Monday 21 January 2008
HAVELOCK EUROPA PLC
Pre-Close Trading Update
Havelock (HVE.L), the Educational and Retail Interiors and Point of Sale Display Group, proposes to announce its results for the year ended 31 December 2007 on Tuesday 8 April 2008. The Board expects these results to show a sixth successive increase in underlying pre-tax profit, with a substantial percentage increase in line with market expectations.
The Retail Interiors Division, which in recent years has tended to contribute the greatest revenue but the smallest profit of the three Divisions, finished the year strongly and its results will reflect the benefits of the significant reorganisation that has taken place over the last two years. Of particular note are the cost savings resulting from a consolidation of manufacturing activities onto a single site and a rapid increase in procurement from low cost countries.
The Point of Sale Display Division also traded well, and better than expected, as a result of solid growth in its customer base following significant capital investment in plant and machinery, including a large format digital litho press.
As indicated in the Interim Announcement of 19 September 2007, the overall results of the Educational Interiors Division have been somewhat disappointing. The extension in the period elapsing between the placing of an order and the commencement of work within the Direct to Schools segment has continued, as projects have become larger and more complex. Whilst the volume of PFI business has continued to grow, this business stream has lower margins and this, when combined with a lower revenue flow from the Direct to Schools segment, will affect the divisional result for the year. In addition, a number of operational issues have contributed to this lower than expected outcome. However, an action plan to rectify these is well established and the changes are already showing benefits, in terms of improved project outcomes and the settlement of outstanding accounts. Elsewhere in the Division, the Group’s new business, Stage Systems, which was acquired in February 2007, traded well and above original expectations.
Net debt levels at 31 December 2007 were significantly lower than those at the same date in 2006 and net finance costs for the year have reduced in comparison to the prior year.
2008 has started with strong order books in place in both the Retail and Educational Interiors Divisions. Within the Retail Interiors Division, the outlook remains positive, with a higher than normal percentage of 2008 sales already visible as a result of significant new store development programmes with House of Fraser and Marks & Spencer, and Boots’ activity in brand consolidation.
Growth in the Educational Interiors Division is also anticipated, with the Group likely to be involved in some 17 PFI and BSF (Building Schools for the Future) projects in 2008, in respect of which letters of intent or orders have already been received for 12. The opening order book for this Division as at 1 January 2008 was £43.4m as compared with £10m as at 1 January 2007. These two Divisions will continue to work closely together under the leadership of Richard Lowery, the main Board Director who is coordinating the business process improvement plan within the Educational businesses.
The volume of activity in low-cost country procurement is expected to double during the year, with five full time employees now in place in Shanghai, bringing benefits to both the Retail and Educational Interiors Divisions. Further cost savings from the property rationalisation at Bristol and Dalgety Bay undertaken in 2007 will come through in 2008, as planned, and these, combined with further operating efficiencies, will contribute to improving profitability.
With a strong client base in the Retail Interiors business, including some in the retail banking sector, many of whom have firm capital expenditure plans, the Group considers that it is well placed to withstand any temporary downturn in the economy. Furthermore, the Point of Sale Division has, in the past, benefited from more difficult trading conditions in the retail sector, as retailers increase their expenditure on promotion to preserve sales volume.
Accordingly, Havelock remains on track for a further year of expansion and views 2008 with enthusiasm although, as usual, it is expected that the great majority of the Group’s profit will be earned in the second half of the year.
Enquiries:
Havelock Europa PLC
01383-820 044
Hew Balfour (Chief Executive) 07801-683 851
Grant Findlay (Finance Director) 07768-745 960
Bankside Consultants Limited
Charles Ponsonby 020-7367 8851
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