6th Sep 2005 07:02
Lavendon Group PLC06 September 2005 6 September 2005 Lavendon Group plc Interim Results for the six months ended 30 June 2005 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 in line with expectations• Operating profits improved to £1.1m (2004: loss before exceptional costs of £0.5m)• Net debt reduced to £73.4m (2004: £98.7m)• Loss before tax of £1.3m (2004: loss before exceptional costs of £3.4m)• Further progress expected for the rest of the year Outlook-------David Price, Chairman, said today: "The Group's trading performance in the first half has shown an encouragingimprovement over the same period last year. This has been achieved throughrevenue growth and operational efficiencies in the UK combined with thepredicted benefits of the restructure of our German operation being secured. "The Board is encouraged with the progress made in the first half of the year,and looks forward to further improvements during the second half." For further information please contact: Lavendon Group plcKevin Appleton, Chief Executive On 06.09.05: 020 7067 0700Alan Merrell, Group Finance Director Thereafter: 01455 558874 Weber Shandwick Square MileTerry Garrett / Nick Dibden / Yvonne Alexander 020 7067 0700 Chairman's Statement Financial Overview The Group's results for the six months to 30 June 2005 are the first to beprepared under International Financial Reporting Standards (IFRS). All financialdata contained in this Chairman's Statement, including comparisons against theprevious year, reflect the conversion to IFRS, with reconciliations of themovements in the Group's results from IFRS to UK GAAP forming part of theInterim Report. The trading performance of the Group for the first half of 2005 was in line withour expectations. Revenues were £47.9 million (2004: £50.0 million) followingthe anticipated reduction in German revenues as a result of the restructure ofthe operation at the end of 2004, and the sale of the Austrian business. Groupoperating profits improved to £1.1 million (2004: loss of £0.5 million beforeexceptional costs and loss of £2.0 million after exceptional costs), mainly dueto operational efficiency improvements coupled with UK revenue growth. The Group's interest charge for the period decreased to £2.5 million (2004: £2.9million), reflecting the continuing reduction in the Group's borrowing levels.The combination of the reduced interest charge and the enhanced tradingperformance produced a loss before tax of £1.3 million, an improvement of £2.1million over the loss before tax and exceptional costs for the same period in2004 of £3.4 million. After exceptional costs, the loss before tax in 2004 was£4.9 million. The loss per share for the six months ended 30 June 2005 was 1.99p(2004: loss of 5.02p before exceptional costs and 8.20p after exceptionalcosts). Earnings before interest, tax, depreciation and amortisation (EBITDA) increasedto £12.5 million during the period (2004: £12.3 million before exceptional costsand £10.8 million after exceptional costs). The net cash inflow from operatingactivities marginally increased to £7.9 million (2004: £7.8 million), despiteabsorbing a cash outflow of £2.2 million in the first six months relating to theexceptional costs accrued, principally associated with the restructuring of theGerman business, at the 2004 year-end. A total of £2.3 million was invested in fixed assets during the first half ofthe year (2004: £0.7 million), of which £1.7 million was invested in specificmachine types which are experiencing an on-going strengthening in demand. Thenet cash inflow from investing activities of £4.2 million (2004: inflow of £0.1million) resulted from the disposal proceeds generated from the sale of theAustrian business, the sale of retired rental units and the sale of a number ofthe surplus German rental units identified at the end of 2004, exceeding thelimited capital expenditure programme undertaken in the first half of the year. The combination of the cash inflows from operating and investing activitiesenabled the Group to produce £12.0 million of 'free cash' (1) (2004: £6.2million), which has been used to reduce the Group's debt levels. During thefirst half of the year, the Euro currency weakened which, as the Group's debt ispredominantly denominated in Euros, had the beneficial effect, on translation,of further reducing the Group's reported debt levels at the half year by £3.6million (2004: £4.5 million). Through the generation of 'free cash' and with theeffect of currency movements, the overall net debt level of the Group hasreduced to £73.4 million (2004: £98.7 million), with a corresponding debt toequity ratio of 98% (2004: 114%). The Group's bank and credit facilitiescontinue to be available and all associated covenants have been met. Dividend Whilst the Group's trading performance is improving, retained losses are stillbeing incurred which are being absorbed by the Group's distributable reserves.Consequently the Directors have decided not to declare an interim dividend thisyear (2004: 2.25p). The Board is hopeful that further improvements in the performance of the Groupwill enable an early resumption of dividend payments. Business Review Overall trading conditions are similar to those reported at the time of ourfinal results