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Lavendon Group plcAnnual Report and Accounts 2004

Lavendon Group plc

Annual Report and Accounts 2004Lavendon Group plc1 Midland Court, Central Park,

Lutterworth, Leicestershire LE17 4PN

Tel: 01455 558874 Fax: 01455 559569

Registered in England No. 2771891

www.lavendongroup.comwww.zooomrent.com

Contents01 Financial highlights02 Chairman’s statement04 Operational review08 Financial review10 Remuneration report 15 Directors’ report 18 Statement of directors’ responsibilities 19 Directors and advisers 20 Corporate governance26 Report of the Audit Committee27 Independent auditors’ report28 Consolidated profit and loss account29 Consolidated and parent

company balance sheets30 Consolidated cash flow statement 31 Notes to the financial statements50 Group five year financial history51 Notice and agenda of

annual general meeting54 Appendix: proposed Lavendon Group plc

Share Matching Plan 2005

Lavendon Group plc

Powered solutions for elevated work areas

What is powered access?

Powered access equipment is designed to enable people to worksafely, productively and comfortably at height. It can be used in a comprehensive range of applications, both inside and outsidebuildings and structures.

Traditional methods of getting people, their tools and equipmentup to an elevated work area include ladders, mobile accesstowers and scaffolding – all of which, if used incorrectly, maypose significant hazards in the workplace. In addition, they canbe time-consuming and costly to erect or reposition in use.

An increased focus on safety in the workplace is a major factorin the accelerating rate of penetration of powered accessequipment, which offers a safe, versatile and cost-effectivealternative to traditional methods. For example, in theconstruction industry falls account for over 50% of all fatalaccidents, and throughout Europe, legislation is beingprogressively tightened to help make it safer to carry out work at height. This campaign for improved safety will continue to drive market demand for powered access equipment acrossEurope as it has in the USA.

The main drivers of substitution for traditional access methods area:

• Commercial pressure to reduce project time scales – where speed, convenience and safety are prime concerns.

• Increasingly stringent health & safety legislation has led tohigher standards of repair and maintenance in the workplace,together with the need to conduct risk assessments on all work activities.

• A growing awareness of the benefits of powered access across a wide range of market sectors outside construction.

• Demonstrable cost-efficiency of powered access comparedwith methods such as aluminium towers and scaffolding, due to its low labour content.

Lavendon is the European market leader in the rental of self-propelled booms and scissor lifts (Mobile Elevating WorkPlatforms or “MEWPs”), with a growing fleet of the morespecialised truck-mounted access platforms. Across Europe andthe Middle East, the Company now operates a fleet of around10,700 machines from a network of over 85 depots.

Powered access machines are available for internal or externaluse. Battery-powered machines are used mainly inside existingbuildings, where users have a requirement for quiet, emission-free machines. Diesel-powered equipment is often usedexternally where its greater power and traction enables a stableworking platform in rugged terrain and difficult conditions.Boom and scissor lifts are self-propelled for easy positioning and the work platform can be raised and lowered either fromthe ground or the elevated work platform. Many models aredesigned to be driven safely in the elevated position, thusadding to their flexibility and increasing productivity.

Powered access equipment is regularly used in a growing anddiverse range of market sectors and applications including signerection, broadcasting, telecommunications, construction andcivil engineering, cleaning and inspection, building services,facilities management and industrial maintenance.

Lavendon Group is the European leader in the rental of powered access equipment.

The quality and diversity of the hire fleet, coupled with the professionalism and accessibility of the depotnetwork, provides an exceptional product range forcustomers and underpins the key operating strategiesof the Group.

Operational performance

2004 2003 +/-

Group turnover £108.0m £107.8m stable

Trading profit (EBITDA)– before exceptional operating costs £31.4m £35.6m down 12%– after exceptional operating costs £25.9m £34.8m down 26%

Net cash inflow from operating activities £29.1m £36.1m down 19%

Group operating profit/(loss)– before exceptional operating costs £5.8m £9.3m down 38%– after exceptional operating costs (£0.3m) £8.5m down 104%

Net borrowings £89.0m £109.5m down 19%

Free cash £20.9m 11.2m up 87%

Exceptional operating costs incurred in 2004 amount to £6.1 million (2003: £0.8 million).

EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation.

Financial highlights

Lavendon Group plc 2004 1

Free cash2004 2003

£million £million

Net cash inflow from operating activities 29.1 36.1Interest (5.4) (6.0)Taxation 0.5 (1.0)Dividends paid (2.6) (2.6)Capital expenditure (0.3) (4.7)Capital expenditure financed by hire purchase agreements (0.4) (10.6)

Net free cash 20.9 11.2

2 Lavendon Group plc 2004

Chairman’s statement

SummaryThe Group’s trading performance in 2004has been disappointing. A poor economicbackdrop in Germany aggravated by excessmachine capacity across Europe, led to asignificant reduction in Group profits.

In the UK, our response to these difficultcircumstances has been further investmentto improve our sales and customer servicecapabilities, to counter the competitivepressure experienced in the first quarter ofthe year. This investment successfullydelivered a resumption of revenue growth asthe year progressed, but conversion of theseincremental revenues into increased operatingprofits proved disappointingly slow, with onlyrelatively small benefits starting to accruetowards the end of the year.

As further market decline became apparentin Germany during the year, we undertook areappraisal of our combined German andAustrian operation. This led to theimplementation of a major restructuringprogramme to reduce the overall scale andcost of the business. Whilst we have retaineda market leading position in Germany, ourbusiness has been significantly downsized.The action taken has lowered the operatingcost base considerably, enabling the businessto weather better the present difficult tradingconditions and allowing it to respond moreefficiently to any improvement in theeconomic climate. As part of the restructuringprogramme, we have also disposed of ourbusiness in Austria since the year-end.

Some limited progress has been made inFrance, while Spain had a tough year as thepreviously robust construction market startedto weaken. In the Middle East both revenuesand operating profits increased as activitylevels in the region remained solid.

The decisions taken in the UK andparticularly Germany have resulted inconsiderable costs being incurred, boththrough increased operating costs andexceptional charges as well as generalbusiness disruption, the impact of whichhave been severely detrimental to theGroup’s results for 2004. These actions werenecessary to return the Group to a positionfrom which, once again, sustainableearnings growth should be achievable.

The Group has continued to generatesubstantial cash inflows, and with the limitedrequirement for capital expenditure in theyear, was able to reduce its debt levels monthon month throughout 2004. Further progressin reducing debt levels is expected in 2005.

We completed the refinancing of our bankfacilities in June and a new £85 millionfacility was put in place which will expire inJune 2009. This new facility provides thenecessary flexibility for the developmentof the Group going forward.

Financial resultsThe Group’s turnover for the year wasbroadly flat at £108.0 million (2003: £107.8million), producing an operating profit beforeexceptional costs of £5.8 million (2003: £9.3million). The operating loss after exceptionalcosts was £0.3 million (2003: profit of£8.5 million). Operating margins prior toexceptional costs were 5.4% (2003: 8.6%),while after exceptional costs a negativemargin of –0.3% was incurred (2003:profit margin of 7.9%).

Exceptional costs totalled £14.5 million(2003: £0.8 million). These comprised£6.1 million of exceptional operating costs,principally the professional fees associatedwith the refinancing of the Group’s debt


“Our financial strength is firmly underpinned by the Group’s strongcash flows and reducing debt levels, attributes which allow us to lowerthe risk profile of the business through these tough trading periods.”

facilities and the costs incurred in Germanywith the goodwill write down and depotclosure programme, together with £8.4 millionof exceptional non-operating costs relatingto a provision made against German assetsidentified for disposal and the write down ofthe Austrian business to the value realisedfrom its disposal post the year-end.

Earnings before interest, tax, depreciation andamortisation (EBITDA) prior to exceptionalcosts declined to £31.4 million (2003: £35.6million) primarily as a result of the reducedoperating profits. After exceptional costs, theGroup’s EBITDA was £25.9 million (2003:£34.8 million). With a reduction of £0.6 million(2003: £1.3 million) in working capitalrequirements, the net operating cash flowprior to exceptional costs was £32.0 million(2003: £36.9 million). After exceptional coststhe net operating cash flow for the year was£29.1 million (2003: £36.1 million).

Due to the continued strength of the Group’scash flow and a limited capital expenditureprogramme, £20.9 million (2003: £11.2 million)of ‘free cash’(1) was generated in the year. Thissubstantial increase in the level of ‘free cash’ (1)

has enabled the Group to reduce its net debtlevels at the year-end to £89.0 million, after asmall adverse foreign exchange movement of£0.5 million, compared to £109.5 million at theend of 2003. The corresponding debt to equityratio was 118% (2003: 122%).

The Group’s pre-tax result before exceptionalcosts was breakeven (2003: a profit of £3.0million). After exceptional costs the lossbefore tax was £14.5 million (2003: a profitof £2.2 million). The loss per share beforeexceptional costs was 3.29 pence (2003:earnings of 4.83 pence) and after exceptionalcosts the loss per share was 34.49 pence(2003: earnings of 3.31 pence).

DividendWe reported in our pre-close trading updatein December 2004, that due to the impactof the exceptional costs on the Group’sdistributable reserves and the cash cost ofthis restructuring, the Board had decidednot to recommend the payment of a finaldividend for 2004.

The Board is hopeful that an improvedtrading performance in 2005 will enable theresumption of dividend payments.

OutlookThe generally weak levels of demand acrossmost of the European Industrial andCommercial construction sector, combinedwith the poor economic climate in Germany,is restricting the Group’s ability to deliversound financial performance. Nonetheless weremain confident that, over the medium term,the demand for powered access products willreturn to average growth trends considerablyabove that of general economic activity, andthat once this occurs, the profitability of theGroup will improve significantly.

Until the marketplace shows signs of asustained recovery, our efforts will be focusedon increasing the cost effectiveness of thebusiness, strengthening managementcapabilities and, through the use of enhancedIT systems, improving operational processes.

Our financial strength is firmly underpinnedby the Group’s strong cash flows andreducing debt levels, attributes which allowus to lower the risk profile of the businessthrough these tough trading periods, andwhich also ensure that the benefits of theGroup’s operational leverage are magnifiedonce demand levels improve.

Trading so far this year is in line with ourexpectations with the UK continuing thetrend of revenue growth year on year.Germany is completing the final elements ofits restructuring programme, which, althoughstill very early in the process, is deliveringperformance improvements.

David PriceChairman7 March 2005

(1) Free cash is defined as net cash inflow from continuingoperating activities less interest, taxation, dividends paid,and capital expenditure before inception of new hirepurchase agreements.

Free cash2004 2003

£million £million

Net cash inflow from operating activities 29.1 36.1Interest (5.4) (6.0)Taxation 0.5 (1.0)Dividends paid (2.6) (2.6)Capital expenditure (0.3) (4.7)Capital expenditure financed by hire purchase agreements (0.4) (10.6)

Net free cash 20.9 11.2


Whilst market conditions continue to begenerally unfavourable, impeding our abilityto grow revenues, we have concentrated ourefforts on reshaping our business to ensurethat the future development of the Group isbased on solid foundations and that theadverse affects of current trading conditionsare minimised. By developing andimplementing enhanced IT and operationalsystems we have improved the economiesof scale available from centralising customerorder taking and transport co-ordinationfunctions, and at the same time increasedthe level of customer service that we offerto the marketplace. We have also, throughtight control of working capital and a limitedcapital expenditure programme, sought tomaximise cash flow to reduce our debt levels.

UKThe UK continues to be the Group’s largestand most important market and,consequently, the key focus, as we came intothe year, was to restore the business to bothrevenue and profit growth. To achieve thisaim substantial sums were invested duringthe first half of the year in marketing,telesales activities, strengthening customerservice centres, expanding the salesforce andimproving fleet availability. By the end of thefirst quarter, this investment had successfullyreversed a declining revenue trend allowingrevenues for the year to grow by 4% to£61.5 million (2003: £59.2 million). Althoughincremental operating profits from thisrevenue growth were being earned in the

final stages of the year, the extent of theinvestments made to improve customerservice standards meant that operatingprofits prior to exceptional costs declined to£7.4 million for the year as a whole (2003:£9.2 million). Operating margins prior toexceptional costs were 12% (2003: 16%).After exceptional costs, operating profitswere £5.3 million (2003: £8.8 million) withan operating margin of 9% (2003: 15%).

During the year, extensive upgrades to ourIT systems were made enabling improved,statistically based, pricing decisions to beapplied consistently across our depotnetwork. These enhancements are allowingadjustments to be made to product pricingwhich reflect the changing patterns ofdemand through the year, and are startingto deliver the expected benefits throughimproved hire rates.

The management structure of the UK hasbeen strengthened, through a combinationof external recruitment and targeted training.In August 2004, the UK senior managementteam was completed with the appointmentof Hugh Cole as Managing Director.

Although the short-term profitability ofthe UK business has been diluted by theinvestments made in the year, the operationis now in a robust shape and ready toimplement strategic decisions going forwardthat will deliver long-term growth andincreased profits.

Operational review


“We have concentrated our efforts on reshaping our business to ensure that the future development of the Group is based on solid foundations and that adverse affects of current trading conditions are minimised.”

Top: Telescopic self-propelled boom lift assistingrestoration work on a lightship.Bottom: Steel erection at the new Coventry Arena, UK.

Germany and AustriaThe German marketplace remains depressedwith extremely testing trading conditions asa result of declining demand from theconstruction sector. Overall demand from thissector has reduced by some 28% since 2000,with the situation being exacerbated by thenon-construction related sectors also havingsubdued demand levels as a result of theprevailing economic climate.

Against this background, as 2004 progressed,it became increasingly clear that the Germanpowered access market was not experiencinga short-term correction between demandand the capability to supply, but wassuffering from a fundamental imbalancebetween these market forces. With theeconomic outlook at best forecasting stabilityor low growth, any demand led resolution ofthe situation was likely to take several years,and the correction of excess machinecapacity was only going to occur throughthe progressive non-replacement of retiringfleet, unless a significant number of rentalunits were removed from the marketplace byone or more main players.

As the strategic options to respond to thismarket situation were being evaluated,regional customer service centres werecreated to de-link the customer contact andorder placing from the local supplying depot,thereby enhancing customer retention in theevent of any future restructuring of theoperation. Once the review of the market

was completed, a more fundamentalrestructuring of the business was required andas a result the depot network was reducedfrom 44 to 24 depots, headcount by 80 and1,000 rental machines were removed from thefleet either by transfer to our operations inother countries or by being placed intostorage for disposal. These actions were takento ensure that the business is more closelyaligned to current market conditions.

As a result of this restructure the cost base ofthe German operation has been reduced by£5.25 million per annum, making the businessmore flexible to changing market conditionsand better able to defend market share fromprice-based competition. By removing 1,000rental units, the present over-capacity in themarketplace is partly addressed, thereby layingthe foundation for improved hire rates as theprice control systems, as implemented in theUK in 2004, are rolled out across the Germandepot network in 2005.

Of the 1,000 machines removed from themarket, 300 units have been transferred toFrance, the UK and the Middle East, with theremaining 700 units being placed into storagefor sale into the secondary market over thecoming 12-24 months with priority beinggiven to disposals into markets in which theGroup does not operate.

Revenues for the year declined by 9.6% to£28.3 million (2003: £31.3 million), producingan operating loss prior to exceptional costs


of £3.4 million (2003: £1.9 million). Theexceptional operating costs totalled £4.0million and related to the restructuring ofthe operation and included depot closurecosts, termination of employee contracts,transport and storage of rental machines andthe write-off of the remaining goodwill.After exceptional operating costs, theoperating loss for the year was £7.4 million(2003: £2.2 million). In addition to theexceptional operating costs, non-operatingexceptional costs were incurred totalling£6.5 million relating to provisions madeagainst the rental units identified for disposal,to reflect their expected realisable value.

Whilst our Austrian operation was includedin the overall market review and was to bepart of the restructuring, an offer to acquirethe business was received from a third partyand accepted, with the sale being completedon 25 February 2005. The business was soldfor £2.65 million payable in cash, its netasset value. Revenues for the year were£2.1 million, (2003: £2.0 million), with anoperating loss of £0.3 million (2003: nil).Non-operating exceptional costs of £1.9million were incurred, which representedthe impairment charge required to reducethe net asset value of the business in linewith the agreed sale price.

