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Havelock Europa PLC (HVE)

  Print      Mail a friend       Annual reports

Tuesday 08 April, 2008

Havelock Europa PLC

Final Results

Havelock Europa PLC
08 April 2008


Tuesday 8 April 2008



                 HAVELOCK EUROPA PLC - PRELIMINARY ANNOUNCEMENT


Havelock, the Educational and Retail Interiors and Point of Sale Display Group,
announces a year of further progress, with underlying pre-tax profit increasing
substantially for a sixth successive year.


Financial Highlights


   • Revenue increased by 9% to £125.0m.


   • Underlying+ pre-tax profit increased by 23% to £7.1m and underlying+
     fully diluted earnings per share were 13.1p, up 13%.


   • Reported pre-tax profit was £6.7m, up 24%, and reported fully diluted
     earnings per share amounted to 12.0p, up 13%.


   • Gearing fell from 88% to 48%, a third successive annual decrease.


   • With the final dividend per share up 13% to 3.4p, total dividends per
     share are increased by 13% to 4.5p, covered 2.6 times.


+ Underlying excludes amortisation of intangibles (other than software) of £0.4m
(2006: £0.4m).


Commercial Highlights


   • Retail Interiors finished the year strongly, with revenue up 14% to
    £54.0m as a result of strong performances with House of Fraser, Marks and
    Spencer, Primark, HBOS and Boots the Chemist.


   • Retail Interiors started 2008 with strong order books and Havelock
    considers that the Division is well placed to withstand any temporary
    downturn in the retail sector.


   • Point of Sale Display produced an excellent result, following
    significant capital investment in plant and machinery, and revenue increased
    marginally to £27.6m.


   • Point of Sale Display has, in the past, benefited from more difficult
    trading conditions in the retail sector, as retailers increase their
    expenditure on promotion to preserve sales. First quarter order intake
    increased substantially as a result of the addition of new customers.
    Another good year is expected in Point of Sale Display.





   • As indicated in the pre-close trading update issued on 21 January 2008,
    the overall results of Educational Interiors were disappointing. Whilst
    revenue increased by 9% to £43.3m, all of this increase was accounted for by
    revenue from the newly-acquired Stage Systems.



   • In 2008, renewed organic growth in Educational Interiors is anticipated,
    with the Group likely to be involved in approximately 21 PFI and BSF
    projects in 2008, in respect to which letters of intent or orders have
    already been received for 19. Its opening order book as at 1 January 2008
    was £43.4m as compared with £10.0m at 1 January 2007 and this order book
    continues to increase.


Overall Prospects


Malcolm Gourlay, Chairman, said 'With first quarter order intake increased to
£36.4m from £25.6m in 2006, a higher than normal percentage of 2008 sales is
already visible. Havelock remains on track for a further year of progress
although, as usual, it is expected that a great majority of its profits will be
earned in the second half.'



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



                             PRELIMINARY STATEMENT


2007 was a year of further progress for Havelock, with underlying pre-tax profit
increasing substantially for a sixth successive year. In an increasingly
competitive marketplace, useful advances have been made in seeking and
delivering efficiencies for our customers and in improving our internal
processes and procedures, as new complexity is becoming evident in many of our
interiors contracts.


FINANCIAL OVERVIEW


Revenues increased by 9% to £125.0 million (2006: £114.5 million).


Pre-tax profit increased by 23% to £7.1 million (2006: £5.8 million) after
adding back £0.4 million (2006: £0.4 million) in respect of the amortisation of
intangibles (other than software) and fully diluted earnings per share on this
basis were 13.1p (2006: 11.6p), up 13%. Reported pre-tax profit was £6.7 million
(2006: £5.4 million), up 24%, and reported fully diluted earnings per share
amounted to 12.0p, up 13% (2006: 10.6p).