for 2004 in March of this year. In general, whilst the demand forpowered access across Europe has recently been more robust than the previous twoyears, the continuance of excess capacity in the marketplace makes it difficultto translate growth in unit volume of sales into growth in revenues. Againstthis background, our focus has remained upon servicing market segments where webelieve we have a competitive advantage, improving our operational processes,tightly controlling costs (particularly in the wake of the restructuring inGermany) and reducing the Group's debt level. This strategy has produced some encouraging results when compared with the firsthalf of 2004 and, we believe, positions us strongly for moving into a new phaseof growth for the business. UKThe UK powered access market has experienced a period of modest growth in thefirst half of this year, mainly driven by increased activity levels in the moreprice competitive sectors, particularly the commercial construction sector.Whilst benefiting from this improved market environment, we have continued toconcentrate our sales efforts in the markets where our nationwide distributioncapability, range of equipment and service levels enable us to secure acompetitive advantage. The progress we have made in this area is considerable,with the revenue growth from our top 50 national customers growing by 22% yearon year. The success of this focused approach has meant that fleet capacityavailable to meet demand from other, more locally based, customers has beenlimited at times, with the result that profitable opportunities from thisimportant market segment have been missed. The need to increase our ability toservice the locally based customer, through securing additional capacity, isrecognised and will be addressed in the coming months. In the first six months of the year revenues increased by 2% to £29.3million(2004: £28.7million), with operating profits increasing to £3.2 million (2004:£2.3 million before exceptional costs and £1.2 million after exceptional costs).Operating margins improved to 11% from 8%, before exceptional costs in theprevious year, through a combination of revenue growth and operationalefficiencies. GermanyAs reported previously, the long awaited economic recovery in Germany remainselusive, although conditions in the powered access market are showing signs ofstabilising. Our decision, at the end of 2004, to restructure our German business aligning itto current market conditions through the reduction of the fleet size and depotinfrastructure, has enabled the business to lower its cost base and at the sametime become more agile in responding to competitive pressures. Whilst weakmarket demand continues to restrict our ability to grow revenues, our focus onfurther improving the efficiency of the business has remained. In the periodsince 1 January we have revised our pricing structures, strengthened performancemeasures, improved our order management systems and enhanced maintenance andtransport effectiveness. These operational efficiency improvements combined withthe already lowered cost base, should ensure that once growth in market demandreturns the profitability of the business will increase significantly. The combination of these actions has enabled operating losses at the half yearto be reduced to £2.5 million (2004: loss of £3.2 million before exceptionalcosts and £3.5 million after exceptional costs). This improvement was achieveddespite a 21% reduction in revenues to £10.1 million (2004: £12.9 million). France and SpainThe recovery in the French market, initially seen towards the end of 2004, hascontinued through the first half of this year, and now offers a stableenvironment in which to develop our business. To position ourselves to benefitfrom the improving market, we have expanded both the rental fleet and our depotnetwork, and now operate a fleet of almost 900 machines through nine depots. Revenue growth in the first half of the year has been encouraging, with salesincreasing by 33% to £3.1 million (2004: £2.3 million). Due to the need toabsorb the increases in the cost base following the fleet and depot expansion,operating losses increased to £0.6 million (2004: £0.4 million). However, as theyear progresses, we expect continued revenue growth to fully absorb these costincreases and enable the operation to make year on year progress. In Spain, in view of the uncertain outlook for the construction market, wereduced our depot network to concentrate our activities in Madrid and Murciawhilst maintaining a satellite operation in Santiago. Revenues for the firsthalf of the year were stable at £1.8 million (2004: £1.8 million), withoperating losses held at £0.1 million (2004: £0.1 million). The lowered costbase, following the reduction in the depot network, should enable progress to bemade in the second half of the year in improving profitability as seasonaldemand increases revenue levels. Middle EastThe region delivered another solid performance, with revenues increasing by 6%to £3.7 million (2004: £3.5 million), but with the continued weakness of the USDollar (to which the main Middle East currencies are linked) operating profitswere held at £1.1 million (2004: £1.1 million). The outlook in the regionremains encouraging and