5th Sep 2006 07:04
Lavendon Group PLC05 September 2006 5 September 2006 Lavendon Group plc Interim Results for the six months ended 30 June 2006 Lavendon Group is Europe's market leader in the rental of powered accessequipment. Powered access provides a high degree of flexibility, therebyreducing labour costs and saving both time and money. The equipment is quick,safe, convenient and highly manoeuvrable. Consequently, it is now used toprovide temporary aerial access in a variety of applications and is fastbecoming industry's favoured option when compared to traditional access methodssuch as scaffolding, ladders and aluminium towers. It is also ideal for a widerange of other applications including industrial and building maintenance,construction, sign erection, outside broadcasting, telecommunications, treesurgery and highway maintenance. Highlights: • Results ahead of market expectations • Three strategic acquisitions made with immediate financial benefits • Revenues increased 19% to £57.1m (2005: £47.9m) • Operating profits increased three-fold to £3.3m (2005: £1.1m) • Profit before tax of £1.1m (2005: loss of £1.3m) • Strong cash generation • Interim dividend to be declared of 1.50p • Positive outlook for the remainder of the year Outlook Kevin Appleton, Chief Executive, said today:"The Group's trading performance for the first half has seen a continuation ofthe improving trend established last year. Our acquisitions of Panther, Kestreland A.M.P are improving the Group's ability to service the regional markets inthe UK, and this, when combined with the organic growth from our existingbusinesses, has led to a very good first half performance. Trading since the half year end has continued strongly and we believe thereremains considerable scope for further improvement in the business performance." For further information please contact: Lavendon Group plcKevin Appleton, Chief Executive On 05.09.06: 020 7067 0700Alan Merrell, Group Finance Director Thereafter: 01455 558874 Weber Shandwick Square MileTerry Garrett / Nick Dibden 020 7067 0700 CHAIRMAN'S STATEMENT Financial OverviewThe Group's trading performance for the six months ended 30 June 2006 has showngood progress over 2005. Revenues for the Group increased by 19% to £57.1million (2005: £47.9 million), through a combination of organic growth and theacquisitions completed during the period. This growth in revenues, together withenhanced margins, enabled operating profits to improve three-fold to £3.3million (2005: £1.1 million). Interest charges for the Group reduced to £2.2 million (2005: £2.5 million),following the significant reduction in debt levels during 2005. This reductionin interest costs, together with the increase in operating profits, produced aprofit before tax for the period of £1.1 million, an improvement of £2.4 millionover 2005. Earnings per share for the six months to 30 June 2006 were 1.65p(2005: loss of 1.99p). Earnings before interest, tax, depreciation and amortisation increased by 25% to£15.7 million (2005: £12.5 million), with net cash generated from operatingactivities increasing by 30% to £10.2 million (2005: £7.9 million). During the first half of the year, the Group invested a total of £44.5 million(2005: £2.3 million) in acquiring three rental businesses in the UK and in themaintenance and expansion of its existing asset base. The acquisitions ofPanther Work Platforms Limited, Kestrel Powered Access Limited and A.M.P. AccessLimited were made for an aggregate consideration of £19.3 million, of which£12.4 million had been paid as at 30 June 2006. The balance of the investment -some £25.2 million of which £18.2 million had been settled by 30 June 2006 - wasmade in the Group's existing operations, focusing upon the replacement ofretired rental units, settlement of leasing commitments and selective purchasesof high demand products. This investment activity has increased the Group's netdebt levels at the half year to £90.6 million (2005: £73.4 million), with acorresponding debt to equity ratio of 115% (2005: 98%) and a debt to rolling 12month EBITDA multiple of 2.75. Whilst net debt levels have increased, they areat a comfortable level and are well supported by strong operational cash flows.These robust cash flows, together with access to significant unutilised bank andcredit facilities, provide the necessary financial resource to fund theinvestments made in the first six months and support the planned expansionprogramme for the