In February 2007, Havelock raised £4.9 million, net of expenses, through the
issue of 3.2 million new ordinary shares. This was applied, in part, to fund the
acquisition of Stage Systems Limited, an educational furniture business, for a
total consideration of £3.45 million. The balance of the cash raised of £1.45
million, together with improved working capital flows, enabled Group net debt to
be reduced to £11.4 million (2006: £13.5 million). Net interest expense was
reduced to £1.3 million (2006: £1.6 million) and was covered 6.2 times (2006:
4.4 times) by operating profit. With shareholders' funds increasing from £15.3
million to £24.0 million, gearing fell from 88% to 48%, a third successive
annual decrease.


DIVIDENDS


The Board is proposing a final dividend per share of 3.4p (2006: 3.0p), up
13.3%. If approved at the Annual General Meeting on 25 June 2008, the dividend
will be paid on 4 July 2008 to shareholders on the register at close of business
on 6 June 2008.


Including the interim dividend per share of 1.1p (2006: 1.0p), paid on 27
December 2007, proposed dividends per share for the year will total 4.5p (2006:
4.0p), up 12.5%, and covered 2.6 times.


At the Annual General Meeting, a resolution will also be proposed to give the
Company power to purchase up to 10% of its own shares. The Company does not
currently have this power and, if the resolution is approved by shareholders,
the Board will monitor market conditions and will consider purchasing shares if
it believes it would be in the best interests of shareholders so to do.


TRADING OVERVIEW


Retail Interiors

Retail Interiors finished the year strongly, with revenue up by 14% to £54.0m
(2006: £47.5m) as a result of strong performances with House of Fraser, Marks
and Spencer, Primark, HBOS and Boots. The improved fortunes of the division
reflects the success of a strategy to focus on three major markets:

   • substantial and successful retailers;
   • major High Street banks; and
   • providers of accommodation in the education, defence and budget hotel
    sectors.


Property rationalisation and low cost country procurement contributed to an
improvement in margins.


Point of Sale Display

Although revenues for the two businesses in this division increased only
marginally to £27.6m (2006: £27.4m), with a decline in revenue at Showcard
Display being offset by increased revenue in Showcard Print, the division
produced an excellent result following significant capital investment in plant
and machinery, including a large format digital litho press.


Educational Interiors

As indicated in the pre-close trading update issued on 21 January 2008, the
overall results of the educational furniture and supplies businesses were
disappointing. Whilst revenues increased by 9% to £43.3m (2006: £39.6m), all of
this increase was accounted for by revenue from the newly-acquired Stage
Systems, a manufacturer of demountable staging products for schools. As projects
in the Direct to Schools segment have become larger and more complex, the period
elapsing between the placing of an order and the commencement of work has
elongated. Whilst the volume of PFI business continued to grow in 2007, this
business stream has lower margins and this, when combined with a lower revenue
flow from the Direct to Schools segment, affected the divisional results for the
year. In addition, as previously noted, a number of operational issues
contributed to produce a lower than expected outcome. Whilst, elsewhere in this
division, Stage Systems traded well and above original expectations, this was
insufficient to offset the less than satisfactory performance in the furniture
business. An action plan to rectify these shortcomings is in place and the
changes are already showing benefits.


STRATEGY


The Group's strategy is based on a drive to find new growth sectors and improve
shareholder value by concentrating on UK markets where the Group can establish
significant competitive advantage or where there is scope for expansion. To this
end, the Group concentrates on relationships with customers who value innovative
design, quality of performance, capacity to supply, and consistency of service.
The separation of the Retail Interiors business into two business units, one
concentrating on the supply and installation of store fittings and furniture and
the other on internal fit out and contracting, has had beneficial effects and
improved marketing success. The application of project management skills,
pioneered in the department store arena, to retail banking and the fit out of
corporate offices within the financial services sector, is one example of the
developing opportunities that the Retail Interiors Division is progressing.


In addition, the Retail and Educational Interiors divisions are now working as a
single team to improve operational efficiency through the sharing of equipment,
production planning and logistics. The two divisions will continue to work
closely together under the leadership of Richard Lowery, the main Board Director
responsible for co-ordinating the operational improvement plan within the
Educational businesses.


CURRENT TRADING AND PROSPECTS


Notwithstanding the more uncertain outlook in the UK economy, 2008 started with
strong order books in place in both Retail and Educational Interiors, with a
higher than normal percentage of 2008 sales already visible.


