Preliminary Results 2015

25 February 2016

Lavendon Group plc

Preliminary Results 2015

Lavendon Group plc ("the Group"), Europe and the Middle East's market leader in the rental of powered access equipment, today announces its preliminary results for the year ended 31 December 2015.

Results Ahead of Market Expectations

· Total and rental revenues increased by 1%, driven by strong growth in Middle East & France

· Group underlying operating profit increased by 10% to £43.1m

· Underlying operating margin up to 17.3% (2014: 16.0%)

· Underlying PBT increased by 13% to £38.5m and underlying EPS increased by 15% to 17.95p

· ROCE improved to 12.3%, a 20 bps increase

· Exceptional non-cash item of £20.6m for goodwill impairment in German & Belgian businesses

· Substantial investment programme of £85.8m in year

· Net debt as expected at £119.2m; net debt/EBITDA 1.39x (2014: 1.13x)

· Full year dividend up 17% reflecting Board's confidence in Group's long-term future

· Current trading to date in line with Board expectations

Notes

(i) Underlying results are stated before amortisation of intellectual property and intangibles recognised on acquisition and exceptional items.

(ii) Underlying and statutory measures are the same.

(iii) ROCE increase of 20bps excludes the favourable impact of the impairment in 2015 of the carrying value of the goodwill in the Group's German and Belgian businesses. The impact of this impairment reduces the capital employed and increases the ROCE for 2015 to 12.7%.

Don Kenny, Chief Executive of Lavendon Group plc said:

"I am encouraged by the Group's performance in 2015 which was ahead of market expectations. We delivered the best underlying operating margin, PBT and ROCE in over 10 years despite tougher conditions across the Group's markets. Our businesses experienced a strong finish to the year with all regions growing in the fourth quarter. The full year dividend increase of 17% reflects this strong performance and the Board's confidence in the Group's long-term future.

The strength of our cash flows and the healthy financial position of the Group enabled us to increase fleet investment during the year, improving our market positions and ensuring we are well placed to capture growth opportunities in 2016.

Our new management team in Germany are restructuring the business and this will be operationally complete by the end of 2016. We are confident the actions being taken will increase our market share, drive revenues and improve financial returns to the Group.

Current trading to date in 2016 is in line with our expectations, and whilst we recognise the recent increased uncertainty in the economic outlook, the Board looks forward to delivering another year of progress in 2016."

For further information please contact:

Lavendon Group plc

Don Kenny, Group Chief Executive Today T: via FTI Consulting

Alan Merrell, Group Finance Director Thereafter T: +44(0)1455 558 874

FTI Consulting

Jonathon Brill/Adam Cubbage/James Styles T: +44(0) 20 3727 1000

A meeting for investors and analysts will be held today at 10.30am at FTI Consulting, 200 Aldersgate, London EC1A 4HD. A copy of the presentation and audio webcast will be available at www.lavendongroup.com later today.

Next Trading Update

The Group's next scheduled announcement of financial information will be its first quarter Trading Update on 14 April 2016.

Notes to Editors

Lavendon Group is the European and Middle East market leader in the rental of powered access equipment. The quality and diversity of its hire fleet, coupled with the professionalism and accessibility of its depot network, provides an exceptional product range for customers.

Powered access equipment is designed to enable people to work safely, productively and comfortably at height. It can be used in a comprehensive range of applications, both inside and outside buildings and structures.

The Group has operations in the United Kingdom, Germany, Belgium, France, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The equipment fleet totals over 21,000 units and the Group employs over 1,650 people.

CHAIRMAN'S STATEMENT

The Group's results for 2015 were ahead of market expectations. Growth in our revenues combined with an efficient operating model have driven further increases in our profitability, margins and returns on capital employed ("ROCE"). This strong performance was primarily delivered from continued strong revenue growth in the Middle East and an improvement in margins from our UK business.

The proposed dividend increase for the year of 17% reflects these strong results and the Board's confidence in the Group's long term future.