remainder of the year. DividendFollowing the resumption of dividends with the recent payment of a finaldividend for 2005, and in light of the continuing improvements in the Group'strading performance, the directors are declaring an interim dividend of 1.50p(2005: nil). This will be paid on 6 November 2006 to shareholders on theregister at close of business on 15 September 2006. Business Review UKWhilst market conditions have, in the main, continued to be broadly favourable,they have remained very competitive during the first six months of the year,limiting the scope to improve hire rates, particularly in the constructionsector. Our approach during this period has been to continue to concentrate on thosesectors where our range of equipment and distribution capability provides acompetitive edge, and at the same time, through the recent acquisitions ofPanther Work Platforms Limited, Kestrel Powered Access Limited and, morerecently, A.M.P. Access Limited, extend our regional and sector coverage. By encouraging cross-hire between our new and existing companies, utilisationlevels have improved, enabling revenue growth to be above market levels. We willcontinue to pursue a twin-track growth strategy of a flexible local marketpresence and a large-scale integrated, high quality national network. Revenues for the first six months increased by 27% to £37.2 million (2005: £29.3million), with around 2% of this growth coming from existing operations and thebalance from the effect of the acquisitions. Operating profits increased by 46%to £4.7 million (2005: £3.2 million), with the acquisitions delivering £1.2million of this profit growth. Operating margins improved to 13% from 11% lastyear, with both existing and, in particular, the acquired businessescontributing to this improvement. GermanyWe are starting to see signs that the extended period of declining demand in theGerman powered access industry is finally coming to an end, as activity levelsbegin to recover and the demand and supply imbalance undergoes a process ofcorrection. However, at this stage, hire rates continue to disappoint and a moresustained period of improving demand and utilisation across the market will berequired before there is any substantial change in this respect. Following the restructuring of the business at the end of 2004 and the beginningof 2005, the business has maintained tight control over costs and improvedservice consistency levels. This improvement in operating efficiency has beensupplemented, in recent months, by year on year revenue growth, enabling thebusiness to reduce its operating losses. Although monthly revenues have nowreturned to year on year growth, the turnover for the first half overall shows adecline of 3% to £9.8 million (2005: £10.1 million), but, with operating lossesreducing by 16% to £2.1 million (2005: £2.5 million), we believe that thisperformance provides a solid base for further improvement in the second half ofthe year. FranceThe French market has continued to recover, albeit at a slower pace thanenvisaged six months ago. This recovery, together with the expansion of ourfleet in 2005, has enabled the business to increase its revenues for the firsthalf of the year by 10% to £3.4 million (2005: £3.1 million), with operatinglosses reducing to £0.5 million (2005: £0.6 million). SpainIn Spain, we are benefiting significantly from re-focusing the business into twomain operating centres, where relatively robust local markets and goodoperational economies of scale are available. Through careful management andselective hire rate increases, revenues have increased by 11% to £2.0 million(2005: £1.8 million), producing an operating profit of £0.1 million compared tothe operating loss of £0.1 million recorded in the previous year. Furtherprogress should be made in the second half of the year. Middle EastDemand levels remain strong in the region and have led to a further 100 machinesbeing transferred to the region since the start of the year. Revenues for thefirst six months have grown by 27% to £4.7 million (2005: £3.7 million), withoperating profits increasing to £1.2 million (2005: £1.1 million). Operatingprofit improvements are currently being suppressed, as transport, clearance andhandling charges associated with the recent fleet increases are incurred andexpensed directly to the income statement. The impact of these charges is onlytemporary as the region's fleet expands to meet demand. Further increases in the fleet