Lavendon's level of debt worries City

Lavendon’s share price fell by 39% in the latest rolling four-week period and it would have been bottom of the class but for Severfield. Lavendon’s high level of debt is raising eyebrows, though Andrew Gibb, analyst with stockbroker Oriel Securities, thinks that the gearing (i.e. ratio of debts to assets) figure of 160% shouldn’t raise the alarm.

The adventurous group might wish to add still further to its debt, should it spot another buying opportunity, but the ability to borrow on acceptable rates of interest is no longer what it was three months ago.

“Lavendon has been heavily oversold,” says Gibb. “It is in a stronger position than the market thinks.”