During the year, we undertook a significant fleet investment programme that provided both additional capacity to grow our business and also continued to refresh our rental fleet to ensure that it remains highly competitive. The investment programme included c.£20 million that was originally planned for 2016, enabling the delivery of additional fleet in the final months of 2015. The decision to bring forward this investment was to ensure our market positions in the UK, France and the Middle East were improved and that we are well positioned to capture growth opportunities as we move into 2016.

The Board remains focused on improving the performance of our German business, and we strengthened its management team during the year with appointments of new Managing and Finance Directors. Following an operational review of the business, its organisational structure is being reshaped to be more in line with our regionally based, larger depot business model applied successfully elsewhere in the Group. We believe that these changes will be operationally complete by the end of 2016, moving the business closer to its customers, streamlining accountability and providing a firm base from which to improve returns.

The continued improvement in the Group's performance in recent years reflects our strategic focus of developing strong market positions and a differentiated service offering to drive revenues and improve margins. The allocation of additional capital during 2015 demonstrates the operational flexibility provided by the strength of the Group's balance sheet, underpinning our ability to support the delivery of our growth plans with investment when required. We are confident that the consistent delivery of revenue growth, driven and serviced from our efficient cost structure with its inherent operating leverage, will generate substantial shareholder value in the medium term.

Dividend

Given the Group's strong financial performance in the year, the Board is proposing a final dividend of 3.70 pence per share, making a total dividend for the year of 5.40 pence, an increase of 17% over the previous year (2014: a total dividend of 4.60 pence). The final dividend, if approved, will be paid on 21 April 2016 to shareholders on the register at the close of business on 4 March 2016.

The proposed increase in the dividend not only reflects the strong financial performance in the year, and the strength of our operating cash flows, but also the Board's confidence in the Group's future and the continued recognition that dividends are an important means of delivering shareholder value.

Dividend cover, based on the proposed total dividend for 2015 and underlying earnings per share, has reduced to 3.3 times (2014: 3.4 times) in line with our stated intention to maintain dividend distributions within a range that is covered three to four times by earnings. The actual dividend cover in any one year will be balanced against the Group's investment needs and funding requirements as we move through the business cycle.

Return on Capital Employed

The Group's ROCE for the year increased to 12.3% (2014: 12.1%). The calculation of ROCE is based on the Group's operating profit before exceptional items and the average of the opening and closing capital employed for the year of £336.6 million (2014: £309.2 million). The ROCE of 12.3% is stated on a like for like basis with the prior year and therefore ignores the favourable impact on the Group's capital employed arising from the impairment this year of the carrying value of the remaining goodwill in the German and Belgian businesses. The impact of this impairment reduces the Group's capital employed and so increases the reported ROCE for 2015 to 12.7% (2014: 12.1%).

The Group's principal strategic target has been to improve ROCE above our weighted average cost of capital ("WACC") and, once achieved, maintain it above this benchmark across the business cycle. This strategic target was achieved in 2014 and further improvements in ROCE have been delivered in 2015. To recognise the development of our capital structure over time and, in particular, changes to the Group's cost of equity and debt, we reassessed the Group's WACC in the year and a WACC of 9.5% is now used when assessing our ROCE performance. As we expand our capital base in support of our growth plans, we anticipate that the Group's ROCE will make more modest progress while the returns from the additional capital employed reach expected levels.

Financial Results

The Group's total revenues in 2015 increased by 1% to £248.6 million (2014: £246.3 million), with rental revenues also increasing by 1% to £233.5 million (2014: £231.9 million).

Underlying operating profits increased by 10% to £43.1 million (2014: £39.3 million) with margins improving to 17.3% (2014: 16.0%). The combination of a further improvement in the Group's trading performance and a reduction in net interest costs to £4.6 million (2014: £5.2 million) enabled the Group's underlying profit before tax to increase by 13% to £38.5 million (2014: £34.1 million).

With the Group's underlying effective tax rate reducing to 21% (2014: 23%), underlying profit after tax increased by 15% to £30.4 million (2014: £26.4 million) and underlying earnings per share increased by 15% to 17.95 pence per share (2014: 15.65 pence per share).