In the retail sector, this reflects a significant development programme in place
with House of Fraser and a continuation of refurbishment activity with both
Marks and Spencer and Boots. In the last three months, the order book has
increased with new, significant customers being added. With a strong customer
base in this division, many of whom have firm capital expenditure plans,
including a number in retail banking, the Group considers that it is well placed
to withstand any temporary downturn in the retail sector.


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. First quarter order intake in the
division increased substantially over the comparative figure for the previous
year as the result of the addition of a number of new customers. Another good
year is expected in this division.


Renewed organic growth in Educational Interiors is anticipated, with the Group
likely to be involved in some 21 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 19. The opening order book as at 1 January 2008 was £43.4m as
compared with £10.0m as at 1 January 2007 and this order book continues to
increase.


In the first quarter of 2008, Group, order intake was £36.4m (2007: £25.6m).
Revenues are in line with expectation but slightly lower than the first quarter
of 2007, reflecting the completion dates of some larger contracts.


The volume of activity in low-cost country procurement is expected to double
during the year, with five full time employees now located in Shanghai, bringing
benefits to both Retail and Educational Interiors. 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 improved performance.


Accordingly, the Group remains on track for a further year of progress although,
as usual, it is expected that the great majority of its profits will be earned
in the second half of the year.



Malcolm Gourlay 8 April 2008



                         CONSOLIDATED INCOME STATEMENT
                      for the year ended 31 December 2007


                                                               2007       2006
                                                     Note      £000       £000

Revenue                                                4    124,955    114,504
Cost of sales                                               (98,031)   (91,767)
                                                               ______    _______
Gross profit                                                 26,924     22,737

Administrative expenses                                     (18,942)   (15,868)
                                                              _______    _______
Operating profit                                       4      7,982      6,869

Expected return on defined benefit pension plan               1,779      1,484
assets
Net financial expenses - on bank borrowings and
finance                                                      (1,420)    (1,561)
leases
Interest on defined benefit pension scheme                   (1,638)    (1,479)
liabilities
                                                              _______    _______
Net financing costs                                          (1,279)    (1,556)
                                                              _______    _______

Share of profit of associates                                     -         24
Gain on sale of interest in associate                             -         98
                                                              _______    _______
Profit before tax                                             6,703      5,435

Income tax expense                                     5     (2,148)    (1,743)
                                                              _______    _______
Profit for the year (attributable to equity holders
of                                                     4      4,555      3,692
the parent)
                                                              _______    _______

Basic earnings per share                               6       12.2p      10.8p

Diluted earnings per share                             6       12.0p      10.6p



                   STATEMENT OF RECOGNISED INCOME AND EXPENSE
                      for the year ended 31 December 2007



                                                           2007           2006
                                                           £000           £000
                                                   Note
Exchange differences on translation of overseas     11        -            (21)
associate
Actuarial gain on defined benefit pension plan              232            622
Tax on items taken directly to equity                      (225)          (187)
Cash flow hedges:
Effective portion of changes in fair value          11      (36)           303
                                                          _______        _______
Net expense recognised directly in equity                   (29)           717

Profit for the year                                       4,555          3,692
                                                          _______        _______

Total recognised income and expense (attributable
to                                                  11    4,526          4,409
equity holders of the parent)                             -------  -------------
                                                              ===            ===


