Lavendon (LVD), which is in the business of leasing motorised mounts and platforms across Europe and the Middle East, registered double-digit growth in sales and underlying profit during the first half. Investors returned the favour, jacking up the equipment hire group's shares by almost 9 per cent on results day.
Solid demand in France, market share gains in the UK and having nearly 1,000 more machines available for hire in the Middle East boosted the top line. Combined with operational improvements, that meant pre-tax profits climbed a tenth to £15.9m, if you exclude exceptional costs and amortisation. Lavendon suffered from weaker trading in parts of continental Europe, but management expects the ongoing restructuring of the German business to swing into profit during the traditionally stronger second half.
Investments in rental equipment and infrastructure leapt by 40 per cent to nearly £55m. Net debt swelled by a quarter to about £150m as a result, and adjusted return on capital employed fell by 0.9 percentage points to 11.8 per cent. But the latter remained well above the group's weighted average cost of capital of 9.5 per cent, giving management the confidence to hike the dividend.
Broker N+1 Singer expects adjusted pre-tax profit of £40.3m for the full year, giving EPS of 18.4p (from £38.5m and 17.9p in 2015).
| LAVENDON (LVD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 135p | MARKET VALUE: | £229m | |
| TOUCH: | 132-137p | 12-MONTH HIGH: | 185p | LOW: 107p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 30 | |
| NET ASSET VALUE: | 140p* | NET DEBT: | 63% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 119 | 13.7 | 6.2 | 1.7 |
| 2016 | 134 | 12.5 | 5.8 | 2.0 |
| % change | +13 | -8 | -6 | +18 |
Ex-div: 8 Sep Payment: 7 Oct *Includes intangible assets of £51.7m, or 30p a share | ||||
