Good morning!

Lavendon (LON:LVD)

This is a powered access hire company (so presumably renting out cherry-pickers, scissor lifts, boom lifts, etc), with about half their business in the UK, and the rest in Europe & the Middle East.

The company's H1 trading update this morning looks mildly positive, with rental revenues up 7%. The growth came from (in descending order), the Middle East, UK, and perhaps surprisingly, France. Whilst Belgium & Germany saw single digit % declines in hire revenues.

On profitability the company says;

The growth in Group revenue across the first half of the year has driven improved profitability, operating margins and ROCE, despite the increased exchange rate headwinds on our overseas earnings. The Board's primary focus remains on improving the Group's ROCE above our average weighted cost of capital across the business cycle and we are confident of making further progress towards this objective in 2014.

...the Board is increasingly confident of delivering on its expectations for 2014.

As you would expect for a hire company, there's quite a bit of debt, reported at £99m at 30 Jun 2014, which is expected to remain at a similar level in H2.

On valuation, it looks about right to me. See the usual valuation graphics to the right. With 168.7m shares in issue, and a share price of 210p, the market cap is currently £354m. So net debt is about 59p per share, which has to be factored into the valuation to some extent.

Bear in mind that companies with a fair bit of debt will in all likelihood be facing increased interest charges over the next few years as interest rates rise, depending on what hedging or fixing arrangements they have put in place. So that could be a bit of a drag on earnings in future, but will probably be more than offset by improving economic conditions.

Another worry with equipment hire companies is that they've faced limited competition in recent years, as bank lending for small companies has been so tight. That could change over the next few years, which is likely to mean smaller competitors springing up & eroding the high margins which hire companies have enjoyed in the last few years. So various positives & negatives to weigh up in this sector.


Shaft Sinkers Holdings (LON:SHFT)

There's an alarming announcement…

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