence
Six months ended 30 June 2010
Basic loss per share
Loss for the period	(232)	163.6	(0.14)
Effect of dilutive securities:
Deferred shares		-
Diluted loss per share	(232)	163.6	(0.14)
Underlying earnings per share
Basic	741	163.6	0.45
Diluted	741	163.6	0.45

 

The potentially dilutive securities are not included in the 30 June 2010 calculation of diluted loss per share, as this dilution cannot be applied to a loss.

 

	Profit/(loss) £'000	Restated weighted average number of shares (in millions)	Per share  amount  pence
Six months ended 30 June 2009
Basic loss per share
Loss for the period	(36,517)	47.3	(77.20)
Effect of dilutive securities:
Deferred shares		1.3
Diluted loss per share	(36,517)	48.6	(77.20)
Underlying earnings per share
Basic	4,094	47.3	8.66
Diluted	4,094	48.6	8.42

 

The potentially dilutive securities are not included in the 30 June 2009 calculation of diluted loss per share, as this dilution cannot be applied to a loss.

	(Loss)/profit £'000	Weighted average number of shares (in millions)	Per share  amount  pence
Year ended 31 December 2009
Basic loss per share
Loss for the year	(43,448)	56.1	(77.45)
Effect of dilutive securities:
Deferred shares		1.4
Diluted loss per share	(43,448)	57.5	(77.45)
Underlying earnings per share
Basic	10,749	56.1	19.16
Diluted	10,749	57.5	18.69

 

The potentially dilutive securities are not included in the 31 December 2009 calculation of diluted loss per share, as this dilution cannot be applied to a loss.

Loss per share is calculated on the 163,594,163 ordinary shares in issue for the six months ended 30 June 2010 being the weighted average number of ordinary shares in issue (six months ended 30 June 2009: 47,345,874 (restated); year ended 31 December 2009: 56,148,882).

 

Diluted underlying earnings per share assumes conversion of all potential dilutive ordinary shares which arise from share incentive scheme awards granted to employees and deferred consideration shares where the exercise price is less than the average market price of the Company's ordinary share capital during the six months. The effect of this dilution is to increase the weighted average number of ordinary shares to 163,594,738 (six months ended 30 June 2009: 48,651,252 (restated); year ended 31 December 2009: 57,464,165).

 

Underlying earnings per share is presented to exclude the impact of exceptional items and amortisation charges in the period and their associated tax effect. The Directors believe that underlying earnings per share provides additional relevant information about underlying business performance.

 

The weighted average number of shares and earnings per share figures for the six months ended 30 June 2009 have been restated for the bonus element of the capital raising on 8 December 2009 comprising of a Firm Placing of 38,490,733 new ordinary shares and a Placing and Open Offer of 76,981,466 new ordinary shares at an issue price of 70.0 pence per new ordinary share.

 

7. Dividends

	6 months ended 30 Jun 2010 £'000	6 months ended 30 Jun 2009 £'000	Year ended 31 Dec 2009 £'000
Final dividend paid in respect of 2009 of 0.60p per 1p ordinary share (2008: 1.65p)	978	773	773
Interim dividend paid in respect of 2009 of 0.99p per 1p ordinary share (2008: 3.29p)	-	-	473
	978	773	1,246

 

The directors are proposing an interim dividend of 0.33 pence per ordinary share which will distribute an estimated £542,000 of shareholders' funds. It will be paid on 15 October 2010 to shareholders who are on the register at 10 September 2010.

 

Following the bonus element of the capital raising on 8 December 2009 the dividends paid per share have been restated for all dividends paid prior to this date.

8. Intangible assets

 

	6 months ended  30 June 2010		6 months ended  30 June 2009		Year ended  31 Dec 2009
	Goodwill	Other intangibles	Goodwill	Other intangibles	Goodwill	Other intangibles
	£'000	£'000	£'000	£'000	£'000	£'000
Cost
At start of period	110,475	23,712	114,149	24,319	114,149	24,319
Exchange movements	(7,047)	(1,342)	(7,655)	(1,397)	(3,674)	(781)
Additions	-	124	-	120	-	182
Disposals	-	-	-	-	-	(8)
At end of period	103,428	22,494	106,494	23,042	110,475	23,712
Amortisation and impairment
At start of period	28,992	16,276	-	9,596	-	9,596
Exchange movements	(2,913)	(1,090)	-	(744)	1,670	(286)
Charge for the period	-	1,330	-	2,077	-	3,519
Exceptional impairment	-	-	27,322	3,460	27,322	3,455
Disposals	-	-	-	-	-	(8)
At end of period	26,079	16,516	27,322	14,389	28,992	16,276
Net book amount at end of period	77,349	5,978	79,172	8,653	81,483	7,436

 

Goodwill acquired in a business combination was allocated, at date of acquisition, to the cash generating unit that benefited from that business combination. The Directors consider that a cash-generating unit is generally an individual country of operation.

