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Havelock Europa PLC (HVE)

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Wednesday 24 September, 2003

Havelock Europa PLC

Interim Results

Havelock Europa PLC
24 September 2003


                                                   
                   HAVELOCK EUROPA PLC - INTERIM ANNOUNCEMENT


Havelock, the Fife-based educational and retail interiors and point of sale
display business, announces an encouraging first six months, in what is
traditionally much the weaker half. A significant increase in pre-tax profit was
achieved, aided by the sale of the Group's share of its Middle East joint
venture. A 17% increase in the interim dividend has been declared.

                                            2003          2002   Change

Turnover (£m)                               42.2          34.5             +22%
Pre-tax profit (£000)                      1,360           754             +80%
Earnings per share (p)                       4.1           2.4             +71%
Dividend per share (p)                       0.7           0.6             +17%


• The underlying figures were a pre-tax profit of £569,000 (2002:
£492,000), up 16%, and earnings per share of 1.4p (2002: 1.6p), reflecting a
higher tax charge due to the increased proportion of UK profit.


• ESA Macintosh, the UK market leader in educational fitted furniture,
increased turnover by 11% to £9.2m, and is well placed to record another
excellent result.


• Point of Sale Display turnover declined by 17% to £10.0m as a result of
the protracted corporate activity in the supermarket sector and some consumer
uncertainty at the time of the outbreak of hostilities in the Gulf, both of
which affected spending on new merchandising formats. Although the overall level
of business in the full year will be lower than 2002, a satisfactory result is
anticipated.


• Retail Interiors increased turnover by 85% to £22.4m and made a
positive first half contribution to the Group for the first time in a number of
years. A strong order book will ensure a much improved performance over that
achieved in the last two years.


• The reduction in exposure to the Middle East, which had contributed
useful earnings in recent years, proved timely, but Havelock remains optimistic
about future opportunities in the Gulf.


Michael Kennedy, Chairman, stated 'The Board remains confident that, overall,
2003 will be a year of further satisfactory progress and will provide a platform
for continuing growth in the coming years, particularly beyond 2004, as the full
impact of Government expenditure in the education sector is realised.'

Enquiries:

Havelock Europa PLC                                               01383-820044
Hew Balfour (Chief Executive)                                     07801-683851
Graham MacSporran (Finance Director)                              07801-683803

Bankside Consultants Limited
Charles Ponsonby                                   07789-202 312/020-7444 4166
Alistair Macdonald                                               020-7444 4168


                              CHAIRMAN'S STATEMENT

FINANCIAL REVIEW

As indicated in my statement at the AGM on 18 June 2003, the Group has had an
encouraging start to the year. In what is traditionally the weaker half of the
year, on turnover up by 22 per cent at
£42.2 million (2002 : £34.5 million), the Group recorded a profit before tax of
£1.36 million (2002 : £0.75 million). Some £935,000 of this profit related to
the sale of the Group's share of the Middle East Joint Venture, Havelock AHI, in
February 2003. The cash proceeds of this sale, net of the re-investment in a 17
per cent share of the purchaser, amounted to £2.0 million.

Underlying pre-tax profit increased by 16 per cent to £569,000 (2002 :
£492,000), after excluding the exceptional profit on disposal of assets of
£935,000 (2002: £399,000) and a goodwill amortisation charge of £144,000 (2002 :
£137,000). Underlying UK profits increased by 164 per cent to £599,000 (2002 :
£227,000).


Basic earnings per share rose to 4.1 pence (2002 : 2.4 pence). Adjusted earnings
per share were 1.4 pence (2002 : 1.6 pence), reflecting a higher tax charge due
to the increased UK proportion of profits.


Net debt at the period end stood at £16.6 million (2002 : £17.8 million). This
reduction was achieved, despite a substantial jump in activity levels, through
strong working capital controls. Full year interest cover is again expected to
be substantial.

DIVIDEND


The Board is pleased to declare an interim dividend per share of 0.7 pence (2002
: 0.6 pence), an increase of 17%. This dividend will be paid on 29 December 2003
to shareholders on the register at close of business on 14 November 2003.


TRADING REVIEW


Educational Furniture


ESA McIntosh is the UK market leader in the design, manufacture and installation
of educational fitted furniture, with facilities in Kirkcaldy, Fife.


Turnover advanced by 11 per cent to £9.2 million (2002 : £8.3 million). Further
progress was made in the proportion of work secured as a sub-contractor to the
educational PFI sector throughout the UK, whilst enquiries for work secured
direct with local authorities and individual schools continued at record levels.