Amortisation* charges for the year reduced to £1.7 million (2014: £2.0 million). An exceptional item of £20.6 million was incurred, relating to a non-cash impairment charge on the carrying values of the remaining goodwill associated with the Group's German and Belgian businesses. After amortisation* charges and the exceptional item, the Group's operating profits were £20.7 million (2014: £27.2 million), profit before tax was £16.2 million (2014: £21.0 million) and profit after tax was £8.3 million (2014: £13.9 million), with earnings per share of 4.91 pence (2014: 8.23 pence).

Using exchange rates consistent with 2014, both total and rental revenues increased by 2% to £252.2 million and £236.9 million respectively, with underlying operating profits increasing by 8% to £42.6 million (2014: £39.3 million) and underlying profits before tax increasing by 11% to £38.0 million (2014: £34.1 million). Underlying profit after tax increased by 14% to £30.1 million (2014: £26.4 million) with earnings per share increasing by 13% to 17.76 pence (2014: 15.65 pence).

*Amortisation of intellectual property and intangibles recognised on acquisition.

Review of financial performance by region

A summary of the revenues, underlying operating profit and margins for each of the Group's regions is given below:-

All figures shown in the above table are before amortisation of intellectual property and intangibles recognised on acquisitions and also prior to exceptional items. Revenues are total revenues including rental revenue and revenue derived from the sale of new and ex-rental fleet equipment.

We have structured the Group so that each country business unit is viewed as a separate profit centre within the combined geographic region, supported by central Group service functions. Each business unit or region has its own management team responsible for delivering agreed performance targets.

The performance of each region in the year is described below with all financial figures being underlying trading stated before amortisation of intellectual property and intangibles recognised on acquisitions charges and exceptional items. Where revenues and revenue growth percentages are given, they relate to rental revenues only and exclude revenues derived from the sale of new and ex-rental fleet equipment. For the Group's overseas operations, figures are quoted in local currencies, unless otherwise stated, to remove the impact of movements in foreign exchange rates and ensure a like for like comparison with the previous year (for the Middle East, the US dollar has been used as a proxy for the basket of Middle East currencies). The split of revenues by country between rental revenues and revenues from the sale of new and ex-rental fleet equipment is given in Note 2 'Segmental Analysis'.

UK (47% of Group rental revenues)

The UK's rental revenues declined by 1% in the year to £110.2 million (2014: £111.1 million). This decline was weighted towards the first half, with an improving trend across the year enabling the business to return to year on year growth in the final quarter of 2015. An improving mix of fleet on hire together with a marginal year on year pricing improvement (0.5%) largely offset the lower volumes seen in the year. The improved mix of rental revenue, increased sales of our BlueSky products and lower payroll costs that offset higher transport charges, enabled underlying operating profits for the year to increase 12% to £22.7 million (2014: £20.4 million), with margins improving strongly to 18.7% (2014: 17.0%).

Through the promotion of our BlueSky safety or efficiency enhancing products and our managed service capability, we have continued to develop our differentiated services. Our ability to deliver more than a standard rental product remains a key factor in securing further market share with our major customers. At the same time additional channels to market through our merchant and re-hire partnership programmes are supporting our growth ambitions in the more localised customer segments.

Considerable attention has also been placed on improving fleet availability as we sought greater operational efficiency to increase our service levels. As a result, by the end of the year, the fleet awaiting repair had reduced by 24%, releasing c.200 machines back into the fleet available for hire. This improvement in availability, together with the additional fleet capacity that we added towards the end of 2015, has enhanced our ability to capture the anticipated growth opportunities in 2016.

Towards the end of the year, we concluded that our outsourced transportation function was not delivering the expected customer service improvements at the expected cost and was restricting progress in our drive for greater operational efficiency. Consequently we have decided to bring this function back under our direct control. This may cause some disruption and increase costs to the business in the short term, as we transition in-house, however we are confident that both our efficiency and customer satisfaction levels will improve over the year.

The measures we have taken to improve both the UK's fleet availability and overall capacity, together with our continued development of a differential service offering, are strengthening our market position and ensuring the business is well placed as it moves into 2016.