 

The allocation of goodwill by operating segment is shown in the table below:

 

		As at 30 June 2010 £'000	As at 30 June 2009 £'000	As at 31 December 2009 £'000
Operating segment:
United kingdom		40,941	40,941	41,029
Belgium		19,585	20,567	21,762
Germany		16,823	17,664	18,692
Total		77,349	79,172	81,483

 

Goodwill is tested annually for impairment, or more frequently if there are indications that goodwill might be impaired. For the purpose of determining potential goodwill impairment, recoverable amounts are determined from value in use calculations using cash flow projections based on financial plans as set out in the financial statements for the year ended 31 December 2009. A goodwill impairment review was performed at 30 June 2010 with no resulting impairment.

 

9. Property, plant and equipment

 

	Note	6 months ended 30 June 2010 £'000	6 months ended 30 June 2009 £'000	Year ended 31 December 2009 £'000
Net book value at start of period		290,410	361,842	361,842
Additions		7,552	4,672	9,016
Recognised on acquisition		-	-	3,691
Disposals		(1,109)	(3,580)	(5,571)
Transferred to inventories		87	(5,908)	(7,538)
Depreciation		(23,364)	(26,369)	(49,385)
Exceptional impairment		-	(8,861)	(11,891)
Foreign exchange and other movements		(10,810)	(15,685)	(9,754)
Net book value at end of period		262,766	306,111	290,410

 

For details of the exceptional impairment see note 3.

 

10. Inventories

	As at 30 June 2010 £'000	As at 30 June 2009 £'000	As at 31 December 2009 £'000
Ex-rental fleet equipment available for resale	3,681	7,138	7,538
Spares	2,794	2,799	2,746
Consumables	351	216	429
Third party equipment purchased for resale	230	457	279
	7,056	10,610	10,992

11. Capital commitments

	As at 30 June 2010 £'000	As at 30 June 2009 £'000	As at 31 December 2009 £'000
Capital expenditure that has been contracted for by the Group but has not yet been provided for in the financial information at the balance sheet date	1,600	1,035	2,076

 

12. Contingent liabilities

The Group has no significant contingent liabilities as at 30 June 2010.

 

 

13. Seasonality of interim operations

The Group's financial results and cash flows have, historically, been subject to seasonal trends between the first and second half of the financial year. Traditionally, the second half of the financial year sees higher revenue and profitability as a result of there being an increased number of working days and higher customer demand in the Group's countries of operation.

 

There is no assurance that this trend will continue.

 

 

14. Principal risks and uncertainties

The principal risks and uncertainties for the Group have not materially changed from those set out in the Operating and Financial Review included in the 2009 Annual Report.

 

These are summarised as: Competition; Reduction in demand by customers; Retention of senior management; Access to capital/additional finance; Currency and interest rate fluctuations; Legal proceedings; Changes in tax legislation or interpretation; Political; Legal and regulatory developments and Environment and safety laws and regulations.

 

 

15. Related party transactions

There have been no significant related party transactions between the Group and its related parties.

 

 

16. A copy of this interim report is being sent to all shareholders and are available from the Company's registered office at 15 Midland Court, Central Park, Lutterworth, Leicestershire, LE17 4PN.

 

Independent review report to Lavendon Group plc

 

Introduction

We have been engaged by the company to review the condensed consolidated interim financial information in the interim report for the six months ended 30 June 2010, which comprises the group income statement, group statement of comprehensive income, group balance sheet, statement of changes in equity, group statement of cash flows, analysis of changes in net borrowings and related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial information.

 

Directors' responsibilities

The interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated interim financial information included in this interim report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

 

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial information in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial information in the interim report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

PricewaterhouseCoopers LLP

Chartered Accountants

Birmingham

27 August 2010

 

 

Notes:

a) The maintenance and integrity of the Lavendon Group plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site.

b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.