Preliminary Results

28 February 2013

Lavendon Group plc

Preliminary Results

Results at the top end of the Board's expectations

Lavendon Group plc ("the Group), the European and Middle East market leader in the rental of powered access equipment, today announces its preliminary results for the year ended 31 December 2012.

Notes

(i) Underlying results stated before amortisation charges, exceptional items, movements in the fair value of financial derivatives and, in 2011, excludes the Group's discontinued Spanish operation

(ii) Underlying and statutory measures are the same

(iii) Calculated on the Group's operating profits before exceptional items

2012 Highlights

·; Rental revenues increased 2% to £220.7m (2011: £216.9m)

·; Operating profits increased 17% to £35.0m (2011: £30.0m); margins up to 14.9% (2011: 13.3%)

·; PBT increased 26% to £27.6m (2011: £21.9m)

·; ROCE increased to 10.7% (2011: 9.0%), through improved trading and enhanced operational and capital performance

·; EPS increased 28% to 12.83p (2011: 10.03p)

·; Net debt reduced to £97.3m (2011:£106.6m); net debt/EBITDA ratio of 1.28x (2011: 1.49x)

·; Full year dividend increased by 57% to 2.75p (2011:1.75p) reflecting strong performance and the Board's confidence in the Group's future.

Don Kenny, Chief Executive of Lavendon Group plc, said:

"The Group made good progress during 2012 with results for the year at the top end of our expectations despite challenging trading conditions in our European markets. The strong revenue growth from our French and Middle East businesses, together with the disciplined delivery of our business plan, have delivered considerable improvements in the Group's profitability, margins and return on capital employed. Our robust cash flows have also supported increased fleet investment, funded an enhanced dividend and enabled further debt reduction."

"As we move into 2013, continued improvement in ROCE remains a key priority. Our focus will remain on the timely delivery of further operational efficiency gains to enhance margins, and on the allocation of capital to support growth opportunities. Our 2013 investment programme will be fully funded from our strong cash flows, as we continue to refresh our European fleet and expand our Middle East business where we see strong demand characteristics."

"Our increased dividend underlines the Board's confidence in the Group's future prospects. While trading since the year end has been disrupted by the adverse weather seen in the UK and Continental Europe, and being ever mindful of the continuing economic uncertainty, the Board remains confident of its expectations for the year as a whole and believes the Group is well positioned to deliver another year of financial progress and continue to create increased shareholder value over the medium term."

A meeting for investors and analysts will be held today at 9.15am 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.comlater 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 18th April 2013.

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 almost 20,000 units and the Group employs over 1,600 people. 

CHAIRMAN'S STATEMENT

The Group has made good progress during 2012, with results for the year at the top end of the Board's expectations.

Strong revenue growth from our French and Middle East businesses, together with the disciplined delivery of our business plan, which targets improvements in both operational and capital efficiency, have enhanced the performance of the Group and strengthened its resilience to the economic headwinds prevailing in our European markets.

This strategic focus has improved our return on capital employed ("ROCE") for the year, delivered revenue growth and margin improvement, as well as supported increased fleet investment, funded an enhanced dividend and enabled further debt reduction.

As our business plan gathers momentum, the Board believes that a firm operational base is being established with an increasingly differentiated service offering. This firm foundation together with our strong cash flows and healthy capital structure, will underpin the future development of the Group, provide enhanced financial returns and continue to create increased shareholder value over the medium term.

Return on Capital Employed

The Group's ROCE, our key performance metric, increased to 10.7% for the year; a marked improvement over the return of 9.0% in 2011. The calculation of ROCE has been based on the Group's operating profit before exceptional items for 2012, and the average of the opening and closing capital employed for the year of £292.5 million (2011: £306.1 million). Further improvements are targeted in 2013 as we look to move the Group's ROCE above our pre-tax weighted average cost of capital of 11% across the business cycle.

Dividend

Given the continued improvement in the Group's financial performance, the Board is proposing a final dividend of 2.00 pence per share, making a total dividend for the

year of 2.75 pence; an increase of 57% over the previous year (2011: total dividend of 1.75 pence). The final dividend, if approved, will be paid on 30 April 2013 to shareholders on the register at the close of business on 8 March 2013.