are planned for the second half of the year tosupport expected increases in activity levels across the region for the balanceof 2006 and beyond. Whilst these fleet transfers will impact the profitabilityof the region in the immediate future, they are essential if the Group is tomaximise the potential of the opportunity that the region presents. Board ChangesAs previously announced, John Heywood retired from the Board as a non-executivedirector on 28 April 2006. On the same date, the Board welcomed David Hollywoodas a non-executive director. David became a member of both the Audit Committeeand the Remuneration & Nomination Committee upon his appointment. SummaryThe financial performance of the Group continues its improving trend,established in 2005, with revenues increasing and operating margins growing. Thepace and scale of the improvement is being enhanced by the success of thebusinesses that were acquired during the first half of the year, and which haveproduced immediate financial benefits for the Group. The Group is now several months into the first phase of strategic growth, basedon market consolidation in our main markets and selective organic growth inthose markets where the addition of capacity is unlikely to contribute to adeterioration of market conditions. The first six months of 2006 have givenencouragement in respect of both the deliverability and effectiveness of thisstrategy and we believe there is considerable scope for further improvement inthe business performance. Trading since the half-year end has continued its improving trend and we lookforward to being able to report further progress for the year. John GordonChairman4 September 2006 Group income statement(unaudited) 6 months ended 6 months ended 12 months ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000-------------------- ----------- ----------- -------------Revenue 57,062 47,911 100,009Cost of sales (33,209) (29,510) (58,652)-------------------- ----------- ----------- -------------Gross profit 23,853 18,401 41,357Operating expenses (20,551) (17,282) (34,013)-------------------- ----------- ----------- -------------Operating profit 3,302 1,119 7,344Investment income 81 4 46Interest payable (2,249) (2,469) (4,491)-------------------- ----------- ----------- -------------Profit/(loss)beforetaxation 1,134 (1,346) 2,899Taxation on(profit)/loss (513) 611 (2,010)-------------------- ----------- ----------- -------------Profit/(loss)for the period 621 (735) 889-------------------- ----------- ----------- ------------- Profit/(loss) perordinary share - basic 1.65 p (1.99) p 2.40 p - diluted 1.64 p (1.99) p 2.38 p-------------------- ----------- ----------- ------------- All of the Group's trading activities relate to continuing operations. Group balance sheet (unaudited) As at As at As at 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000-------------------------- ---------- --------- ------------AssetsNon-current assetsIntangible assets 2,168 923 1,107Goodwill 10,223 - -Property, plant and equipment 172,860 148,646 143,292-------------------------- ---------- --------- ------------ 185,251 149,569 144,399Current assetsInventories 908 855 749Trade and other receivables 30,747 25,414 23,406Current tax assets - 589 -Financial assets - derivative financial instruments 308 - -Cash and cash equivalents 7,429 3,544 7,980-------------------------- ---------- --------- ------------ 39,392 30,402 32,135LiabilitiesCurrent liabilitiesFinancial liabilities - borrowings (21,910) (14,850) (14,162) - derivative financial instruments - (183) (9)Trade and other payables (29,828) (14,961) (15,879)Current tax liabilities (1,507) - (1,879)-------------------------- ---------- --------- ------------ (53,245) (29,994) (31,929)-------------------------- ---------- --------- ------------Net current(liabilities)/assets (13,853) 408 206-------------------------- ---------- --------- ------------Non-current liabilitiesFinancial liabilities - borrowings (76,150) (62,135) (55,514)Deferred tax liabilities (14,668) (13,073) (12,028)Other non-current liabilities (1,515) - --------------------------- ---------- --------- ------------ (92,333) (75,208) (67,542)-------------------------- ---------- --------- ------------Net assets 79,065 74,769 77,063-------------------------- ---------- --------- ------------ Shareholders' equityOrdinary shares 379 370 370Share premium 72,440 70,449 70,449Capital redemption reserve 4 4 4Other reserves (325) (828) (431)Retained