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Havelock Europa PLC (HVE)

  Print      Mail a friend       Annual reports

Friday 07 September, 2001

Havelock Europa PLC

ACQUISITION/INTERIMS

Havelock Europa PLC
7 September 2001

                                                              7 September 2001



                             HAVELOCK EUROPA PLC

                   SUBSTANTIAL ACQUISITION/INTERIM RESULTS


Substantial Acquisition


  * Havelock, the retail interiors and point of sale display business,
    announces the acquisition of McIntosh 88 Ltd and its subsidiary, ESA
    McIntosh, the UK market leader in the design, manufacture and installation
    of educational science laboratories.


  * In the year ended 31 December 2000, McIntosh made an audited pre-tax
    profit of  £932,000 on turnover of £13.3 m. McIntosh's trading results in
    the seven months to end July 2001 have been significantly ahead of the
    equivalent period of the previous year.


  * An initial consideration of £3m will be paid at Completion. Further
    consideration of up to £5m will be payable dependent on McIntosh's pre-tax
    profit in both 2001 and 2002. The maximum additional consideration of £5m
    will only be payable if McIntosh's pre-tax profit in both 2001 and 2002
    reaches £3m. Other than the issue of 2,800,000 new Havelock shares, valued
    at approximately £882,000, the acquisition will be bank financed.


  * The Board resolved to look for opportunities to develop the business
    further into areas, offering prospects of enhanced returns, which also
    build on the Company's existing resources and skills as well as lessening
    the Company's traditional dependence on the non-food retail sector.


  * The directors believe that the acquisition of McIntosh will have the
    following key commercial benefits:


      + the entry of the Group into a market where there is the opportunity
        for significant growth and attractive returns and in which McIntosh
        has already established a strong foothold;


      + the integration into the Group of a business which is geographically
        close to Havelock's headquarters, involving similar production
        processes to those used by Havelock and where the Group's established
        manufacturing skills can be brought to bear to support growth and
        enhance profit;


      + the opportunity to increase the efficiency of the combined business
        through significant asset rationalisation; and


      + a more even manufacturing work flow, as a result of the seasonal
        demand for McIntosh's products falling earlier in the year than that
        of Havelock, thereby enabling an improved utilisation of the
        manufacturing resources of the Enlarged Group.


  * The acquisition is subject to Havelock shareholders' consent at an EGM
    to be held on 24 September.  A circular will be posted shortly.


  * Michael Kennedy, Chairman, stated 'McIntosh is an excellent fit with
    Havelock, with considerable scope for enhancement in earnings per share.
    McIntosh matches our strategic criteria and follows earlier successful
    initiatives to broaden Havelock's business into areas with significant
    growth prospects.' *


Interim Results


  * In what is traditionally the much weaker half of the year, Havelock
    recorded a pre-tax loss of £1,493,000 (2000: loss £1,413,000) on a
    turnover of £24.3 m (2000: £25.7 m), reflecting mixed trading, as
    indicated at the AGM on 29 June 2001.


  * A maintained interim dividend per share of 0.5p is declared.


  * Retail Interiors' turnover was sharply down at £11.4 m (2000: £14.1 m)
    reflecting difficult trading conditions in the retail fashion industry and
    a significant reduction in the volume of work done for Marks & Spencer.


  * Point of Sale Display's turnover increased to £10.2 m (2000:  £10.1 m)
    as a result of increased penetration of the supermarket sector with
    Safeway becoming a more significant customer offsetting a reduction in
    business with Arcadia.  Volumes of business with BHS also grew strongly.


  * Havelock's share of the operating profit of the Middle East retail and
    hotels interiors joint venture increased to £373,000 from £64,000.


  * Net debt of £10.8 m at 30 June 2001 compares with £15.1 m a year
    earlier.


  * With regard to prospects, Michael Kennedy, Chairman, stated 'The level
    of activity in the Retail Interiors Division is likely to be substantially
    less than in 2000 and, with difficult and volatile conditions persisting,
    it is too early to predict the outcome for this year with certainty.
    However, lower volumes of business in Retail Interiors are likely to be
    partly offset by a strong recovery at Showcard Print and a much increased
    contribution from the Middle East, where prospects are most encouraging.'