The proposed increase in the dividend for the year reflects the Board's confidence in the future and our continued recognition that dividends are an important means of delivering shareholder value. As previously stated, we intend, over time, to increase dividend distributions to a level that is covered three to four times by earnings. Dividend cover in 2012, based on underlying earnings per share, has been reduced to 4.7 times (2011: 5.7 times): the pace of further progress towards our aim will reflect the Group's investment needs and funding requirements as we move through the business cycle.

Operational and Capital Efficiency Programmes

The expected efficiency gains from our three year plan are being delivered through a range of enhanced operational procedures and processes. By the end of 2012, we had secured operational efficiency gains of £3.7 million per annum; slightly ahead of our schedule to achieve our previously stated target of annualised savings of £5.0 million by the end of 2013. These gains have been derived over the past two years, principally in France, Germany and the UK, from a combination of better pricing, improved transport efficiency, sales resource realignment and procurement of goods and services.

Our capital efficiency programmes remain focused on realigning the level of capital employed in our European businesses, while looking to allocate additional capital through fleet expansion to our Middle East operation to meet growing demand. We continue to dispose of surplus under-utilised fleet, mainly from Germany, but more recently from Belgium, as well as re-distributing fleet to improve overall utilisation levels. Benefits from improvements to our maintenance processes, originally expected as a reduction to our cost base, are now being delivered through improved availability of fleet, providing increased revenue generation capacity without additional capital investment - an important factor that can amplify our financial returns when market conditions improve.

The operational and capital efficiency programmes remain a core focus for the Board, and they have played a key part in the overall improvement in the Group's ROCE, particularly in Germany where its ROCE performance has improved by 210 bps in the year, thereby increasing its relative contribution towards the Group's overall performance.

Financial Results

The Group's total revenue for the year increased by 4% to £234.6 million (2011: £225.4 million), with rental revenues increasing by 2% to £220.7 million (2011: £216.9 million) and revenues from the sale of new and ex-rental fleet equipment increasing by £5.4 million.

This increased revenue, together with the additional operational efficiency gains secured in the period, increased underlying operating profits by 17% to £35.0 million (2011: £30.0 million), with margins improving to 14.9% (2011: 13.3%).

With underlying net interest costs reducing to £7.4 million during the year (2011: £8.1 million), the Group's underlying profit before tax increased by 26% to £27.6 million (2011: £21.9 million). This increase in profitability, combined with a reduced effective tax rate of 23% (2011: 25%), generated an underlying profit after tax of £21.2 million (2011: £16.5 million) and a 28% increase in underlying earnings per share to 12.83 pence (2011: 10.03 pence).

Amortisation charges in the year increased to £3.8 million (2011: £2.3 million), reflecting the full year amortisation of the intangible assets acquired as part of the acquisition of BlueSky Access Limited in October 2011.

During the year, the Group incurred an exceptional charge of £3.6 million (2011: £6.3 million). This charge relates to ongoing restructuring, principally within our German business, and the fees associated with the Group's bank refinancing in February 2012. In addition to this charge, there was a credit of £0.7 million relating to the net fair value movement in financial derivatives arising in the year (2011: credit of £0.8 million).

After amortisation charges, exceptional items and fair value movements in financial derivatives, the Group's operating profit was £29.7 million (2011: £22.9 million). The Group's profit before tax was £20.8 million (2011: £14.2 million) and the Group's profit after tax was £16.2 million (2011: £15.2 million), with earnings per share of 9.80 pence (2011: 9.22 pence).

Using exchange rates consistent with 2011, the Group's total revenues for the year increased by 6% to £239.5 million (2011: £225.4 million), with underlying operating profits increasing by 18% to £35.4 million (2011: £30.0 million). Underlying profits before tax increased by 28% to £28.0 million (2011: £21.9 million), while underlying profits after tax increased by 30% to £21.5 million (2011: £16.5 million), with earnings per share also increasing by 30% to 13.06 pence (2011: 10.03 pence).

As previously reported, the Group's Spanish business was closed in 2011 and its results for the comparative period have been reported as a discontinued operation.