Point of Sale Display


The Point of Sale Display Division prints promotional graphics and manufactures
display equipment in Letchworth and Bristol for use in retail and branded goods
businesses, typically as part of marketing rather than capital expenditure
budgets.


Activity in this division was below budget as a result of the protracted
corporate activity in the supermarket sector and some consumer uncertainty at
the time of the outbreak of hostilities in the Gulf, both of which affected
spending on new merchandising formats. In consequence, turnover in the first
half fell to £10.0 million (2002 : £12.0 million).


Further capital investment was channelled into the print facilities at
Hartcliffe in Bristol, where a new lithographic press was installed in April.
The anticipated benefits to productivity as a result of this investment have
already begun to emerge.


Retail Interiors


The Retail Interiors Division designs, manufactures and installs furniture and
fittings for retailers, banks and hotels from its manufacturing site in Dalgety
Bay, Fife. It also has a project management, sales and design office in
Alfreton, Derbyshire.


The Division entered 2003 with the best order book for many years and the level
of activity has continued to improve. Turnover increased to £22.4 million (2002
: £12.1 million), aided by the completion of a new store for Fenwick in
Canterbury, the hand over of the first stage of a major project for House of
Fraser in Manchester, and increased levels of activity in the banking sector and
the hotel bedroom refurbishment market. With overall volumes showing a
significant increase and with the benefits of operating from a single site
throughout the period, the Division made a positive contribution to the Group in
the first half of the year for the first time in a number of years.


Middle East


Havelock AHI manufactures and installs retail and hotel interiors from its base
in Bahrain.


The reduction in exposure to the Middle East in February 2003 proved timely.
Trading in the first half was inevitably affected by the war in Iraq and the
consumer uncertainty which accompanied it. A loss, attributable to the Group, of
£30,000 was recorded.


STRATEGY


The strategy, set out at the time of the acquisition of ESA McIntosh in
September 2001, to concentrate on UK markets offering significant opportunities
for profitable growth, is continuing to bear fruit. The scale of the market in
educational furniture is very considerable and is likely to provide further
opportunities for substantial growth, particularly beyond 2004, as a result of
PFI projects that are now reaching preferred bidder status or financial close.


Within the Retail Interiors Division, opportunities are being sought to use the
skill base for more profitable work in other sectors, such as furniture for
hotel bedrooms. There is a growing flexibility between the personnel of ESA
McIntosh and the Retail Interiors Division, and this will enable the Group to
harness the combined resources of the two Divisions to take advantage of rising
levels of Government expenditure in the education and healthcare sectors, as
well as in other areas requiring substantial improvements in infrastructure.


Havelock will continue to build upon the Point of Sale Display Division's
strengths, which include an increasing diversity of customers, and intends to
seek opportunities for further growth in this sector.


CURRENT TRADING AND PROSPECTS


Enquiries by individual schools and local authorities are running at record
levels. This, coupled with the volume of PFI work in hand, suggests that ESA
McIntosh will record another excellent result.


PFI orders for educational furniture secured for completion in 2003 total £9.6m.
Negotiations are already at an advanced stage for orders in excess of £10m for
2004, of which £4.5m relates to follow on work to contracts completed in 2003. A
substantial further advance in 2005 is expected with negotiations well underway
for contracts significantly in excess of £15m. To meet the increased demand in
2005, an investment of some £400,000 in additional staff resources will be made
during 2003 and 2004.


A revival of activity has taken place in July and August within the Point of
Sale Display Division and, although the overall level of business in the full
year will be lower than in 2002, a satisfactory result is anticipated.


In the Retail Interiors Division, a strong order book will ensure a much
improved performance over that achieved in the last two years. For reasons
already explained, the share of profit from the Middle East Joint Venture will
be much lower than the contribution achieved in the last three years, but the
uncertainties resulting from the war are now much diminished and the Group
remains optimistic about future opportunities in the Gulf.


Overall, the Board remains confident that 2003 will be a year of further
satisfactory progress and provide a platform for continuing growth in the coming
years, particularly beyond 2004, as the full impact of Government expenditure in
the education sector is realised.