earnings 6,567 4,774 6,671-------------------------- ---------- --------- ------------Total equity 79,065 74,769 77,063-------------------------- ---------- --------- ------------ The interim financial statements were approved by the Board of Directors on 4September 2006 and were signed on its behalf by: John Gordon Alan MerrellChairman Finance Director Group cash flow statement(unaudited) 6 months ended 6 months ended 12 months ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000---------------------------- --------- --------- ----------Cash flows from operating activities:Profit/(loss) for theperiod after tax 621 (735) 889Taxationcharge/(credit) 513 (611) 2,010Net interest expense 2,168 2,465 4,445Amortisation anddepreciation 12,372 11,381 22,428Gain on sale ofproperty, plant andequipment (331) (204) (307)Other non-cashmovements 347 (250) 178Net (increase)/decreasein working capital (1,533) (1,334) 1,582---------------------------- --------- --------- ----------Cash generated from operations 14,157 10,712 31,225 Net interest paid (2,227) (2,835) (4,852)Taxation paid (1,711) (1) (1,035)---------------------------- --------- --------- ----------Net cash generated fromoperating activities 10,219 7,876 25,338 Net cash (used)/generated byinvesting activities:Acquisition of subsidiaries (net of cash acquired andconsideration deferred) (12,382) - -Proceeds from sale ofsubsidiary - 2,665 2,665Proceeds from sale ofproperty, plant and equipment 2,406 2,812 4,113Purchase of property,plant and equipment (2,639) (1,280) (1,657)---------------------------- --------- --------- ----------Net cash(used)/generated byinvesting activities: (12,615) 4,197 5,121 Cash flows from financingactivities:Drawdown/(repayment) of loans 6,914 (9,380) (18,220)Repayment of principalunder hire purchase agreements (6,176) (6,623) (11,802)Equity dividends paid (853) - -Proceeds from equityshares issued 2,000 37 37---------------------------- --------- --------- ----------Net cash used byfinancing activities 1,885 (15,966) (29,985)---------------------------- --------- --------- ----------Net (decrease)/increase in cashand cash equivalents beforeexchange differences (511) (3,893) 474Effects of exchange rates (40) (97) (28)---------------------------- --------- --------- ----------Net (decrease)/increase in cashand cash equivalents beforeexchange differences (551) (3,990) 446 Cash and cash equivalents at start of period 7,980 7,534 7,534---------------------------- --------- --------- ----------Cash and cash equivalents atend of period 7,429 3,544 7,980---------------------------- --------- --------- ---------- Analysis of changes in net borrowings during the six months(unaudited) At Acquired Currency At 1 January Cash with Other non translation 30 June 2006 flows Subsidiaries cash items differences 2006 £000 £000 £000 £000 £000 £000----------------- -------- ------ --------- -------- --------- -------Cash and cashequivalents 7,980 (3,033) 2,522 - (40) 7,429Bank overdrafts - - - - - ------------------ -------- ------- --------- -------- --------- ------- 7,980 (3,033) 2,522 - (40) 7,429 Bank debt duewithin one year (7,510) - (114) (2,182) - (9,806)Bank debt dueafter one year (46,648) (6,914) - 2,182 (229) (51,609)Loan notes - - - (1,400) - (1,400)Hire purchaseand finance leaseagreements (15,518) 6,176 (10,257) (15,589) (57) (35,245)----------------- -------- ------- --------- -------- --------- ------- (69,676) (738) (10,371) (16,989) (286) (98,060)----------------- -------- ------- --------- -------- --------- -------Total netborrowings (61,696) (3,771) (7,849) (16,989) (326) (90,631)----------------- -------- ------- --------- -------- --------- ------- Shareholders' funds and statement of changes in equity (unaudited) For the six months ended 30 June 2006 Share Share Capital Translation Cash flow Net investment Retained Total capital premium redemption reserve hedge reserve hedge reserve earnings reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000----------------- ------ ------ -------- ------- ------ ------- ------- ------Balance at 1January 2006 370 70,449 4 (2,232) (9) 1,810 6,671 77,063Profit for the period - - - - - - 621 621Share based payments - - - - - - 163 163Deferred tax movementon share basedpayments - - - - - - (35) (35)Cash flow hedges - fair value gains in the period - - - - 317 - - 317Dividends paidin the period - - - - - - (853) (853)Shares issued 9 1,991 - - - - - 2,000Currencytranslationdifferences - - - (297) - 86 - (211)------------------- ------ ------ -------- ------- ------ ------- ------ ------Balance at 30June 2006 379 72,440 4 (2,529) 308 1,896 6,567 79,065------------------- ----- ------ ------ -------- ------- ------ ------- ------ For the six monthsended 30 June 2005 Share Share Capital Translation Cash flow Net investment Retained Total capital premium redemption reserve hedge reserve hedge reserve earnings reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000-------------- ------ ------ -------- ------- ------ ------- ------ -----Balance at 31December 2004 370 70,412 4 (841) - - 5,455 75,400IAS39 - recognitionof fair value offinancial instruments - - - - (578) - - (578)------------------ ------ ------ -------- ------- ------ ------- ------ -----Balance at 1January 2005 370 70,412 4 (841) (578) - 5,455 74,822Loss for theperiod - - - - - - (735) (735)Share basedpayments - - - - - - 77 77Deferred taxmovement on sharebased payments - - - - - - (23) (23)Cash flow hedges - fair value gains in the period - - - - 395 - - 395Shares issued - 37 - - - - - 37Currency translationdifferences - - - 196 - - - 196----------------- ------ ------ -------- ------- ------ ------- ------ -----Balance at 30June 2005 370 70,449 4 (645) (183) - 4,774 74,769----------------- ------ ------ -------- ------- ------ ------- ------ ------ For the twelve months ended 31 December 2005 Share Share Capital Translation Cash flow Net investment Retained Total capital premium redemption reserve hedge reserve hedge reserve earnings reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000-------------- ------ ------ -------- ------- ------ ------- ------ ----- Balance at 1January 2005 370 70,412 4 (841) - - 5,455 75,400Profit for the year - - - - - - 889 889Share based payments - - - - - - 178 178Deferred taxmovement on sharebased payments - - - - - - 149 149Cash flow hedges - fair value lossesin the year - - - - (9) - - (9)Shares issued - 37 - - - - - 37Currency translationdifferences - - - (1,391) - 1,810 - 419----------------- ------ ------ -------- ------- ------ ------- ------ ------Balance at 31December 2005 370 70,449 4 (2,232) (9) 1,810 6,671 77,063----------------- ------ ------ -------- ------- ------ ------- ------- ------ Notes to the interim financial statements 1. These interim financial statements are prepared using the IFRS accountingpolicies (including IAS and interpretations issued by the InternationalFinancial Reporting Interpretations Committee ("IFRIC")) that are expected to beapplicable for the full reporting year in 2006. These remain subject to ongoingamendment and/or interpretation and are therefore subject to possible change.Consequently, information contained in these interim financial statements mayneed updating for any subsequent amendments to IFRS, or for any new standardsthat the Group may elect to adopt early. The interim financial statements set out on pages 4 to 10 are unaudited and donot comprise statutory accounts for the purpose of section 240 of the CompaniesAct 1985. Comparative figures for the six months to 30 June 2005 and year to 31December 2005 have been previously presented in the Group's Interim and Annualreports for 2005, further details of these and the accounting policies underIFRS are available on the Group website (www.lavendongroup.com). 2. The accounting policies used have been consistently applied to both thecurrent and prior year information. 3. Primary segmental analysis - geographical segments 6 months ended 6 months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £'000 £'000 £'000Revenue------------------- -------- --------- -----------UK 37,194 29,265 61,106Germany 9,819 10,131 21,153France 3,416 3,059 6,661Spain 1,983 1,770 3,614Middle East 4,650 3,686 7,475------------------- -------- --------- -----------Total 57,062 47,911 100,009------------------- -------- --------- ----------- Operating profit/(loss)------------------- -------- --------- -----------UK 4,672 3,189 8,313Germany (2,149) (2,455) (3,130)France (510) (571) (521)Spain 64 (145) (27)Middle East 1,225 1,101 2,709------------------- -------- --------- -----------Total 3,302 1,119 7,344------------------- -------- --------- ----------- Note: The information disclosed for the UK operation includes centralised groupcosts, which may relate to the operation and financing of overseas subsidiaries. 4. The taxation charge for the six months to 30 June 2006 has been calculated byapplying the estimated tax rate for the current financial year ending 31December 2006. 