Cash Flow

Underlying earnings before interest, tax, depreciation and amortisation ("EBITDA") increased by 5% to £75.6 million (2011: £71.7 million), with margins improving to 32.2% (2011: 31.8%). Whilst the planned increase in the purchase and sale of rental fleet assets during the year resulted in net cash outflows rising to £25.4 million (2011: £4.4 million), the Group still generated a healthy level of cash from operations of £39.7 million (2011: £56.9 million). Net cash generated from operating activities, after payment of interest and tax, reduced to £21.2 million (2011: £41.2 million).

Investment

As planned, the Group increased its level of capital expenditure for 2012 with a total of £47.9 million being invested in the Group's rental fleet and operational infrastructure (2011: £16.9 million). This was partly funded by the disposal of surplus or retired assets which generated £11.1 million (2011: £6.2 million). After reflecting movements in amounts owing to equipment suppliers at the beginning and end of the year, this activity resulted in a net cash outflow relating to capital expenditure of £29.8 million (2011: £8.8 million), which was funded from annual operating cash

flows. In 2013, it is planned to undertake an investment programme of similar size to 2012, again funded through annual operating cash flows.

The investment programme undertaken in the year has replaced approximately 10% of the Group's rental fleet, expanded the Middle East fleet to meet growing demand, increased the availability of our BlueSky range of machine attachments and improved our operational infrastructure. The overall impact of our fleet investment and disposal programme has been a net reduction in the Group's total fleet size of around 150 units to 19,800 machines by the year end, but with an improved mix of fleet and revenue-generating capability.

Net Debt

Although the Group's capital expenditure programme increased in 2012, the strength of the Group's cash flows, combined with a favourable foreign exchange movement of £1.8 million, enabled the Group to reduce its net debt levels at the year end to £97.3 million (2011: £106.6 million). Adjusting for the un-amortised costs of £0.8 million relating to the Group's US Private Placement in February 2012, the Group's reported net debt position at 31 December 2012 was £96.5 million. The corresponding debt to equity ratio was 49% (2011: 58%), with an improved net debt to pre-exceptional EBITDA ratio (calculated on a rolling 12 month basis) of 1.28 times (2011: 1.49 times). The Group is operating well within its banking covenants and has significant liquidity available from its combined finance facilities.

Refinancing

In February 2012, the Group replaced its previous 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 diversified financing package, with significant liquidity that will support the development of the Group in the coming years. The costs associated with the new bank facility have been written off as an exceptional item in 2012, whilst the costs relating to the US Private Placement are being amortised over the term of that facility.

Summary and Outlook

We are encouraged by the progress we made during 2012, with our operational and capital efficiency improvements delivering the expected benefits, and increasing demand continuing to drive our Middle Eastern revenues and margins.

As a Board, the further improvement in the Group's ROCE continues to be our key priority, as we seek to move this ahead of our weighted average cost of capital in the coming year. Our focus remains on the timely delivery of our targeted operational efficiency gains, to enhance margins, and to allocate capital in support of growth opportunities and underpin our strong market positions. In particular, further investment in our Middle East business is planned, as we believe the growth opportunities in that region are considerable over the coming years and the returns available warrant the deployment of additional capital.

The planned increase in our investment programme in 2012 was funded from annual operating cash flows, enabling an extensive replacement programme to be undertaken in our European fleet as well as facilitating an expansion of our Middle East fleet to meet growing demand. The strength of the Group's cash flows not only supported this increased level of investment during the year and funded an enhanced dividend, but also facilitated a further modest reduction in net debt levels. With strong cash flows, a comfortable level of borrowings, a healthy capital structure and enhanced liquidity following the refinancing of the Group in the year, we are well placed to fund our future development and exploit growth opportunities over the medium term.

While trading since the year end has been disrupted by the adverse weather seen in the UK and Continental Europe, and being ever mindful of the continuing economic uncertainty, the Board remains confident of its expectations for the year as a whole and believes the Group is well positioned to deliver another year of financial progress and continue to create increased shareholder value over the medium term.

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, exceptional items and movements in the fair value of financial derivatives

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 were broadly flat for the year at £107.7 million (2011: £108.4 million), as a year on year pricing improvement of 1.5% compensated for a decline in volumes during the year. An increase in the sale of new and ex-rental fleet equipment enabled the UK to grow total revenues in the year by 2% to £114.8 million (2011: £112.3 million).