FranceThe French market showed some signs ofrecovery in 2004 as demand levels startedto increase as the year progressed.

Our own operation reflected this marketrecovery as revenues in the second half ofthe year grew by 15%, to produce a totalrevenue for the year of £5.3 million (2003:£5.0 million), an increase of 6%. Theoperating loss for the year reduced to£0.6 million (2003: £0.7 million).

During the year the standard Group ITplatform was implemented to improveoperational control and managementinformation, and in the second half of theyear we decided to improve our position fora recovery in the market by opening a depotin Rouen and increasing the fleet by 120units, mainly transferred from Germany,bringing the total fleet to 750 units. Whilstthe expansion of the depot network producesa drag on profits in the short term, theincremental revenues earned, once the depotis established, will enable the business as awhole to move towards profitability.

SpainThe growth of the use of powered accessproducts in the Spanish market has beendriven by the expanding construction sectorover the last few years. This growth has beenconcentrated around the major cities, andSpain does not therefore have widespreaddepth and breadth of cross-industry sectordemand that exists in, for example, the UKand France. Consequently the health of thepowered access market is particularly sensitiveto the rate of growth in the constructionsector, which showed early signs of slowing

Operational review continued

S125 Boom lift with a working height of 40 metresassists installation of speakers & lighting at Sports Arena.


during 2004, and is reflected in the declinein our revenues for the year to £3.6 million(2003: £3.7 million). The operating result forthe year was breakeven (2003: profit of£0.2 million).

To mitigate an expected further slowdown inthe construction market we are concentratingour activities in Madrid and Murcia where wehave strong market positions with a relativelystable demand base.

Middle EastOur Middle East business, recorded anotherexcellent trading performance, despite thesuspension of many customers’ projects inSaudi Arabia from the second quarter inlight of a number of terrorist incidents.

Revenues increased by 9% to £7.2 million(2003: £6.6 million), with operating profitsgrowing by 12% to £2.7 million (2003: £2.4million). These improved results were achieveddespite an adverse 8% year on year currencytranslation impact following the continuedweakness of the US dollar.

As we start 2005 there are encouraging signsof a resumption of many of the suspendedactivities in Saudi Arabia and, consequently,we are optimistic of another strongperformance in the year ahead.

SummaryThe past year has clearly been a difficultand disappointing year for the Group.Nevertheless by restructuring our operationsto be further in-line with current marketprospects and strengthening our operationalprocesses to improve customer service, weare well placed to deliver an improvedperformance. It is clear that without ourmany excellent and motivated employeesthe changes that have been made duringthe year would not have been possible,and considerable thanks are due to themfor their dedication and determination.

The year has started off in line with ourexpectations. The measures taken toimprove efficiency in the UK and mitigatethe impact of the poor economicenvironment in Germany should see theoverall Group make progress in 2005.

Kevin AppletonChief Executive7 March 2005

Chandeliers bedecked with gold and silver baublesare safely installed in shopping centres usingNationwide’s articulating boom lifts.

“It is clear that without our many excellent and motivatedemployees the changes that have been made during the year would not have been possible, and considerable thanks are due to them for their dedication and determination.”


Financial review

Trading performanceThe turnover for the Group was stable for theyear at £108 million, with revenue growth inthe UK, France and the Middle East beingoffset by declines in Germany and Spain.

Prior to exceptional costs, the operatingprofits before interest tax, depreciation andamortisation declined to £31.4 million from£35.6 million in the previous year, due to thecombination of reduced operating profits andincreased losses from our main operations.

The Group’s depreciation and amortisationcharge for the year declined marginally to£25.6 million from £26.3 million in 2003, as aresult of currency fluctuations and a smallreduction in the size of the Group’s rentalfleet. As the average age of our rental fleetremains relatively young and still has sufficientcapacity to support anticipated revenuegrowth, the capital expenditure programmefor the year was tightly controlled with only£2.3 million being invested in fixed assets.

Operating profits after charging depreciationand amortisation, but before exceptionalcosts and interest charges, were £5.8 millioncompared to £9.3 million in 2003.

Exceptional operating costs totalling £6.1million were incurred in the year, mainlyrelating to the refinancing of the Group inthe first half of the year and the restructuringof our German operation involving the write-off of goodwill and an extensive depotclosure programme with associated employeetermination costs. In addition to theexceptional operating costs, non-operatingexceptional costs of £8.4 million wereincurred, relating to a provision made againstGerman assets identified for sale togetherwith the write down of the net assets of theAustrian business to the value realised fromits disposal post the year-end.

Interest charges decreased by £0.5 million to£5.8 million for the year, as the Group’s levelof borrowings continued to decline.

Although interest charges decreased, theextent of the decline in operating profits hasmeant that the Group produced a breakevenresult prior to tax and exceptional costs.After exceptional costs, the loss beforetaxation was £14.5 million. With the benefitof a net tax credit of £1.7 million, the lossafter tax was £12.8 million, compared to aprofit in 2003 of £1.2 million.

The loss per share after both tax andexceptional costs was 34.49p compared toearnings of 3.31p in the previous year. Priorto the effects of the exceptional costs, theloss per share was 3.29p against earningsof 4.83p in 2003.

Cash flow and financingThe net operating cash flow of the Groupprior to the impact of exceptional costs,remained strong at £32.0 million, compared to£36.9 million in 2003. After the cash effect ofthe exceptional costs are accounted for, thenet operating cash flow for the year was£29.1 million, against £36.1 million in 2003.

Although the cash inflow from operationsdeclined during the year, a reduced interestcharge, taxation refunds and limited capitalexpenditure, enabled the level of free cash toincrease significantly to £20.9 million from£11.2 million in 2003. Unlike in recent years,currency fluctuations only marginallytempered the effect that this free cash hadon reducing the Group’s level of borrowings,enabling net debt levels to reduce to £89.0million, a substantial decline from the £109.5million reported at the previous year-end.

As the Group’s requirement for capitalexpenditure in 2005 is again minimal, afurther significant decrease in net debtlevels is expected to be produced.

During the year, the Group completed therefinancing of its bank facilities and put inplace new facilities comprising of a €60.0million amortising term loan over five yearsto 30 June 2009, and a £45.0 million multicurrency revolving loan repayable 30 June2009. These facilities continue to be availableand all associated covenants have been met.

Financial riskThroughout the year, the Group’s approach tofinancial risk has remained consistent in itsaim to manage and mitigate the risks thatrelate to fluctuations in interest and foreignexchange rates, and to ensure that thenecessary funds are available to meet theGroup’s ongoing requirements.


The risks are managed to reduce the overalllevel of uncertainty to which the Group isexposed, whilst providing the necessaryflexibility to meet the commercial needsof the business.

Interest rate riskThe Group has exposure to movements ininterest rates on its borrowings. This exposureis managed by a combination of fixed andfloating interest agreements. The mix of shortand long-term fixed interest rate agreementsallows the Group to smooth the impact ofinterest rate fluctuations by allowing somebenefit from rate reductions, whilst offeringsome protection against rate rises.

The fixed interest rate element of borrowingsat the end of the year was 58%, a smallincrease from the previous year, but remainingbroadly in line with the Board’s intention tomaintain an even split between fixed andfloating rate borrowings.

Based on the year-end mix and quantum ofborrowings, a movement in Euro interest baserates of 0.25% would increase or decrease theGroup’s annual interest costs by approximately£70,000, whilst a similar movement in Sterlinginterest base rates would increase or decreaseannual costs by £30,000.

Currency riskThe Group has international operations tradingin local foreign currencies. The fluctuation ofglobal exchange rates, particularly the Euro,can cause currency exposures to the Group’sconsolidated Sterling results.

The Group does not hedge the translationalexposure, believing the cost is notcommensurate with the risk. If the exchangerates prevailing at the year-end had appliedthroughout 2004, the earnings per share

would have decreased by 2.45 pence. Had theexchange rates at the previous year-endapplied throughout 2004, the earnings pershare would have decreased by 1.11 pence.

The Group manages its risk to transactionalcurrency exposures by, if circumstances aredeemed appropriate, taking forward coverwhere significant receipts or payments aredue. The remittance of funds between cross-border entities is minimised to reducetransaction exposure on earnings.

The Group’s aim is to both match itsinvestments with borrowings of the samecurrency, and service these borrowings fromcashflows in the appropriate currency whereavailable. This is managed by maintainingborrowing facilities in both the Group’s maintrading currencies of Sterling and the Euro.

Liquidity riskThe Group aims to achieve a balance betweencertainty of funding and a flexible costeffective borrowing structure. The currentcommitted bank facility, which forms 84% ofthe net indebtedness at the year-end, is notdue to finally mature until 2009, and this issupplemented by hire purchase and leasingcredit lines. To ensure a prudent approach istaken, the Group ensures that there aresufficient funds or credit lines available tosupplement internal cashflow to meet knownobligations in the next twelve months.

TaxationThe Group recorded a tax credit of £1.7 millionfor the year, compared to a charge of £0.9million in 2003.

Both the tax credit and the previous year’scharge reflect estimated liabilities for thecurrent year together with movements indeferred taxation balances, and are the

blended average of the effective tax ratesapplicable in the UK and the overseasoperations.

DividendsDue to the impact that the restructuringcharges have had on the Group’s distributablereserves together with the associated casheffect of this restructuring, the Board hasdecided not to recommend the payment ofa final dividend for 2004.

Going concernThe directors have acknowledged the latestguidance on going concern and have formeda judgment at the time of approving thefinancial statements, having made all relevantenquiries, that it has adequate resources atits disposal to continue its operations forthe foreseeable future.

International FinancialReporting StandardsPreparations for the move to reporting theGroup’s consolidated financial statementsin accordance with International FinancialReporting Standards (IFRS) are underway.The Group is confident that it will be able tomeet the reporting requirements under IFRSfor its Interim Report in 2005.

Alan MerrellGroup Finance Director7 March 2005

“As the Group’s requirement for capital expenditure in 2005 is again minimal, a further significant decrease in net debt levels is expected to be produced.”


Auditable informationThe Remuneration Report has been audited by PricewaterhouseCoopers LLP as required by Schedule 7A to the Companies Act 1985. The sections on pages 11 and 12 disclosing target composition of directors’ performance related pay, directors’ service contracts, and thecompany performance comparative chart are unaudited.

Members of the Remuneration and Nomination CommitteeThe Remuneration and Nomination Committee (the ‘Committee’) comprised the two non-executive directors of the Company, JohnHeywood (Chairman of the Committee) and John Gordon, throughout the year. The terms of reference for the Committee are available on the Lavendon Group website (www.lavendongroup.com).

During 2004, the following parties provided material assistance to the Committee:

• Ashurst: legal advice on negotiation of the revised service contract for the Executive Chairman• Future Focus: executive pension scheme advice• M, M & K Limited: executive directors’ remuneration review• Odgers Ray & Berndtson: non-executive recruitment search

Both the non-executive directors are considered to be independent by the Company and both are members of remuneration committeeswith other companies.

Remuneration policyThe Committee is responsible for determining the remuneration packages of the executive directors of the Group. In doing so, theCommittee ensures that:

i. the Group’s executive directors are appropriately rewarded for their contributions to the Group;ii. account is taken of their individual responsibility and performance;iii. the remuneration packages reflect current market conditions in order to attract, retain and motivate executive directors of a high quality;iv. the Company complies with the Code of Best Practice set out in the Listing Rules of the UK Listing Authority and

the Committee has given full consideration to the Best Practice provisions outlined therein.

Directors’ remunerationThe emoluments of the individual directors were as follows:

Salary Benefits Performance related Total Pension and fees in kind payments remuneration contributions

2004 2003 2004 2003 2004 2003 2004 2003 2004 2003£000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Executive directors:David Price 70 150 4 33 – – 74 183 28 80Kevin Appleton 165 165 14 14 – – 179 179 41 41Alan Merrell 145 145 18 17 30 – 193 162 36 36

380 460 36 64 30 – 446 524 105 157

Non-executive directors:John Gordon 25 25 – – – – 25 25 – –John Heywood 25 25 – – – – 25 25 – –

50 50 – – – – 50 50 – –

Total directors’ emoluments 430 510 36 64 30 – 496 574 105 157

Remuneration report


Amounts shown as salary and fees relate to basic salary in the case of executive directors and fees in the case of non-executive directors.Benefits in kind relate principally to company cars, fuel for private motoring, private health insurance and disability cover.

On 1 January 2004 David Price formally adopted the role of part-time Executive Chairman.

The fees for non-executive directors were last revised on 10 October 2002 at the time that their service contracts were renewed. The Boarddetermined the fees payable with reference to the current market conditions at that time.

The targeted composition for achievement of full performance related pay of each director’s remuneration is as follows:

Non-performance related Performance related

David Price 100% 0%Kevin Appleton 50% 50%Alan Merrell 50% 50%John Gordon 100% 0%John Heywood 100% 0%

In 2003, Kevin Appleton and Alan Merrell, each voluntarily agreed to apply 50% of future post-tax bonuses in acquiring shares in theCompany. This is in accordance with the desire of the Remuneration Committee for executive directors to have a greater equity holding in the Company to increase the alignment of their interests with those of the shareholders.

Both Kevin Appleton and Alan Merrell can earn performance related payments under the Group’s Executive Director’s Bonus Scheme, whichis directly linked to the financial performance of the Group. In 2004 the targets set out in the Executive Directors’ Bonus Scheme were notachieved and consequently no bonus payments were earned.

During the year a discretionary payment of £30,000 was paid to Alan Merrell to recognise the efforts made in completing the refinancing of the Group’s bank facilities.

Directors’ service contractsIn keeping with recommended practices under the Combined Code, Lavendon Group’s policy on executive directors’ service contracts is that no notice period of employment should exceed twelve months duration. Contractual termination payments should not exceed a notice period equivalent of the directors’ service contract at the time of termination.

All of the current directors have service contracts with the Company. Details of these are as follows:

Contract Unexpired Notice Contractual Note date term period termination payments

David Price (i) 10 October 1996 Rolling contract 12 months 12 months current salaryKevin Appleton 1 January 2002 Rolling contract 12 months 12 months current salaryAlan Merrell 26 May 1998 Rolling contract 6 months 6 months current salaryJohn Gordon (ii) 10 October 2002 9 months Fixed term 6 months current salaryJohn Heywood (ii) 10 October 2002 9 months Fixed term 6 months current salary

Notes:(i) David Price was originally employed as Chairman of the Group on 12 December 1992. His current contract commenced on the date of the Company’s Listing

on the London Stock Exchange, and was revised with effect from 1 January 2004 to reflect the move to the role of part-time Executive Chairman.

(ii) John Gordon and John Heywood are serving their third terms of appointment with the Company. Their original contracts commenced on the date of the Company’s Listing on 10 October 1996.


Remuneration reportContinued

Company performance

Share optionsExecutive directors are eligible to participate in the Executive Scheme. In accordance with current best practice the RemunerationCommittee will consider grants on an annual basis subject to an individual limit for executive directors of twice basic salary. Optiongrants will be made only if appropriate considering the interests of the Company and prevailing market practice.

Details of options held by directors and applicable performance conditions are set out in the table below.

The directors exercised no options during the year.

Number Options Options Number Option of shares granted during surrendered of shares Issued price per

1 Jan 2004 the year during the year 31 Dec 2004 capital ordinary share Earliest date Latest dateDate granted Note (no.) (no.) (no.) (no.) (%) (pence) exercisable exercisable

Alan Merrell:27 February 2002 (i) 100,000 – – 100,000 0.27 203.0 27 Feb 2005 27 Feb 201214 October 2003 (ii) 56,410 – – 56,410 0.15 150.0 14 Oct 2006 14 Oct 2010 14 October 2003 (iii) 93,590 – – 93,590 0.25 150.0 14 Oct 2006 14 Oct 2010

250,000 – – 250,000 0.67Kevin Appleton: 27 February 2002 (i) 325,123 – – 325,123 0.88 203.0 27 Feb 2005 27 Feb 2012 14 October 2003 (iii) 200,000 – – 200,000 0.54 150.0 14 Oct 2006 14 Oct 2010

525,123 – – 525,123 1.42

775,123 – – 775,123 2.09

0

100

200

300

400

500

31 Dec 99 31 Dec 00

Lavendon Group – Total Return Index

31 Dec 01 31 Dec 02 31 Dec 03 31 Dec 04

FTSE Small Cap Index – Total Return Index

Valu

e (p

ence

)

Total shareholder return reflects the theoreticalgrowth in value of a shareholding over the periodassuming that gross dividends are reinvested topurchase additional shares at the closing priceapplicable on the ex-dividend date.