Enquiries:

Havelock Europa                                                  01383-82 00 44
   Hew Balfour (Chief Executive)
   Graham MacSporran (Finance Director)

Noble Grossart                                                    0131-226 7011
    Guy Stenhouse

Bankside Consultants
    Charles Ponsonby                                              020-7444 4166



* Nothing in this announcement should be construed as a profit forecast or be
interpreted to mean that the future earnings per share of the Company
following the acquisition will necessarily be greater than the historic
published earnings per share of Havelock.



                             HAVELOCK EUROPA PLC

                           ACQUISITION OF McINTOSH



BACKGROUND



Havelock Europa's original core business was the fitting out of retail stores.
In the mid 1990's the board concluded that the demand for traditional retail
shopfitting was likely to reduce and become more volatile. The Board therefore
embarked on a strategy to develop the business into areas which were
complementary to its existing activities and which had the potential to
enhance profitability.


The first element of this strategy was to develop Havelock Europa's presence
in the financial services market and the second was to build, through
acquisition, a point of sale display division. Later, in 1998 the Company also
extended its storefitting business into the Middle East through a joint
venture. Each of these initiatives has proven to be beneficial to the Company.


Havelock Europa is now one of the leading UK providers of retail interiors to
the financial services industry, most notably refitting branches for Bank of
Scotland but also working for Lloyds TSB, HSBC and Barclays. More recently
this activity has been curtailed as a result of the mergers and potential
mergers in this sector. However, the directors believe that this area will
continue to offer opportunity for growth once the recent spate of corporate
activity in the sector is concluded.


In point of sale display the Company acquired three businesses, Showcard Print
and Showcard Display in 1996, followed by Hartcliffe in 1997. These have
successfully established themselves as Havelock Europa's point of sale display
division which is trading strongly in the current year assisted by increased
penetration of the supermarket sector. The board believes this division has
the potential for further growth.


The Middle East joint venture is trading particularly well. As reported in the
results for the six months to 30th June 2001, Havelock Europa's share of the
operating profits of the joint venture in the period amounted to £373,000,
which compares with £64,000 in the equivalent period of the previous year. On
29th June 2001 the Company announced that the joint venture had reached
conditional agreement to acquire the factory and fixed assets of the Bahrain
Light Industries Company enabling the joint venture to meet its aspirations
for continuing growth. Prospects for the joint venture are good.


Notwithstanding these initiatives, the Company's profitability remains well
below that achieved in earlier years and well below what the board believes is
satisfactory.


The Company is experiencing difficult and unpredictable markets in its UK
retail interiors arm, where fashion retail continues to suffer from mixed
fortunes, and also reduced investment in the financial services market as a
result of the number of actual and potential acquisitions and mergers in that
sector. Together with particularly fierce competition in the retail supply
chain and an increasing trend towards a pronounced seasonality in favour of
the second half, these factors have created more difficult trading conditions.
Although the board expects some recovery in the medium term it believes that
the retail market is likely to remain difficult and unpredictable for some
time.


In the light of this difficult background and following discussions with
shareholders the board committed publicly to pursue actively options which
would maximise shareholder value. The Company, with the assistance of its
financial advisers, has, over a prolonged period, developed and evaluated a
number of initiatives, in order to determine whether there might be an
opportunity to deliver value for shareholders in line with that commitment. As
part of these initiatives the board has invited offers for the entire issued
share capital of the Company.


In recent months, detailed discussions have been held with a number of parties
but none has resulted in a definite proposal which the board could recommend
to shareholders. Accordingly, the board has resolved to look for opportunities
to develop the business further into areas, offering prospects of enhanced
returns, which also build on the Company's existing resources and skills as
well as lessening the Company's traditional dependence on the non-food retail
sector. In pursuing this objective the board has identified McIntosh.



McINTOSH


McIntosh, based near Havelock Europa's headquarters in Fife, is the UK market
leader in the design, manufacture and installation of educational science
laboratories. Government expenditure in the education sector has increased
dramatically recently and the directors believe that high levels of demand are
likely to continue for some time as a result of many years of underinvestment
and the Government's commitment to correct this. McIntosh has been
particularly successful in securing the majority of work available in
educational PFI contracts in Scotland. Scotland's experience of PFI in terms
of improving the quality of school environments is greater than that of
England where the development of PFI is less advanced in this sector. The
directors believe that McIntosh is well-placed to benefit from the significant
new business opportunities which are emerging in the English market.


