Just as we predicted in our buy tip (193p, 09 Jan 2014), the UK economic recovery is beginning to drive a major uptick in business at Lavendon (LVD). The group rents out crane-like equipment for aerial construction work, but had been experiencing sluggish trading in the UK as the boom in construction was tilted more toward housing than the major construction projects that are Lavendon’s bread and butter.
No longer: UK rental revenue increased 11 per cent in the first half - “a rate of growth not seen in the business since 2009”, said chairman John Standen. That reflected a combination of higher volumes, a more favourable fleet mix and, importantly, rising prices.
Strong growth in the Middle East further boosted Lavendon’s bottom line, even after factoring in adverse currency movements. Double-digit rental revenue growth in local currencies drove a 6 per cent increase in the division’s underlying operating profit even after translation into a strong sterling.
Lavendon continues to invest in upgrading its fleet of equipment, and has refinanced its debt facilities to help lower its average cost of capital. Mr Standen expects the group to meet analysts' current full-year expectations.
Broker Peel Hunt forecasts adjusted EPS of 15.5p this year, rising to 16.9p in 2015 (2013: 14.3p).
LAVENDON (LVD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 199p | MARKET VALUE: | £ 336m | |
| TOUCH: | 198.5-199p | 12-MONTH HIGH: | 248p | LOW: 165p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 126p* | NET DEBT: | 47% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 114 | 8.6 | 4.1 | 1.15 |
| 2014 | 117 | 10.8 | 4.9 | 1.40 |
| % change | +3 | +26 | +20 | +22 |
Ex-div: 10 Sep Payment: 10 Oct *Includes intangible assets of £86m, or 51p a share | ||||