Against the backdrop of a relatively weak market, we believe our UK business is continuing to gain market share with major users of powered access equipment, by differentiating itself through the provision of value adding solutions that improve safety and efficiency. At the same time, we have improved the UK's fleet mix through the replacement of some 1,700 rental units, enhancing the range of equipment on offer to our customers and increasing our revenue generating capacity. The combination of a well invested fleet and a service offering that goes beyond the pure rental of equipment, underpins our ability to secure market share and provides a degree of resilience to pricing pressures.

The UK business has been a key contributor to the Group's operational and capital efficiency programme over the past two years, with improvements in pricing, transport efficiency and sales resource allocation. The progress made in transitioning to a more efficient operating model has contributed to the increase in underlying operating profits in the year to £18.9 million (2011: £17.7 million) with margins improving to 16.5% (2011: 15.8%).

Germany

Total Euro revenues in Germany were flat compared to 2011, with an almost two fold increase in revenues derived from the sale of ex-rental fleet equipment off-setting a 6% decline in rental revenues. Once converted to sterling, total revenues declined by 7% to £47.5 million (2011: £51.2 million), with rental revenues declining by 12% to £43.5 million (2011: £49.7 million).

Demand levels in Germany continue to be unpredictable, with volumes in 2012, particularly following the summer months, not reaching prior year levels and not reflecting traditional seasonal patterns. Consequently, our focus was on the continued delivery of our business plan to increase the operational efficiency of the business and to lower its capital base. In particular over the past two years, the German rental fleet has been reduced by over 700 machines, with a net reduction of almost 400 machines in 2012. This action has lowered the German capital base, removed a future capital replacement requirement and generated increased disposal revenues and profits.

Despite the weaker revenues seen in 2012, the improvements in the cost efficiency of the business and the reduced capital base have delivered a marked improvement in the ROCE performance of Germany, both in absolute terms and in its relative contribution to the overall financial performance of the Group. Whilst the full benefits of our restructure of the business are yet to be seen, and, in the short term, its delivery can create a degree of revenue disruption, we are encouraged by the progress made to date.

Underlying operating profits increased to £5.0 million (2011: £4.1 million) and margins improved to 10.5% from 8.0% in 2011.

Belgium

Belgium's total Euro revenues grew by 6%, with rental revenues increasing by 1% and revenues from the sale of new and ex-rental fleet equipment almost doubling. Once converted to sterling, total revenues were flat at £15.6 million (2011: £15.7 million), with rental revenues declining by 5% to £14.0 million (2011: £14.8 million).

This revenue performance was disappointing given our expectation that the transfer of fleet from our closed Spanish operation towards the end of 2011 would be progressively utilised through the year. As we moved through the second half of the year and pricing pressure started to emerge in the market, we took the view that the additional fleet would not be fully utilised and consequently commenced a process to redistribute fleet and dispose of surplus units.

Underlying operating profits reflect the increase in the cost base in the year following the transfer of fleet from Spain, declining to £2.8 million (2011: £3.5 million), with margins declining but remaining relatively healthy at 18.0% (2011: 22.3%).

France

Our French business grew strongly in 2012, with both total and rental Euro revenues increasing by 17%. Once converted to sterling, both total and rental revenues increased by 10%.

This strong revenue performance has been driven by a well utilised expanded fleet, with excellent availability, and supported by a targeted sales and marketing strategy. Although the market has remained relatively flat throughout the year, we have been able to gain market share, and whilst pricing has eased this has been more than compensated by increased volumes. The operating leverage derived from the increased revenues was good, as the expanded fleet was placed within the existing depot network, and this generated a 36% increase in underlying operating profits to £2.7 million (2011: £2.0 million), with margins improving to 13.7% from 11.2% in the previous year.

Additional capital will be allocated to our French business in 2013 to support our growth aspirations in this market.