THE TERMS AND FINANCING OF THE TRANSACTION

The terms of the acquisition are as follows:


(i)         An initial payment of £3 million payable on completion to be
satisfied by the issue of      2,800,000 new ordinary shares in Havelock
Europa and approximately £2.1 million of loan notes (see (iv) below), subject
to a possible net asset value adjustment.
            

(ii)        A first deferred payment based on McIntosh's audited
profit before tax (as defined in the share acquisition agreement) for the year
ending 31st December 2001 which, if payable, will be satisfied by the issue of
further loan notes. The maximum payment would be £2.5 million which would
require a profit before tax of £3 million. To the extent that such profit
falls below £3 million down to a profit of £2.5 million the first deferred
consideration will be reduced on a £ for £ basis and will reduce by £2 for
every £1 shortfall in profit below £2.5 million. No first deferred
consideration will be payable unless profit before tax exceeds £1.5 million.
Any amount payable in excess of £2 million relating to the first deferred
consideration will be placed in escrow pending agreement of the audited profit
before tax for the year to 31st December 2002 and its release will depend on
the average level of profit in that year and 2001 being not less than £2
million.  The escrow amount, if it becomes payable to the vendors, will fund
the issue of further loan notes to them (see (iv) below).  If the average
profits are less than £2 million the escrow amount will be released to the
Company.


(iii)       A second deferred payment of up to £2.5 million, satisfied by the
issue of loan notes (see (iv) below), based on the audited profit before tax
for the year ending 31st December 2002 on the same formula as in (ii) above.


(iv)       two individuals, who each own one share in McIntosh (out of a total
of 111), will receive cash as consideration rather than loan notes.


The maximum consideration payable is therefore £8 million; this amount will
only be payable if McIntosh's profit before tax (as defined in the share
acquisition agreement) in both 2001 and 2002 is at least £3 million.


The loan notes to be issued as part of the transaction will be guaranteed by
Bank of Scotland and will bear interest at one per cent. below Bank of
Scotland base rate. The loan notes may be redeemed at the vendors' option on
14 days' notice at any time at least six months and one day after the date on
which the relevant notes are issued, and will in any event be repaid on 31st
December 2004. The loan notes will not be listed on any exchange.


Other than the Consideration Shares referred to above, the acquisition will be
financed by a combination of existing and additional bank facilities.


The Consideration Shares are being issued at a price of 31.5 pence each being
the average closing mid-market price of the Company's shares according to the
Daily Official List on the five business days prior to signature of the Sale &
Purchase Agreement and will represent an increase of 9.99 per cent. in
Havelock Europa's issued share capital.


Application will be made to the UK Listing Authority for the Consideration
Shares to be admitted to the Official List. Application will also be made to
the London Stock Exchange for the Consideration Shares to be admitted to
trading. It is expected that listing of the Consideration Shares will become
effective and that trading in such shares on the London Stock Exchange will
commence on 25 September 2001. The Consideration Shares will, when allotted
and finally paid, rank equally in all respects with existing shares.  The
Consideration Shares may be held in either certificated or uncertificated
form.  No application has been made or is proposed to be made for the
admission of the Company's shares to trading on any other exchange.



FINANCIAL RECORD OF McINTOSH

The figures set out in this paragraph are extracted from the audited accounts
of McIntosh.


In the year ended 31st December 2000, McIntosh recorded an audited profit
before taxation of £931,709 on turnover of £13,316,363. At 31st December 2000
McIntosh's net assets were £3,854,593 and net debt (overdrafts, bank loans and
finance leases less cash in hand) was £886,757.


McIntosh's trading results in the seven months ended July 2001 have been
significantly ahead of the equivalent period of the previous year. An interim
dividend payment of £351,000 was made in July 2001. McIntosh intends, prior to
the completion of the transaction, to pay a dividend of £2,649,000.



MANAGEMENT OF McINTOSH


McIntosh's executive chairman is Roy Bell (age 60) who, through trusts
associated with his family and with other members of his family, presently
owns approximately 90 per cent. of McIntosh's share capital. McIntosh's
managing director is William McColl (age 43) who, through trusts associated
with his family, presently owns approximately 10 per cent. of McIntosh's share
capital.


