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Havelock Europa PLC (HVE)

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Friday 23 November, 2001

Havelock Europa PLC

Proposed Restructuring

Havelock Europa PLC
23 November 2001



                                HAVELOCK TO CREATE
                         CENTRES OF EXCELLENCE IN SCOTLAND


*   Havelock Europa PLC, the retail interiors, point of sale display and
    educational furniture group, announces its intention to create centres 
    of excellence for its retail interiors and educational furniture          
    businesses, which will both be located in Fife, Scotland.  As a result 
    of these moves, the Company proposes to close its manufacturing plant 
    in Nottingham.

*   As envisaged in the September 2001 McIntosh acquisition circular,
    significant asset rationalisation and the proximity of the educational
    furniture plant of ESA McIntosh to the Group's existing premises in Fife 
    will permit improved utilisation of the manufacturing resources of the      
    enlarged group.

*   The Directors estimate that the proposed restructuring should
    generate annualised savings in the order of £2.0m for a one-off exceptional
    provision in the current year of approximately £3.75m, permitting the Retail
    Interiors Division to trade profitably in the future at a  much lower level 
    of activity.  The associated short term cash outlay would be £2.5 million, 
    which would be accommodated by existing available resources.

*   Trading for the year ending 31 December 2001 remains in line with
    expectations, with intensely competitive conditions for UK retail interiors
    offsetting strong performances by ESA McIntosh, the point of sale display
    businesses and the Middle Eastern interiors joint venture.

*   Michael Kennedy, Chairman, stated 'The successful implementation of
    these moves would result in the creation of centres of excellence in 
    Scotland, for the design and manufacture of store fittings and educational 
    furniture, unrivalled in the UK. Overall, these proposed changes, which will
    enhance our ability to serve our clients effectively, coupled with a greater
    emphasis and orientation towards the buoyant markets of educational 
    furniture, point of sale display and Middle East interiors, will, when fully
    implemented, have a marked effect on improving shareholder value'.


Enquiries:


Havelock Europa PLC                                               01383-820044
Hew Balfour  (Chief Executive)                            Mobile: 07801-683851

Bankside Consultants Limited
Charles Ponsonby                                                 020-7444 4166




                                HAVELOCK TO CREATE
                           CENTRES OF EXCELLENCE IN SCOTLAND


INTRODUCTION



Havelock Europa, the retail interiors, point of sale display and educational
furniture group, announces its intention to create centres of excellence for
its retail interiors and educational furniture businesses in Fife, Scotland in
pursuit of its stated objective of maximising shareholder value.

The Group's trading for the year ending 31 December 2001 remains in line with
expectations.  However, the effects of the intensely competitive conditions in
the retail fashion market on the Retail Interiors Division are offsetting
strong performances from its newly acquired subsidiary in the educational
furniture market, ESA McIntosh, its point of sale display businesses, Showcard
and Hartcliffe, and its Middle Eastern interiors joint venture, Havelock AHI.
The Board has taken the view that these conditions are unlikely to change
significantly in 2002.  Accordingly, radical action is proposed to restructure
the Retail Interiors Division in order to deliver a more balanced and
efficient business capable of delivering better returns for shareholders.



ASSET RATIONALISATION PROGRAMME


As outlined in the Group's circular to shareholders dated 7 September 2001,
the acquisition of McIntosh will have the following 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; and

-   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.


Current trading at ESA McIntosh is running well up to expectations.  A strong
3rd quarter has been followed by an excellent start to quarter 4.  The company
has produced significant amounts of furniture for the Glasgow schools PFI and
in the last few weeks has been awarded new work for PFI schemes in Aberdeen
and West Lothian.  Negotiations are in hand with other major contractors
specialising in educational projects not only in Scotland but also in England
and the Republic of Ireland, and further progress in this sector is
anticipated in the near future.

Importantly, as was originally envisaged, this acquisition also presents an
opportunity to increase the efficiency of the combined businesses through
significant asset rationalisation.  In addition, a more even manufacturing
workflow, as a result of the seasonal demand for McIntosh's products falling
earlier in the year than that of the Retail Interiors Division, will enable
the management to achieve an improved utilisation of the manufacturing
resources of the enlarged group.

As part of this process, the proposed closure of Havelock's storefitting plant
at Eastwood, Nottingham, is announced.  Detailed discussions will now take
place with the unions and workforce at Nottingham with a view to restructuring
the Retail Interiors Division's operations, such that, from early 2002,
production of all timber and metal componentry for the retail, banking and
educational furniture sectors would take place in Scotland at the Group's
premises in Dalgety Bay and Kirkcaldy.  Implementation of the restructuring
would result in up to 200 redundancies at Nottingham offset by the creation of
up to 90 new jobs in Scotland following the transfer of a proportion of
timber processing machines to Dalgety Bay.  The balance of the plant at
Nottingham would either  be transferred to Havelock's Middle Eastern joint
venture or sold.  In due course, once the moves have been agreed and
completed, Havelock's buildings and land at Nottingham would be put up for
sale.  A strong sales and project management arm would remain located in the
East Midlands to serve the Retail Interiors Division's southern-based
customers.  The successful implementation of these moves would result in the
creation of centres of excellence in Scotland, exceeding 400,000 square feet
in area, for the design and manufacture of store fittings and educational
furniture, unrivalled in the UK.



COSTS AND BENEFITS


The cost of achieving this proposed restructuring, which remains subject to
the outcome of the consultation process, would total approximately £3.75
million including redundancy payments, the write-off of some plant and
equipment, moving and recommissioning certain key elements of equipment and
all necessary works to make the Nottingham premises saleable. The associated
short term cash outlay would be £2.5 million, which would be accommodated by
existing available resources. The Group intends to make a provision in the
current year to cover these costs totalling approximately £3.75 million, which
would be taken as an exceptional item.

The directors believe that the benefits of the restructuring would be very
considerable.  It is estimated that there would be annualised savings in the
order of £2.0 million, which would enable the Retail Interiors Division to
trade profitably at a much lower level of activity.  In addition, there remain
considerable benefits from closer co-operation between the manufacturing
activities of McIntosh and the  Retail Interiors Division.  These are likely
to begin to accrue during 2003.



CONCLUSION


It is expected that the consultation process with the workforce at Nottingham
will be complete by the end of February and, subject  to the outcome of that
process, the proposed asset rationalisation plan should therefore be fully
implemented by early April, traditionally a quiet period of activity in the
Retail Interiors Division.  As a result of the acquisition of McIntosh, the
amount of space and resources available for the manufacture of timber products
would remain in line with that which existed prior to the acquisition of this
subsidiary but structured in such a way as to make a much more effective
utilisation of resources. The Group would therefore expect to be able to
maintain all the necessary skills and processes to satisfy its existing
customer base in the retail sector, with the added benefit of the co-location
of all the Group's design and manufacturing resources for fixtures and
fittings.

The Board expects that the cash outlay of this restructuring plan would in due
course be substantially recovered on sale of the Nottingham premises and that
the streamlining of its manufacturing premises would have major and swift
benefits.

Michael Kennedy, Chairman, stated: 'The successful implementation of these
moves would result in the creation of centres of excellence in Scotland, for
the design and manufacture of store fittings and educational furniture,
unrivalled in the UK. Overall, these proposed changes, which will enhance our
ability to serve our customers effectively, coupled with a greater emphasis
and orientation towards the buoyant markets of educational furniture, point of
sale display and Middle East interiors, will, when fully implemented, have a
marked effect on improving shareholder value.'