                                 BALANCE SHEET
                             as at 31 December 2007

                                                               2007       2006
                                                               £000       £000
                                                     Note
Assets
Non-current assets
Property, plant and equipment                                14,117     12,321
Intangible assets                                            14,653     12,470
Deferred tax assets                                           1,417      1,927
                                                              _______    _______
Total non-current assets                                     30,187     26,718
                                                              _______    _______
Current assets
Inventories                                            7     11,385     11,791
Non-current assets classified as held for sale                1,765        348
Trade and other receivables                            8     25,276     25,279
Cash and cash equivalents                                     4,447      2,080
                                                              _______    _______
Total current assets                                         42,873     39,498
                                                              _______    _______
Total assets                                           4     73,060     66,216
                                                              _______    _______
Liabilities
Current liabilities
Interest-bearing loans and borrowings                  9     (1,577)    (3,591)
Derivative financial instruments                                (51)       (15)
Income tax payable                                           (1,090)    (1,160)
Non-current liabilities classified as held for sale            (409)         -
Trade and other payables                              10    (25,512)   (26,603)
                                                              _______    _______
Total current liabilities                                   (28,639)   (31,369)
                                                              _______    _______
Non-current liabilities
Interest-bearing loans and borrowings                  9    (14,286)   (11,964)
Retirement benefit obligations                               (5,168)    (6,424)
Deferred tax liabilities                                     (1,007)    (1,132)
                                                              _______    _______
Total non-current liabilities                               (20,461)   (19,520)
                                                              _______    _______
Total liabilities                                      4    (49,100)   (50,889)
                                                              _______    _______
Net assets                                                   23,960     15,327
                                                              _______    _______
Equity
Issued share capital                                  11      3,853      3,486
Share premium                                         11      7,013      2,020
Other reserves                                        11      3,127      3,163
Revenue reserves                                      11      9,967      6,658
                                                              _______    _______
Total equity attributable to equity holders of the
parent                                                       23,960     15,327
                                                              _______    _______


                              CASH FLOW STATEMENT
                      for the year ended 31 December 2007

                                                                2007      2006
                                                                £000      £000
Cash flows from operating activities                   Note
Profit before tax                                              6,703     5,435
Adjustments for:
Depreciation of property, plant and equipment                  2,095     1,818
Amortisation of intangible assets                                546       466
Gain on sale of property, plant and equipment                   (282)      (11)
Gain on sale of interest in associate                              -       (98)
Net financing costs                                            1,279     1,556
Share of profit of associates                                      -       (24)
IFRS 2 charge relating to equity settled plans                   326       177
                                                               -------   -------
Operating cash flows before changes in working capital
and provisions                                                10,667     9,319
Increase in trade and other receivables                         (635)   (5,018)
Decrease/(increase) in inventories                               468    (2,868)
(Decrease)/Increase in trade and other payables               (1,266)    4,627
Movement relative to defined benefit pension scheme             (883)     (674)
                                                               _______   _______
Cash generated from operations                                 8,351     5,386
                                                               _______   _______
Interest paid                                                 (1,473)   (1,585)
Income taxes paid                                             (2,145)     (909)
                                                               _______   _______
Net cash from operating activities                             4,733     2,892
                                                               _______   _______
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
and asset held for resale                                        699        64
Proceeds from sale of interest in associate                        -       943
Acquisition of property, plant and equipment                  (4,113)   (1,105)
Acquisition of intangible assets                                (256)      (84)
Acquisition of subsidiaries, net of cash balances
acquired                                                      (2,535)     (246)
                                                               _______   _______
Net cash outflow from investing activities                    (6,205)     (428)
                                                               _______   _______
Cash flows from financing activities
Proceeds from the issue of share capital                       5,110        40
Increase in bank loans                                         1,031       782
Movements in relation to purchase of own shares                    -       (99)
Repayment of loan notes                                            -      (532)
Repayment of bank borrowings                                    (625)   (1,250)
Repayment of finance lease liabilities                           (98)      (72)
Dividends paid                                          11    (1,579)   (1,288)
                                                               _______   _______
Net cash inflow/(outflow) from financing activities            3,839    (2,419)
                                                               _______   _______
Net increase in cash and cash equivalents                      2,367        45
Cash and cash equivalents at 1 January                         2,080     2,035
                                                               _______   _______
Cash and cash equivalents at 31 December                       4,447     2,080
                                                               _______   _______



                            NOTES TO THE STATEMENTS

1. The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2007 or 2006 but is derived
from the 2007 accounts. Statutory accounts for 2006 have been delivered to the
Registrar of Companies and those for 2007 will be delivered in due course. The
auditors have reported on those accounts; their reports were (i) unqualified,
(ii) did not include references to any matters to which the auditors drew
attention by way of emphasis without qualifying their reports and (iii) did not
contain statements under section 237(2) or (3) of the Companies Act 1985.