Following the acquisition Messrs Bell and McColl will remain with McIntosh
reporting to Hew Balfour, chief executive of Havelock Europa. Havelock Europa
has given undertakings that McIntosh will operate as an autonomous business at
least until 31st December 2002.


Mr Bell will enter into a new fixed term service contract with McIntosh as
joint chairman expiring on 31st March 2003 under which he will work at
McIntosh at such times as may be required from time to time. Mr Bell has
indicated that it is his intention to retire when his contract expires.


Mr McColl will enter into a new service contract with McIntosh as managing
director terminable by three months' notice by either party, such notice not
to expire on or before 31st March 2003. Mr McColl will devote his full time to
the McIntosh business.



THE BENEFITS OF THE ACQUISITION TO HAVELOCK EUROPA


The directors believe that the acquisition of McIntosh will have the following
key benefits:


  * a significant uplift in earnings per share compared with earnings per
    share without McIntosh;


  * a marked improvement in interest cover coupled with an enhanced
    cashflow;


  * the entry of the Group into a market where there is the opportunity for
    significant growth and attractive returns and in which McIntosh has
    already established a strong foothold;


  * the integration into the Group of a business which is geographically
    close to Havelock Europa's headquarters, involving similar production
    processes to those used by Havelock Europa and where the Group's
    established manufacturing skills can be brought to bear to support growth
    and enhance profit;


  * the opportunity to increase the efficiency of the combined business
    through significant asset rationalisation; and


  * a more even manufacturing work flow, as a result of the seasonal demand
    for McIntosh's products falling earlier in the year than that of Havelock
    Europa, thereby enabling an improved utilisation of the manufacturing
    resources of the Enlarged Group.



EXTRAORDINARY GENERAL MEETING


A circular shortly to be posted to shareholders will contain a notice
convening an Extraordinary General Meeting of the Company for 24 September
2001 at which meeting an ordinary resolution will be proposed to approve the
Acquisition. Three further resolutions will be proposed to restore the
unissued share capital and the board's authority to issue shares to normal
levels, after taking account of the shares to be issued to acquire McIntosh,
as well as increasing the Company's borrowing powers.




                             HAVELOCK EUROPA PLC

                             INTERIM ANNOUNCEMENT

                    for the six months ended 30 June 2001



                             CHAIRMAN'S STATEMENT


OVERVIEW


As indicated in the Chairman's Statement at the AGM on 29 June the Group has
had a mixed start to the year, with a strong performance from Showcard Print
and the Middle Eastern joint venture and a more difficult trading environment
for the UK Retail Interiors Division.



The Group recorded a loss of before tax of £1,493,000 (2000 loss before tax :
£1,413,000) on a turnover of £24.3 million (2000 : £25.7 million), in what is
traditionally the much weaker half of the year.


DIVIDEND


The Board has declared an interim dividend per share of 0.5p (2000 interim
0.5p) which will be paid on 28 December 2001 to shareholders on the register
at close of business on 16 November 2001.

TRADING



Retail Interiors


Turnover was sharply down at £11.4 million (2000 : £14.1 million) reflecting
difficult trading conditions in the retail fashion industry and a significant
reduction in the volume of work done for Marks & Spencer.



Point of Sale Display


Turnover increased to £10.2 million  (2000 : £10.1 million) as a result of
increased penetration of the supermarket sector with Safeway becoming a more
significant customer offsetting a reduction with Arcadia.  Volumes of business
with BHS also grew strongly.



Joint Venture


The joint venture made an excellent start to the year with a particularly
strong performance in the retail market.  The business continues to generate a
substantial cash flow and during May repaid all outstanding indebtedness to
the Group.



INDEBTEDNESS AND INTEREST


Net debt at £10.8 million at 30 June 2001 compares with £15.1 million a year
earlier reflecting strong cash flows over the last 12 months and lower
interest charges.  Gearing at 124.6% (2000 : 221.5%) is correspondingly lower.

PROSPECTS


The level of activity in the Retail Interiors Division is likely to be
substantially less than in 2000 and, with difficult and volatile conditions
persisting, it is too early to predict the outcome for this year with
certainty.  However, lower volumes of business in Retail Interiors are likely
to be partly offset by a strong recovery at Showcard Print and a much
increased contribution from the Middle East, where prospects are most
encouraging.