Lavendon Group considers the FTSE Small Capindex the most meaningful comparison of historicshare price performance in assessing the Companyagainst an index of similarly sized businesses.

FTSE Small Cap Index shown rebased at 327.1on 1 January 2000.


Notes:(i) The options granted to Alan Merrell and Kevin Appleton on 27 February 2002 were exceptional grants made by deed (all other options have been granted under the terms

of the Executive Scheme). The options will not be exercisable unless growth in earnings per share (“EPS”) exceeds growth in the Retail Price Index (“RPI”) over theperformance period by at least an average of 8 per cent per annum in the case of Alan Merrell’s option and 3 per cent per annum in case of Kevin Appleton’s option. Theoptions will be exercisable in full if growth in EPS exceeds growth in RPI by at least an average of 12 per cent per annum in the case of Alan Merrell’s option, and 6 per centper annum in the case of Kevin Appleton’s option. Each option will be exercisable on a straight-line basis between nil and 100% between the two applicable percentagetargets. The performance target will be measured over an initial period of three financial years and may be achieved in each successive year thereafter provided that theperiod over which the performance target is measured will be extended to include each additional successive year up to the tenth anniversary of grant and the target willalways be measured from the fixed base of the financial year preceding the year of grant.

(ii) The option will not be exercisable unless growth in EPS exceeds growth in RPI over the performance period by an average of 3 per cent per annum. The option will beexercisable in full if annual growth in EPS exceeds growth in RPI by an average of at least 6 per cent. The option will be exercisable on a straight-line basis between nil and100% between the two percentage targets. The performance target will be measured over an initial three-year period and to the extent that it has not been met, will beretested annually over 0-4 years and 0-5 years, measured from the fixed base of the financial year immediately prior to grant. The option will lapse to the extent that the target has not been achieved by the end of the fifth year.

(iii) The options will not be exercisable unless compound growth in EPS over the performance period is at least an average of 20 per cent per annum. The options will be exercisablein full if compound growth in EPS is at least an average of 30 per cent per annum. The options will be exercisable on a straight-line basis between nil and 100% between these two percentage targets. The performance target will be measured over an initial three-year period and, to the extent that it has not been met, will be retested annuallyover 0-4 years and 0-5 years, measured from the fixed base of the financial year immediately prior to grant. The option will lapse to the extent that the target has not beenachieved by the end of the fifth year. If the Company is subject to a change of control prior to the publication of the Annual Report for the year ended 31 December 2005,these options will become exercisable on a straight-line, time-apportioned basis over the period from 31 December 2002. If the exit price on a change of control exceeds theNet Asset Value as disclosed in the latest Annual Report at that date then 100% of these options will vest irrespective of the average growth in EPS at that date.

Performance conditions of executive optionsIt is the Committee’s policy in setting performance conditions for executive options to set challenging targets in producing earnings pershare growth over the medium term that exceeds basic expectations. The three-year performance measurement encourages appropriatesustained growth in earnings and rewards loyal service by executives.

No other directors have been granted options in the shares of the Company.

The market price of the Company’s shares at 31 December 2004 was 112.5p; the range of market prices during the year was between 111.5p and 172.5p.

Long-term incentive schemesNo directors currently participate in long-term incentive schemes other than in share option schemes.

Subject to shareholder approval at the 2005 Annual General Meeting, executive directors will become eligible to participate in theLavendon Group plc Share Matching Plan 2005. The principal terms of the plan (including the performance conditions which are proposedfor the 2005 awards) are set out in the appendix to the Notice of the Annual General Meeting of the Company dated 7 March 2005 onpages 54 and 55 of this document.

The Remuneration Committee will consider grants on an annual basis and awards will only be made if appropriate considering the interestsof the Company and the prevailing market practice.

It is the Remuneration Committee’s policy in setting performance conditions for the Share Matching Plan to set challenging targets overthe medium term. The three year measurement rewards loyal service by executives. For the 2005 awards the Remuneration Committeeintends to use share price as the measure of performance in order to emphasise the importance of increasing shareholder value.

The Remuneration Committee has decided to recommend that executive directors be able to participate in both the executive option planand the Share Matching Plan in the belief that the combination of both plans will align the interests of these directors more closely withthose of shareholders.


Remuneration reportContinued

Directors’ pension entitlementThe Company made pension contributions amounting to £28,000, being 40% of David Price’s basic salary during the year which was paidinto David Price’s personal pension plan.

The Company contributed 25% of Kevin Appleton’s basic salary to an Executive Pension Scheme. The contribution for 2004 totalled £41,250.

The Company contributed 25% of Alan Merrell’s basic salary to an Executive Pension Scheme. The contribution for 2004 totalled £36,250.

Directors’ interestsThe interests of the directors in the ordinary share capital of the Company are shown below:

Beneficial number of shares

31 December 2004 31 December 2003

David Price 2,853,706 3,553,706Kevin Appleton 10,000 10,000Alan Merrell 12,500 12,500John Gordon 52,623 52,623

John Heywood 70,000 70,000

All directors’ interests are beneficially held. On 1 April 2004, David Price sold 700,000 ordinary shares in the Company at a price of 150.0p per share. There has been no change in the directors’ interests in the ordinary share capital of the Company between 31 December 2004 and 7 March 2005.

John HeywoodChairman of the Remuneration and Nomination Committee

7 March 2005


Directors’ report

Your directors present their report and financial statements of the Group for the year ended 31 December 2004.

Principal activitiesThe principal activity of the Group is the rental of powered access equipment. Powered access equipment is used to provide temporaryaerial access for people in a broad range of applications: in industrial repair and maintenance, construction, telecommunications, outsidebroadcasting, sign erection and highway maintenance. These activities are undertaken both in the UK and overseas.

Review of the businessA review of the business, together with an outlook for the future development of the Group, is contained in the Chairman’s Statement andthe Operational and Financial Reviews.

Financial resultsThe financial results for the year are set out in the consolidated profit and loss account on page 28. The consolidated loss for the year of £13,595,000 (2003: £1,346,000) will be transferred from reserves. The position at the end of the year is set out in the consolidated balancesheet on page 29.

DividendThe directors do not recommend a final dividend for the year, consequently the total dividend for the year is 2.25p per ordinary share.

DirectorsThe present directors of the Company are shown on page 19. Information on the directors’ interests in the ordinary shares of theCompany during 2004 is set out in the Remuneration Report on pages 10 to 14.

No director has, or has had, any beneficial interest in any transaction of significance which has been effected by any Group company at any time during the year.

The Company has maintained insurance throughout the year to cover all directors against liabilities in relation to the Company and its subsidiary undertakings.

EmployeesThe Group pursues a policy of employee communication through regular team briefings and newsletters. Personal employee development isencouraged through the structure provided by the Investors in People National Standard. Employee involvement in the financial performance of the Group is encouraged through a comprehensive range of well established profit share programmes. Furthermore, all employees who workover 25 hours per week are eligible for the grant of share options when they achieve two years service with the Group.

It is the policy of the Group that disabled people, whether registered or not, should receive full and fair consideration for all job vacanciesfor which they are suitable applicants. Employees who become disabled during employment will be retained wherever possible andretrained if necessary. The Group is prepared to modify procedures or equipment wherever this is practicable, to allow full use to be madeof an individual’s abilities.

The Board has issued a statement of business operations and culture detailing the Group’s commitment to ensuring that all employeescomply with all applicable laws and regulations, support a culture of honesty and integrity, conduct operations in an ethical andprofessional manner, and act at all times to prevent impropriety, discrimination, bribery and corruption. The Board has also approved theimplementation of independent reporting procedures across the Group’s operations to assist employees in upholding these standards andto further facilitate communications throughout the organisation.

EnvironmentThe Group’s policy is to harmonise its business operations with environmental best practice to minimise its impact on both its social andnatural surroundings, where this is operationally feasible. This practice is embodied within the Group’s Quality accreditation and Healthand Safety Policies and compliance is monitored by field based Systems auditors. As part of this process, maintenance of the rental fleetis of a high and regular standard to minimise noise and emission pollution. Consumable recycling and waste disposal are undertakendiligently and fuel oils are stored safely.


Directors’ reportContinued

Fixed assetsDuring the year the Group’s total capital expenditure on tangible fixed assets amounted to £2,317,000. Details of this expenditure,and all other fixed asset movements, are set out in notes 15, 16 and 17 to these financial statements.

Issue of share capitalBy resolutions passed on 6 May 2004 the directors were:

i. generally and unconditionally authorised for the purposes of Section 80 of the Companies Act 1985 (the ‘Act’) to exercise all the powers of the Company to allot relevant securities up to an aggregate nominal amount of £123,344 and

ii. empowered, pursuant to Section 95 of the Act, to allot shares for cash up to an aggregate nominal amount of £18,501 (being 5 per centof the Company’s issued share capital at that time) as if Section 89 of the Act did not apply with regard to pre-emption rights.

These authorities expire at the conclusion of the Annual General Meeting, and your directors propose that renewal should be sought. Suchproposals are set out as resolutions 6 and 7 in the Notice of the Annual General Meeting on page 51. Details of any movements in sharecapital during the year are set out in note 24 to these financial statements.

Share option schemesThe Company established two share option schemes on admission of its ordinary shares to the Official List of the London Stock Exchangeon 10 October 1996, namely:

i. the Lavendon Group 1996 Company Share Option Plan (the ‘Employee Scheme’); andii. the Lavendon Group 1996 Unapproved Executive Share Option Scheme (the ‘Executive Scheme’).

Options are normally granted under the terms of the schemes on the day following the announcement of the Group’s interim and annualfinancial results each year at an option price equal to the mid-market quoted share price derived from the London Stock Exchange DailyOfficial List at the close of trading on the preceding day.

The value of options granted to any individual during the year is subject to an individual limit such that the aggregate exercise price of alloptions granted during the year cannot exceed 200 per cent of basic annual salary in the case of a director, or 100 per cent in case of anyother employee.

Options are granted subject to the following performance targets:

The Executive Scheme:An option will not be exercisable unless growth in Earnings Per Share (“EPS”) exceeds growth in the Retail Price Index (“RPI”) over theperformance period by an average of 3 per cent per annum. The option will be exercisable in full if growth in EPS exceeds growth in RPI by an average of at least 6 per cent per annum. The option will be exercisable on a straight line basis between these two percentage levels.

The Employee Scheme:An option will be exercisable in full if growth in EPS exceeds growth in RPI over the performance period by an average of at least 3 per cent per annum.

All performance targets are measured over an initial three year period and to the extent that they are not met, will be retested. In the caseof an option granted in the period to 31 August 2003 the target may be achieved on a three-year rolling basis up to the tenth anniversary of grant in the case of the Employee Scheme, and the seventh anniversary in the case of the Executive Scheme. Any options granted afterthis date will be capable of being retested annually over 0-4 years and 0-5 years, provided that the target will always be measured from thefixed base of the financial year immediately prior to grant and the option will lapse to the extent that the target has not been achieved by the end of the fifth year.


Details of options granted to executive directors are disclosed separately in the Remuneration Report on pages 10 to 14.

Details of all other share options granted to date under the terms of the schemes are shown below:

Ordinary Option Options Options Options not Optionsshare options Issued price per exercised since lapsed since exercisable at exercisable at

granted capital ordinary share date of grant date of grant 31 Dec 2004 31 Dec 2004Date granted Note (no.) (%) (pence) (no.) (no.) (no.) (no.)

i. The Employee Scheme:11 October 1996 121,370 0.33 140.5 74,973 36,101 – 10,296 27 March 1997 10,256 0.03 236.5 3,994 3,555 – 2,707 2 September 1997 23,302 0.06 242.5 10,078 8,128 – 5,09616 March 1998 21,216 0.06 381.5 2,931 17,475 – 810 24 August 1998 25,732 0.07 407.5 – 22,592 – 3,140 16 March 1999 (1) 37,220 0.10 329.5 – 34,981 2,239 –24 August 1999 (1) 33,454 0.09 407.5 – 31,159 2,295 –9 March 2000 (1) 44,270 0.12 410.5 – 40,957 3,313 –15 August 2000 (1) 30,832 0.08 463.5 – 27,212 3,620 –14 March 2001 (1) 41,584 0.11 510.0 – 34,022 7,562 –6 September 2001 (1) 86,055 0.23 208.5 – 41,338 44,717 –26 February 2002 114,114 0.31 203.0 – 42,045 72,069 –5 September 2002 227,392 0.61 127.5 – 99,566 127,826 –5 March 2003 287,038 0.78 90.0 – 86,990 200,048 –5 September 2003 185,304 0.50 136.0 – 49,176 136,128 –14 October 2003 46,963 0.13 150.0 – 5,172 41,791 –3 March 2004 137,237 0.37 160.0 – 20,679 116,558 –8 September 2004 244,194 0.66 120.0 – 2,375 241,819 –

1,717,533 4.64 91,976 603,523 999,985 22,049

ii. The Executive Scheme:11 October 1996 – 14 March 2001 (2) 700,324 1.89 140.5-510.0 61,489 638,835 – –26 February 2002 167,375 0.45 203.0 – 57,244 110,131 – 5 September 2002 25,000 0.07 127.5 – – 25,000 –5 September 2003 65,000 0.18 136.0 – 25,000 40,000 –14 October 2003 114,739 0.31 150.0 – – 114,739 –3 March 2004 157,623 0.42 160.0 – – 157,623 –8 September 2004 50,000 0.14 120.0 – – 50,000 –

1,280,061 3.46 61,489 721,079 497,493 –

Note:(1) Options granted under the terms of the Employee Scheme in the period March 1999 to September 2001 inclusive have not achieved the required performance criteria to

31 December 2004 and remain unexercisable at this date.

(2) Options granted under the terms of the Executive Scheme between 11 October 1996 and 14 March 2001 have been fully exercised or lapsed at 31 December 2004.

Substantial shareholdingsAt 28 February 2005 the following interests in the ordinary share capital of the Company had been notified:

Name % interest

M&G Investment Management Limited 14.98Cycladic Capital Management Limited 12.93Goldman Sachs International 8.97

The directors are not aware of any changes in these substantial shareholdings up to 7 March 2005.

The interests of the directors in the ordinary share capital of the Company are set out in the Remuneration Report on pages 10 to 14.


Directors’ reportContinued

Charitable donationsCharitable donations amounting to £6,479 (2003: £6,298) were made during the year. There were no donations to political parties duringthe year.

Post balance sheet eventOn 25 February 2005 the Group disposed of its Austrian subsidiary. Details of the sale are given in note 30.

Policy on payment of suppliersThe Company’s creditor payment period at 31 December 2004 was Nil days (2003: Nil) as the Company had no trading activities.

AuditorsA resolution to reappoint our auditors, PricewaterhouseCoopers LLP, will be proposed at the Annual General Meeting, including authorityfor the directors to fix their remuneration.

By order of the Board

Alan MerrellSecretary

7 March 2005

Statement of directors’ responsibilities

The directors are required by the Companies Act 1985 to prepare financial statements for each financial year which give a true and fair viewof the state of affairs of the Company and the Group as at the end of the financial year and of the Group’s profit or loss for that period.

The directors are also responsible for ensuring the keeping of proper accounting records which disclose with reasonable accuracy thefinancial position of the Company and the Group, and they have a general responsibility to safeguard the assets of the Company and theGroup, and to prevent and detect fraud and other irregularities.

The directors confirm that suitable accounting policies, consistently applied and supported by reasonable and prudent judgements andestimates, have been used in the preparation of the financial statements, and that applicable accounting standards have been followed.

The directors have acknowledged the latest guidance on going concern and have formed a judgement at the time of approving thefinancial statements, having made all relevant enquiries, that the Group has adequate resources at its disposal to continue its operationsfor the foreseeable future.


