Preliminary Results

29 February 2012

Lavendon Group plc

Preliminary Results

Lavendon Group plc, Europe's market leader in the rental of powered access equipment, today announces its preliminary results for the year ended 31 December 2011.

Notes

(i) Underlying results stated before amortisation charges, exceptional items, movements in the fair value of financial derivatives and excludes the Group's discontinued Spanish operation

(ii) Underlying and statutory measures are the same.

2011 - Year of Good Progress

·; Rental revenues increased 8% to £216.9m (2010: £200.7m)

·; Underlying operating profits increased by 21% to £30.0m (2010: £24.7m), margins up to 13.3% (2010: 11.4%)

·; Underlying PBT increased 65% to £21.9m (2010: £13.3m)

·; Underlying EPS increased 65% to 10.03p (2010: 6.07p)

·; Net debt reduced by £33.7m to £106.6m (2010: £140.3m); net debt/EBITDA 1.49x (2010: 2.00x)

·; ROCE increased to 9% (2010: 6.6%), reflecting improved trading and enhanced operational and capital performance

·; DPS increased by 75% to 1.75p (2010:1.0p)

Business highlights

·; Deliveryof first stage of operational review, with £2m efficiency gains in 2011

·; Revenue dynamics:

o Good levels of rental growth across UK and Continental Europe

o Middle East revenues progressively improved throughout the year with rates of growth accelerating across H2

·; Operational efficiency:

o On track to deliver £5m operational efficiency gains by 2013

o Operational improvements embedded throughout regional operations

o German management team strengthened and detailed plan to improve performance being implemented

·; Capital efficiency: 

o Successfully exited Spain - fleet principally redeployed to France and Belgium

·; Banking facilities - successfully agreed terms to refinance the Group's banking facilities

o £100m revolving credit facility expiring July 2016

o €60m US private placement expiring July 2019

·; Clear strategy established to continue to improve efficiency, drive top-line growth and increase margins and ROCE to greater than WACC over the cycle

Current trading

·; Trading in line with Board expectations since year end

·; Board remains confident of delivering another year of progress in 2012

Don Kenny, Chief Executive of Lavendon Group plc said:

"The Group made good progress during 2011 in improving the financial performance of its operations. As we move into 2012, we are encouraged by the operational efficiency gains made to date and the impact that these will have on the Group's operating leverage as revenue growth is delivered. Our improvement plans for Germany are being implemented and our Middle East region is now demonstrating a sustained recovery in revenues. The increased level of capital investment in the Group's rental fleet planned for 2012 will be funded from our annual cash flows, still allowing free cash to be generated to reduce net debt levels further.

"Our increased dividend in 2011 underlines the Board's confidence in the strength of the Group's cash flows. Whilst clearly conscious of the continuing uncertain economic environment, we believe that the combination of self-help measures to improve operational performance, our selective investment in high return assets and close management of cash generation, should enable the Group to make further progress in improving its return on capital employed in the coming year."

A meeting for investors and analysts will be held today at 11.30am at the offices of FTI Consulting, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB. A copy of the presentation and audio webcast will be available at www.lavendongroup.com later today.

For further information please contact:

Lavendon Group plc

Don Kenny, Group Chief Executive Today T: +44(0)207 831 3113

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

FTI Consulting

Jonathon Brill/ Alex Beagley T: +44(0)207 831 3113

Next Trading Update

The Group's next scheduled announcement of financial information will be its first quarter interim management statement on 19th April 2012.

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, Saudi Arabia, the United Arab Emirates, Bahrain, Oman and Qatar. The equipment fleet totals some 20,000 units and the Group employs over 1,600 people.

CHAIRMAN'S STATEMENT

Overview

The Group's financial performance in 2011 showed a marked improvement over the previous year, in line with the Board's expectations, principally driven by improved pricing together with rigorous operational management and control of capital. Trading conditions during the year were relatively stable across the Group's markets, although the economic outlook became increasingly uncertain as the year progressed.

The improvement in trading performance, together with a targeted capital investment programme and tightly managed working capital, has produced another significant reduction in the Group's net debt levels, further strengthening our capital structure and underpinning our ability to invest in the Group's longer term development.