Michael Kennedy                                               7  September 2001
Chairman



                              HAVELOCK EUROPA PLC

                      UNAUDITED PROFIT AND LOSS ACCOUNT

                    For the six months ended 30 June 2001


                                                          Half    Half Audited
                                                          Year    Year    year
                                                         Ended   Ended   Ended
                                                       30 June 30 June  31 Dec
                                                          2001    2000    2000
                                                 Notes    £000    £000    £000
Turnover

Group and share of Joint Venture                        24,260  25,689  71,511
Less:  share of Joint Venture's turnover               (2,657) (1,302) (3,364)

                                                      -------- -------- --------
                                                        21,603  24,387  68,147
                                                         =====   =====   =====

Operating (loss)/profit                                (1,461)   (933)   2,266
Share of Joint Venture's
operating profit                                           373      64     408

                                                      -------- -------- --------
                                                       (1,088)   (869)   2,674

Interest payable less receivable
Group                                                    (397)   (521) (1,127)
Joint Venture                                              (8)    (23)    (34)

                                                      -------- -------- --------

(Loss)/profit on ordinary activities before
taxation                                               (1,493) (1,413)   1,513
                                                      
Tax credit/(charge) on (loss)/profit on ordinary
activities                                         3       669     538   (412)
                                                      -------- -------- --------
                                                      

(Loss)/profit for the period                             (824)   (875)   1,101
Dividend                                                 (140)   (140)   (490)

                                                      -------- -------- --------
Retained (loss)/profit for the period                    (964) (1,015)     611
                                                         =====   =====   =====

Basic and diluted (loss)/earnings per share        4    (3.0p)  (3.1p)    4.0p
                                                         =====   =====   =====
                                                                                
Dividend per share                                       0.50p   0.50p   1.75p
                                                         =====   =====   =====



                STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES



(Loss)/profit for the period                             (824)   (875)   1,101

Exchange gain on investment in Joint Venture
                                                            16      16      19
Surplus on revaluation of fixed assets                       -       -   1,125

                                                        ______  ______  ______
Total recognised (losses)/gains relating to the
period                                                   (808)   (859)   2,245
                                                         =====   =====   =====
                                                         


                                                     
                              HAVELOCK EUROPA PLC

                           UNAUDITED BALANCE SHEET

                              As at 30 June 2001


                                                                  Audited
                                                  30 June 30 June  31 Dec
                                                     2001    2000    2000
                                            Notes    £000    £000    £000

Fixed Assets
Intangible asset - goodwill                           135     173     154
Tangible assets                                    12,937  13,116  13,511
Investment in own shares                              249     120     221
Investment in Joint Venture
- goodwill                                            148     172     160
- share of assets                                   2,075   1,077   1,503
- share of liabilities                             (1,254)   (787)   (877)

                                                      969     462     786

                                                  -------- -------- --------
                                                   14,290  13,871  14,672
                                                    =====   =====   =====

Current Assets

Stocks                                        5     5,802   7,122   4,835
Debtors                                       6    10,755  11,000  14,729
Cash at bank and in hand                              965      33   2,417
                                                  -------- -------- --------
                                                   17,522  18,155  21,981
Creditors - amounts falling due within one
year                                          7   (12,409) (13,989) (16,109)
                                                  -------- -------- --------
                                                 
Net Current Assets                                  5,113   4,166   5,872

                                                  -------- -------- --------
Total Assets Less Current Liabilities              19,403  18,037  20,544


Creditors - amounts falling due after more
than one year                                 8   (10,195) (10,589) (10,388)
                                              
Provision for liabilities and charges               (564)   (610)   (564)
                                                  -------- -------- --------
Net Assets                                          8,644   6,838   9,592
                                                    =====   =====   =====


Capital and Reserves

Share capital                                       2,803   2,803   2,803
Share premium account                         9       242     242     242
Revaluation reserves                          9     1,762     637   1,762
Profit and loss account                       9     3,837   3,156   4,785
                                                  -------- -------- --------
Equity Shareholders' Funds                          8,644   6,838   9,592