Michael Kennedy
Chairman                                                      24 September 2003

                       UNAUDITED PROFIT AND LOSS ACCOUNT
                      for the half year ended 30 June 2003

                                                Half       Half        Audited
                                                Year       Year           Year
                                               Ended      Ended          Ended
                                             30 June    30 June    31 December
                                                2003       2002           2002
                                    Notes       £000       £000           £000
Turnover

Group and share of Joint Venture              42,168     34,544         87,442

Less: share of Joint Venture's                  (553)    (2,184)        (4,601)
turnover
                                            --------   --------       --------

Group turnover                                41,615     32,360         82,841
                                               =====      =====          =====



Operating profit before exceptional              944        651          4,066
items


Exceptional reorganisation credit                  -        399            399
                                            --------   --------       --------

Operating profit after exceptional               944      1,050          4,465
items


Share of Joint Venture's operating               (24)       269            586
(loss)/profit

Share of Associated Company's
operating loss                                    (4)         -              -
                                            --------   --------       --------


Total operating profit                           916      1,319          5,051


Gain on sale of investments                      935          -              -


Interest payable less receivable

Group                                           (489)      (561)        (1,115)

Joint Venture                                     (2)        (4)           (10)
                                            --------   --------       --------

Profit on ordinary activities
before taxation                                1,360        754          3,926


Tax charge on profit on ordinary        3       (143)       (27)          (995)
activities
                                            --------   --------       --------

Profit for the period                          1,217        727          2,931

Dividend-equity                                 (217)      (185)          (743)
                                            --------   --------       --------

Retained profit for the period                 1,000        542          2,188
                                               =====      =====          =====


Basic earnings per share                4        4.1p       2.4p           9.8p
                                               =====      =====          =====

Adjusted earnings per share             4        1.4p       1.6p           9.4p
                                               =====      =====          =====

Diluted earnings per share              4        3.9p       2.4p           9.6p
                                               =====      =====          =====

Dividend per share                               0.7p       0.6p           2.4p
                                               =====      =====          =====






             STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

                                                  Half         Half    Audited
                                                  Year         Year       Year
                                                 Ended        Ended      Ended
                                               30 June      30 June 31 December
                                                 2003         2002        2002
                                                 £000         £000        £000

Profit for the period                           1,217          727       2,931

Exchange loss on investment in Joint
Venture                                           (21)         (51)       (107)
                                              --------      --------    --------

Total recognised gains relating to the
period                                          1,196          676       2,824


Prior year adjustment (adoption of FRS                        (732)       (732)
19)

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

Total gains/(losses) recognised since           1,196          (56)      2,092
the last annual report                          ======       ======       =====



               STATEMENT OF HISTORICAL COST PROFITS AND LOSSES

Reported profit on ordinary activities          1,360          754       3,926
before taxation

Realisation of property revaluation               --           444         444
gains of previous years

Difference between a historical cost              --            (4)         (4)
depreciation charge and the actual
deprecation charge of the period
calculated on the revalued amount
                                            --------       -------     -------

Historical cost profit on ordinary             1,360        1,194       4,366
activities before taxation
                                            --------     -------      -------


Historical cost profit for the period          1,000          982       2,628
retained after taxation and dividends
                                            ---------    -------      -------



                            UNAUDITED BALANCE SHEET
                               as at 30 June 2003

                                                                          Audited
                                              30 June      30 June    31 December
                                                 2003         2002           2002
                                Notes            £000         £000           £000

Fixed assets

Intangible asset - goodwill                     3,952        4,206          4,077

Tangible assets                                13,222       12,376         12,649


Investment in Associated                          541   
Company

Investment in Joint Venture                                                            
                                                -------     --------    --------
- goodwill                                                     124         112

- share of assets                                            2,250       2,551

- share of liabilities                                        (959)     (1,005)
                                                -------     --------    --------

                                                             1,415       1,658

Investment in own shares                           73          368         368
                                             --------      --------     --------

                                               17,788       18,365      18,752
                                                =====        =====       =====

Current assets

Stocks                              5           7,454        7,471       7,317

Debtors                             6          18,830       17,375      16,725

Cash at bank and in hand                            1            1         902
                                             --------      --------   --------

                                               26,285       24,847      24,944


Prepayments and accrued                           --           434         --
income


Creditors - Amounts falling due
within one year                     7         (24,604)     (24,837)    (24,568)
                                             --------      --------    --------

Net current assets                              1,681          444         376
                                             --------      --------    --------

Total assets less current                      19,469       18,809      19,128
liabilities


Creditors - Amounts falling due
after more than one year            8          (8,745)     (10,798)     (9,399)



Provision for liabilities and                     (79)        --           (79)
charges
                                             --------    --------     --------

Net assets                                     10,645        8,011       9,650
                                                =====        =====       =====


Capital and reserves

Share capital                                   3,101        3,083       3,097

Share premium account               9             891          844         879

Revaluation reserve                 9           1,318        1,318       1,318

Profit and loss account             9           5,335        2,766       4,356
                                             --------     --------    --------

Equity shareholders' funds                     10,645        8,011       9,650
                                                =====        =====       =====



                         UNAUDITED CASH FLOW STATEMENT
                      for the half year ended 30 June 2003