has led to additional fleet being sent to the region toservice a number of projects coming on stream in the second half of the year. Board Changes As already announced, I am retiring upon reaching the age of 60 on 24 September2005 and shall step down both as Chairman and as a Director of Lavendon Group.John Gordon, who is presently the Company's Senior Non-Executive Director andChairman of the Audit Committee will succeed me as Chairman of the Board. JohnStanden, who joined the Board on 1 May 2005, will become Senior Non-ExecutiveDirector and Chairman of the Audit Committee. On 1 October 2005, as previouslyannounced, Timothy Ross will join the Board as a non-executive director, andwill become a member of both the Audit Committee and the Remuneration andNomination Committee. John Heywood, who has been a non-executive director since the Company'sflotation, has indicated that he wishes to retire at the Company's AnnualGeneral Meeting in April 2006. Prior to John's retirement a replacementnon-executive director will be appointed. Summary The Group's trading performance in the first half has shown an encouragingimprovement over the same period last year. This has been achieved throughrevenue growth and operational efficiencies in the UK combined with thepredicted benefits of the restructure of our German operation being secured. Whilst the overall European market for powered access still suffers fromover-capacity, there are indications that this is being brought back intobalance in certain markets. In the medium term we retain the view that thedemand for powered access will increase at average rates that are ahead ofgeneral economic growth. Whilst our focus on restructuring operations to be morein line with market conditions and improving operational processes is startingto strengthen our financial performance, the benefits from these developmentswill be increased significantly once a general market recovery is underway andwe are able to channel additional business through an increasingly lean andefficient operational infrastructure. Solid cash flows continue to strengthen the balance sheet by reducing theGroup's level of debt and enhancing the trading performance through loweredinterest charges. The extent of the de-leveraging of the balance sheet over thepast two years, with borrowing levels having reduced by £43 million, providesthe necessary flexibility for the Group to examine resolutions to capacityconstraint issues in the UK and to explore other growth opportunities that themarket presents in the coming months and years. The Board is encouraged with the progress made in the first half of the year,and looks forward to further improvements in performance during the second halfof 2005. (1) Free cash is defined as net cash flow from operating activities plus net cash flow from investing activities less dividends paid and capital expenditure financed financed by new hire purchase agreements. 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 £'million £'million £'million Net cash generated from operating activities 7.9 7.8 24.2 Net cash generated from / (used by) investing activities 4.2 0.1 (0.3)Dividends paid 0.0 (1.7) (2.6)Capital expenditure financed by hire purchase agreements (0.1) 0.0 (0.4) ---------- ---------- ----------Free cash 12.0 6.2 20.9 ---------- ---------- ---------- Group income statement 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000--------------------------------------------------------------------------------Revenue 47,911 50,035 108,013Cost of sales before exceptional cost of sales (29,510) (30,866) (63,960)Exceptional cost of sales - - (8,118)--------------------------------------------------------------------------------Total cost of sales (29,510) (30,866) (72,078)--------------------------------------------------------------------------------Gross profit 18,401 19,169 35,935Operating expenses before exceptional operating expenses (17,282) (19,672) (38,326)Exceptional operating expenses - (1,523) (6,396)--------------------------------------------------------------------------------Total operating expenses (17,282) (21,195) (44,722)--------------------------------------------------------------------------------Operating profit / (loss) 1,119 (2,026) (8,787)Investment income 4 15 30Interest payable (2,469) (2,896) (5,810)--------------------------------------------------------------------------------Loss before taxation (1,346) (4,907) (14,567)Taxation on loss 611 1,872 1,753--------------------------------------------------------------------------------Loss after taxation (735) (3,035) (12,814)-------------------------------------------------------------------------------- Loss per ordinary share- basic (1.99) p (8.20) p (34.63) p- diluted (1.99) p (8.20) p (34.63) p-------------------------------------------------------------------------------- Group balance sheet As at As at As at 30 June 30 June 31 December 2005 2004 2004 £000 £000 £000-----------------------------------------------------------------------------------AssetsNon-current assetsIntangible assets 923 1,999 1,218Property, plant and equipment 148,646 181,448 166,157----------------------------------------------------------------------------------- 149,569 183,447 167,375Current assetsInventories 