2. Basis of consolidation


The consolidated financial statements comprise Havelock Europa PLC and its
subsidiaries, together with the Group's share of the results of its former
associate. The financial statements of subsidiaries are prepared to the same
reporting date using accounting policies consistent with those of the parent
company. Intra-group transactions and balances, including any unrealised gains
and losses or income and expenses arising from intra-group transactions, are
eliminated in full.


3. Profit before tax

                                  Cost of       Administrative           Total
                                   sales            costs
                               2007     2006    2007    2006     2007     2006
                               £000     £000    £000    £000     £000     £000
Profit before tax is stated
after charging/ (crediting):

Depreciation of property,
plant                         1,369    1,463     726     355    2,095    1,818
and equipment
Amortisation of intangible       14        -     532     466      546      466
assets
(Gain)/loss on sale of
property,                      (306)       -      24     (11)    (282)     (11)
plant and equipment
Dilapidations and
non-recurring                     -        -       -     545        -      545
property costs


4. Segment reporting


Segment information is presented in respect of the Group's business segments and
is based on the Group's management and internal financial reporting structure.


Inter-segment pricing is determined on an arm's length basis.


Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Unallocated items mainly comprise interest-bearing loans and borrowings,
deferred consideration payable for business combinations, income taxes and
corporate assets, liabilities and expenses.


Segment capital expenditure is the total cost incurred during the period to
acquire segment assets that are expected to be used for more than one period.


Business segments


The Group comprises the following business segments, all of which are continuing
operations:

   • Retail - design, manufacture and installation of interiors for
    retailers, financial services, hotels and healthcare premises;

   • Education - design, manufacture and installation of classrooms, fitted
    and loose furniture, teaching aids, display boards and fume cupboards for
    the education sector;

   • Point of sale display - printing of promotional graphics and manufacture
    of display equipment for use in retail, financial services and branded goods
    businesses.





Business             Retail              Education         Point of sale       Elimination        Consolidated
segments                                                      display
                  2007       2006      2007      2006      2007      2006     2007     2006       2007       2006
                  £000       £000      £000      £000      £000      £000     £000     £000       £000       £000

Revenue from
external
customers       54,042     47,507    43,289    39,623    27,624    27,374        -        -    124,955    114,504
Inter-segment
revenue            839        368        90       167       570       573   (1,499)  (1,108)         -          -
                 -----      -----     -----     -----     -----     -----    -----    -----     ------     ------
Total revenue   54,881     47,875    43,379    39,790    28,194    27,947   (1,499)  (1,108)   124,955    114,504
                 -----      -----     -----     -----     -----     -----    -----    -----     ------     ------

Segment
result before
amortisation
of
intangibles
excluding
software         3,644      1,124     1,970     4,154     4,713     3,806        -        -     10,327      9,084
Amortisation
of
intangibles
excluding            -          -      (435)     (368)        -         -        -        -       (435)      (368)
software         -----      -----     -----     -----     -----     -----    -----    -----     ------     ------
Segment
result after
amortisation
of
intangibles      3,644      1,124     1,535     3,786     4,713     3,806        -        -      9,892      8,716
Unallocated
expenses                                                                                        (1,910)    (1,847)
                                                                                                ------     ------
Profit from
operations
before
financing
costs                                                                                            7,982      6,869
Net financing
costs                                                                                           (1,279)    (1,556)
Share of
profit from
associates                                                                                           -         24
Gain on sale
of interest
in                                                                                                   -         98
associate
Income tax
expense                                                                                         (2,148)    (1,743)
                                                                                                ------     ------
Profit for
the                                                                                              4,555      3,692
year                                                                                            ------     ------

Segment         17,534     18,184    34,549    29,528    12,709    13,233        -        -     64,792     60,945
assets
Assets
classified as
held for sale                                             1,765       348                        1,765        348
Unallocated
assets                                                                                           6,503      4,923
                                                                                                ------     ------
Total assets                                                                                    73,060     66,216
                                                                                                  ------     ------