                                                    =====   =====   =====


                             HAVELOCK EUROPA PLC

                        UNAUDITED CASH FLOW STATEMENT

                    For the six months ended 30 June 2001


                                                           Half    Half Audited
                                                           Year    Year    year
                                                          Ended   Ended   ended
                                                        30 June 30 June  31 Dec
                                                           2001    2000    2000
                                                 Notes     £000    £000    £000

Cash (outflow)/inflow from operating activities  10(a)    (166)   (314)   6,946
                                                       -------- -------- -------
                                                       
Return on investments and servicing of finance
Interest received                                            29       2      16
Interest paid                                             (448)   (456) (1,078)
                                                      -------- -------- --------
                                                          (419)   (454) (1,062)
                                                      -------- -------- --------
Taxation                                                  (212)   (171)   (442)

                                                      -------- -------- --------

Capital expenditure and financial investment
Purchases of tangible fixed assets                        (552)   (614)   (988)
Proceeds from sale of tangible fixed assets                  32       -      49
                                                      -------- -------- --------

                                                          (520)   (614)   (939)

                                                     --------- -------- --------
Acquisitions
Repayment of Loan from Joint Venture                        186       -       -

                                                     ---------- ------- --------

Equity dividends paid                                         -       -   (420)

                                                      -------- -------- --------
Cash (outflow)/inflow before use of liquid
resources and financing                                 (1,131) (1,553)   4,083
                                                    --------- --------- --------
  
                                                    

Financing and management of liquid resources
Repayment of loan notes issued on acquisition of
subsidiaries                                              (100)    (95)   (115)
Loan to ESOP Trust                                         (28)   (120)   (221)
Capital element of finance lease rental payments          (193)   (175)   (358)
                                                        ------- ------- ------- 
                                                          (321)   (390)   (694)
                                                       ------- -------- --------
(Decrease)/increase in cash for the period.      10(b)  (1,452) (1,943)   3,389
                                                        ------- ------- -------
                                                
                                                        


                             HAVELOCK EUROPA PLC

                            NOTES TO THE STATEMENT


1.       The figures for the financial year ended 31 December 2000 are
extracted from the statutory accounts for that year on which an unqualified
report was made by the Auditors and which have been delivered to the Registrar
of Companies.  The summarised results for the half-year to 30 June 2001 and
the comparative results for the half-year to 30 June 2000 are non-statutory
accounts within the meaning of section 240 of the Companies Act 1985.



2.       All operations are continuing.



3.       A credit for taxation has been included at 36% (2000:37%), being the
effective rate likely to be applied to the UK result for the full year to 31
December 2001.  The results of the Middle East joint venture are not estimated
to be subject to taxation in this year.



4.       (Loss)/earnings per share is calculated by dividing the loss or
profit after tax by 27,443,429 (2000: 28,033,849) being the average number of
shares in issue during the period, excluding those held by the employee share
scheme in accordance with UITF 13.  There is no dilutive effect of unexercised
share options.



5.       Stocks                             30 June       30 June        31 Dec
                                               2001          2000          2000
                                               £000          £000          £000

      Raw material and consumables            1,926         2,182         1,588
      Work in progress                        1,710         2,248         1,082
      Less: payments to account                (26)          (15)             -
      Finished goods                          2,192         2,707         2,165
                                          ---------      --------      --------
                                              5,802         7,122         4,835
                                              =====         =====         =====


                                            30 June       30 June        31 Dec
                                               2001          2000          2000
                                               £000          £000          £000
6.      Debtors
      Trade debtors                           9,133         9,338        13,671
      Other debtors                             744           530           348
      Prepayments                               878         1,132           710
                                           --------      --------      --------
                                             10,755        11,000        14,729
                                              =====         =====         =====



7.       Creditors: amounts falling due within one year

                                                    30 June     30 June  31 Dec
                                                       2001        2000    2000
                                                       £000        £000    £000

      Bank advances (secured)                             -       2,948       -
      Loan notes                                      1,144       1,264   1,244
      Trade creditors                                 6,539       5,501   8,281
      Corporation tax                                     -           -     359
      Other taxes and social security                 1,008         879   2,943
      Accruals                                        2,835       2,602   2,539
      Dividends:
      -   Final                                         350         280     350
      -   Interim                                       140         140       -
      Obligations under finance leases                  393         375     393
                                                   --------    -------- --------
                                                     12,409      13,989  16,109
                                                      =====       =====   =====

The loan notes are repayable at par on the holder giving one month's
notice.  In so far as the notes have not already been redeemed, they will be
redeemed in full by the Company on 5 January 2003 at par.