Alan MerrellSecretary

7 March 2005


Directors and advisers

DirectorsDavid Price, aged 59, ChairmanDavid Price has been Chairman of the Group since it was established in 1992 and until January 2002 also held the role of Chief Executive.Prior to establishing Lavendon he held various senior management positions, both in the UK and overseas, with GKN plc. In particular,in 1986 he became Chairman and Chief Executive of the building services division of GKN plc where he established powered accessbusinesses in Australia, USA and the UK. His role as Executive Chairman became part-time with effect from January 2004.

Kevin Appleton, aged 44, Chief ExecutiveKevin Appleton was appointed Chief Executive to the Group in January 2002. He has spent most of his senior management career withinthe international logistics and materials handling industry. Most recently he was the Managing Director for the European business ofDexion Group Limited.

Alan Merrell, aged 44, Group Finance DirectorAlan Merrell has been Group Finance Director since May 1998. He qualified as a Chartered Accountant in 1984. Prior to joining the Grouphe had spent the previous 12 years in the transportation industry with TNT Post Group where he held a number of financial roles, both inthe UK and overseas, before becoming Finance Director for its international business operation.

John Gordon, aged 65, Senior Non-Executive Director, Chairman of Audit Committee, member of Remuneration and Nomination CommitteeJohn Gordon qualified as a Chartered Accountant in 1965 before commencing a career in corporate finance in the City which culminated inhis being Head of Corporate Finance at Capel-Cure Myers and then at Beeson Gregory Limited before his retirement in March 1996. He iscurrently non-executive Chairman of UCM Group plc and Epic Group plc. He is also a non-executive director of Alizyme plc and ImprintSearch and Selection plc where he also serves as Chairman of both the Remuneration and Audit Committees at both companies.

John Heywood, aged 67, Non-Executive Director, Chairman of Remuneration and Nomination Committee, member of Audit CommitteeJohn Heywood was formerly Managing Director of Jardine Matheson and Company Limited and a director of various public and privatecompanies in the Far East, Middle East, South Africa and the USA. He is also a non-executive director of F&C Asset Management plc,where he also serves on the Remuneration and Audit Committees.

Secretary and Registered OfficeAlan Merrell, 1 Midland Court, Central Park, Lutterworth, Leicestershire LE17 4PN

Advisers

AuditorsPricewaterhouseCoopers LLP, Cornwall Court, 19 Cornwall Street, Birmingham B3 2DT

Solicitors Ashurst, Broadwalk House, 5 Appold Street, London EC2A 2HA

BankersBank of Scotland, 1 Bede Island Road, Bede Island Business Park, Leicester LE2 7EA

StockbrokersEvolution Securities Limited, 100 Wood Street, London EC2V 7AN

RegistrarsCapita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU

Public RelationsWeber Shandwick Square Mile, Fox Court, 14 Grays Inn Road, London WC1X 8WS


Corporate governance

Statement of appliance of corporate governance policies and the combined codeThe directors believe as a Board that their principal function is to deliver sustainable wealth to the Group’s investors, and that this shouldbe achieved within the acknowledged corporate governance guidelines. The directors confirm that they have continued to ensure that theGroup applies and maintains the principles of good corporate governance, in so far as is practicable and appropriate for a public companyof this size.

The directors have set out below the means by which they apply current best practice corporate governance procedures within the Groupand the extent of that compliance with the Listing Rules of the UK Listing Authority (12.43A) relating to the provisions of the Principles ofGood Governance and Code of Best Practice (the ‘Combined Code’ – as revised in 2003).

In particular, during their review, the directors have acknowledged the latest guidance on going concern and have formed a judgement at the time of approving the financial statements, having made all relevant enquiries, that the Group has adequate resources at its disposalto continue its operations for the foreseeable future.

A DirectorsA1 The Board

The Board of directors currently comprises three executive and two non-executive directors all of whom served a full year in officeduring 2004. The responsibilities of each director and the identity of the senior non-executive director are detailed on page 19 of thefinancial statements.

1.1 The members currently comprising the Board provide the Group with a range of industry, financial and commercial knowledge andexperience. This combination of skills and interests facilitates the Board in formulating the decisions and strategies which the Groupadopts and ensures that all directors are able to make a significant and individual contribution to all such matters. Biographical details ofeach director, including current directorships held in other non-Group companies, are detailed on page 19 of the financial statements.

The Company maintains a schedule of matters reserved for decisions by the full Board which incorporates release of a number ofcorporate and statutory disclosures (including the Annual Report itself), approval of major operating strategies, composition of relevantCommittees and management structures, and policies relating to ethical, health and safety matters.

The directors provide effective leadership and control of the Group by means of regular Board meetings throughout the year. Relevantpapers are circulated to all members of the Board on a timely basis and in advance of each meeting and the quantity and focus of suchinformation is reviewed on an ongoing basis. Directors provide feedback to management to continually enhance reporting formats andcontent of Board papers and, in addition, make individual enquiries of management wherever necessary to ensure that they are in receiptof all relevant information to allow the appropriate decisions to be made with regard to Group matters. The Chairman also holds strategyand review meetings with the executive directors at other intervals throughout the year.

The Group appoints employees in key executive positions throughout the business to provide strong management teams in its maincountries of trade. These management teams comprise both local directors and senior management whose aim is to deliver expectedfinancial performance and to develop and implement both operational and non-operational improvements within their businesses.These management teams report directly to executive Board directors and a formal Group Executive Committee meets on a regularbasis to receive the key reports from each country of operation and each business functional unit. This facilitates the day-to-daymanagement of the subsidiaries concerned by supporting a devolved process of decision-making which in turn allows the GroupBoard to focus resources more efficiently within the Group.

1.2 The Chairman, David Price, reduced his previous full-time commitment in assuming the position of part-time Executive Chairmanfrom 1 January 2004. Kevin Appleton holds the position of Chief Executive Officer.

John Gordon has been designated the Senior Independent Director

The Remuneration and Nomination Committee comprises the two non-executive directors and its remit includes the responsibilityrelating to decisions of nominating and appointing new directors. John Heywood is the Chairman of the Remuneration andNomination Committee.


The Audit Committee comprises the two non-executive directors and its remit includes the responsibility relating to appointment ofauditors, policy on procurement of other non-audit services and internal monitoring and reporting procedures. John Gordon is theChairman of the Audit Committee.

During 2004, the Board held 8 formal meetings. The attendance of each director at these meetings is shown in the table below:

Director K A Appleton J E Gordon J A Heywood A S Merrell D L Price

Attended in person 8 8 8 8 8Apologies given – – – – –

1.3 The Chairman is given the opportunity to meet at least annually with the non-executives separately from the other directors in orderto review the contributions and performance of all individuals comprising the Board. Further details of this process are given in A.6.1below. This process was approved during 2004 and a formal review of the Board’s performance has been undertaken.

1.4 Minutes of Board meetings are agreed by all directors ensuring that the Company maintains appropriate records of all relevant matters.

1.5 The Company reviews conduct and liability issues as part of its annual risk review and mitigates these exposures where possible.

A2 Segregation of duties2.1 The Board has a part-time Executive Chairman and a Chief Executive Officer enabling separation of the appropriate shareholder

interests from the day-to-day operational requirements of the business. Each has clear lines of responsibilities and reporting whichhave been agreed by the Board.

2.2 The incumbent Chairman was appointed directly to this role in 1996 at the time of the Company’s flotation.

A3 Board balance and independence3.1 The two non-executive directors constitute in excess of one third of the total Board members. The non-executive directors are

considered to provide a strong and independent monitor on the performance of both the Group and its executive management,thereby performing an essential role in safeguarding investors’ interests.

3.2 The Board believes that both non-executive directors are independent within the guidance of the Combined Code as they have noconflicting business interests with the Group, they are remunerated on a fixed salary basis only and have adequate and unfetteredaccess to consultation with internal management and with professional external advisors to the Group. Their backgrounds in industryand finance make them suitably qualified to provide sufficient input and guidance to adequately perform their required duties, both tothe Board, and as members of both the Audit, and Remuneration and Nomination Committees.

3.3 Significant shareholders in the Company are offered the opportunity to meet with the senior independent director of the Companyannually at which time any concerns may be raised separately from the other Board directors. In addition, both the non-executivedirectors ensure that they are available for questions from individual shareholders on the day of the Annual General Meeting.

A4 Appointments to the Board4.1 The Remuneration and Nomination Committee comprises the two non-executive directors of the Company and has written terms of

reference. These terms of reference are published for information purposes on the Group’s website (www.lavendongroup.com). BothCommittee members are considered to be independent.

During 2004, the Remuneration and Nomination Committee held 2 formal meetings. The attendance of each director at thesemeetings is shown in the table below:

Director J E Gordon J A Heywood

Attended in person 2 2Apologies given – –


Corporate governanceContinued

4.2 The incumbent non-executive directors currently hold appointments for a term period of three years ending on 9 October 2005.This is the second reappointment under three-year contracts of both directors following their initial appointments by the Board on 10October 1996. Fees for the non-executives are determined by the Board. The reappointment or rotation of non-executive directors isaddressed after giving due consideration to their qualifications, continuing independence, and willingness to accept reappointment.

As the current non-executive directors will have each completed nine years continuous service during 2005, the NominationCommittee has recommended that the Board develop succession plans for when the non-executive directors reach the end of theirthird term of appointment on 9 October 2005. The Board has accepted the Committee’s recommendation and has appointed anindependent executive recruitment agency to commence the search for two replacement non-executive directors.

4.3 The Chairman currently holds no other roles which are considered to impair or conflict with his abilities to serve the Company appropriately.

4.4 The terms and conditions of appointment of the non-executives are available for inspection at the Company’s registered office andduring the Company’s Annual General Meeting each year.

4.5 The work of the Nomination Committee is detailed in a separate Remuneration Report on pages 10 to 14 of the financial statements.

A5 Information and professional development5.1 The Group has agreed procedures for the directors to take any professional independent or individual advice as may be necessary in

carrying out their duties. New directors are offered training and advice tailored to their needs upon appointment to the Board and alldirectors have continuing access to such support as and when it is required.

5.2 The joint role of Finance Director and Company Secretary, held by Alan Merrell, ensures that the directors have ready access to theCompany Secretary in all relevant matters and that compliance with Board procedures is maintained.

A6 Performance evaluation6.1 Following the recommendations introduced in the Revised Combined Code the Board has completed an evaluation for 2004 of the

performance of the Board, its Committees and each director. The directors completed detailed appraisals on matters relevant to theBoard, its Committees and director performance. A report was presented to and reviewed by the Board and various action plans arebeing developed in response to its recommendations. The Board intends to carry out further performance evaluations on an annual basis.

A7 Re-election7.1 In accordance with the Articles of the Company a maximum of one third of the directors offer themselves for re-election each year

subject that each director shall stand for re-election within a time period not exceeding three years from the date of their previous re-election. This year Kevin Appleton retires by rotation and will seek re-election. Biographical details and the Annual General Meetingparticulars are detailed on page 19 and on pages 51, 52 and 53 of the financial statements respectively.

7.2 No non-executive directors retire by rotation at the Annual General Meeting in 2005.

B RemunerationThe Remuneration Committee considers it is currently complying in full with the relevant provisions of the Combined Code and outlinesits procedures and guidelines in a separate Remuneration Report on pages 10 to 14 of the financial statements. Details of the directors’remuneration and interests in shares during 2004 are included within this Report. In addition the Committee, in line with considered bestpractice, will invite the members of the Company to vote on the Remuneration Report at the Company’s Annual General Meeting on28 April 2005, details of which are given on pages 51, 52 and 53 of the financial statements respectively.

C Accountability and auditC1 Financial reporting1.1 The directors and auditors set out their respective responsibilities for preparing and reviewing the accounts in the Statement of

directors’ responsibilities on page 18 and in the Independent auditors’ report on page 27 of the financial statements respectively.


1.2 The directors have acknowledged the latest guidance on going concern and have formed a judgement at the time of approving thefinancial statements, having made all relevant enquiries, that the Group has adequate resources at its disposal to continue itsoperations for the foreseeable future.

C2 Internal control2.1 The directors operate a system of internal controls within the Group that exist to minimise or control business risks in order to

safeguard investors’ interests. The Board has overall responsibility for ensuring that the Group maintains a system of internal controlsthat will provide them with reasonable, but not absolute, assurance of the reliability of the financial information used within thebusiness and for external publication, as well as safeguarding the assets of the Group against unauthorised use or disposition.

Although no system of internal controls can provide absolute assurance against material misstatement, loss or mismanagement of theGroup’s assets, the systems in place are designed to identify to the directors matters which require attention on a timely basis so thatthey may be considered and dealt with appropriately.

The directors have considered the systems of internal control in operation during the past financial year and are able to report theirfindings under the following headings:

Control environmentThere is a clearly defined organisational structure that allows the Group’s objectives to be planned, communicated, executed, controlledand monitored. The Group is committed to employing suitably qualified staff so that the appropriate level of authority can bedelegated to ensure the efficient management of the business. The main UK operating subsidiary was accredited with the Investors inPeople award in June 1996 in recognition of its achievements in supporting a culture of ability and progression for its staff. Duringreview in 2004 the appropriate body has recommended that this accreditation be renewed.

Identification and evaluation of business risks and control objectivesThe identification and evaluation of financial business risks facing the Group are reviewed and approved at Board level as part of thedevelopment of the annual operating and budgetary plans. For other non-financial business risks the Board meets annually to formallyconsider and review the extent and nature of the major perceived risks to the business and the effectiveness of its internal controls insafeguarding against these risks. In addition, appropriate control policies are continually monitored and developed to manage any newareas of risk identified. These policies are communicated and enforced throughout all appropriate areas of the organisation.

Information systemsThe management information systems provide the business with relevant and timely reports from which both the directors and seniormanagement can monitor the performance of the business. Budgets and prior year data provide the directors and senior managementwith comparative information on which to assess and monitor the performance of the various activities of the Group. Operationalperformance statistics are reviewed against a range of measures including competitive benchmarks, trends or historical data, andacceptable tolerance levels. The Group has continued to invest substantially in developing and enhancing these information systems.During 2004 the French operation successfully implemented the standard Group information reporting software.

Main control proceduresThe directors and senior management implement the control objectives of the Group through the adoption of defined controls andprocedures. These controls have been embedded throughout the organisation and have been recognised with the ISO EN 9002 Qualityaccreditation of Nationwide Access Limited in May 1995 and ISO EN 9002 Quality accreditation in the United Arab Emirates in 2001.Existing controls include the review of financial information, the setting of appropriate authority levels, the segregation of duties andthe defining of procedures for seeking and obtaining approval for major transactions and organisational changes, in addition tocompliance with operational best practices and compatibility with current legislation.

MonitoringThe executive directors have a significant involvement in the day-to-day management of the Group’s activities and are, therefore, ableto monitor the control procedures at an operational and financial level. A Group Executive Committee comprising two executivedirectors and direct reports from the major operating subsidiaries and business functional units within the Group also meets regularlyto ensure the efficient communication and control of information and processes.


Corporate governanceContinued

In addition to the monitoring of controls by the executive directors, any reportable weaknesses identified by the Group’s externalauditors during the annual audit are discussed with the Audit Committee, and reports are circulated to the relevant executive directors.

C3 Audit Committee and Auditors3.1 The Audit Committee comprises the two independent non-executive directors of the Company and has written terms of reference.

These terms of reference are published for information purposes on the Group’s website (www.lavendongroup.com).

During 2004 the Audit Committee held three formal meetings. The attendance of each director at these meetings (and the occasions atwhich the Group external auditors were invited to attend) is shown in the table below:

Group externalDirector J E Gordon J A Heywood auditors

Attended in person 3 3 2Apologies given – – –

The Audit Committee considers it is currently complying in full with the relevant provisions of the Combined Code and outlines itsprocedures and guidelines in a separate Report of the Audit Committee on page 26 of the financial statements. Details of theCommittee’s responsibility relating to appointment of auditors, procurement of other non-audit services, and internal monitoring andreporting procedures are included in this report.

D Relations with shareholdersD1 Dialogue with institutional shareholders1.1 The Board recognises the benefits of maintaining a regular dialogue with institutional investors to improve the mutual understanding

of the aspirations and objectives of both the Group and investors. The directors hold a series of meetings with institutional investorsafter the publication of the Group’s annual and interim financial results each year and also host ad-hoc site visits during the year forboth existing and prospective investors to enhance their knowledge of the Group’s financial and non-financial aims and operations.Each major investor is offered the opportunity to meet with the senior independent director annually.