                                               Half        Half        Audited
                                               Year        Year           Year
                                              Ended       Ended          Ended
                                            30 June     30 June    31 December
                                               2003        2002           2002
                                Notes          £000        £000           £000

Cash (outflow)/inflow from
operating activities            10(a)        (2,348)     (1,984)         7,047
                                             ------       -----        -------

Return on investments and
servicing of finance
Interest received                                37           3              5
Interest paid                                  (516)       (559)        (1,114)
                                            -------     --------      --------
                                               (479)       (556)        (1,109)
                                           --------     --------      --------
Taxation (paid) / reimbursed                   (102)        458            498
                                           --------     --------      --------

Capital expenditure and
financial investment

Purchases of tangible fixed                  (1,585)       (504)        (1,807)
assets

Sales of tangible fixed                        --         3,430          3,324
assets

Loan to ESOP trust                             (250)       (118)          (118)
                                           --------     --------      --------

                                             (1,835)      2,808          1,399
                                           ---------    --------      --------


Acquisitions

Deferred consideration and                      (45)       (740)          (238)
fees

Cost of investment in                          (568)         --            --
Associate

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

                                               (613)       (740)          (238)

Disposals

Proceeds from disposal of                     2,567           --          --
interest in Joint Venture


Equity dividends paid                          -            (33)          (682)
                                          --------     --------       --------

Cash (outflow)/inflow before                (2,810)        (47)          6,915
financing
                                         ---------    ---------       --------

Financing

Repayment of loan notes issued
on acquisition of subsidiaries               (1,310)     (2,327)        (4,334)

Capital element of finance
lease rental payments                          (152)       (293)          (516)

Repayment of long term loan                    (624)       (625)        (1,251)

Bank term loan and other                        --         2,600         2,000
advances

Issue of new shares                              16         ---             49
                                            -------      -------      -------

                                             (2,070)       (645)        (4,052)
                                            -------      --------     --------

(Decrease)/increase in cash for 10(b)        (4,880)       (692)         2,863
the period
                                            -------      -------       -------


                             NOTES TO THE STATEMENT


1.      The financial information contained in this statement for the half year
ended 30 June 2003 has been prepared on a basis consistent with the accounting
policies set out in the audited accounts for the year ended 31 December 2002.


The figures for the financial year ended 31 December 2002 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 2003 and the comparative results
for the half year to 30 June 2002 are non-statutory accounts within the meaning
of section 240 of the Companies Act 1985.


2.      All operations are continuing.


3.      A charge for taxation has been included at 31% (2002:30%), being the
effective rate likely to be applied to the UK result, excluding the exceptional
gain, for the full year to 31 December 2003. The results of the Middle East
joint venture (including the exceptional gain) are not subject to taxation.


4.      Basic and adjusted earnings per share are calculated by dividing the
profit after tax by 29,969,760 (2002: 29,853,926), being the weighted average
number of shares in issue during the period, excluding those held by the
employee share scheme in accordance with UITF 13. Diluted earnings per share are
calculated by dividing the profit after tax by 31,082,760 shares, which includes
all share options with an option price less than the average market price for
the period.

Adjusted earnings attributable to
shareholders
                                                  June       June     December
                                                  2003       2002         2002
                                                  £000       £000         £000

Profit after tax                                 1,217        727        2,931
Adjusted for:
Gain on sale of investments                       (935)         -            -
Exceptional items                                    -       (399)        (399)
Amortisation of goodwill                           144        137          277
                                             ---------   --------      -------
Adjusted profit after tax                          426        465        2,809
                                                 =====       =====       =====

Basic weighted average shares                   29,970     29,854       29,940

Diluted weighted average shares                 31,083     30,657       30,590

Basic EPS                                          4.1p       2.4p         9.8p
Adjusted EPS                                       1.4p       1.6p         9.4p
Diluted EPS                                        3.9p       2.4p         9.6p


5.      Stocks                                 30 June    30 June  31 December
                                                  2003       2002         2002
                                                  £000       £000         £000

Raw materials and consumables                    2,144      1,994        2,027
Work in progress                                 2,964      2,775        3,514
Less: Payments to account                       (1,102)        (1)        (787)
Finished goods                                   3,448      2,703        2,563
                                             ---------   --------     --------
                                                 7,454      7,471        7,317
                                                 =====      =====        =====

                                              30 June     30 June  31 December
                                                  2003       2002         2002
                                                  £000       £000         £000
6.      Debtors
Trade debtors                                   17,042     15,800       15,029
Other debtors                                    1,441        868          351
Prepayments                                        347        707        1,345
                                              --------    --------   --------
                                                18,830     17,375       16,725
                                                =====       =====        =====