Segment
liabilities    (15,229)   (18,055)   (4,918)   (4,122)   (3,471)   (4,013)       -        -    (23,618)   (26,190)
Unallocated
liabilities                                                                                    (25,482)   (24,699)
                                                                                                ------     ------
Total
liabilities                                                                                    (49,100)   (50,889)
                                                                                                ------     ------

Capital
expenditure       (571)      (567)     (944)     (756)   (2,854)     (394)       -        -     (4,369)    (1,717)
Unallocated
capital
expenditure                                                                                          -         (5)
Depreciation      (422)      (502)     (540)     (449)   (1,113)     (853)       -        -     (2,075)    (1,804)
Unallocated
depreciation                                                                                       (20)       (14)
Amortisation
of intangible
assets             (18)       (24)     (508)     (407)      (17)      (20)       -        -       (543)      (451)
Unallocated
amortisation
of intangible
assets                                                                                              (3)       (15)



5. Income tax expense


Recognised in the income statement

                                                              2007        2006
                                                              £000        £000
Current tax expense
Current year                                                (1,956)     (1,559)
Adjustments for prior years                                     21          80
                                                             -------     -------
                                                            (1,935)     (1,479)
                                                             -------     -------

Deferred tax expense
Origination and reversal of temporary differences             (202)       (207)
Adjustments for prior years                                    (11)        (57)
                                                             -------     -------
                                                              (213)       (264)
                                                             -------     -------

Total income tax expense in the consolidated income
statement                                                   (2,148)     (1,743)
                                                             -------     -------



6. Earnings per share


The calculation of basic earnings per share and underlying earnings per share at
31 December 2007 is based on the profit attributable to ordinary shareholders as
follows:




                                              2007      2006     2007     2006
                                          Earnings  Earnings      EPS      EPS
                                              £000      £000      pence    pence
Basic                                        4,555     3,692     12.2     10.8
Adjusted for:
Amortisation of intangibles that attract
no                                             435       368      1.2      1.1
corporate tax deduction                     --------  --------  -------  -------
Adjusted                                     4,990     4,060     13.4     11.9
                                            --------  --------  -------  -------
Diluted basic earnings per share                                 12.0     10.6
Diluted adjusted earnings per share                              13.1     11.6



Amortisation of intangible assets

                                                                2007      2006
                                                                £000      £000
Total amortisation of intangible assets                          546       466
Less amortisation of computer software                          (111)      (98)
                                                              --------   -------
Amortisation of intangibles that attract no tax deduction        435       368
                                                              --------   -------



The weighted average number of shares used in each calculation is as follows:


Undiluted earnings per share


In thousands of shares                                        2007       2006

Issued ordinary shares at 1 January                         34,859     34,789
Effect of own shares held                                     (656)      (656)
Effect of shares issued in 2006                                  -         50
Effect of shares issued in 2007                              3,166          -
                                                             -------    -------
Weighted average number of ordinary shares for the year
ended 31 December                                           37,369     34,183
                                                             -------    -------


Diluted earnings per share


In thousands of shares                                          2007      2006

Weighted average number of ordinary shares for the year
ended 31 December                                             37,369    34,183
Effect of share options on issue                                 671       724
                                                               -------   -------
Weighted average number of ordinary shares (diluted) for the
year ended 31 December                                        38,040    34,907
                                                               -------   -------


7. Inventories

                                                          2007           2006
                                                          £000           £000
Raw materials and consumables                            3,477          3,161
Work in progress                                         2,025          3,783
Finished goods                                           5,883          4,847
                                                         -------        -------
                                                        11,385         11,791
                                                         -------        -------





8. Trade and other receivables

                                                    2007                 2006
                                                    £000                 £000
Trade receivables                                 23,527               22,719
Other receivables                                    512                  466
Prepayments                                        1,237                2,094
                                                   -------              -------
                                                  25,276               25,279
                                                   -------              -------




9. Interest-bearing loans and borrowings



Current liabilities                                              2007     2006
                                                                 £000     £000
Secured bank loans                                              1,000    3,021
Loan notes                                                        476      476
Obligations under hire purchase contracts and finance leases      101       94
                                                                -------  -------
                                                                1,577    3,591
                                                                -------  -------