1.2 The Board retains a Stockbroker to ensure a regular flow of relevant information is made available to both current and prospectiveinvestors and to facilitate investor feedback to assist the Board in understanding the issues and concerns of the major shareholders.

D2 The Annual General Meeting and shareholder communicationsThe majority of the Company’s share capital continues to be held by institutional investors. With regard to the smaller private investorholdings, the Company does not include a formal Group presentation at the Annual General Meeting.

The Company maintains a website: www.lavendongroup.com, which publishes financial results, formal announcements, and a numberof corporate governance documents and information for review by current and potential investors. A financial adviser is retained bythe Company to provide ready access to any specialist advice or assistance that may be appropriate.


Analysis of shareholders at 31 DecemberNumber of shareholders Number of shares held

2004 2003 2004 2003No. No. No. ‘000 No. ‘000

Number of shares held:<5,000 1,127 1,325 1,432 1,7245,001 to 50,000 166 222 2,473 3,202>50,000 68 90 33,098 32,077

1,361 1,637 37,003 37,003

2.1 The directors announce the proxy vote on the respective resolutions at the Annual General Meeting for enhanced shareholderinformation. Proxy voting numbers are announced following the show of hands for each resolution.

2.2 It continues to be the Company’s policy that Annual General Meeting resolution proposals remain segregated when voting issues aresubstantially separate issues. In particular a separate resolution relating to the annual report and accounts will continue to be included.Details of the Annual General Meeting date, venue and the agenda are available on pages 51, 52 and 53.

2.3 The Company believes that private investors gain a benefit from having the full Board, including the Chairmen of the Audit, andRemuneration and Nomination Committees, available at the Annual General Meeting to answer individual questions or concerns aboutthe Group’s performance and strategy and allows time for such communications.

Statement of compliance with the combined code under listing rule 12.43AIn accordance with the guidance of the UK Listing Authority, the Board has reviewed its internal control procedures formally within theCombined Code.

The directors believe that the Company is complying with all current areas of best practice as detailed in the Combined Code.

During 2003 the Company reported non-compliance with the original Combined Code having an Audit Committee of only two independentnon-executive directors. The Revised Combined Code no longer advocates a third independent member of the Audit Committee for smallcompanies and the Company is therefore in compliance with C.3.1 of the Revised Combined Code throughout 2004.


Report of the Audit Committee

Members and qualifications of the Audit CommitteeThe Audit Committee comprises the two independent non-executive directors. The Group believes that the existing Audit Committee has the necessary accounting knowledge and resources to fulfil its duties competently. The Chairman of the Committee is a CharteredAccountant and both non-executive directors are members of audit committees with other companies.

Terms of referenceThe Audit Committee has written terms of reference which are published for information purposes on the Company website(www.lavendongroup.com).

The Committee’s role and responsibilities include the following:• Monitor and review significant issues raised by the auditors relating to the financial statements, and review the Group’s accounting

policies annually to comply with best practice.• Review the need for a formal internal audit function and make recommendations thereon.• Monitor the continuing independence of the external auditors and make appropriate policy and recommendations to the Board.• Approve the level of audit related fees and determine and communicate policy to the Board relating to procurement of non-audit

related assignments from external auditors.

In addition the Board as a whole formally reviews the Group’s perceived risks and internal control procedures annually and makesrecommendations on future policy.

Performance of the Audit CommitteeThe Committee had direct contact with the Group’s external auditors at two formal meetings during the year where the interim andannual financial statements were reviewed and an assessment of the scope, strategy and findings of the external audit made. At thesemeetings these findings were reviewed and appropriate actions taken, and the Audit Committee also confirmed with the external auditorsthat they had received all necessary information for completion of their assignment.

The Committee formally approved the accounting policies used within the Group’s financial statements as part of an annual review and hadaccess to discuss appropriate accounting policies or other related issues with the Group’s external auditors.

During 2004 the Audit Committee reviewed the Group’s arrangements concerning the ability of employees to raise genuine mattersof impropriety or concern. The Committee recommended a policy statement to be issued with the support of the Board highlighting thisissue to employees and outlining the reporting procedures through which employee concerns can be raised. The Committee has alsoimplemented a formal reporting structure with lines of communication and procedures to provide feedback to all employees of mattersraised and actions taken.

The Committee reviewed the need for an internal audit function within the Group. At present the Committee believes that a specificfinancial internal audit function is unnecessary and not cost effective as reliance can be adequately placed on:• the review of detailed daily and monthly financial information by management;• the existence of an internal Health & Safety and Quality audit function;• the absence of any significant issues being reported by the external auditors.

During 2004 PricewaterhouseCoopers LLP formally confirmed their independence and willingness to continue as auditors to the Group. The Audit Committee has a formal policy relating to the procurement of non-audit related work from the Group’s external auditors. This policy is reviewed annually and following this review the Committee believes that the appointment of PricewaterhouseCoopers LLP to conduct the 2004 year-end audit was appropriate.

Auditable informationPricewaterhouseCoopers LLP have not audited the Report of the Audit Committee.

John GordonChairman of the Audit Committee

7 March 2005


Independent auditors’ reportto the members of Lavendon Group plc

Independent auditors’ report to the members of Lavendon Group plcWe have audited the financial statements, which comprise the consolidated profit and loss account, the balance sheets, the consolidatedcash flow statement, the statement of total recognised gains and losses and the related notes. We have also audited the disclosuresrequired by Part 3 of Schedule 7A of the Companies Act 1985 contained in the directors’ Remuneration Report (“the auditable part”).

Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the Annual Report, the directors’ Remuneration Report and the financial statements in accordancewith applicable United Kingdom law and accounting standards are set out in the statement of directors’ responsibilities.

Our responsibility is to audit the financial statements and the auditable part of the directors’ Remuneration Report in accordance with relevantlegal and regulatory requirements and United Kingdom Auditing Standards issued by the Auditing Practices Board. This report, including theopinion, has been prepared for and only for the Company’s members as a body in accordance with Section 235 of the Companies Act 1985and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person towhom this report is shown or in to whose hands it may come save where expressly agreed by our prior consent in writing.

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements andthe auditable part of the director’s Remuneration Report have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors’ Report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if informationspecified by law regarding directors’ remuneration and transactions is not disclosed.

We read the other information contained in the Annual Report and consider the implications for our report if we become aware of anyapparent misstatements or material inconsistencies with the financial statements. The other information comprises only the Directors’Report, the unaudited part of the directors’ Remuneration Report, the Report of the Audit Committee, the Chairman’s Statement, theOperational and Financial Reviews, the Corporate Governance Statement, the Financial Highlights and the Five Year Financial History.

We review whether the Corporate Governance Statement reflects the Company’s compliance with the nine provisions of the 2003 FRCCombined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are notrequired to consider whether the Board’s statements on internal control cover all risks and controls, or to form an opinion on theeffectiveness of the Group’s corporate governance procedures or its risk and control procedures.

Basis of audit opinionWe conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination,on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the auditable part of the directors’Remuneration Report. It also includes an assessment of the significant estimates and judgements made by the directors in the preparationof the financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently appliedand adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order toprovide us with sufficient evidence to give reasonable assurance that the financial statements and the auditable part of the directors’Remuneration Report are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinionwe also evaluated the overall adequacy of the presentation of information in the financial statements.

OpinionIn our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 December 2004and of the loss and cash flows of the Group for the year then ended, have been properly prepared in accordance with the Companies Act1985, and those parts of the directors’ Remuneration Report required by Part 3 of Schedule 7A to the Companies Act 1985 have beenproperly prepared in accordance with the Companies Act 1985.

PricewaterhouseCoopers LLPChartered Accountants and Registered AuditorsBirmingham

7 March 2005


Consolidated profit and loss accountFor the year ended 31 December 2004

2004 2003

Exceptional Exceptional Ordinary costs Ordinary costsactivities (note 4) Total activities (note 4) Total

Notes £000 £000 £000 £000 £000 £000

Turnover 2 108,013 – 108,013 107,778 – 107,778 Cost of sales (63,946) – (63,946) (62,003) – (62,003)

Gross profit 44,067 – 44,067 45,775 – 45,775 Operating expenses 3 (38,266) (6,148) (44,414) (36,456) (848) (37,304)

Operating profit/(loss) 2,5 5,801 (6,148) (347) 9,319 (848) 8,471 Non-operating expenses – (8,366) (8,366) – – –Investment income 9 30 – 30 51 – 51

Profit/(loss) before interest 5,831 (14,514) (8,683) 9,370 (848) 8,522 Interest payable 10 (5,810) – (5,810) (6,357) – (6,357)

Profit/(loss) before taxation 21 (14,514) (14,493) 3,013 (848) 2,165 Taxation on profit/(loss) 11 (1,237) 2,968 1,731 (1,226) 287 (939)

(Loss)/profit after taxation (1,216) (11,546) (12,762) 1,787 (561) 1,226 Dividends 13 (833) – (833) (2,572) – (2,572)

(Loss) for the year 25 (2,049) (11,546) (13,595) (785) (561) (1,346)

(Loss)/earnings per ordinary share– basic 12 (3.29) (31.20) (34.49) 4.83 (1.52) 3.31p– diluted 12 (3.29) (31.20) (34.49) 4.83 (1.52) 3.31p

Statement of total recognised gains and losses(Loss)/profit after taxation (12,762) 1,226 Currency translation differences (841) 262

Total (loss)/gains since the last annual report (13,603) 1,488

There is no difference between the profit/(loss) on ordinary activities before taxation and the loss for the year as stated above, and theirhistorical cost equivalents.

All of the Group’s trading activities relate to continuing operations for the year.


Consolidated and parent company balance sheetsAt 31 December 2004

The Group The Company

2004 2003 2004 2003Notes £000 £000 £000 £000

Fixed assetsIntangible assets 15 119 833 – –Tangible assets 16 167,256 200,051 – –Other investments 17 – – 197,191 201,627

167,375 200,884 197,191 201,627Current assetsStocks 18 873 970 – –Debtors 19 26,024 27,730 30,184 132,126Cash at bank and in hand 7,534 4,038 125 119

34,431 32,738 30,309 132,245Creditors – amounts falling due within one year 20 (32,705) (27,812) (22,686) (120,412)

Net current assets 1,726 4,926 7,623 11,833

Total assets less current liabilities 169,101 205,810 204,814 213,460

Creditors – amounts falling due after more than one year 21 (80,870) (101,335) (70,052) (79,045)Provisions for liabilities and charges 23 (12,831) (14,639) – –

Net assets 75,400 89,836 134,762 134,415

Capital and reservesCalled up share capital 24 370 370 370 370Share premium account 25 70,412 70,412 70,412 70,412Capital redemption reserve 25 4 4 4 4Profit and loss account – distributable reserves 25 4,614 19,050 5,441 5,094

– non-distributable reserves 25 – – 58,535 58,535

Equity shareholders' funds 26 75,400 89,836 134,762 134,415

The financial statements on pages 28 to 49 were approved by the Board of Directors on 7 March 2005 and were signed on its behalf by:

David Price Alan MerrellChairman Finance Director


Consolidated cash flow statementFor the year ended 31 December 2004

2004 2003Notes £000 £000

Net cash inflow from operating activities 27 29,104 36,085

Returns on investment and servicing of finance:Interest received 30 17Interest paid on bank borrowings (3,910) (4,074)Interest paid on hire purchase and finance lease agreements (1,524) (1,935)

(5,404) (5,992)

Taxation:United Kingdom corporation tax received/(paid) 552 (1,016)Overseas corporation tax (paid) (10) (15)

542 (1,031)Capital expenditure and financial investment:Purchase of tangible fixed assets (1,881) (5,981)Sale of tangible fixed assets 1,542 1,277

(339) (4,704)

Equity dividends paid (2,572) (2,572)

Net cash inflow before management of liquid resources and financing 21,331 21,786

Financing:Repayment of loans (5,032) (6,722)Repayment of principal under hire purchase and finance lease agreements (12,807) (13,927)

Net cash outflow from financing (17,839) (20,649)

Increase in cash during the year 28, 29 3,492 1,137


Notes to the financial statementsFor the year ended 31 December 2004

1 Principal accounting policiesThe financial statements have been prepared in accordance with the Companies Act 1985 and applicable Accounting Standards in theUnited Kingdom. The principal accounting policies and estimation techniques have been applied consistently and are set out below:

Basis of accountingThe financial statements are prepared in accordance with the historical cost convention.

Adoption of new accounting standardsNo new Financial Reporting Standards have been adopted during the year.

Basis of consolidationThe consolidated profit and loss account, balance sheet and cash flow statement include the financial statements of the Company and itssubsidiary undertakings. The results of any subsidiaries acquired during the year are included in the consolidated profit and loss accountfrom the date of their acquisition. Intra-Group sales and profits are eliminated fully on consolidation.

Foreign currenciesTransactions denominated in foreign currencies are translated into the functional currency at the exchange rates ruling at the time of thetransactions.

The assets and liabilities of overseas subsidiaries are translated into sterling at the exchange rate ruling on the balance sheet date. Theresults of these subsidiaries are translated at an average exchange rate for the year. Exchange rate gains or losses arising on translationare taken directly to reserves and are reported in the statement of total recognised gains and losses. All other foreign exchange gains orlosses are dealt with through the profit and loss account.

Intangible fixed assetsGoodwill arising on acquisition represents the excess of the fair value of the consideration given over the fair value of the identifiable netassets acquired. Goodwill arising after 1 January 1998 is capitalised and amortised over its estimated economic life. In previous years, priorto the introduction of Financial Reporting Standard 10, goodwill was written-off immediately.

Costs associated with registering trademarks are capitalised at the value of monetary costs incurred in establishing and protecting theireconomic benefit to the Group and amortised over their estimated useful life.

The Group reviews the carrying values of intangible assets on an annual basis in order to identify any potential impairment in value.

Tangible fixed assetsThe cost of tangible fixed assets is their purchase cost, together with any incidental expenses of acquisition. Depreciation is calculated so asto write off the cost of tangible fixed assets down to their estimated residual values, on a straight line basis, over the expected usefuleconomic lives of the assets concerned. The principal economic lives used for this purpose are:

Years

Motor vehicles 3-10Office fixtures and equipment 3-4Plant and machinery 4-12

The Group’s powered access rental equipment is considered to have a residual value equivalent to10-30% of original cost, depending onthe size of the platform concerned.

Short leasehold properties are amortised over the period of the lease.

The Group reviews the carrying values of assets on an annual basis in order to identify any potential impairment in value.

Fixed asset investmentsInvestments are included at cost stated at the historical sterling value at the time of investment other than where overseas investmentsare hedged by foreign currency borrowings in which case the investment is included at cost, restated at the year end sterling value at thebalance sheet date and any exchange movement is taken to reserves. Where appropriate, the carrying values of fixed asset investments aremeasured by reference to their discounted future operational cash flows, or their imputed resale value, and provision is made for anydiminution in value where necessary. Movements arising on borrowings denominated in foreign currencies designated as hedges ofinvestments overseas are taken directly to reserves and reported in the statement of total recognised gains and losses.

Hire purchase and finance lease obligationsHire purchase and finance lease payments are treated as consisting of capital and interest elements. The capital element is applied to reducethe outstanding obligations and the interest element is charged against profit in proportion to the reducing capital element outstanding.Assets held under finance lease agreements are depreciated over the shorter of the period of the lease or their useful economic lives.


Notes to the financial statementsContinued

1 Principal accounting policies continuedOperating leasesNet rentals under operating leases are charged to the profit and loss account over the period of use of the leased asset.

StocksStocks are stated at the lower of cost and estimated net realisable value. Cost includes transport and handling charges. Where necessary,provision is made for obsolete, slow moving and defective stocks.

TurnoverTurnover, which excludes value added tax and trade discounts, represents the invoiced value of goods and services supplied.

Other operating incomeOther operating income is credited to the profit and loss account in the period in which it arises. Amounts include payment for warrantyclaims, contractual penalties for late deliveries of equipment and other reimbursement of costs received.

Deferred taxationProvision is made for deferred taxation, using the liability method, on all material timing differences. The measurement uses anon-discounted basis at the applicable taxation rates in each jurisdiction of operation. Deferred taxation assets are only recognisedwhere they are considered to be recoverable.