855 910 873Trade and other receivables 25,414 27,330 26,024Current tax assets 589 1,694 -Cash and cash equivalents 3,544 3,575 7,534----------------------------------------------------------------------------------- 30,402 33,509 34,431LiabilitiesCurrent liabilitiesFinancial liabilities- borrowings (14,850) (15,644) (15,673)- financial instruments (183) - -Trade and other payables (14,961) (13,890) (16,782)Current tax liabilities - - (250)----------------------------------------------------------------------------------- (29,994) (29,534) (32,705)-----------------------------------------------------------------------------------Net current assets 408 3,975 1,726-----------------------------------------------------------------------------------Non-current liabilitiesFinancial liabilities - borrowings (62,135) (86,675) (80,870)Deferred tax liabilities (13,073) (14,282) (12,831)Other non-current liabilities - (47) ------------------------------------------------------------------------------------ (75,208) (101,004) (93,701)-----------------------------------------------------------------------------------Net assets 74,769 86,418 75,400-----------------------------------------------------------------------------------Shareholders' equityOrdinary shares 370 370 370Share premium 70,449 70,412 70,412Capital redemption reserve 4 4 4Other reserves (828) (403) (841)Retained earnings 4,774 16,035 5,455-----------------------------------------------------------------------------------Total equity 74,769 86,418 75,400----------------------------------------------------------------------------------- The interim financial statements on pages 4 to 10 were approved by the Board ofDirectors on 5 September 2005 and were signed on its behalf by: David Price Alan MerrellChairman Finance Director Group cash flow statement 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000-----------------------------------------------------------------------------------Cash flows from operating activities:Loss after taxation (735) (3,035) (12,814)Taxation credit (611) (1,872) (1,753)Net interest expense 2,465 2,881 5,780Amortisation and depreciation 11,381 12,828 26,230Gain on sale of plant, property and equipment (204) (31) (119)Other non-cash movements (250) 30 74Provision against German assets held for resale - - 6,443Provision against Austrian subsidiary - - 1,675Net (increase) / decrease in working capital (1,334) (130) 3,588-----------------------------------------------------------------------------------Cash generated from operations 10,712 10,671 29,104-----------------------------------------------------------------------------------Net interest paid (2,835) (3,018) (5,404)Taxation (paid) / received (1) 180 542-----------------------------------------------------------------------------------Net cash generated from operating activities 7,876 7,833 24,242-----------------------------------------------------------------------------------Cash flows from investing activities:Proceeds from sale of subsidiary 2,665 - -Proceeds from sale of property, plant and equipment 2,812 659 1,542Purchase of property, plant and equipment (1,280) (581) (1,881)-----------------------------------------------------------------------------------Net cash generated from /(used by) investing activities 4,197 78 (339)-----------------------------------------------------------------------------------Cash flows from financing activities:Repayment of loans (9,380) - (5,032)Repayment of principal under hire purchase agreements (6,623) (6,523) (12,807)Equity dividends paid - (1,739) (2,572)Proceeds from equity shares issued 37 - ------------------------------------------------------------------------------------Net cash used by financing activities (15,966) (8,262) (20,411)-----------------------------------------------------------------------------------Net (decrease) / increase in cash and cash equivalents before exchange differences (3,893) (351) 3,492Effects of exchange rates (97) (112) 4-----------------------------------------------------------------------------------Net (decrease) / increase in cash and cash equivalents after exchange differences (3,990) (463) 3,496-----------------------------------------------------------------------------------Cash and cash equivalents at start of period 7,534 4,038 4,038-----------------------------------------------------------------------------------Cash and cash equivalents at end of period 3,544 3,575 7,534----------------------------------------------------------------------------------- Analysis of changes in net borrowings during the six months At Currency At 1 January Other non translation 30 June 2005 Cash flows cash items differences 2005 £000 £000 £000 £000 £000-----------------------------------------------------------------------------------Cash and cash equivalents 7,534 (3,893) - (97) 3,544-----------------------------------------------------------------------------------Bank debt due within one year (4,545) - (2,491) - (7,036)Bank debt due after one year (70,052) 9,380 2,491 3,328 (54,853)-----------------------------------------------------------------------------------Hire purchase and finance lease agreements (21,946) 6,623 (147) 374 (15,096)----------------------------------------------------------------------------------- (96,543) 16,003 (147) 3,702 (76,985)-----------------------------------------------------------------------------------Total net borrowings (89,009) 12,110 (147) 3,605 (73,441)----------------------------------------------------------------------------------- Shareholders' funds and statement of changes in equityFor the six months ended 30 June 2005 Capital Share Share redemption Other Retained capital premium reserve reserves earnings Total £000 £000 £000 £000 £000 £000---------------------------------------------------------------------------------------------------Balance at 31 December 2004 370 70,412 4 (841) 5,455 75,400IAS39 - recognition of fair value of financial instruments - - - (578) - (578)---------------------------------------------------------------------------------------------------Balance at 1 January 2005 370 70,412 4 (1,419) 5,455 74,822Loss for the period - - - - (735) (735)Share based payments - - - - 77 77Tax credit on share based payments - - - - (23) (23)Change in fair value of financial instruments - - - 395 - 395Currency translation differences - - - 196 - 196Shares issued - 37 - - - 37---------------------------------------------------------------------------------------------------Balance at 30 June 2005 370 70,449 4 (828) 4,774 74,769--------------------------------------------------------------------------------------------------- For the six months ended 30 June 2004 Capital Share Share redemption Other Retained capital premium reserve reserves earnings Total £000 £000 £000 £000 £000 £000---------------------------------------------------------------------------------------------------Balance at 1 January 2004 370 70,412 4 - 20,789 91,575Loss for the year - - - - (3,035) (3,035)Dividends - - - - (1,739) (1,739)Share based payments - - - - 30 30Tax credit on share based payments - - - - (10) (10)Currency translation differences - - - (403) - (403)---------------------------------------------------------------------------------------------------Balance at 30 June 2004 370 70,412 4 (403) 16,035 86,418--------------------------------------------------------------------------------------------------- For the year ended 31 December 2004 Capital Share Share redemption Other Retained capital premium reserve reserves earnings Total £000 £000 £000 £000 £000 £000---------------------------------------------------------------------------------------------------Balance at 1 January 2004 370 70,412 4 - 20,789 91,575Loss for the period - - - - (12,814) (12,814)Dividends - - - - (2,572) (2,572)Share based payments - - - - 74 74Tax credit on share based payments - - - - (22) (22)Currency translation differences - - - (841) - (841)---------------------------------------------------------------------------------------------------Balance at 31 December 2004 370 70,412 4 (841) 5,455 75,400--------------------------------------------------------------------------------------------------- Notes to the interim financial statements 1. As a European Union listed company Lavendon Group plc has adopted International Financial Reporting Standards ("IFRS") with effect from 1 January 2005. The Group will apply IFRS in its consolidated financial statements for the year ended 31 December 2005. The first results reported under IFRS are therefore for the interim six months ended 30 June 2005. 2. Previously the Group reported under UK Generally Accepted Accounting Policies ("UK GAAP"). Reconciliations from IFRS to UK GAAP of equity for the balance sheet dates of 1 January 2004, 30 June 2004 and 31 December 2004, and of the income statements for the six months to 30 June 2004 and for the full year to 31 December 2004 are provided as appendices to this interim report. These interim financial statements are prepared using the IFRS accounting policies (including IAS and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC")) that are expected to be applicable for the full reporting year in 2005. These remain subject to ongoing amendment and/or interpretation and are therefore subject to possible change. Consequently, information contained in these interim financial statements may need updating for any subsequent amendments to IFRS required for first time adoption, or for any new standards that the Group may elect to adopt early. Costs that are both material and non-recurring, whose significance is sufficient to warrant separate disclosure in the financial statements, are referred to as 'exceptional costs'. Exceptional costs are included and separately identified within their relevant income statement category. The interim financial statements set out on pages 4 to 10 are unaudited and do not comprise statutory accounts for the purpose of section 240 of the Companies Act 1985. Comparative figures for the six months to 30 June 2004 and year to 31 December 2004 have been previously presented in the Group's Adoption of IFRS press release of 14 July 2005 and further details of these and the accounting policies and first time adoption rules under IFRS are available on the Group website (www.lavendongroup.com). The figures presented in these interim statements are consistent with the press release with the exception of clarification of the estimated tax rates to be used for the six months to 30 June 2004 which increased the tax credit to the income statement by £272,000. The accounting policies used have been consistently applied to both the current and prior year information with the exception of the adoption of IAS 32 ("Financial instruments: disclosure and presentation") and IAS 39 ("Financial instruments: recognition and measurement"). The Group has made use of the exemption available under IFRS 1 to only apply these standards with effect from 1 January 2005. 