Companies: LVD   

Europe's market-leading 'powered access' equipment rental group has flagged up noticeably tougher trading across its UK and European businesses.

Sales for the ten months to October were 36% up on 2007, said Lavendon, with operating margins showing improvement. The company also explained that its significant net debt of £260m – 3.66 times today’s market cap – is ‘well supported’ by strong cash flows further strengthened by April’s transformational cash and shares acquisition of The Platform Company for £46.8m.

Domestic sales were up 26% for the period, boosted by The Platform Company, which strengthened Lavendon’s market position in powered access, though this growth rate suffered in comparison to 2007, which was flattered by acquisitions.

Sales in Germany were off by 5% in local currency, with Lavendon finding it more difficult to grow there in recent months. Growth of almost 330% in France and Belgium meanwhile, and of 180% in a weakening Spanish market, reflected the DK Rental acquisitions at the end of last year. The buoyant Middle East represented a bright spot, with total sales having burgeoned by 27% and operating margins on the rise.

Given uncertainty, Lavendon has pared back its capital expenditure budget in order to focus on cash generation and debt reduction. Encouragingly, it should still meet forecasts for the year to December – sales of £243m (2007: £186m), pre-tax profits of £28m (£18.9m) and earnings of 48.3p (42p).

Lavendon, whose shares have plummeted from a 52-week peak of 633.5p, now trades on a paltry p/e of 3.2 (and offers a yield north of 6%), with the de-rating based on concerns about construction slowdown and debt levels. Whilst Lavendon looks a long-term winner, consider reducing exposure short-term with sentiment remaining poor.

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Lavendon Group	LSE	£87.82m	190.00p	-2.00p
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