The ongoing implementation of our business plan has made good progress, and is a key factor in the improvement in the overall trading performance of the Group. In particular, our management teams have been strengthened; expected operational efficiency improvements are being delivered; our German business is being re-aligned; and the deployment of our capital base is being focused on those markets that offer greater potential returns. It is these actions to reshape the Group, driving greater efficiency and the ability to leverage our strong market positions, that the Board believes will enable Lavendon to continue to drive increased financial returns and generate substantial shareholder value in the coming years.

In October 2011, we welcomed Don Kenny as the Group's new Chief Executive Officer and he is providing further impetus in leading the Group through this important next stage of its development.

Return on capital employed

The Group's return on capital employed (ROCE), the key performance metric for the Group, improved across the year, reaching 9.0% at the year-end, a significant increase over the return of 6.6% at the previous year-end. This calculation has been based on the Group's operating profits before exceptional items for 2011 and the average of the opening and closing capital employed for the year of £306.1 million (2010: £338.4 million). Further improvements are targeted in the coming 12 months as we look to move the Group's ROCE above our pre-tax weighted average cost of capital of 11% across the business cycle.

Operational and Capital Efficiency Programmes

The expected operational efficiency gains are being delivered in line with our three-year plan, supported by strengthened management and changes, where necessary, to our operating procedures and processes. In 2011, we realised overall efficiency gains in the order of £2.0 million, principally from pricing improvements in the UK and transportation efficiencies in Germany and France. These benefits will continue to accumulate throughout the coming year and into 2013, augmented by actions being taken to improve our procurement and planned maintenance processes that have a longer lead time to deliver significant benefits. These programmes are a core focus of the Board and we remain confident that our overall annualised profit improvement target of £5.0 million will be progressively achieved through to the end of 2013.

The Group's Spanish operation is now closed and the rental fleet successfully redeployed to the Group's other markets, principally into Belgium and France, with the remainder in the process of being sold. Through this redeployment of capital, the ability to increase capital returns to an acceptable level is improved, as the increase in fleet scale in the receiving countries should generate attractive incremental margins.

In Germany, actions are being taken to address its sub-optimal returns. A process began in 2011 to reduce its capital base through the disposal of approximately 600 rental machines, thereby removing a future capital replacement requirement of around £18 million from the business. This adjustment to the fleet, when combined with operational efficiency gains that will continue to accrue in the coming year, should enable the German business to deliver a substantial improvement in its relative contribution to the Group's financial performance. We believe that achieving a 'step-change' in the financial returns made on the capital deployed in Germany is a key factor in returning the Group's ROCE to above its cost of capital, and this remains a major area of focus for management in 2012.

Financial results

The Group's total revenues for the year (excluding revenues from our discontinued Spanish business) increased by 4% to £225.4 million (2010: £217.5 million), reflecting an 8% increase in rental revenues to £216.9 million (2010: £200.7 million) partly offset by the anticipated decline in revenues from the disposal of a smaller number of ex-rental fleet machines.

Underlying operating profits for the year increased by 21% to £30.0 million (2010: £24.7 million), with margins improving to 13.3% (2010: 11.4%) as a result of the growth in revenues and the operational efficiency gains delivered during the year.

With underlying net interest costs reducing to £8.1 million (2010: £11.4 million), reflecting the decline in the Group's net debt levels over the past two years, underlying profit before tax increased 65% to £21.9 million (2010: £13.3 million). This increase in profitability combined with an effective underlying tax rate of 25% (2010: 25%), generated an underlying profit after tax of £16.5 million (2010: £10.0 million) and a 65% increase in underlying earnings per share to 10.03 pence (2010: 6.07 pence).

During the year, the Group incurred a total post tax exceptional charge of £0.4 million (2010: nil) on continuing operations. This overall charge is the net effect of exceptional operating costs of £4.8 million (with an associated tax credit of £0.9 million) relating to restructuring charges incurred during the year, and following agreement with the tax authorities on the treatment of intra-group financing arrangements from prior years, exceptional interest payable and tax credits of £1.4 million and £4.9 million respectively.

Amortisation charges in the year of £2.3 million (2010: £2.3 million) include the amortisation of the intangible assets acquired on completion of the acquisition of Blue Sky Access Limited in October 2011.