Middle East (24% of Group rental revenues)

Our Middle East region again performed strongly in the year, with rental revenues increasing by 7% to US$85.5 million (2014: US$79.5 million). Underlying operating profits increased by 9% to US$28.1 million (2014: US$25.9 million), with margins improving to 32.4% (2014: 31.7%). On conversion to £ Sterling, rental revenues increased by 16% to £55.9 million (2014: £48.2 million) and underlying operating profits were £18.4 million (2014: £15.7 million).

The strong performance in the year was volume-driven, with increased utilisation of an expanded fleet (c.700 units were added to the fleet during the year) more than offsetting a 6% decline in pricing in the region. As reported previously, the geographic drivers of revenue growth in the region have changed with strong growth in the UAE, Qatar, Kuwait and Oman more than absorbing a revenue decline in our higher margin Saudi Arabian business. This was particularly evident towards the end of the year, where the delivery of additional fleet capacity was largely into markets other than Saudi Arabia and delivered an accelerated rate of year on year revenue growth of 10% in the final quarter.

In Saudi Arabia, the lower oil price and political change in 2015 are influencing the pace of new investment in this market and whilst in the medium term the structural drivers will continue to drive activity levels, in the near term we are seeing increased competitive pressures. However the structural drivers across the Middle East region remain strong and the number of large-scale projects underway is both significant and diverse. Moreover we also expect the penetration of powered access across the Middle East to increase, as the market develops with health and safety awareness and the need to drive productivity improvements.

The well-publicised liquidity issues within the region have made the management of our working capital more challenging during the year. This is primarily an issue within our Saudi Arabian business, although its impact is mitigated by the better working capital metrics seen in our other markets in the region that are driving our current revenue growth. Whilst the region continues to be self-funding, its increased working capital requirements will moderate the rate at which we allocate additional capital into the region in the coming year. We are taking this measure so that the level of "free cash" generated by the region is increased, a discipline that will remain in place until the liquidity pressures in the market show signs of easing.

Continental Europe (29% of Group rental revenues)

Rental revenues in the region increased by 3% in the year to €92.8 million (2014: €90.0 million) with continued strong revenue growth in France driving this performance. Underlying operating profits for the region were €10.1 million (2014: €11.3 million), with operating margins at 10.4% (2014: 11.9%). The decline in overall profitability reflects the decline in margins in both the German and Belgian businesses more than offsetting our increased profitability in France. On conversion to £ Sterling, Continental Europe's rental revenues declined by 7% to £67.4 million (2014: £72.6 million) and underlying operating profits were £7.3 million (2014: £9.1 million).

The individual performances of the countries within our Continental Europe region are discussed below:-

Germany

German rental revenues in the year were stable at €48.6 million (2014: €48.5 million), with growth in volumes across the year offsetting a 2% year on year price decline. The benefits from the investment in additional sales resource earlier in the year started to emerge in the final quarter, with continued volume growth and a better pricing environment driving a 3% revenue increase. However, the rate of improvement in the revenue performance of the business was insufficient to fully absorb the cost of the investment in the business during the year and consequently, underlying operating profits declined to €3.5 million (2014: €4.8 million) with margins at 6.8% (2014: 9.4%). On conversion to £ Sterling, rental revenues declined to £35.3 million (2014: £39.1 million) and underlying operating profits were £2.5 million (2014: £3.8 million).

An improvement in the financial performance of the Group's German business is a key area of focus for the Board and, following the appointment of our new management team in the year, we are accelerating the regionalisation of the business to concentrate our resources in the larger industrial conurbations and implement a 'local champion' strategy similar to that applied successfully elsewhere in the Group. Whilst these changes could disrupt the progress in our revenue development in the short term, and will incur restructuring costs, we believe that they will establish a firmer base from which the business can increase market share, drive revenues and improve financial returns to the Group.

Given the weaker trading performance in the year and the increased risk within the business as it moves through its restructure, the Group's carrying value of goodwill associated with the German business has been reviewed for impairment at the year end and, as a consequence, an exceptional non-cash impairment charge of £15.1 million has been made in 2015.

France

Our French business continued to grow strongly in the year, with rental revenues increasing by 11% to €30.3 million (2014: €27.4 million).