Pension costsThe Group operates several defined contribution pension schemes, the assets of which are held separately from those of the Group.The amounts of any contributions payable to the schemes in respect of the accounting period are charged to the profit and loss account.Any outstanding or prepaid contributions at the balance sheet date are shown as liabilities or assets respectively.

The Group provides no other post retirement benefits to its employees.

2 Segmental analysisTurnover by geographical destination:

2004 2003£000 £000

United Kingdom 61,245 59,191Rest of Europe 39,559 41,949Rest of World 7,209 6,638

Total Group turnover 108,013 107,778

Turnover and operating profit by geographical origin:2004 2003

Operating OperatingTurnover profit Turnover profit

£000 £000 £000 £000

United Kingdom 61,513 5,295 59,213 8,823Rest of Europe 39,312 (8,338) 41,927 (2,705)Rest of World 7,188 2,696 6,638 2,353

Total Group turnover and operating profit 108,013 (347) 107,778 8,471

Net assets by geographical origin:2004 2003£000 £000

United Kingdom 11,354 9,248Rest of Europe 60,043 78,036Rest of World 4,003 2,552

Total Group net assets 75,400 89,836


3 Operating expenses2004 2003£000 £000

Selling and distribution costs 13,587 14,115Administrative expenses 24,735 22,523Exceptional operating costs (note 4) 6,148 848Other operating income (56) (182)

44,414 37,304

4 Exceptional costsExceptional costs incurred during the year are set out below:

2004 2003£000 £000

Exceptional operating costs:Bank fees (i) 495 160Refinancing advisory fees (ii) 843 –Restructuring costs (iii) 4,155 688Goodwill write down (iv) 655 –

6,148 848

Exceptional non-operating costs:Provision against German assets held for resale (v) 6,443 –Write down of Austrian net assets (vi) 1,923 –

8,366 –

Total exceptional costs 14,514 848Taxation effect from exceptional costs (vii) (2,968) (287)

Total exceptional costs net of taxation 11,546 561

Notes:(i) Bank fees relate to fees in respect of the Group’s refinancing during the year. Fees during 2003 related to adjustments made to existing covenants under the Group’s

previous loan facility.(ii) Refinancing advisory fees are in respect of professional costs in relation to the restructuring and refinancing of the Group’s operations during the year.(iii) Restructuring costs relate to the Group’s trading operations, primarily in respect of the Group’s German and UK businesses, and include employee termination costs,

depot closure costs, transport and storage of rental machines, and associated professional fees. Restructuring costs for 2003 related mainly in respect of the Group’sGerman and UK businesses and included termination costs and associated professional fees.

(iv) The goodwill write down relates to the remaining goodwill carried in the balance sheet from the acquisition of a German business in 1998. This goodwill has beenfully amortised in the year.

(v) The provision against German assets held for resale relates to a number of rental units that have been identified for disposal with the provision being made to reflectthe expected net realisable sale value in the secondary market. These assets have been reclassified within fixed assets as assets held for resale (note 16).

(vi) The write down of the Austrian net assets has been made to reflect the net value realised from the sale of the subsidiary post year-end (note 30).(vii) Taxation relating to the exceptional costs and the benefits of the restructuring of the operations has been shown above where it is considered to be tax deductible.

The value of such tax credits reflects the blended average of the effective tax rates in the jurisdictions and years in which the amounts arise.



5 Operating profit2004 2003£000 £000

Operating profit is arrived at after charging:Amortisation (note 15) 39 180Depreciation (note 16) 25,536 26,118Staff costs (note 8) 31,654 31,133Fees paid to auditors (note 6) 985 549Hire of plant and machinery 3,398 3,603Other operating leases – property 4,035 4,030

And after crediting:Profit on disposal of tangible fixed assets 119 207

The directors believe that it is not practicable to analyse the depreciation charge between owned assets and assets held under hirepurchase agreements.

Profits and losses arising on disposal of tangible fixed assets from the Group’s rental fleet assets, excluding those assets held for resale, reflectadjustments to the carrying book value of the assets at the time of their disposal and as such are included within operating profits above.

6 Fees paid to auditors2004 2003£000 £000

Audit servicesStatutory audit (i) 129 102Audit related regulatory reporting (ii) 38 50

167 152Taxation servicesCompliance 44 101Advisory services (iii) 423 230

467 331Other servicesIT – 18Valuation 4 19Other services (iv) 347 29

351 66

Total 985 549

2004 2003% %

Audit services 17 28Taxation services 47 60Other services 36 12

Total 100 100

Notes:(i) Auditors’ remuneration as auditors to the Company during the year amounted to £29,190 (2003: £27,555).(ii) Audit related regulatory reporting includes fees for reviews of overseas Group companies that do not require statutory audits in their local jurisdictions, and for technical

advice relating to the adoption and presentation of specific accounting issues within the Group’s accounts.(iii) Taxation advisory services include amounts relating to fees for advice in connection with implementing and managing the Group’s cross-border taxation affairs and

for advisory fees in relation to corporate financing and restructuring within the Group.(iv) Other services includes fees relating to company secretarial assistance, regulatory compliance and advisory fees in connection with the refinancing of the Group’s bank

facilities during 2004.


7 Directors’ emoluments and interest in sharesDetails of directors’ emoluments and interest in shares are included in the Remuneration Report on pages 10 to 14.

8 Employee informationThe average monthly number of persons (including executive directors) employed by the Group during the year, analysed by category, was:

2004 2003Number Number

Operations 624 621Selling and distribution 401 387Administration 142 139

1,167 1,147

Aggregate payroll costs for the above persons (including executive directors): 2004 2003£000 £000

Wages and salaries 27,496 26,917Social security costs 3,770 3,784Other pension costs 388 432

31,654 31,133

9 Investment income2004 2003£000 £000

Interest receivable 30 51

10 Interest payable and similar charges2004 2003£000 £000

Interest on bank loans and overdrafts 4,286 4,422Interest on hire purchase and finance lease agreements 1,524 1,935

5,810 6,357



11 Taxation on (loss)/profit2004 2003£000 £000

United KingdomCorporation Tax at 30% (2003: 30%)– Current – 580– Under/(over) provision in prior years 67 (137)

67 443Overseas– Corporation taxes 10 –– Overprovision in prior years – (142)

10 (142)

Total current taxation 77 301

Deferred taxation– United Kingdom (1,622) 558– Adjustment in respect of prior years (186) 80

Total deferred taxation (1,808) 638

Taxation on (loss)/profit (1,731) 939

No provision has been made in the financial statements for any tax liability which may arise upon future distributions of profit to theUnited Kingdom from the overseas subsidiaries.

As the overseas subsidiaries return to profitability the tax rate will reduce due to the utilisation of unprovided deferred tax assets relating to past trading losses incurred which are not currently capable of recognition.

Reconciliation of corporation taxation:The tax for the period is higher (2003: lower) than the standard rate of corporation tax in the UK (30%). The differences are explained below:

2004 2003£000 £000

(Loss)/profit before taxation (14,493) 2,165

(Loss)/profit at standard rate of corporation taxation in the UK: 30% (2003: 30%) (4,348) 650Effects of:Adjustments to tax in respect of prior years 67 (279)Adjustment in respect of foreign tax rates 10 (464)Expenses not deductible for tax purposes 228 347Depreciation in excess of/(less than) capital allowances 2,564 (1,457)Losses recognised through deferred tax (942) 834Losses unutilised 5,423 1,185Other short term timing differences – (15)Permanent differences (2,925) (500)

77 301


12 Earnings per shareEarnings per share calculations are based on:(a) the (loss)/profit for the year, after deducting taxation, of (£12,762,000) (2003: profit of £1,226,000)(b) the weighted average of 37,003,383 ordinary shares in issue during the year (2003: 37,003,383)

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume issue of all dilutive potential ordinaryshares, based on the average market price of the Company’s shares of £1·377 (2003: £1·238). The Group has only one category of dilutive potentialordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company’s ordinaryshares during the year. The effect of this dilution is to increase the weighted average number of ordinary shares to 37,123,889 (2003: 37,073,780).

This dilution cannot be applied to a loss and the stated diluted EPS is hence equal to the basic EPS for the current year.

Exceptional operating costs and non-operating costs charged to the profit and loss account during the year do not relate to the profitability ofthe Group on an ongoing basis. Therefore the earnings per share before exceptional operating and non-operating costs have been calculated afteradjustment for these costs and the related tax effect based on the basic number of shares in issue (note 4).

2004 2003

Loss per Earnings perLoss share Earnings share

£000 pence £000 pence

(Loss)/earnings per share (12,762) (34.49) 1,226 3.31

Exceptional operating costs:Bank fees 495 1.34 160 0.43Refinancing advisory fees 843 2.27 – –Restructuring costs 4,155 11.23 688 1.86Goodwill write down 655 1.77 – –

6,148 16.61 848 2.29

Exceptional non-operating costs:Provision against German assets held for resale 6,443 17.41 – –Write down of Austrian net assets 1,923 5.20 – –

8,366 22.61 – –

Total exceptional costs 14,514 39.22 848 2.29Taxation effect from exceptional costs (2,968) (8.02) (287) (0.77)

Total exceptional costs net of taxation 11,546 31.20 561 1.52

(Loss)/earnings per share before exceptional costs (1,216) (3.29) 1,787 4.83

13 Dividends2004 2003£000 £000

(a) Interim dividend paid of 2.25p per 1p ordinary share (2003: 2.25p) 833 833(b) The directors do not recommend a final dividend for 2004 (2003: 4.70p) – 1,739

833 2,572


14 Profit for the financial yearAs permitted by section 230 of the Companies Act 1985, the parent Company’s profit and loss account has not been presented in thesefinancial statements. The parent Company’s profit after tax for the financial year was £1,129,000 (2003: £61,414,000).

15 Intangible fixed assetsTrademarks Goodwill Total

The Group £000 £000 £000

CostAt 1 January 2004 200 1,380 1,580Exchange movements on retranslation – 14 14

At 31 December 2004 200 1,394 1,594

AmortisationAt 1 January 2004 42 705 747Exchange movements on retranslation – 34 34Charge for the year 39 – 39Exceptional write down (note 4) – 655 655

At 31 December 2004 81 1,394 1,475

Net book value

At 31 December 2004 119 – 119

At 31 December 2003 158 675 833

The goodwill arising in respect of the acquisition of the partnership interests of Albert Furg & Co oHG and the share capital of Furg Arbeitsbuhnenserviceund vermietung GmbH in 1998 was being amortised on a straight line basis over a period of 10 years, being the original estimated economic life. As aresult of the restructuring exercise in Germany in 2004 the goodwill has been fully amortised during the year.

Costs incurred in establishing trademark brands are being amortised on a straight line basis over a period of 5 years, being the estimated economic life.

The CompanyThe Company has no intangible fixed assets.



16 Tangible fixed assetsShort Office

leasehold Plant and Motor fixtures and Assets heldproperties machinery vehicles equipment for resale Total

The Group £000 £000 £000 £000 £000 £000

CostAt 1 January 2004 748 287,921 8,266 6,537 – 303,472 Exchange movements on retranslation – 428 (31) 37 – 434Additions – 1,595 77 645 – 2,317Disposals – (5,625) (1,252) (34) – (6,911)Transfer to assets held for resale – (15,927) – – 15,927 –

At 31 December 2004 748 268,392 7,060 7,185 15,927 299,312

DepreciationAt 1 January 2004 635 93,118 5,924 3,744 – 103,421 Exchange movements on retranslation – 464 (26) 31 – 469Charge for the year 113 23,234 1,135 1,054 – 25,536Exceptional impairment of tangiblefixed assets (note 4) – 8,118 – – – 8,118Disposals – (4,270) (1,202) (16) – (5,488)Transfer to assets held for resale – (12,698) – – 12,698 –

At 31 December 2004 748 107,966 5,831 4,813 12,698 132,056

Net book value

At 31 December 2004 – 160,426 1,229 2,372 3,229 167,256

At 31 December 2003 113 194,803 2,342 2,793 – 200,051

The net book value of plant and machinery transferred to assets held for resale amounted to £3,229,000. These assets have been reclassifiedduring the year following the restructuring in Germany.

Included within office fixtures and equipment additions in the current year is an amount of £Nil (2003: £155,000) in respect of computer systemsin the process of implementation. No depreciation is charged on these amounts until the systems become operative within the Group's businesses.

The net book value of tangible fixed assets includes an amount of £33,252,000 (2003: £41,605,000) in respect of assets held under hirepurchase and finance lease agreements.

The CompanyThe Company has no tangible fixed assets.



17 Fixed asset investmentsThe Company

2004 2003Interests in subsidiary undertakings £000 £000

CostAt 1 January 201,627 61,987Exchange movements 633 4,520Additions at cost – 137,304Disposals – (2,184)

At 31 December 202,260 201,627

ProvisionsAt 1 January – 1,535Charge for the year 5,069 –Disposals – (1,535)

At 31 December 5,069 –

Net book value

At 31 December 197,191 201,627

The charge for the year relates to a partial impairment of the Company’s investment in Pro-Lift Holding (Deutschland) GmbH followingthe restructuring and consequent reduction in the subsidiary’s net asset value during the year.


17 Fixed asset investments continued

Interests in subsidiary undertakingsThe Company, which is the holding company of the Group, has the following wholly owned subsidiaries, unless stated otherwise:

Proportion of voting rights and

Country of Issued and fully paid shares held byName incorporation Principal activity share capital The Company A subsidiary

Zooom Holdings (UK) Limited United Kingdom Investment holding company 19,328,112 ordinary shares 100%of £1 each2,157,569 irredeemable preference 100%shares of £0.01 each

Rapid Access Limited United Kingdom Investment holding company 3 ordinary shares 100%of £1 each329,455 irredeemable preference 100%shares of £0.01 each

Access Solutions (UK) Limited United Kingdom Non-trading company 4 ordinary shares 100%of £1 each

Pro-Lift Holding Germany Investment holding company 917,499 ordinary shares 100%(Deutschland) GmbH of €100 each

Zooom Limited United Kingdom Investment holding company 183,976,291 ordinary shares 64% 36%of £1 each

Nationwide Access Limited United Kingdom Rental of specialist powered 250,000 ordinary shares 100%access equipment of £1 each

Logical Commerce Limited United Kingdom Professional services 100 ordinary shares 100%of £1 each

Zooom (Deutschland) GmbH Germany Rental of specialist powered 25,565 ordinary shares 100%access equipment of €1 each

Interlift GmbH Germany Provision of specialist powered 25,565 ordinary shares 100%access services of €1 each

B2B Inkasso GmbH Germany Professional services 51,129 ordinary shares 100%of €1 each

Zooom France SA France Rental of specialist powered 1,562,500 ordinary shares 100%access equipment of €16 each

Zooom Access SL Spain Rental of specialist powered 550,500 ordinary shares 100%access equipment of €10 each

Zooom Arbeitsbuhnen- Austria Rental of specialist powered 17,500 ordinary shares 100%Vermietung GmbH (i) access equipment of €1 each

Rapid Access BV (ii) Netherlands Investment holding company 40,001 ordinary shares 100%of NLG1 each

Rapid Access LLC (iii) United Arab Emirates Rental of specialist powered 300 ordinary shares 49%access equipment of Dhs1,000 each

Rapid Access (Bahrain) WLL (iv) Bahrain Rental of specialist powered 100 ordinary shares 49%access equipment of BD100 each

All of the above subsidiaries are included in the Group's consolidated financial statements.

Notes:(i) On 25 February 2005 the Group sold its Austrian subsidiary business, Zooom Arbeitsbuhnen-Vermietung GmbH (note 30).

(ii) The denomination and value of the share capital of Rapid Access BV formally remained in the pre € currency of Netherlands Guilders (NLG) at 31 December 2004.

(iii) Rapid Access BV has a 49% interest in the shares of Rapid Access LLC. The Company has a right to give directions with respect to the operating and financial policies of Rapid Access LLC and is considered to have dominant influence within the meaning of Financial Reporting Standard 2 and as such treats Rapid Access LLC as a wholly owned subsidiary for the Group's accounting purposes.

(iv) Rapid Access Limited has a 49% interest in the shares of Rapid Access (Bahrain) WLL. The Company has a right to give directions with respect to the operating and financial policies of Rapid Access (Bahrain) WLL and is considered to have dominant influence within the meaning of Financial Reporting Standard 2 and as such treats Rapid Access (Bahrain) WLL as a wholly owned subsidiary for the Group's accounting purposes.