5. Earnings per share are calculated on the 37,679,011 ordinary shares in issuefor the six months to 30 June 2006 being the weighted average number of ordinaryshares in issue (6 months 2005: 37,013,498; full year 2005: 37,021,112). Diluted earnings per share assume conversion of all dilutive potential ordinaryshares which arise from share options granted to employees where the exerciseprice is less than the average market price of the Company's ordinary sharecapital during the six months. The effect of this dilution is to increase theweighted average number of ordinary shares to 37,892,441 (6 months 2005:37,309,804; full year 2005: 37,370,394). This dilution cannot be applied to aloss for the period and the stated diluted EPS is hence equal to the basic EPSfor the current period. 6. Acquisition of subsidiary companies Panther Work Platforms Limited (Panther) On 14th February 2006, the group acquired 100% of the share capital of PantherWork Platforms Limited and its subsidiaries. The initial consideration was £7.0 million, with £5.0 million beingsatisfied in cash and £2.0 million being satisfied by the issue of 865,800 newordinary shares of 1p each in Lavendon Group plc ('Ordinary Shares'). Additionalconsideration of between £0.8 - £3.1 million is payable in cash and loan notesby Lavendon Group plc ("Lavendon") dependent upon Panther's financialperformance over the two years ending on 31 January 2008. Kestrel Powered Access Limited (Kestrel) On 21st February 2006, the group acquired 100% of the share capital of KestrelPowered Access Limited. The consideration paid on completion was £4.3 million, satisfied in cash.Additional consideration of between £0.6 - £2.6 million will be payable in cashand loan notes by Lavendon dependent upon Kestrel's financial performance overthe two years ending on 31 January 2008. A.M.P. Access Limited (AMP) On 20th June 2006, the Group acquired 100% of the share capital of A.M.P. AccessLimited. The consideration paid on completion was £3.0 million, to be satisfied incash. Additional consideration of between £0.3 - £2.6 million will be payable incash by Lavendon dependent upon AMP's financial performance over the two yearsending 31 May 2008. Details of the acquisitions are provided in aggregate below: 2006 2005 £'000 £'000 Book value of assets acquired 7,496 -Fair value adjustments (i) 395 - ------- ----- Fair value of assets acquired 7,891 - Goodwill on acquisition 10,223 -Other intangible assets recognised at acquisition 1,200 - -------- ---- Cost of acquisitions 19,314 - -------- ---- Satisfied by: 2006 2005 £'000 £'000 Consideration in cash 12,275 -Shares issued 2,000 -Loan notes issued 1,400 -Deferred consideration (ii) 3,030 -Acquisition costs 609 - ------- ------ 19,314 - ------ ------ The attributed fair values are provisional. Notes (i) The fair value adjustments relate to the restatement of the acquired balance sheets under the Group's accounting policies. The adjustments primarily relate to increases in the carrying value of property plant and equipment offset by compensatory adjustments to corporation tax and deferred tax. (ii) The carrying value of the deferred consideration is estimated after taking into account forecast future earnings. The maximum deferred consideration payable is £8.3 million. 7. A copy of this interim statement is being sent to all shareholders and copies are available from the Company's registered office at 1 Midland Court, Central Park, Lutterworth, Leicestershire, LE17 4PN. Independent review report to Lavendon Group plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the consolidated interimbalance sheet as at 30 June 2006 and the related consolidated interim statementsof income, cash flows and changes in shareholders' equity for the six monthsthen ended and related notes. We have read the other information contained inthe interim report and considered whether it contains any apparent misstatementsor material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The Listing Rulesof the Financial Services Authority require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. This interim report has been prepared in accordance with the basis set out inNote 1. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. PricewaterhouseCoopers LLPChartered AccountantsBirmingham4 September 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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