The revenue performance was principally driven by growth in volumes across the year and a stable pricing environment. Our continuing success in growing our revenue base in recent years strengthens our belief that we are building local share in a market that has still to show signs of a sustained recovery.

During the year, we continued to invest additional resources to support the business' ability to secure and service revenue growth. Whilst this increase in the cost structure of the business has constrained margin growth in the year, the strong revenue growth generated by the expanded structure has enabled operating profits in the year to increase to €5.0 million (2014: €4.3 million), with margins improving to 16.2% (2014: 15.1%).

We intend to continue to provide additional capital to our French business to ensure that it is well positioned to achieve both its growth ambitions in 2016 and ultimately benefit from any future recovery in market conditions.

On conversion to £ Sterling, rental revenues were stable at £22.0 million (2014: £22.1 million) and operating profits were £3.6 million (2014: £3.5 million).

Belgium

Belgian rental revenues declined by 2% in the year to €13.8 million (2014: €14.1 million). This revenue decline was heavily weighted towards the first half of the year, since when, a significant increase in volumes has absorbed the continuing pricing pressures in the market and enabled a return to year on year revenue growth of 9% in the second half of the year.

The difficult trading conditions seen in recent years continued through 2015, with market pricing under severe pressure and our business seeing a price decline of 9% in the year. Although we continue to manage our cost base in response to these market conditions, underlying operating profits in the year reduced to €1.6 million (2014: €2.2 million), with margins at 10.6% (2014: 14.3%). On conversion to £ Sterling, rental revenues declined to £10.0 million (2014: £11.4 million) and operating profits were £1.1 million (2014: £1.8 million).

Given this continued weaker trading performance, the Group's carrying value of goodwill associated with the Belgian business has been reviewed for impairment at the year end and, as a consequence, an exceptional non-cash impairment charge of £5.5 million has been made in 2015.

Cash Flow

Underlying earnings before interest, tax, depreciation and amortisation ("EBITDA") increased by 8% to £85.9 million (2014: £79.6 million) with margins improving to 34.5% (2014: 32.3%). After absorbing movements in working capital and payments of interest and tax, the Group generated £68.8 million of operating cash in the year (2014: £66.7 million). This operating cash was used to largely fund the Group's increased purchase of rental fleet assets in 2015, after which the net cash used by operating activities was £21.1 million (2014: net cash generated from operating activities £13.6 million).

As we moved through 2015, the management of our working capital in the Middle East became more challenging due to the well publicised liquidity issues in the region. This is primarily an issue within our Saudi Arabian business, although its impact is mitigated by the better working capital metrics seen in our other markets in the region that are driving our current revenue growth. Whilst our Middle East business unit is self-funding, its increased working capital needs will moderate the rate at which we allocate additional capital into the region in the coming year. This discipline is expected to increase the level of "free cash" generated by the region and will remain in place until the liquidity pressures in the market show signs of easing.

Investment

In 2015, the Group increased its level of investment in its rental fleet and operational infrastructure to £95.5 million (£64.7 million) including c.£20 million originally planned for 2016. As in previous years, this was partly funded by the disposal of surplus or retired assets which generated £8.8 million (2014: £11.6 million) in the year. After reflecting movements in amounts owing to equipment suppliers at the beginning and end of the year, our investment programme resulted in a net cash outflow for the year of £85.8 million (2014: £45.6 million). This capital expenditure was predominantly funded by the Group's strong operating cash flows with the balance financed using the Group's debt facilities.

The investment was principally directed towards the purchase of c. 3,100 rental machines, which has provided additional capacity to our operations and enabled a further substantial refreshment of the Group's existing rental fleet to be undertaken. Over the past four years, around 40% of the Group's rental fleet has been refreshed, ensuring that it remains well invested and highly competitive in support of our strong market positions.

Net Debt

The Group's net debt before issue costs at 31 December 2015 was £119.9 million (2014: £90.6 million). The increase in net debt is principally the net effect of the investment programme undertaken during the year being partially offset by our strong operating cash flows and a favourable foreign exchange movement of £4.3 million on our non-Sterling denominated debt. After adjusting for the unamortised debt issue costs relating to the Group's US Private Placements, the Group's reported net debt at 31 December 2015 was £119.2 million (2014: £89.7 million).