After the exceptional and amortisation charges, the Group's operating profit was £22.9 million (2010: £22.4 million). The Group's profit before tax was £14.2 million (2010: £10.9 million) and the Group's profit after tax was £15.2 million (2010: £8.3 million), with a resulting earnings per share of 9.22 pence (2010: 5.05 pence).

As previously announced, the Group's Spanish operation was closed towards the end of 2011, and its results for the year have been reported as a 'discontinued business'. The loss for the year was £0.8 million (2010: loss of £0.2 million), and an exceptional charge of £5.0 million was incurred in closing the business and transferring its rental fleet.

There would be no material difference to the Group's financial results for 2011 if consistent exchange rates with 2010 were used to convert the results of the Group's international operations.

Cash flow generation

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for the year increased by 5% to £71.7 million (2010: £68.2 million), with margins improving to 31.8% (2010: 31.4%). Cash generated from operations, including the sale and purchase of rental fleet assets and after movements in working capital, was £56.9 million (2010: £67.9 million). Net cash generated from operations, after payment of interest and tax was £41.2 million (2010: £51.8 million).

Investment

A total of £16.9 million (2010: £14.7 million) was selectively invested in the Group's rental fleet and operational infrastructure, partly funded by the disposal of surplus and retired assets that generated £6.2 million in cash (2010: £14.0 million). This activity, after reflecting movements in amounts owing to equipment suppliers at the beginning and end of the year, resulted in a net cash outflow relating to capital expenditure of £8.8 million (2010: £0.9 million). The Group has made progress in optimising its rental fleet mix, by removing under utilised machines and replacing them with a smaller number of higher yielding assets during the year. This has facilitated a net reduction in the Group's fleet of around 1,000 machines across the year to a total fleet of 20,000 at the year end.

In October 2011, the Group acquired Blue Sky Access Limited ("Blue Sky") for a total consideration of £7.1 million (net of cash acquired). Blue Sky designs and engineers products to improve efficiency and safety in the use of powered access equipment. This acquisition is a further step in delivering our strategy of creating key points of differentiation between the Group and our competitors in the marketplace, and underpins our ability to provide innovative solutions that increase productivity and the safety of a customer's workforce. Of the total consideration, £3.1 million was paid on completion and a further £2.5 million will become payable over the next two years. In addition to the total consideration, further payments of up to £1.5 million could become payable over the next four years dependent on revenue generation.

Reduction in net debt

The strength of the Group's operating cash flows and modest levels of investment, together with a small favourable foreign exchange movement of £1.6 million on Euro-denominated borrowings, enabled the Group to reduce its net debt levels during the year by £33.7 million to £106.6 million (2010: £140.3 million). The corresponding debt to equity ratio was 58% (2010: 78%), with an improved net debt to pre-exceptional EBITDA ratio of 1.49 times (2010: 2.00 times). Whilst we plan to increase our fleet investment in 2012, we still expect to make a further reduction in fleet size in the year as well as making further progress in reducing the Group's net debt level. These plans will ensure our rental fleet mix continues to improve and remains highly competitive, but will also move the Group towards a level of net debt that will be maintained for the foreseeable future until market conditions or investment opportunities warrant the deployment of additional capital.

Dividend

Following the Group's improved financial performance, and reflecting the Board's confidence in the strength of the Group's cash flows, a final dividend of 1.38 pence per share is proposed, doubling the final dividend for 2010 and making a total dividend for the year of 1.75 pence (2010: 1.00 pence). The final dividend, if approved, will be paid on 1 May 2012 to shareholders on the register at the close of business of 9 March 2012.

The increase in dividend for the year reflects the Board's recognition that dividend distributions are an important element in delivering shareholder value. This is an area that the Board will continue to keep under review, to ensure that future distributions adequately reflect the Group's earnings and cash flows, as well as its investment needs and funding requirements as we progress through the cycle.