3. Primary segmental analysis - geographical segments 6 months ended 30 June 2004 Year ended 31 December 2004 --------------------------- --------------------------- Before After Before After 6 months ended Exceptional Exceptional Exceptional Exceptional 30 June 2005 Costs Costs Costs Costs £000 £000 £000 £000 £000 ------------------------------------------------------------------------------------------------ Revenue UK 29,265 28,719 28,719 61,513 61,513 Germany 10,131 12,862 12,862 28,339 28,339 Austria - 896 896 2,128 2,128 France 3,059 2,297 2,297 5,297 5,297 Spain 1,770 1,789 1,789 3,548 3,548 Middle East 3,686 3,472 3,472 7,188 7,188 ------------------------------------------------------------------------------------------------ Total 47,911 50,035 50,035 108,013 108,013 ------------------------------------------------------------------------------------------------ Operating profit UK 3,189 2,309 1,169 7,332 5,292 Germany (2,455) (3,195) (3,543) (3,351) (13,890) Austria - (214) (232) (289) (2,213) France (571) (409) (409) (599) (599) Spain (145) (121) (138) (62) (73) Middle East 1,101 1,127 1,127 2,696 2,696 ------------------------------------------------------------------------------------------------ Total 1,119 (503) (2,026) 5,727 (8,787) ------------------------------------------------------------------------------------------------ As previously reported in note 30 of the 2004 Annual Report, the Group sold its Austrian subsidiary on 25 February 2005 with an effective date of 31 December 2004. There are no exceptional operating costs for the six months to 30 June 2005. 4. Exceptional items Exceptional costs incurred during the prior periods are set out below: 6 months ended 6 months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 --------------------------------------------------------------------------------- Exceptional cost of sales: Provision against German assets held for resale - - 6,443 Write down of Austrian net assets - - 1,675 --------------------------------------------------------------------------------- - - 8,118 Exceptional operating expenses: Bank fees - 315 495 Refinancing advisory fees - 659 843 Restructuring costs - 549 4,403 Goodwill write down - - 655 --------------------------------------------------------------------------------- - 1,523 6,396 --------------------------------------------------------------------------------- Total exceptional costs - 1,523 14,514 Taxation effect from exceptional costs - (344) (2,968) --------------------------------------------------------------------------------- Total exceptional costs net of taxation - 1,179 11,546 --------------------------------------------------------------------------------- 5. The taxation charge for the six months to 30 June 2005 has been calculated by applying the estimated tax rate for the current financial year ending 31 December 2005. 6. Earnings per share are calculated on the 37,013,498 ordinary shares in issue for the six months to 30 June 2005 being the weighted average number of ordinary shares in issue (6 months 2004: 37,003,383; full year 2004: 37,003,383). Diluted earnings per share assume conversion of all dilutive potential ordinary shares which arise from share options granted to employees 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 37,309,804 (6 months 2004: 37,125,504; full year 2004: 37,123,889). This dilution cannot be applied to a loss for the period and the stated diluted EPS is hence equal to the basic EPS for the current period. 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 IntroductionWe have been instructed by the Company to review the interim financialinformation which comprises the summarised income statement, the summarisedbalance sheet information as at 30 June 2005, the statement of shareholders'funds and changes in equity, the summarised cash flow statement and thecomparative figures and associated notes. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. Directors' responsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in note 2, the next annual financial statements of the Group willbe prepared in accordance with accounting standards adopted for use in theEuropean Union. This interim report has been prepared in accordance with thebasis set out in note 2. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. As explained in note 2, there is,however, a possibility that the directors may determine that some changes arenecessary when preparing the full annual financial statements for the first timein accordance with the accounting standards adopted for use in the EuropeanUnion. The IFRS standards and IFRIC interpretations that will be applicable andadopted for use in the European Union at 31 December 2005 are not known withcertainty at the time of preparing this interim financial information. Review work performedWe 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 ConclusionOn 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 2005. PricewaterhouseCoopers LLPChartered AccountantsBirmingham5 September 2005 AppendicesReconciliation of balance sheet to UK GAAP at 1 January 2004 (unaudited) As at As at 1 January 2004 1 January 2004 IFRS Conversion UK GAAP £000 £000 £000---------------------------------------------------------------------------------AssetsNon-current assetsIntangible assets 2,257 (1,424) 833Property, plant and equipment 198,627 1,424 200,051--------------------------------------------------------------------------------- 200,884 - 200,884Current assetsInventories 970 - 970Trade and other receivables 27,361 - 27,361Current tax assets 369 - 369Cash and cash equivalents 4,038 - 4,038---------------------------------------------------------------------------------Liabilities 32,738 - 32,738Current liabilitiesFinancial liabilities - borrowings (12,426) - (12,426)Trade and other payables (13,647) (1,739) (15,386)--------------------------------------------------------------------------------- (26,073) (1,739) (27,812)---------------------------------------------------------------------------------Net current assets 6,665 (1,739) 4,926---------------------------------------------------------------------------------Non-current liabilitiesFinancial liabilities - borrowings (101,072) - (101,072)Deferred tax liabilities (14,639) - (14,639)Other non-current liabilities (263) - (263)--------------------------------------------------------------------------------- (115,974) - (115,974)---------------------------------------------------------------------------------Net assets 91,575 (1,739) 89,836---------------------------------------------------------------------------------Shareholders' equityOrdinary shares 370 - 370Share premium 70,412 - 70,412Capital redemption reserve 4 - 4Retained earnings 20,789 (1,739) 19,050---------------------------------------------------------------------------------Total equity 91,575 (1,739) 89,836--------------------------------------------------------------------------------- Non-current Trade and other Retained assets payables earningsConversion effects comprise: £000 £000 £000-----------------------------------------------------------------------------------IAS 38 - Intangible assets: reclassification of software from tangible to intangible non-current assets (1,424) - -IAS 38 - Intangible assets: reclassification of software from tangible to intangible non-current assets 1,424 - -IAS 10 - Events after the balance sheet: deferral of dividend until date of approval - (1,739) (1,739)-----------------------------------------------------------------------------------Net movement - (1,739) (1,739)-----------------------------------------------------------------------------------IFRS2 share based payments charged to the income statement in the period arerecycled through, and have no net impact on, retained earnings. Reconciliation of income statement to UK GAAP for six months ended 30 June 2004 (unaudited) 6 months ended 6 months ended 30 June 2004 30 June 2004 IFRS Conversion UK GAAP £000 £000 £000------------------------------------------------------------------------------------------Revenue 50,035 - 50,035Cost of sales (30,866) 368 (30,498)------------------------------------------------------------------------------------------Gross profit 19,169 368 19,537Operating expenses before exceptional operating expenses (19,672) 374 (19,298)Exceptional operating expenses (1,523) - (1,523)------------------------------------------------------------------------------------------Total operating expenses (21,195) 374 (20,821)------------------------------------------------------------------------------------------Operating loss before interest (2,026) 742 (1,284)Investment income 15 - 15Interest payable (2,896) - (2,896)------------------------------------------------------------------------------------------Loss before taxation (4,907) 742 (4,165)Total taxation on loss 1,872 (282) 1,590------------------------------------------------------------------------------------------Loss after taxation (3,035) 460 (2,575)------------------------------------------------------------------------------------------Loss per ordinary share- basic (8.20)p 1.24p (6.96)p- diluted (8.20)p 1.24p (6.96)p------------------------------------------------------------------------------------------ Conversion effects comprise: £000 EPS (p)--------------------------------------------------------------------------------IAS 19 - Employee benefits: untaken employees' holiday accrual 712 1.93IFRS 2 - Share based payments: employee option schemes 30 0.08--------------------------------------------------------------------------------Loss before taxation 742 2.01Taxation effect on IAS 19 (272) (0.74)Taxation effect on IFRS 2 (10) (0.03)--------------------------------------------------------------------------------Loss after taxation 460 1.24-------------------------------------------------------------------------------- Reconciliation of balance sheet to UK GAAP at 30 June 2004 (unaudited) As at As at 30 June 2004 30 June 2004 IFRS Conversion