The corresponding debt to equity ratio was 53% (2014: 41%) and our net debt to underlying EBITDA ratio was 1.39 times (2014: 1.13 times). The Group continues to operate comfortably within its preferred leverage range of 1.00 - 1.75 times EBITDA.

Board Changes

Given the development of the Group in recent years and our desire as a Board to demonstrate best practice, we are separating the current role of Finance Director and Company Secretary in 2016. Alan Merrell will continue in his role as Finance Director and we have appointed a Company Secretary who is expected to join the Group in April 2016.

Summary and Outlook

The Group delivered a strong underlying financial performance in 2015, ahead of market expectations with revenues, profits, margins and ROCE all delivering year on year growth. The proposed increase in the total dividend for the year of 17% reflects these strong results and the Board's confidence in the Group's long term future.

The key drivers of 2015's performance were further strong revenue growth in our Middle East region and a notable margin improvement in our UK business. We recognise that the current financial performance of our German business is unsatisfactory and are taking further steps to address this in 2016 so as to establish a firm base from which the business can return to growth on a sustainable basis and deliver improved financial returns for the Group.

Our fleet investment programme for 2015 was substantial and included additional fleet added towards the end of the year to ensure capacity is available to meet anticipated growth in demand as we move into 2016. Following this capacity increase, our investment programme for 2016 is primarily focused on the ongoing refreshment and improvement in the product mix of our fleet. As a consequence, our fleet investment for 2016 will reduce to c.£55 million, more in line with our trend level of annual investment and one that is largely self-funded from our operational cash flows.

While our strong financial position provides us with the flexibility to accelerate the allocation of capital in response to opportunities offering attractive financial returns as they emerge, the disciplined allocation of additional capital remains a key focus of the Board. This will ensure we maintain our ROCE above our weighted average cost of capital across the business cycle. In this regard, the recent increase in working capital requirements of our Middle East business will moderate the rate at which we expand in this market until such time as the liquidity issues ease in the region.

Trading in the current financial year has been in line with our expectations and, whilst recognising the recent increased uncertainty in the economic outlook, the Board looks forward to delivering another year of progress in 2016.

John Standen

Chairman

25 February 2016

(i) Non-underlying is defined as amortisation of intellectual property and intangibles recognised on acquisitions and exceptional items.

Group statement of comprehensive income

for the year ended 31 December 2015

Group statement of changes in equity

for the year ended 31 December 2015

During the year £nil was debited from retained earnings, relating to the nominal value of shares issued following the vesting of the 2012 Long Term Incentive Plan in the period. In 2014, £7,000 was debited from retained earnings, relating to the nominal value of shares issued following the vesting of the 2011 Long Term Incentive Plan in the period

Group statement of changes in equity

for the year ended 31 December 2014

Notes

With the exception of long term borrowings, the carrying value of the Group's financial instruments are considered to be materially consistent with their fair value. Long term borrowings before unamortised debt issue costs has a carrying value of £131,485,000 (2014: £107,265,000) and a fair value of £140,408,000 (2014: £116,989,000).

2. Segmental analysis

The internal reporting arrangements for Lavendon Group plc comprises of five operating segments based on the geographical locations of the UK, the Middle East, Germany, France and Belgium and one non operating Corporate cost centre. The Corporate cost centre comprises the Group directorate, statutory compliance and Group functions and holds the Group's bank borrowing facilities.

The Group's chief operating decision maker ("CODM") is the Group Board. The Group 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 allocation of resources. Performance is evaluated based on actual results compared to agreed targets and performance in prior periods.

Notes:Inter segment trading has been eliminated in the analysis presented above, so that only trading between the Group and external third parties is represented.

Included within the Middle East is external revenue of £28,753,000 (2014: £29,141,000) generated in Saudi Arabia.

* Amortisation of intellectual property and intangibles recognised on acquisitions.