Refinancing

With effect from 29 February 2012, the Group has agreed terms to replace its existing bank facilities with new debt facilities of £150 million, comprising a £100 million revolving bank facility expiring in July 2016 and a €60 million US private placement expiring in July 2019. These new facilities provide the Group with a robust medium to long-term diversified financing package, with significant liquidity, that will support the development of the Group in the coming years. The costs associated with the completion of this refinancing, approximately £2.9 million or 2% of the new facilities, will be amortised over the term of the facilities.

Board changes

On 30 June 2011, Kevin Appleton stepped down as Chief Executive Officer after nine years with the Group. I would like to offer the sincere thanks of the Board to Kevin for all that he achieved in increasing the scale and quality of the business during that time.

With effect from 1 October 2011, we welcomed Don Kenny to the Board as the Group's new Chief Executive Officer. Don has a wealth of experience of improving operating performance and growing businesses successfully both in the UK and internationally, and is ideally placed to lead the Group through the next phase of its development. 

As previously announced, Tim Ross, who had been a Non-Executive Director of the Group since 2005, retired from the Board at the Company's Annual General Meeting on 20 April 2011. I would like to thank Tim for his contribution to the Board.

Summary and outlook

We have made good progress in 2011 with revenues, margins and returns on capital employed improving in all our European businesses. Revenues from our Middle East operation returned to growth during the year and, in the final quarter, started to deliver year on year growth in profits on a monthly basis.

Our net debt levels have again reduced significantly during the year, leaving the Group with a comfortable level of borrowings and a healthy capital structure that benefits from enhanced liquidity following the refinancing of the Group with new medium to long-term debt facilities. Our future capital investment plans will be funded from annual cash flows, and will ensure our rental fleet remains highly competitive while also enabling the Group to continue to generate free cash.

As we move into 2012, we believe that the progress we have made over the last twelve months, together with our strong market positions and geographic spread of operations, provides a firm foundation from which our return on capital employed can be further enhanced. In particular, we recognise that further improvement in the performance of our German business will be central to the Group moving towards the inflexion point, whereby our overall returns on capital will surpass our weighted average cost of capital which remains the Group's key objective.

Trading since the year end has been in line with the Board's expectations, and whilst mindful of the continuing uncertain economic climate, the Board remains confident of delivering another year of progress in 2012 and substantial shareholder value in the medium term.

Note: Underlying operating profits, profit before and after tax are stated before amortisation charges, exceptional items, movements in the fair value of financial derivatives and the Group's discontinued Spanish business.

Review of performance by country

A summary of the revenues and operating profit by each business unit is given below:-

All figures shown in the above table relate to continuing businesses and are before amortisation charges and exceptional items.

We have structured the Group so that each country of operation is viewed as a separate reporting profit centre, supported by central Group service functions. Each operation has its own management team responsible for delivering agreed performance targets.

The performance of each continuing operation is summarised below, with all financial figures being underlying numbers quoted before amortisation charges, exceptional items and movements in the fair value of financial derivatives.

UK

Rental revenues in the UK increased by 7% during the year to £108.4 million (2010: £100.9 million), principally driven by a 5% year on year pricing improvement and good volume growth from the first eight months of the year. Volumes peaked in September and then declined towards the year-end as a number of major projects completed. The growth in rental revenues fully absorbed the anticipated decline in sales of ex-rental fleet machines (a smaller number of units were available for sale in 2011), resulting in total revenues for the year being stable at £112.3 million (2010: £112.1 million).

Although we saw some softening in demand towards the end of the year as the major projects completed, we believe our market share has increased, particularly with major users of powered access equipment in the construction sector. This progress has been made by increasingly being recognised as a provider of value-added services and not just a supplier of rental machines. We strengthened this position during the year with the acquisition of Blue Sky Access Limited ("Blue Sky"), a company that designs and engineers products to improve efficiency and safety in the use of powered access equipment. The acquisition of Blue Sky provides an additional point of differentiation between the Group and the market place, and should facilitate further market share gains going forward.

Towards the end of the year, we announced the decision to rationalise our three operating brands in the UK (Nationwide Platforms, Panther and EPL Skylift) under the common name of Nationwide Platforms. This has been implemented successfully in the first weeks of 2012, with strong acceptance from our combined customer base.

The combination of the rental revenue growth and operating efficiencies derived from transportation and sales force optimisation actions enabled underlying operating profits to increase by 20% to £13.6 million (2010: £11.3 million), with margins improving to 12.1% from 10.1% in the previous year.