Middle East

Revenues from our Middle East business increased across the year, with the rate of growth accelerating as we moved through the second half of the year. Total local currency revenues, including the sale of new and ex-rental fleet equipment increased by 29%, with local currency rental revenues increasing by 35%. On conversion to sterling, total revenues increased by 31% to £37.1 million (2011: £28.3 million) with rental revenues increasing by 37% to £36.3 million (2011: £26.6 million).

Although this growth is centred on our main markets of Saudi Arabia and Abu Dhabi, our other operations in the region experienced increased demand. To meet this increased demand and support the growth of our business, we progressively allocated more capital to the region as we went through the year, investing a total of £12 million in fleet expansion.

We believe that the current activity levels are sustainable and likely to improve further as we move through 2013. Consequently we are committing additional capital to the region in the coming year, to ensure we are well placed to benefit from the growth opportunities that become available. We believe the scale of the potential in the region could be significant over the medium term and will warrant a further shift of our available capital into the region over time.

Underlying operating profits for the year increased to £10.5 million (2011: £6.8 million), with margins improving to 28.3% (2011: 24.0%).

John Standen

Chairman

28 February 2013

(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 2012

for the year ended 31 December 2011

Notes

2. Segmental analysis

From 1 January 2012, the internal reporting arrangements for the Group were reorganised into six operating segments based on the geographical locations of the UK, Germany, Belgium, France and the Middle East together with one non operating Corporate cost centre. The Corporate cost centre comprises the Group directorate, statutory compliance and Group administrative functions and holds the Group's bank borrowing facilities. The segmental reporting has therefore been updated to reflect this change for the current and comparative periods with Corporate items, that were previous reported as part of the UK segment, now reported separately.

The Group'schief operating decision maker (the "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 targetsand performance in prior periods.

Notes:

The depreciation charge shown for the Middle East operation includes rental equipment owned by the UK operation for the first half of the year, but which were used by and costed to the Middle East operation. The inclusion of the depreciation charge in the Middle East more accurately reflects the commercial nature of the arrangement and the reporting to the CODM. The associated assets were transferred to the Middle East in July 2012.

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

.

Year ended 31 December 2011

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 associated assets were transferred to the Middle East in July 2012.

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

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 during 2012 principally relate to the ongoing reorganisation of the German business. Restructuring costs in 2011 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) In 2011 the Group reached an agreement with certain tax authorities on the 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.

(iv) Fees incurred on bank refinancing.

4. Discontinued operations

During 2011 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 flow of discontinued operations includescash flows from intra-group transactions.

5. 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 164,990,033 weighted average number of ordinary sharesin issue for the year ended 31 December 2012 (year ended 31 December 2011: 164,688,101).

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 169,167,889 (year ended 31 December 2011: 164,696,423).  

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

6. Dividends

The directors are proposing a final dividend in respect of the financial year ended 31 December 2012 of 2.00 pence per ordinary share which will distribute an estimated £3,301,000 of shareholders' funds. It will be paid on 30 April 2013 to those shareholders who are on the register at 8 March 2013 subject to approval at the Company's Annual General Meeting.

7. Taxation on profit/(loss)

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

The taxation charge on the underlying profit is £6,388,000, (2011: £5,353,000). The taxation credit on amortisation charges, exceptional items and fair value movements on financial derivatives is £1,756,000 (2011: £6,387,000), see note 3.

In addition to the amount of taxation charged to the income statement, tax of £555,000 (2011: £15,000) in respect of share based payments was credited directly to reserves. This represents the 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 charge/(credit) for the year is lower (2011: lower) than the standard rate of corporation tax in the UK of 24.50% (2011: 26.49%). The differences are explained below:

The standard rate of corporation tax in the UK changed from 26% to 24% from 1 April 2012. Accordingly, the Company's UK profits for this accounting period are taxed at an effective rate of 24.50%. The relevant deferred tax balances have been re-measured to reflect this change in the rate of corporation tax.

With effect from 1 April 2013 the UK corporation tax rate will change to 23% (legislation was enacted in Finance Act 2012), and it has been announced that the rate will further reduce to 21% from 1 April 2014. The change in tax rate to 21% had not been substantively enacted at the balance sheet date and therefore is not recognised in these financial statements. The estimated impact of the change is a reduction in deferred tax balances of £1.0m

8. Property, plant and equipment