Havelock Europa Regulatory News (HVE)

29 Jan 2009 07:00

Thursday 29 January 2009

HAVELOCK EUROPA PLC

Pre-Close Trading Update

Havelock (HVE.L), the Educational and Retail Interiors and Point of Sale Group, proposes to announce its results for the year ended 31 December 2008 on Tuesday 7 April 2009. The Board expects these results to show a seventh successive annual increase in underlying pre-tax profit, in line with market expectations.

With a successful outturn for 2008 under its belt, Havelock's current order book would support expectations of continuing progress in 2009. However, given the current economic and financial environment, particularly in the Retail sector, the Board believes that the Group should proceed with caution and has budgeted for a reduced level of retail activity in 2009.

The Retail Interiors Division traded strongly throughout the year, benefiting from the decision, two years ago, to widen its customer base and concentrate on three main categories - large High Street retailers, banks and other financial institutions, and budget accommodation providers. With four new stores completed for House of Fraser, the maintenance of its traditional links with Primark and Boots, and an increased volume of business with Centerparcs and Travelodge, the Division achieved a significant percentage increase in revenue and is likely to have made a satisfactory contribution to profit.

Following the disposal of Showcard Display, in May 2008, continuing operations in the Point of Sale Division, at Showcard Print, recorded a double digit percentage uplift in revenue. Showcard Print also procured its largest ever order in December 2008 by winning the contract to supply the closing down sale notices for Woolworths.

Both the Retail Interiors and Point of Sale Divisions have managed to offset margin pressure through significant increases in business volumes, on an expanded customer base.

Improvements in the performance of the Educational Interiors Division continued throughout the year, particularly at TeacherBoards and Clean Air in the classroom accessory segment. Stage Systems, the manufacturer of demountable staging products for schools, acquired in February 2007, also improved both its revenue and contribution. The business improvement programme at ESA McIntosh is beginning to bear fruit and the company recorded a significant increase in its revenue as the first Building Schools for the Future (BSF) programmes came on stream, whilst maintaining a leading position in the Scottish PPP market.

Order book levels remain encouraging, particularly in the Educational Interiors Division where orders are already in hand for 18 PPP and BSF projects for execution in 2009 and beyond. Within the Point of Sale Division, business levels have remained solid in January, with much promotional activity being directed to liquidation and clearance sales. The Division continues to add new customers as a result of the extra capacity created in 2007, which has proved invaluable and a key competitive advantage.

In the Retail Interiors Division, 2009 is likely to be a difficult year for most of our customers, with many still formulating their plans and budgets. However, several customers have programmes for new stores, with building already underway. The Division expects to continue to improve its share of a reduced and more competitive market as a result of a clearly demonstrated advantage in "live trading" refurbishment and effective project management; nevertheless the Board is expecting both revenues and margins in this segment to fall back, in 2009, to levels similar to those of 2006.

Net debt levels at 31 December 2008 were in line with those a year earlier, representing a good outturn, given the pressure that many customers have exerted to secure longer payment terms and the fact that a number of Education PPP/BSF jobs spanned the year end, with a consequent requirement for additional working capital. The Point of Sale Division generated a particularly strong cash flow. 

Finance charges in 2008 were usefully lower than in 2007 and, with the Group's borrowing facilities linked to base rate, the Group will continue to benefit from the reduction in bank lending rates, although this will be offset by a reduced non-cash interest credit in relation to the expected return on the pension scheme's assets.

Against the background of deteriorating economic conditions in 2008, the Board is pleased with the expected outturn for the year. Although visibility for 2009 is more than usually limited, Havelock expects further growth in its Educational Interiors activity and that the defensive characteristics of the Retail Interiors and Point of Sale Divisions, emanating from the wide diversification of their customer bases, will help mitigate a probable slackening in activity. Accordingly, having adopted a prudent budget, the Board believes that the Group is well placed to weather the current economic downturn."

Notes for Editors:

For the year to 31 December 2007, Havelock reported revenue of £125.0 million, pre-tax profit of £6.7 million and fully diluted earnings per share of 12.0p, and dividends per share of 4.5p were paid. Underlying pre-tax profit totalled £7.1m and underlying fully-diluted earnings per share were 13.1p.