Germany

Total revenues in Germany increased by 8% during the year to £51.2 million (2010: £47.2 million), with rental revenues also improving by 8% to £49.7 million (2010: £46.0 million). This improvement was principally volume-driven, although towards the end of the year, we saw early signs of pricing starting to firm.

During the year, the German management team was strengthened and a detailed plan to improve performance was agreed and is being implemented. The plan encompasses specific actions to improve operational efficiency through reducing transportation capacity, improving the availability of the fleet and realigning the sales resource to be cost effective. In addition, the capital base of the business has been reviewed and a controlled reduction in fleet size of approximately 600 machines is being undertaken to adjust our capability to be more in line with the demand from markets that we are targeting.

The actions being taken are designed to improve the ROCE performance of the business and ensure its contribution to the overall financial performance of the Group is more reflective of the level of capital deployed in the territory. To date, we are encouraged by the progress made and expect to see the rate at which benefits are realised gather pace as we move through 2012.

The revenue growth in the year, combined with the operational efficiency gains to date, enabled underlying operating profits to increase three-fold to £4.1 million (2010: £1.3 million) and margins improve to 8.0% from 2.7% in 2010.

Belgium

Belgium's total revenues grew strongly by 18% to £15.7 million (2010: £13.3 million), driven by an increase in rental revenues of 17% to £14.8 million (2010: £12.6 million). This revenue performance reflects a robust level of activity throughout the year and a stable pricing environment. Underlying operating profits increased by 46% to £3.5 million (2010: £2.4 million), with margins up at a healthy 22.3% from 18.0% in the previous year.

Towards the end of the year, the Belgian fleet was increased through the transfer of 225 machines following the closure of the Group's Spanish operation.

This expansion in fleet provides Belgium with the necessary capacity to facilitate further revenue growth and support the future development of the business.

France

Our French business grew strongly in 2011, with total revenues increasing by 17% to £17.9 million (2010: £15.3 million), and rental revenues improving by 16% to £17.4 million (2010: £15.0 million). This strong revenue performance has been supported by excellent availability of fleet and improved transport efficiency, leading to an underlying operating profit increase of 82% to £2.0 million (2010: £1.1 million), with margins improving to 11.2% from 7.2% in the previous year.

As with Belgium, the scale of our French operation was increased towards the end of the year with approximately 350 machines being transferred from Spain. Whilst this increase in fleet will take some time to be absorbed in 2012, it will be placed within the existing depot network and consequently, the operating leverage of the business will be improved as the expanded fleet becomes utilised.

Middle East

Revenues from our Middle East operations have progressively improved throughout the year with rates of year on year growth accelerating across the second half. This growth has been driven through increases in activity in the Saudi Arabia and Abu Dhabi markets, which have more than offset continued weakness in Dubai and Qatar.

We believe that the recovery in activity levels is sustainable and consequently, we are committing approximately £5.0 million of additional capital to the region in 2012. This investment will supplement the re-distribution of fleet and personnel that has taken place during the year and will be used to expand the rental fleet to secure further revenue growth opportunities.

Total revenues for the year declined to £28.3 million (2010: £29.5 million), weighted towards the first half of the year and to a decline in the revenues derived from the sale of new machines. Rental revenues increased by 1% to £26.6 million (2010: £26.3 million), with constant local currency revenues showing a 5% year on year increase.

Underlying operating profits for the year reduced to £6.8 million (2010: £8.6 million), weighted towards the first nine months of the year, with an overall margin of 24.2% (2010: 29.2%). The region returned to year on year profit growth on a monthly basis in the final quarter.

John Standen

Chairman

29 February 2012

(i) non-underlying defined as amortisation charges, exceptional items and fair value movements on financial derivatives.

Group statement of comprehensive income

for the year ended 31 December 2011

 for the year ended 31 December 2010

Notes

2. Segmental analysis

The Group's chief operating decision maker (the "CODM") is the Group Board, comprising the two executive directors and direct reports from the operating subsidiaries and business functional units in the Group. 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.

The primary profit measure used by the CODM is the underlying operating profit.