UK GAAP £000 £000 £000--------------------------------------------------------------------------------AssetsNon-current assetsIntangible assets 1,999 (1,288) 711Property,plant and equipment 181,448 1,288 182,736-------------------------------------------------------------------------------- 183,447 - 183,447Current assetsInventories 910 - 910Trade and other receivables 27,330 - 27,330Current tax assets 1,694 (272) 1,422Cash and cash equivalents 3,575 - 3,575-------------------------------------------------------------------------------- 33,509 (272) 33,237LiabilitiesCurrent liabilitiesFinancial liabilities - borrowings (15,644) - (15,644)Trade and other payables (13,890) (121) (14,011)-------------------------------------------------------------------------------- (29,534) (121) (29,655)--------------------------------------------------------------------------------Net current assets 3,975 (393) 3,582--------------------------------------------------------------------------------Non-current liabilitiesFinancial liabilities - borrowings (86,675) - (86,675)Deferred tax liabilities (14,282) - (14,282)Other non-current liabilities (47) - (47)-------------------------------------------------------------------------------- (101,004) - (101,004)--------------------------------------------------------------------------------Net assets 86,418 (393) 86,025--------------------------------------------------------------------------------Shareholders' equity Ordinary shares 370 - 370Share premium 70,412 - 70,412Capital redemption reserve 4 - 4Other reserves (403) 403 -Retained earnings 16,035 (796) 15,239--------------------------------------------------------------------------------Total equity 86,418 (393) 86,025-------------------------------------------------------------------------------- Non-current Current tax Trade and other Other Retained assets assets payables reserves earningsConversion effects comprise: £000 £000 £000 £000 £000----------------------------------------------------------------------------------------------------------IAS 38 - Intangible assets: reclassification of software from tangible to intangible non-current assets (1,288) - - - - IAS 38 - Intangible assets: reclassification of software from tangible to intangible non-current assets 1,288 - - - - IAS 10 - Events after the balance sheet: deferral of dividend until date of declaration. - - (833) - (833) IAS 19 - Employee benefits: untaken employees' holiday accrual - - 712 - 712 IAS 19 - Employee benefits: untaken employees' holiday accrual - tax - (272) - - (272) IAS 21 - Foreign currency translation: reclassification from retained earnings to other reserves - - - 403 (403)-----------------------------------------------------------------------------------------------------------Net movement - (272) (121) 403 (796)-----------------------------------------------------------------------------------------------------------IFRS2 share based payments charged to the income statement in the period are recycled through,and have no net impact on, retained earnings. Reconciliation of income statement to UK GAAP for the year ended 31 December 2004 (unaudited) Year ended Year ended 31 December 2004 31 December 2004 IFRS Conversion UK GAAP £000 £000 £000-----------------------------------------------------------------------------------------Revenue 108,013 - 108,013Cost of sales before exceptional cost of sales (63,960) 14 (63,946)Exceptional cost of sales (8,118) 8,118 ------------------------------------------------------------------------------------------Total cost of sales (72,078) 8,132 (63,946)-----------------------------------------------------------------------------------------Gross profit 35,935 8,132 44,067Operating expenses before exceptional operating expenses (38,326) 60 (38,266)Exceptional operating expenses (6,396) 248 (6,148)-----------------------------------------------------------------------------------------Total operating expenses (44,722) 308 (44,414)-----------------------------------------------------------------------------------------Operating loss before interest (8,787) 8,440 (347)Investment income 30 - 30Non-operating expenses - (8,366) (8,366)Interest payable (5,810) - (5,810)-----------------------------------------------------------------------------------------Loss before taxation (14,567) 74 (14,493)Total taxation on loss 1,753 (22) 1,731-----------------------------------------------------------------------------------------Loss after taxation (12,814) 52 (12,762)-----------------------------------------------------------------------------------------Loss per ordinary share- basic (34.63)p 0.14p (34.49)p- diluted (34.63)p 0.14p (34.49)p----------------------------------------------------------------------------------------- Conversion effects comprise: £000 EPS(p)--------------------------------------------------------------------------------IAS 1 - Reclassification of exceptional non-operating costs to cost of sales 8,118 21.94IAS 1 - Reclassification of exceptional non-operating costs to administration costs 248 0.67IAS 1 - Reclassification from exceptional non-operating costs to operating and administration costs (8,366) (22.61)Related Shares:
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