18 StocksThe Group The Company

2004 2003 2004 2003£000 £000 £000 £000

Spares 678 768 – –Consumables 195 202 – –

873 970 – –

19 DebtorsThe Group The Company

2004 2003 2004 2003£000 £000 £000 £000

Amounts falling due within one year:Trade debtors 23,414 23,746 – –Amounts owed by subsidiary undertakings – – 30,135 132,018Corporation tax – 369 – –Other debtors 619 1,127 7 2Prepayments and accrued income 1,991 2,488 42 106

26,024 27,730 30,184 132,126

20 Creditors: amounts falling due within one yearThe Group The Company

2004 2003 2004 2003£000 £000 £000 £000

Amounts owed to subsidiary undertakings – – 16,550 117,589Bank loans (notes 21(a) and 22(c)) 4,545 – 4,545 –Hire purchase and finance lease liabilities (note 22(c)) 11,128 12,426 – –Trade creditors 4,771 5,046 – –Capital creditors 273 – – –Corporation tax 250 – – –Other taxation and social security 3,296 3,143 3 3Other creditors 54 480 – 160Accruals and deferred income 8,388 4,978 1,588 921Dividend payable – 1,739 – 1,739

32,705 27,812 22,686 120,412

Capital creditors arise from the extended credit terms agreed on purchases of powered access equipment for the rental fleet.


21 Creditors: amounts falling due after more than one yearThe Group The Company

2004 2003 2004 2003£000 £000 £000 £000

Bank loans (notes 21(a) and 22(c)) 70,052 79,045 70,052 79,045Hire purchase and finance lease liabilities (note 22(c)) 10,818 22,027 – –Other creditors – 263 – –

80,870 101,335 70,052 79,045

Bank loans are repayable as follows:The Group The Company

2004 2003 2004 2003£000 £000 £000 £000

In one year or less 4,604 – 4,604 –Between one and two years 7,787 79,045 7,787 79,045Between two and five years 62,476 – 62,476 –

74,867 79,045 74,867 79,045Unamortised issue costs (270) – (270) –

74,597 79,045 74,597 79,045

(a) The bank loans relate to a facility comprising of a €60,000,000 term-loan repayable over 5 years to 30 June 2009 and a £45,000,000multi-currency revolving loan repayable on 30 June 2009, both secured by fixed and floating charges. All other borrowings are repayableon an instalment basis.

22 Financial instrumentsShort term debtors and creditorsShort term debtors and creditors (other than bank and other borrowings) have been excluded from all of the following disclosures, other than the currency risk disclosures.

(a) Interest rate risk of financial assets2004 2003

Cash at Cash at bank and bank and

in hand in hand Currency £000 £000

Sterling 4,233 1,721EU currencies (excluding sterling) 2,895 2,105Other currencies 406 212

At 31 December 7,534 4,038

Floating rate 7,534 4,038Fixed rate – –

At 31 December 7,534 4,038

The floating rate financial assets comprise cash at bank, bearing interest rates based on varying national bank base rates.



22 Financial instruments continued(b) Interest rate risk of financial liabilities

Fixed rate Fixed rate Floating rate Fixed rate weighted weighted

financial financial average average liabilities liabilities Total period interest rate

Currency £000 £000 £000 years %

Sterling 12,555 351 12,906 0.3 6.5EU currencies (excluding sterling) 28,419 55,218 83,637 1.0 6.0

At 31 December 2004 40,974 55,569 96,543 1.0 6.0

Sterling 19,494 712 20,206 1.3 6.5EU currencies (excluding sterling) 33,442 59,850 93,292 1.9 5.8

At 31 December 2003 52,936 60,562 113,498 1.9 5.8

The floating rate financial liabilities comprise bank loans and hire purchase liabilities, bearing interest rates based on bank base, LIBORor EURIBOR rates.

The effect of the Group's interest rate swaps is to classify £46,726,000 (2003: £46,270,000) of EU currency borrowings in the above tableas fixed rate liabilities.

(c) Maturity of financial liabilitiesThe maturity profile of the carrying amount of the Group's financial liabilities at 31 December, net of unamortised issue costs, was as follows:

Hire purchase 2004 Hire purchase 2003Debt and finance leases Total Debt and finance leases Total £000 £000 £000 £000 £000 £000

Within 1 year or on demand 4,545 11,128 15,673 – 12,426 12,426Between 1 and 2 years 7,728 5,974 13,702 79,045 11,478 90,523Between 2 and 5 years 62,324 4,844 67,168 – 10,549 10,549

74,597 21,946 96,543 79,045 34,453 113,498

(d) Borrowing facilitiesThe Group has the following undrawn committed borrowing facilities available at 31 December in respect of which all conditionsprecedent had been met at that date:

2004 2003£000 £000

Expiring within 1 year 5,625 4,967Expiring in excess of 1 year 9,133 5,955

14,758 10,922


22 Financial instruments continued(e) Currency exposuresThe currency exposure of the Group's net monetary liabilities is shown below. Such exposures comprise the monetary assets and liabilitiesthat are not denominated in the operating (or 'functional') currency of the operating unit involved.

Net foreign currency monetary assets/(liabilities)

2004 2003

Sterling Euro Total Sterling Euro Total £000 £000 £000 £000 £000 £000

Functional currency ofGroup operation: Sterling – (74,656) (74,656) – (78,999) (78,999)Euro (5,977) – (5,977) (4,735) – (4,735)Other 1,647 – 1,647 422 – 422

Total (4,330) (74,656) (78,986) (4,313) (78,999) (83,312)

(f) Fair value of assets and liabilities Primary financial instruments held or issued to finance the Group's operations:

2004 2003

Book value Fair value Book value Fair value £000 £000 £000 £000

Cash at bank and in hand 7,534 7,534 4,038 4,038Overdrafts and short term borrowings (15,673) (15,771) (12,426) (12,612)Long term borrowings (80,870) (80,917) (101,072) (101,217)

(89,009) (89,154) (109,460) (109,791)

Derivative financial instruments held to managethe interest rate and currency profile:

Interest rate swaps – (578) – (1,487)

Differences arising between the book value and fair value of the Group's short and long term borrowings relate principally to thedifferences arising between future fixed rate interest liabilities arising on existing hire purchase and bank debt measured against thecomparable future interest liabilities payable currently for equivalent floating rate borrowings over the same period.

(g) HedgesThe Group does not hedge the translational exposure and earnings. The Group’s aim is to match its investments with borrowings of thesame currency and that those borrowings are serviced from the cash flows of the appropriate currency.

The Group will consider entering forward currency contracts where significant receipts or payments are due.

The table below shows the extent to which the Group has off-balance sheet (unrecognised) and on-balance sheet (deferred) gains andlosses in respect of financial instruments used as hedges at the beginning and end of the year. It also shows the amounts of such gainsand losses which have been included in the profit and loss account for the year and those gains and losses which are expected to beincluded in next year's or later profit and loss accounts.



22 Financial instruments continued(g) Hedges continued

UNRECOGNISEDTotal net

Gains Losses losses£000 £000 £000

Losses on hedges at 1 January 2004 – (1,487) (1,487)Arising in previous years including in 2004 results – 894 894

Losses arising in previous years, not included in the 2004 results – (593) (593)Arising before 1 January 2004 – 15 15Arising in 2004 – – –

Losses on hedges at 31 December 2004 – (578) (578)

Of which:Losses expected to be included in the 2005 results – (575) (575)Losses expected to be included after the 2005 results – (3) (3)

23 Provisions for liabilities and chargesDeferred taxation provided in the financial statements is as follows:

2004 2003Amount Amountprovided provided

The Group £000 £000

Tax effect of timing differences because of:– Excess of capital allowances over depreciation 18,592 23,130– Tax losses carried forward (5,761) (8,491)

12,831 14,639

The movement in deferred taxation provided is summarised below:2004 2003£000 £000

At beginning of period 14,639 14,001(Credit)/charge to profit and loss account (1,808) 638

At end of period 12,831 14,639

There are unrecognised deferred tax assets relating to trading losses in overseas operations. The losses which have not been recognised inthe current year amount to £11,600,000 (2003: £1,185,000). Further unrecognised losses exist relating to years prior to 2003 but, asunrecognised, these losses remain to be quantified.

The CompanyThe Company had no deferred tax liability at 31 December 2004 (2003: £Nil).

24 Called up share capital2004 2003£000 £000

Authorised:287,333,400 (2003: 287,333,400) ordinary shares of 1p each 2,873 2,873

Allotted, called up and fully paid:37,003,383 (2003: 37,003,383) ordinary shares of 1p each 370 370


25 Reserves Share Capital Distributable Non-distributable

premium redemption Profit and profit and lossaccount reserve loss account account Total

£000 £000 £000 £000 £000

The Group At 1 January 2004 70,412 4 19,050 – 89,466Loss for the year – – (13,595) – (13,595)Currency translation differences – – (841) – (841)

At 31 December 2004 70,412 4 4,614 – 75,030

The CompanyAt 1 January 2004 70,412 4 5,094 58,535 134,045Profit retained for the year – – 296 – 296Currency translation differences – – 51 – 51

At 31 December 2004 70,412 4 5,441 58,535 134,392

Cumulative goodwill relating to acquisitions made prior to 1998 which has been eliminated against reserves, amounted to£454,000 (2003: £454,000).

Non-distributable profit reserves within the Company relate to profits made on disposal of investments to other Group companies.Total profit and loss account reserves for the Company amount to £63,976,000 (2003: £63,629,000).

26 Reconciliation of movement in shareholders' fundsThe Group The Company

2004 2003 2004 2003£000 £000 £000 £000

(Loss)/profit after taxation for the year (12,762) 1,226 1,129 61,414Dividends (833) (2,572) (833) (2,572)Currency translation differences (841) 262 51 356

(14,436) (1,084) 347 59,198Opening equity shareholders' funds 89,836 90,920 134,415 75,217

Closing equity shareholders' funds 75,400 89,836 134,762 134,415



27 Reconciliation of operating (loss)/profit to net cash inflow from operating activities2004 2003£000 £000

Operating (loss)/profit (347) 8,471Amortisation of intangible assets 39 180Exceptional write down of intangible assets (note 4) 655 –Depreciation on tangible fixed assets 25,536 26,118Gain on sale of tangible fixed assets (119) (207)Decrease/(increase) in stocks 95 (65)Decrease in trade debtors 277 194Decrease/(increase) in prepayments, accrued income and other debtors 946 (294)(Decrease)/increase in trade creditors (345) 1,541Increase in taxation, social security, accruals and other creditors 2,367 147

Net cash inflow from operating activities 29,104 36,085

During the year exceptional operating costs of £6,148,000 (2003: £848,000), which included an impairment write down of goodwill of£655,000 (2003: £Nil), and exceptional non-operating costs of £8,366,000 (2003: £Nil) were incurred (note 4). At December 2004exceptional operating costs of £2,571,000 (2003: £218,000), and exceptional non-operating costs of £249,000 (2003: £Nil), remainedunpaid and are included within accruals and deferred income due within one year.

28 Reconciliation of net cash flow to movement in net debt2004 2003£000 £000

Net increase in cash 3,492 1,137Outflow from decrease in debt 17,839 20,649

Change in net debt resulting from cash flows 21,331 21,786Non-cash items:New hire purchase and finance lease agreements (369) (10,567)Currency translation differences – on cash and net debt (511) (6,600)

Movement in net debt in the period 20,451 4,619Net debt at 1 January (109,460) (114,079)

Net debt at 31 December (89,009) (109,460)

29 Analysis of changes in net debt during the yearAt Currency At

1 January Other non- translation 31 December 2004 Cash flows cash items differences 2004£000 £000 £000 £000 £000

Cash at bank and in hand 4,038 3,492 – 4 7,534

Bank debt due within one year – – (4,545) – (4,545)Bank debt due after one year (79,045) 5,032 4,545 (584) (70,052)Hire purchase and finance lease agreements (34,453) 12,807 (369) 69 (21,946)

(113,498) 17,839 (369) (515) (96,543)

Total (109,460) 21,331 (369) (511) (89,009)

Capital creditors in respect of fixed asset additions increased by £273,000.


30 Post balance sheet eventOn 25 February 2005 the Group disposed of its Austrian business, Zooom Arbeitsbuhnen-Vermietung GmbH (“Zooom Austria”). Theconsideration for the sale was £2.65 million payable in cash, which represented the net asset value of Zooom Austria at 31 December 2004,following the restructuring provision of £1.92 million made during 2004 (note 4).

As part of the disposal of Zooom Austria the Group agreed to underwrite a total warranty of €450,000 against the book value of the assetsof the business at the time of the sale valid until 14 July 2006. After this date the warranty reduces to €225,000 payable only for tax relatedcontingencies valid until 25 February 2008. Any contingency payment is subject to a de minimis claim limit of €10,000 and total paymentsunder the combined warranties are capped at €450,000.

31 Related party transactionsThe Company is exempt under the terms of Financial Reporting Standard 8, “Related party disclosures” from disclosing related partytransactions with entities that are part of the Group or investees of the Group.

32 Leasing commitmentsAt 31 December 2004, the Group had annual commitments under non-cancellable operating leases as follows:

2004 2003

Land and Land andbuildings Other buildings Other

£000 £000 £000 £000

Expiring within:One year 1,197 3,185 538 77Two to five years 2,264 450 2,287 4,344More than five years 358 – 545 –

3,819 3,635 3,370 4,421

The Company has no leasing commitments at 31 December 2004 (2003: £Nil)

33 Capital commitments2004 2003£000 £000

Capital expenditure that has been contracted for by the Group but has not yetbeen provided for in the financial statements at 31 December 2,460 46

The Company has no capital commitments at 31 December 2004 (2003: £Nil).

34 Contingent liabilitiesThe Company is party to an unlimited cross guarantee to secure the bank facilities of its UK and German subsidiary undertakings,which amounted to £Nil at 31 December 2004 (2003: £Nil).

Nationwide Access Limited have contracted to repurchase machinery sold to customers, these obligations amounted to £Nil at31 December 2004 (2003: £4,000).

A potential liability exists at 31 December 2004 amounting to a maximum of £5,000,000 (2003: £5,000,000) relating to a restocking feeunder the terms of one of the Group’s operating lease agreements. Having considered the situation at 31 December 2004 the Board are of the opinion that no material provision is currently appropriate as the features of the operating lease which gives rise to the contingencyare not expected to crystallise.


Group five year financial history

2004 2003 2002 2001 2000Note £million £million £million £million £million

Turnover 108.0 107.8 103.0 90.1 67.5Trading profit (EBITDA):– before exceptional operating costs 31.4 35.6 36.5 36.0 26.9– after exceptional operating costs 25.9 34.8 35.3 35.4 26.9Depreciation and amortisation 25.6 26.3 24.4 21.1 13.1Exceptional operating costs 6.1 0.8 1.2 0.6 –Exceptional non-operating costs 8.4 – – – –Total exceptional costs (i) 14.5 0.8 1.2 0.6 –Operating profit/(loss):– before exceptional operating costs 5.8 9.3 12.0 14.9 13.8– after exceptional operating costs (0.3) 8.5 10.8 14.3 13.8Pre-tax profit/(loss):– before exceptional costs 0.0 3.0 6.0 9.9 10.2– after exceptional costs (14.5) 2.2 4.8 9.3 10.2Net cash inflow from operating activities 29.1 36.1 28.8 35.6 22.0Capital expenditure 2.3 3.2 26.8 85.2 83.1Net borrowings (ii) 89.0 109.5 114.1 98.4 70.1Shareholders' funds 75.4 89.8 90.9 89.7 57.8

StatisticsTrading profit (EBITDA) margin:– before exceptional operating costs 29.1% 33.0% 35.4% 40.0% 39.8%– after exceptional operating costs 24.0% 32.3% 34.3% 39.3% 39.8%Depreciation and amortisation (as % of turnover) 23.7% 24.4% 23.7% 23.4% 19.4%Operating profit/(loss) margin:– before exceptional costs 5.4% 8.6% 11.7% 16.5% 20.4%– after exceptional costs (0.3)% 7.9% 10.5% 15.9% 20.4%Pre-tax profit/(loss) margin:– before exceptional costs 0.0% 2.8% 5.8% 11.0% 15.1%– after exceptional costs (13.4)% 2.0% 4.7% 10.3% 15.1%Earnings/(loss) per share (basic) (34.49)p 3.31p 9.57p 17.76p 20.98pEarnings/(loss) per share (before exceptional costs) (3.29)p 4.83p 11.69p 18.87p 20.98pDebt/equity ratio 118.0% 121.8% 125.5% 109.8% 121.2%

Note:(i) Exceptional costs represents the total of exceptional operating costs and exceptional non-operating costs.(ii) Net borrowings represent bank, hire purchase and other indebtedness, less cash at bank and in hand.