Notes:Inter segment trading has been eliminated in the analysis presented above, so that only trading between the Group and external third parties is represented.

* Amortisation of intellectual property and intangibles recognised on acquisitions.

** Exceptional finance expense relates to Corporate items.

3. Exceptional items and amortisation

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

Notes

 (i) Exceptional operating expenses in 2014 relate to the closure of the Group's operations in India and were primarily made up of provisions against fixed assets and receivables.

(ii) Exceptional impairment costs relate to the impairment of the carrying value of goodwill associated with the Group's Belgian and German businesses (2014: Belgium).

(iii) Fees incurred on bank refinancing in 2014.

* Amortisation of intellectual property and intangibles recognised on acquisitions.

4. Earnings per share

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

Earnings per share are calculated on the 169,392,703 weighted average number of ordinary shares in issue for the year ended 31 December 2015 (year ended 31 December 2014: 168,556,682).

Diluted earnings per share assumes conversion of all potential dilutive ordinary shares which arise from share incentive scheme awards granted to employees, where the exercise price is less than the average market price of the Company's ordinary share capital during the year. The effect of this dilution is to increase the weighted average number of ordinary shares to 170,262,717 (year ended 31 December 2014: 169,729,849).

Underlying earnings per share is presented to exclude the impact of amortisation charges on intellectual property and intangibles recognised on acquisitions and exceptional items in the year and their associated tax effect. The directors believe that underlying earnings per share provides additional relevant information about underlying business performance.

5. Dividend

The directors are proposing a final dividend in respect of the financial year ended 31 December 2015 of XX pence per ordinary share which will distribute an estimated £XXX of shareholders' funds. It will be paid on 21 April 2016 to those shareholders who are on the register at 4 March 2016 subject to approval at the Company's Annual General Meeting.

6. Taxation on profit

Analysis of taxation charge for the year:

The taxation charge on the underlying profit is £8,084,000 (2014: £7,704,000). The taxation credit on amortisation of intellectual property and intangibles recognised on acquisitions and exceptional items is £246,000 (2014: £598,000).

In addition to the amount of taxation charged to the income statement, net tax of £42,000 (2014: £159,000) was credited directly to reserves in respect of share based payments. This comprises a current tax credit of £125,000 (2014: £191,000) in respect of options exercised during the year and a deferred tax charge of £167,000 (2014: £32,000) representing the reduction (2014: reduction) in the deferred tax asset held in respect of share based payments.

Following a review of the potential for profit distributions from the Group's overseas subsidiaries, a deferred tax provision of £172,000 (2014: £636,000) including a prior year adjustment of £67,000 has been made in the financial statements for withholding tax liabilities that may arise upon any future distributions of profit to the United Kingdom from overseas subsidiaries.

Reconciliation of taxation

The tax charge for the year is higher (2014: higher) than the standard rate of corporation tax in the UK of 20.25% (2014: 21.50%). The differences are explained below:

The standard rate of corporation tax in the UK changed from 21% to 20% from 1 April 2015. Accordingly, the standard rate of corporation tax applied to the Group's UK profits for the accounting period is 20.25%.

In the July 2015 Budget Statement, it was announced that the standard rate of corporate tax in the UK will be further reduced to 19% with effect from 1 April 2017 and to 18% with effect from 1 April 2020. These changes were substantively enacted on 26 October 2015 and are therefore reflected in deferred tax balances in the financial statements.

7. Property, plant and equipment

for the year ended 31 December 2015

for the year ended 31 December 2014

8. Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2015 or 2014 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies, and those for 2015 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2015 or 2014.

The Group financial statements have been prepared in accordance with EU endorsed International Financial Reporting Standards ("IFRS's") and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Group financial statements have been prepared, on a going concern basis, on a consistent basis, under the historical cost convention as modified by financial assets and liabilities (including derivative instruments) at fair value through the profit or loss.

The Group has included the disclosures required by these standards and amendments in the financial statements.

9. Annual General Meeting

The Annual General Meeting of Lavendon Group plc will be held at FTI Consulting, 200 Aldersgate, Aldersgate Street, London EC18 4HD on 14 April 2016 at 11.30am.