Non-current liabilities                                         2007      2006
                                                                £000      £000
Secured bank loans                                            13,974    11,547
Obligations under hire purchase contracts and finance leases     312       417
                                                               -------   -------
                                                              14,286    11,964
                                                               -------   -------


10. Trade and other payables


Amounts disclosed in current liabilities

                                                           2007           2006
                                                           £000           £000
Trade payables                                           17,064         15,045
Other taxes and social security                           4,301          3,981
Accruals                                                  4,147          7,577
Amounts owed to group undertakings                            -              -
                                                         --------       --------
                                                         25,512         26,603
                                                         --------       --------



11. Capital and reserves


Reconciliation of movement in capital and reserves

                Share     Share   Merger   Trans-  Hedg-ing    Other  Revenue   Total
              capital  prem-ium  reserve   lation   reserve  reserve  reserve
                                          reserve
               £000      £000     £000     £000      £000     £000     £000      £000
Balance at 1
January 2006  3,479     1,987    2,184       21      (318)     994    3,918    12,265

Total
recognised
income and
expense for
the period        -         -        -      (21)      303        -    4,127     4,409

Movements
relating to
share-based
payments and
ESOP trust        -         -        -        -         -        -      (99)      (99)

Shares            7        33        -        -         -        -        -        40
issued

Dividends to
shareholders      -         -        -        -         -        -   (1,288)   (1,288)
               ------    ------   ------   ------    ------   ------  -------    ------
Balance at
31 December
2006
and at 1
January 2007  3,486     2,020    2,184        -       (15)     994    6,658    15,327

Total
recognised
income and
expense for
the period        -         -        -        -       (36)       -    4,562     4,526

Movements
relating to
share-based
'payments
and               -         -        -        -         -        -      326       326
ESOP trust

Shares          367     4,993        -        -         -        -        -     5,360
issued

Dividends to
shareholders      -         -        -        -                  -   (1,579)   (1,579)
               ------    ------   ------   ------    ------   ------  -------    ------
Balance at
31            3,853     7,013    2,184        -       (51)     994    9,967    23,960
December       ------    ------   ------   ------    ------   ------  -------    ------
2007



12. Acquisitions


Stage Systems Limited


On 12 February 2007, the Company acquired 100% of Stage Systems Limited for a
purchase price of £3.45 million. £3.2 million was paid in cash raised in a
vendor placing of 2,091,504 shares at 153p each. The balance of £0.25 million
was paid by the issue to the vendors of 159,236 new Havelock shares at 157p
each.

Cost of business acquisition                                              2007
                                                                          £000
Shares issued                                                              250
Cash and cash equivalents                                                3,200
Directly attributable costs of business combination                        409
                                                                          ------
Total purchase consideration                                             3,859
                                                                          ------

Identifiable assets and liabilities acquired                2007
                                                  Book    Fair value      Fair
                                                values   adjustments    values
                                                  £000          £000      £000
Property, plant and equipment                      111             -       111
Intangible assets (excluding goodwill)               -           923       923
Goodwill                                             -         1,557     1,557
Inventories                                        342           101       443
Trade and other receivables                        473             -       473
Cash and cash equivalents                        1,074             -     1,074
Trade and other payables                          (635)            -      (635)
Corporation tax liabilities                          -          (140)     (140)
Deferred tax asset                                   -            53        53
                                                --------      --------  --------
Total identifiable net assets acquired           1,365         2,494     3,859
                                                --------      --------  --------


Stage Systems Limited earned a profit after tax of £620,000 in the year ended 31
March 2007, of which £50,000 arose in the period from 12 February 2007 to 31
March 2007. If the acquisition had taken place at 1 January 2007, Group revenue
in the year to 31 December 2007 would have been £125,230,000 and profit before
tax would have been £6,609,000. Group profit before tax includes £425,000 in
respect of Stage Systems Limited (net of amortisation of £164,000 in respect of
intangibles relating to this acquisition). The impact on group cash flows was
not materially different from the profit.





13. The accounts for the year ended 31 December 2007 were approved by the
Directors on 8 April 2008.




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