Notice and agenda of annual general meeting

Notice is hereby given that the Annual General Meeting of Lavendon Group plc will be held at PricewaterhouseCoopers LLP, CornwallCourt, 19 Cornwall Street, Birmingham B3 2DT on 28 April 2005 at 10.30am when the resolutions set out below will be proposed.

Ordinary businessOrdinary resolutionsTo consider and, if thought fit, to pass the following resolutions as ordinary resolutions.

1. To receive the accounts for the year ended 31 December 2004 together with the reports of the directors and auditors thereon.

2. To re-elect Kevin Appleton as a director of the Company.

3. To reappoint PricewaterhouseCoopers LLP as auditors of the Company to hold office until the conclusion of the next general meetingat which accounts are laid before the Company and to authorise the directors to fix their remuneration.

Special businessOrdinary resolutionsTo consider and, if thought fit, to pass the following resolutions as ordinary resolutions.

4. To receive the Remuneration Report for the year ended 31 December 2004.

5. That the Rules of the Lavendon Group plc Share Matching Plan 2005 (the “Plan”), the principal terms of which are set out in theappendix to this Notice, be approved and established and the directors of the Company be authorised to do all acts and things whichthey consider necessary or desirable to carry the Plan into effect.

6. That the directors be and are hereby generally and unconditionally authorised for the purposes of section 80 of the Companies Act1985, to exercise all the powers of the Company to allot relevant securities (within the meaning of section 80(2) of the said Act) up toan aggregate nominal amount of £123,344. This authority to expire at the conclusion of the Annual General Meeting of the Companyin 2006 or on 30 June 2006, whichever is the earlier (save that the Company may before such expiry make offers or agreements whichwould or might require relevant securities to be allotted after such expiry and the directors may allot relevant securities in pursuance of such offers or agreements as if the authority conferred hereby had not expired).

Special resolutionTo consider and, if thought fit, to pass the following resolution as a special resolution.

7. That, subject to the passing of resolution 6 above, the directors be and are hereby empowered to allot equity securities (as defined in section 94(2) of the Companies Act 1985) for cash pursuant to the authority conferred by resolution 6 above as if section 89(1) of the said Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities:

7.1 in connection with a rights issue in favour of shareholders where the equity securities are proportionate (as nearly as practicable)to the respective number of ordinary shares held by such holders but subject to such exclusions or other arrangements as thedirectors may deem necessary or desirable in relation to fractional entitlements or legal or practical problems arising in, orpursuant to, the laws of any territory or the requirements of any regulatory body or stock exchange in any territory; and

7.2 otherwise than pursuant to 7.1 above, up to an aggregate nominal amount of £18,501; and this power shall expire at theconclusion of the Annual General Meeting of the Company to be held in 2006 or 30 June 2006 whichever is the earlier (save thatthe Company may before such expiry make offers or agreements which would or might require equity securities to be allottedafter such expiry and the directors may allot equity securities in pursuance of such offers or agreements as if the powerconferred hereby had not expired).


Alan MerrellSecretary7 March 2005

Registered Office:1 Midland CourtCentral ParkLutterworthLeicestershire LE17 4PN


Notice and agenda of annual general meetingContinued

Notes

Proxies1. Holders of ordinary shares are entitled to attend and vote at this meeting. A member entitled to attend and vote may appoint a proxy

or proxies who need not be a member of the Company to attend (and on a poll to vote) instead of him or her. Forms of proxy need to be deposited with the Company’s registrar, Capita Registrars, at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU notlater than 48 hours before the time of the meeting. Completion of a form of proxy will not preclude a member attending and voting in person at the meeting.

Documents on display

2. The register of directors’ interests in the share capital and debentures of the Company, together with copies of service agreements under which the directors of the Company are employed and the draft rules of the Lavendon Group plc Share Matching Plan 2005 (the“Plan”), are available for inspection at the Company’s registered office during normal business hours from the date of this Notice untilthe date of the Annual General Meeting and will also be available for inspection at the place of the Annual General Meeting for at least 15 minutes prior to and during the meeting. In addition, a copy of the draft rules of the Plan will also be available for inspection at theoffices of Ashurst, Broadwalk House, 5 Appold Street, London EC2V 7AN during this period.

Right to attend and vote

3. To have the right to attend and vote at the meeting (and also for the purpose of calculating how many votes a person entitled toattend and vote may cast), a person must be entered on the register of holders of the shares of the Company by no later than 10.30am on 26 April 2005 being 48 hours before the time fixed for the meeting. Changes to entries on the register after this time shall be disregarded in determining the rights of any person to attend or vote at the meeting.

Explanatory notes

Resolution 1: Report and accounts

This is a standard resolution common to all annual general meetings.

Resolutions 2: Re-election of director

Kevin Appleton will retire by rotation and being eligible will stand for re-election by the shareholders.

Resolution 3: Appointment of auditors

Company law requires Lavendon Group plc, at each general meeting at which accounts are laid, to appoint auditors who will remain in office until the next general meeting at which accounts are laid. This resolution will, therefore, reappoint PricewaterhouseCoopers LLP as auditors of Lavendon Group plc and authorise the directors to agree their remuneration.


Resolution 4: Remuneration Report

The Remuneration Report for the Group will be placed before the members for formal adoption.

Resolution 5: Lavendon Group plc Share Matching Plan 2005 (the “Plan”)

The Remuneration Committee believes that the Plan will encourage senior employees, including executive directors, to invest and holdshares in the Company, thereby more closely aligning their interests with those of shareholders. The principal terms of the Plan (includingthe performance conditions proposed for the 2005 awards) are summarised in the appendix to this Notice on pages 54 and 55.

Resolution 6: General authority to allot shares

Your directors may only allot shares or grant rights over shares if authorised to do so by the shareholders. The authority granted at theAnnual General Meeting of the Company held on 6 May 2004 is due to expire at this year’s Annual General Meeting. Accordingly,resolution number 6 will be proposed as an ordinary resolution to grant a new authority to allot unissued share capital up to anaggregate nominal value of £123,344, representing 33.3 per cent of the total issued ordinary share capital as at the date of this notice.If given, this authority will expire at the Annual General Meeting in 2006 or on 30 June 2006 whichever is the earlier. The directorshave no present intention of exercising this authority.

Resolution 7: Dis-application of pre-emption rights

Your directors also require additional authority from the shareholders to allot shares or grant rights over shares where they propose to do so for cash and otherwise than to existing shareholders pro rata to their holdings. The authority granted at the Annual GeneralMeeting of the Company held on 6 May 2004 is due to expire at this year’s Annual General Meeting. Accordingly, resolution number 7 will be proposed as a special resolution to grant such authority. Apart from rights issues, the authority will be limited to the issue of shares up to an aggregate nominal value of £18,501 (being five per cent of the total issued ordinary share capital as at the date ofthis notice). If given, this authority will expire on 30 June 2006 or at the conclusion of the Annual General Meeting in 2006 whichever is the earlier.


This document is important and if you are in any doubt as to what action to take you should consult your own independent advisors.

In the opinion of the Directors it is in the best interests of the shareholders as a whole that this plan be approved. Therefore the directors recommend thatshareholders vote in favour of this resolution.

If you have sold or transferred your shares in Lavendon Group plc you should pass on this document to the person through whom the sale or transfer wasmade for onward transmission to the purchaser or transferee.

The Company is seeking the approval of shareholders for the adoption of a new employee incentive share matching plan (“the Plan”). A summary of the main features of the Plan is set out below, together with details of the way in which it is intended to operate. Theremuneration policy under which the Plan will operate is set out in the Remuneration Report on pages 10 to 14 of the Annual Report and Accounts.

1. Operation of the PlanAwards under the Plan will normally only be made within a period of 42 days after the announcement of the Company’s results. It isintended that awards will be made on one occasion each year. The first awards are intended to be made soon after the approval andadoption of the Plan by the shareholders. The Plan will terminate, at the latest, 10 years after its adoption. Under the Plan participants will be granted awards over ordinary shares in the Company (“Shares”).

2. EligibilityAll employees and directors of the Company, any subsidiaries and selected associated companies are eligible to participate in the Plan.However it is intended that awards will in fact only be made to employees that fulfill the relevant selection criteria.

3. AwardsAwards under the Plan are not transferable and benefits under the Plan are not pensionable.

Shares issued under the Plan will rank equally with Shares of the same class in issue on the date of allotment, except in respect ofrights arising by reference to a prior record date.

If participants use their own funds to acquire Shares and hold such Shares throughout the performance period, the Plan allows theCompany to grant rights to acquire free matching Shares (“Matching Shares”). A maximum of four Matching Shares will be awarded foreach acquired Share.

One of the Matching Shares will be subject to the first performance condition and will vest after two years. The other three MatchingShares will be subject to the second performance condition and will vest after three years.

4. Performance conditionsIf the Plan is approved, the initial performance condition that will apply to the 2005 awards will be linked to the Company’s share price.

There are two performance targets. The first is satisfied if the price of a share in the Company both increases by at least 25% andreaches a minimum of £2.10 on the second anniversary of the award date. The second performance condition is a sliding scale with apayout of between 0.5 and 3.0 further Matching Shares being payable if the share price reaches between £2.50 and £5.00 on the thirdanniversary of the award date.

There will be no retesting of performance targets after the end of the measurement period. Awards will be released two or three years after grant at the end of the period over which the performance target is measured to the extent the performance target is satisfied.

For future awards, the same type of performance condition may apply or the Company may chose a different performance test, which it considers no less demanding.

5. DividendsParticipants may receive, to the extent that an award vests, a cash amount or a number of Shares equivalent to the value of dividends paid on Shares from the date of the award until vesting and attributable to the number of Shares which vest.

Appendix: proposed Lavendon Group plc Share Matching Plan 2005


6. Satisfaction of the awardsAwards will be satisfied by the transfer of existing shares, the issue of new shares or, in exceptional circumstances, by means of a cashpayment. Shares determined to be due pursuant to an award will be transferred to the participant either free of charge or on payment of the nominal value of the Shares. All personal taxes and social security contributions due in relation to the award and to any issue or transfer of shares or to any cash payments made pursuant thereto (including applicable employer National Insurance contributions)will be due and payable by the participant concerned.

7. Cessation of employmentIf a participant ceases to be an employee or a director, his award will generally lapse. However awards will be reduced to reflect thetime that has elapsed since award and will continue (subject to the same applicable performance targets) in certain circumstancesincluding if employment terminates because of a participant’s ill health, disability, injury, retirement, redundancy or in othercircumstances if allowed by the directors.

If a participant dies, his award will vest to the extent the performance condition has been satisfied and pro rated to reflect the timeelapsed since the award date.

8. Variation in share capitalAwards may be adjusted following certain variations in the share capital of the Company as considered reasonable and appropriate by the directors.

9. Takeovers and reconstructionsOn a takeover or reconstruction, awards may be exchanged for equivalent awards over shares in the acquiring company. Such new Awards will either be subject to an equivalent performance condition or, if they are not to be subject to a performance condition, willonly be exchanged to the extent that the targets are satisfied at the date of the reconstruction or takeover, will be reduced to reflectthe time that has elapsed since award and will lapse as to the balance.

If, on a takeover, the acquiring company does not agree to an exchange of awards, awards will instead vest to the extent that anyperformance targets are satisfied as at the date of the takeover and reduced to reflect the time that has elapsed since award.

10. LimitsIn any 10-year period, not more than 10 percent of the issued ordinary share capital the Company may be issued or issuable under the Plan and under all other employee share incentive plans operated by the Company.

This limit does not include rights which have lapsed or been surrendered.

Rights under the Plan may also be satisfied using treasury shares. If treasury shares are used, they will count towards the dilution limit set out above.

The maximum number of Matching Shares which can be awarded under the Plan is 1,000,000.

No Matching Award can be granted to a Participant if it would cause the total market value of Matching Awards granted to him under the Plan in any given financial year to exceed four times his annual base salary.

11. AmendmentsProvisions related to eligibility, individual and dilution limits, rights attaching to awards and Shares, adjustment of awards and other rights in the event of a variation in share capital and the amendment powers cannot be altered to the advantage of present or futureparticipants without the prior approval of shareholders in general meeting. However, no such approval is required for minor changesincluding changes intended to benefit the administration of the Plan, or to comply with or take account of existing or proposed legislation or any changes in legislation, or to secure favourable tax treatment for the Company or for participants.


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Contents01 Financial highlights02 Chairman’s statement04 Operational review08 Financial review10 Remuneration report 15 Directors’ report 18 Statement of directors’ responsibilities 19 Directors and advisers 20 Corporate governance26 Report of the Audit Committee27 Independent auditors’ report28 Consolidated profit and loss account29 Consolidated and parent

company balance sheets30 Consolidated cash flow statement 31 Notes to the financial statements50 Group five year financial history51 Notice and agenda of

annual general meeting54 Appendix: proposed Lavendon Group plc

Share Matching Plan 2005

Lavendon Group plc

Powered solutions for elevated work areas

What is powered access?

Powered access equipment is designed to enable people to worksafely, productively and comfortably at height. It can be used in a comprehensive range of applications, both inside and outsidebuildings and structures.

Traditional methods of getting people, their tools and equipmentup to an elevated work area include ladders, mobile accesstowers and scaffolding – all of which, if used incorrectly, maypose significant hazards in the workplace. In addition, they canbe time-consuming and costly to erect or reposition in use.

An increased focus on safety in the workplace is a major factorin the accelerating rate of penetration of powered accessequipment, which offers a safe, versatile and cost-effectivealternative to traditional methods. For example, in theconstruction industry falls account for over 50% of all fatalaccidents, and throughout Europe, legislation is beingprogressively tightened to help make it safer to carry out work at height. This campaign for improved safety will continue to drive market demand for powered access equipment acrossEurope as it has in the USA.

The main drivers of substitution for traditional access methods area:

• Commercial pressure to reduce project time scales – where speed, convenience and safety are prime concerns.

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• A growing awareness of the benefits of powered access across a wide range of market sectors outside construction.

• Demonstrable cost-efficiency of powered access comparedwith methods such as aluminium towers and scaffolding, due to its low labour content.

Lavendon is the European market leader in the rental of self-propelled booms and scissor lifts (Mobile Elevating WorkPlatforms or “MEWPs”), with a growing fleet of the morespecialised truck-mounted access platforms. Across Europe andthe Middle East, the Company now operates a fleet of around10,700 machines from a network of over 85 depots.

Powered access machines are available for internal or externaluse. Battery-powered machines are used mainly inside existingbuildings, where users have a requirement for quiet, emission-free machines. Diesel-powered equipment is often usedexternally where its greater power and traction enables a stableworking platform in rugged terrain and difficult conditions.Boom and scissor lifts are self-propelled for easy positioning and the work platform can be raised and lowered either fromthe ground or the elevated work platform. Many models aredesigned to be driven safely in the elevated position, thusadding to their flexibility and increasing productivity.

Powered access equipment is regularly used in a growing anddiverse range of market sectors and applications including signerection, broadcasting, telecommunications, construction andcivil engineering, cleaning and inspection, building services,facilities management and industrial maintenance.

Lavendon Group is the European leader in the rental of powered access equipment.

The quality and diversity of the hire fleet, coupled with the professionalism and accessibility of the depotnetwork, provides an exceptional product range forcustomers and underpins the key operating strategiesof the Group.

Lavendon Group plcAnnual Report and Accounts 2004

Lavendon Group plc

Annual Report and Accounts 2004

Lavendon Group plc1 Midland Court, Central Park,

Lutterworth, Leicestershire LE17 4PN

Tel: 01455 558874 Fax: 01455 559569

Registered in England No. 2771891

www.lavendongroup.comwww.zooomrent.com