"The shift in demand seen this year, away from high volume smaller machines towards larger higher revenue generating units, is expected to continue over the balance of the year and is an indication that the commercial and industrial construction sectors we serve continue to recover,” said today’s interim management statement.
The board said that it remains confident of delivering its expectations for the year. There has been strong rental revenue growth in key UK and Middle East businesses and the German figures returned to revenue growth towards end of the third quarter. Lavendon said that the revenue growth is driving improved profitability, margins and return on capital employed “despite strong FX headwinds”. The company’s investment programme continues to be funded by cash flow.
The group's total and rental revenues for the nine months ended 30 September 2014, excluding ex-fleet equipment sales, increased by 6% compared with the prior year. At actual exchange rates, the increase was 3% compared with the prior year.
In the UK, third quarter revenue growth was good despite increasingly more difficult comparators. The growth of 8% was driven by factors including continued pricing improvements, which more than offset the lower year-on-year volumes expected in the quarter.
The rate of revenue growth in the Middle East business increased to 15% during the third quarter. This revenue growth was principally driven by increases in volume but was supported with some further pricing improvements.
Volumes in the German business improved in the quarter and, despite some continued pricing pressure in the market, the business returned to year-on-year revenue growth in September. The French business has delivered another quarter of strong revenue growth, whilst Belgian revenues declined against the prior year.
As expected, the group's net debt level at 30 September 2014 increased to £105m relative to the £97m at the 2013 year end. At actual exchange rates, the group's reported net debt position at 30 September 2014 was £99m. The planned investment programme for 2014 is being funded from our annual cash flows, and the Board continues to expect the group's year end net debt level to be broadly in line with that at 31 December 2013.
Chief executive Don Kenny said: "The group has performed well in the first nine months of the year, with particularly strong revenue growth coming from our key UK and Middle East businesses. It is encouraging to see the growth in group revenue driving improvements in our profitability and margins, and at the same time delivering a better return on our capital employed. The board remains confident of delivering on its expectations for 2014, despite the FX headwinds on our overseas earnings and the continuing economic weakness in our Continental European markets."