Notes:

The assets and depreciation charge shown for the Middle East operation includes rental equipment owned by the UK operation, but which is used by and costed to the Middle East operation. The inclusion of the assets and depreciation charge in the Middle East more accurately reflects the commercial nature of the arrangement and the reporting to the CODM.

The information disclosed for the UK operation includes certain centralised Group costs, assets and liabilities which may relate to the operation and financing of overseas subsidiaries.

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

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

Notes:

The assets and depreciation charge shown for the Middle East operation includes rental equipment owned by the UK operation, but which is used by and costed to the Middle East operation. The inclusion of the assets and depreciation charge in the Middle East more accurately reflects the commercial nature of the arrangement and the reporting to the CODM.

The information disclosed for the UK operation includes certain centralised Group costs, assets and liabilities which may relate to the operation and financing of overseas subsidiaries.

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

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

3. Exceptional items, amortisation and movement in fair value of financial derivatives

Exceptional items, amortisation and movement in fair value derivatives incurred during the period are set out below:

Notes:

(i) Restructuring costs related to consultancy costs, employee termination costs and associated professional fees that arose following the operational and business plan reviews conducted during the period.

(ii) The Group reached an agreement with certain tax authorities on treatment of intra group financing arrangements from prior periods (2006 - 2009). This agreement resulted in a reduction being required to the Group's corporation tax and deferred tax creditors to reduce these provisions to reflect the actual liability agreed, and interest payable becoming due on the agreed liability.

(iii) Relates to the movement in fair value of interest rate swaps that are not designated as cash flow hedges.

4. Discontinued operations

During the year the Group's Spanish operations were closed and accordingly it has been presented as a discontinued operation.

Analysis of the results of discontinued operations is as follows:

The cash flows presented in the table above include amounts paid to and received from other Group companies.

5. Acquisition of Subsidiary companies

Blue Sky Access Limited ("Blue Sky")

On 19th October 2011, the Group acquired 100% of the share capital of Blue Sky Access Limited.

The consideration paid on completion was £3.1 million (net of cash acquired) in cash. Deferred consideration of £1.5 million is payable in cash on the first anniversary and £1.0 million in cash on the second anniversary.

Additional consideration of up to £1.5 million could become payable over four years from the date of acquisition, subject to the achievement of certain performance criteria.

Further amounts are contingent on the sale of the rights in certain territories, the financial impact of which cannot currently be quantified.

The effective date of the acquisition was 1 October 2011. Accordingly only three calendar months of trading have been recorded in the current period results.

Details of the acquisition are provided below:

6. 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 164,688,101 weighted average number of ordinary shares in issue for year ended 31 December 2011 (year ended 31 December 2010: 164,011,025).

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 164,696,423 (year ended 31 December 2010: 164,011,436).

Underlying earnings per share is presented to exclude the impact of amortisation charges, exceptional items, movements in financial derivatives and discontinued operations in the year and their associated tax effect. The directors believe that underlying earnings per share provides additional relevant information about underlying business performance.

7. Dividends

The directors are proposing a final dividend in respect of the financial year ended 31 December 2011 of 1.38 pence per ordinary share which will distribute an estimated £2,276,000 of shareholders' funds. It will be paid on 12 May 2012 to those shareholders who are on the register at 9 March 2012, subject to approval at the Company's Annual General Meeting.

8. Taxation

Analysis of taxation (credit)/charge for the year:

The taxation charge on the underlying profit is £5,353,000 (2010: £3,312,000). The taxation credit on amortisation charges, exceptional items and movement in fair value of financial derivatives is £6,387,000 (2010: £660,000), see note 3.

In addition to the amount charged to the income statement, tax of £15,000 (2010: credit of £172,000) in respect of share based payments was charged directly to reserves. This represents the reduction (2010: recognition) of a deferred tax asset which is in excess of the credit to the income statement for share based payments.

No provision has been made in the financial statements for any tax liability which may arise upon future distributions of profit to the United Kingdom from overseas subsidiaries.

Reconciliation of taxation

The tax (credit)/charge for the year is lower (2010: lower) than the standard rate of corporation tax in the UK of 26% (2010: 28%). The differences are explained below:

9. Intangible assets