7.      Creditors: amounts falling
        due within one year
                                       30 June         30 June      31 December
                                          2003           2002             2002
                                          £000           £000             £000
Bank overdraft (secured)                 3,979          2,654               --
Bank loans (secured)                     1,250          1,250            1,250
Loan notes                               2,455          2,781            1,310
Trade creditors                         11,276          8,932           12,610
Corporation tax                            121                              80
Other taxes and social security          2,054          1,837            2,258
Accruals                                 2,564          3,076            3,750
Provision for Nottingham closure           --             856               --
Dividends - Final                          557            463              557
- Interim                                  217            185               --
Obligations under finance leases           131            303              253
Provision for deferred                      --          2,500            2,500
consideration
                                      --------        --------         --------
                                        24,604         24,837           24,568
                                         =====          =====            =====

The loan notes are repayable at par on the holder giving one month's notice. The
Company's obligations under these notes are guaranteed by the Bank of Scotland.
In so far as the ESA McIntosh notes have not already been redeemed, they will be
redeemed in full by the Company on 31 December 2004 at par.



8.      Creditors: amounts falling
        due after more than one year
                                      30 June         30 June      31 December
                                          2003           2002             2002
                                          £000           £000             £000
Bank loans (secured)                     8,563         10,413            9,187
Obligations under hire purchase            182            385              212
contracts
and finance leases
                                      --------       --------         --------
                                         8,745         10,798            9,399
                                         =====          ==               =====

10.   Reserves
                                         Share    Revaluation    Profit & Loss
                                       Premium        Reserve          Account
                                          £000           £000             £000
At 1 January 2003                          879          1,318            4,356
Exchange loss on investment                  -              -              (21)
Issue of new shares                         12              -                -
Retained profit for the period               -              -            1,000
                                        -------       -------          -------
At 30 June 2003                            891          1,318            5,335
                                          ====           ====             ====



11.   Cash Flow Statement                       Half       Half        Audited
                                                Year       Year           Year
                                               ended      Ended          Ended
                                             30 June    30 June    31 December
                                                2003       2002           2002
                                                £000       £000           £000

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

Operating profit after exceptional items         944      1,050          4,465
Depreciation and amortisation charges          1,090      1,264          2,442
Gain on disposal of fixed tangible assets          -       (297)          (145)
Increase in stocks                              (137)    (1,678)        (1,524)
Increase in debtors                           (2,105)      (764)          (528)
(Decrease)/increase in creditors              (2,140)    (1,559)         2,337
                                             -------    -------        -------
Net cash (outflow)/inflow from operating
activities                                    (2,348)    (1,984)         7,047
                                             -------    -------        -------

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

(Decrease)/increase in cash for the           (4,880)      (692)         2,863
period
Finance lease payments                           152        294            516
Inception of new finance leases                             (44)           (44)
Loan notes issued in the period               (2,455)    (1,965)        (2,500)
Loan notes redeemed                            1,310      2,327          4,334
Bank loan repaid                                 624        625          1,251
Bank term loan & other advances                    -     (2,600)        (2,000)
                                             -------    -------        -------
Movement in net debt in the period            (5,249)    (2,055)         4,420

Opening net debt                             (11,310)   (15,730)       (15,730)
                                            --------   --------        --------
Closing net debt                             (16,559)   (17,785)       (11,310)
                                               =====      =====          =====





c)    Analysis of net debt
                                        At                  Other          At
                                 1 January       Cash    Non-Cash     30 June
                                      2003       Flow     Changes        2003
                                      £000       £000        £000        £000

Overdraft                             --      (3,979)        --        (3,979)
Cash at bank and in hand               902       (901)       --             1
                                  --------    -------    --------     -------
                                       902     (4,880)       -         (3,978)
                                  --------    -------    -------      -------
Debt due within one year

Bank loans                          (1,250)       624        (624)     (1,250)
Loan notes                          (1,310)     1,310      (2,455)     (2,455)
Finance lease creditor                (253)       152         (30)       (131)
                                   -------    -------     -------     -------
                                    (2,813)     2,086      (3,109)     (3,836)
                                   -------     -------    -------     -------

Debt due after one year

Finance lease creditor                (212)     --             30        (182)
Bank loans                          (9,187)     --            624      (8,563)
                                   -------     -------    -------     -------
                                    (9,399)      -            654      (8,745)
                                   -------     -------    -------     -------
Total net debt                     (11,310)    (2,794)     (2,455)    (16,559)
                                     =====       ====       ====        =====



12.   The interim statement for the half year ended 30 June 2003 was approved by
the Directors on 23 September 2003.






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