Results in March from the power access business handsomely beat pre-flotation forecasts of pounds 2.55m, with profits motoring ahead by 50 per cent on 1995 figures. Pre-tax profit was pounds 2.7m, up from pounds 1.8m, while sales rose 34 per cent to pounds 13.2m.
Powered access is a relatively new area of the plant hire market, supplying mobile access platforms for everything from outside broadcasts for the likes of Wimbledon, to alternatives to scaffolding on construction sites. A large part of its business comes from supplying hydraulic lifts and platforms to factories, to use for maintenance and cleaning.
Plant hire is capital intensive, and in recent years - in large part because of the general downturn in construction - many plant hire firms have had a hard time of it. Margins have remained flat, and there are precious few bright spots. Lavendon would appear to be a glorious exception to the rule, and for a very good reason: it's in a growth sector of the market.
When chairman David Price founded the group in 1992, power access was a very small part of the UK market. Mobile platforms now account for 10 per cent of the UK market, compared to 35 per cent in the US - hinting at the potential there is for further expansion.
Nationwide Access is the core business, and has a fleet of 1,400 units, the largest in Europe, with 18 depots, up from 14 a year ago. It has also built up its Skylift business from its formation in January 1996, which concentrates on supplying platforms for outside broadcasts, chiefly sports events.
The group is also expanding overseas: in the last year, it has set up operations in Germany, United Arab Emirates, Norway and Hong Kong.
The expansion is reflected in the balance sheet, with tangible assets of pounds 22.36m, almost double the level in 1995. The business is a tight ship, with 168 employees. Looking ahead, the company's broker, Beeson Gregory, predicts profits will hit pounds 4.1m in 1997, and pounds 5.2m in 1998. Earnings per share should come in at 14.4p and 17.9p, compared to the 13.8p announced at the results. On that basis the shares, on 237.5p, currently trade on a forward price earnings ratio of 16.4 times. Expecting the company to repeat another 50 per cent hike in pre-tax profits, however, may be a tall order, although if the rise in rental units continues at this pace, the company could even beat these demanding forecasts.
Setting that aside, however, the company has shown a consistent track record since its inception - always crucial - and is clearly ambitious enough to seize opportunities as they come up.
While some of the headier growth may be over - the shares were listed at 140p only last October - it seems reasonable to expect solid performance in the medium term. Buy.