8.       Creditors: amounts falling due after more than one year

                                                    30 June     30 June  31 Dec
                                                       2001        2000    2000
                                                       £000        £000    £000

      Bank loans (secured)                           10,000      10,000  10,000
      Obligations under finance leases                  195         589     388
                                                   --------    -------- --------
                                                     10,195      10,589  10,388
                                                      =====       =====   =====

9.       Reserves
                                                                          Profit
                                                      Share Revaluation and Loss
                                                    Premium     Reserve  Account
                                                       £000        £000    £000

      At 1 January 2001                                 242       1,762   4,785
      Exchange gain on investment                         -           -      16
      Loss for the period                                 -           -   (964)
                                                    -------     ------- -------
      At 30 June 2001                                   242       1,762   3,837
                                                       ====        ====    ====



10.   Cash Flow Statement                                   Half   Half 
                                                            year   Year Audited 
                                                           ended  Ended    Year
                                                              30     30   Ended
                                                            June   June  31 Dec
                                                            2001   2000    2000
                                                            £000   £000    £000

a)   Reconciliation of operating (loss)/profit to net
cash flow from operating activities

      Operating (loss)/profit                             (1,461)  (933)   2,266
      Depreciation and amortisation charges                1,049  1,073   2,166
      Loss on disposal of fixed tangible assets                -      -      10
      (Increase)/decrease in stocks                        (968)  (518)   1,769
      Decrease/ (increase) in debtors                      4,496  3,765   (330)
      (Decrease)/increase in creditors                    (3,282) (3,701)  1,065
                                                         ------- ------- -------
      Net cash (outflow)/inflow from operating activities   (166)  (314)   6,946
                                                         ------- ------- -------

b)   Reconciliation of net cash flow to movement in net 
     debt

     (Decrease)/Increase in cash for the period          (1,452) (1,943)   3,389
      Finance lease payments                                 193    175     358
      Loan notes redeemed                                    100     95     115
                                                         ------- ------- -------
     Movement in net debt in the period                  (1,159) (1,673)   3,862
     Opening net debt                                    (9,608)(13,470)(13,470)
                                                       -------- -------- -------
     Closing net debt                                   (10,767) (15,143)(9,608)
                                                           =====  =====   =====



c)   Analysis of net funds
                                   At               Other            At
                                1 Jan      Cash  non-cash       30 June
                                 2001      flow   changes          2001
                                 £000      £000      £000          £000

      Cash at bank and in hand  2,417   (1,452)   -                965
                                ====      ====      ====          ====

      Debt due within one year

      Loan notes                (1,244)   100       -             (1,144)
      Finance lease creditor    (393)     193       (193)         (393)
                                -------   -------   -------       -------
                                (1,637)   293       (193)         (1,537)
                                -------   -------   -------       -------

      Debt due after one year

      Bank loans                (10,000)  -         -             (10,000)
      Finance lease creditor    (388)     -         193           (195)
                                -------   -------   -------       -------
                                (10,388)  -         193           (10,195)
                                -------   -------   -------       -------
      Total net debt            (9,608)   (1,159)   -             (10,767)
                                =====     ====      ====          =====



11.  The interim statement for the six months ended 30 June 2001 was approved
by the Directors on 6 September 2001.


INDEPENDENT REVIEW REPORT BY KPMG AUDIT PLC TO HAVELOCK EUROPA PLC



KPMG Audit Plc
24 Blythswood Square
Glasgow
G2 4QS
United Kingdom



Introduction

We have been instructed by the Company to review the financial information set
out in Part 3 of the circular dated 7 September and we have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.



Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors.  The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with
those applied in preparing the preceding annual accounts except where they are
to be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be disclosed.



Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999
/4:  Review of Interim Financial Information issued by the Auditing Practices
Board.  A review consists principally of making enquiries of group management
and applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed.  A
review is substantially less in scope than an audit performed in accordance
with Auditing Standards and therefore provides a lower level of assurance than
an audit.  Accordingly, we do not express an audit opinion on the financial
information.



Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2001.


KPMG Audit Plc
Chartered Accountants


7 September 2001