Havelock Europa Regulatory News (HVE)

21 Jan 2008 07:00

Havelock Europa PLC21 January 2008 Monday 21 January 2008 HAVELOCK EUROPA PLC Pre-Close Trading Update Havelock (HVE.L), the Educational and Retail Interiors and Point of Sale DisplayGroup, proposes to announce its results for the year ended 31 December 2007 onTuesday 8 April 2008. The Board expects these results to show a sixth successiveincrease in underlying pre-tax profit, with a substantial percentage increase inline with market expectations. The Retail Interiors Division, which in recent years has tended to contributethe greatest revenue but the smallest profit of the three Divisions, finishedthe year strongly and its results will reflect the benefits of the significantreorganisation that has taken place over the last two years. Of particular noteare the cost savings resulting from a consolidation of manufacturing activitiesonto a single site and a rapid increase in procurement from low cost countries. The Point of Sale Display Division also traded well, and better than expected,as a result of solid growth in its customer base following significant capitalinvestment in plant and machinery, including a large format digital litho press. As indicated in the Interim Announcement of 19 September 2007, the overallresults of the Educational Interiors Division have been somewhat disappointing.The extension in the period elapsing between the placing of an order and thecommencement of work within the Direct to Schools segment has continued, asprojects have become larger and more complex. Whilst the volume of PFI businesshas continued to grow, this business stream has lower margins and this, whencombined with a lower revenue flow from the Direct to Schools segment, willaffect the divisional result for the year. In addition, a number of operationalissues have contributed to this lower than expected outcome. However, an actionplan to rectify these is well established and the changes are already showingbenefits, in terms of improved project outcomes and the settlement ofoutstanding accounts. Elsewhere in the Division, the Group's new business, StageSystems, which was acquired in February 2007, traded well and above originalexpectations. Net debt levels at 31 December 2007 were significantly lower than those at thesame date in 2006 and net finance costs for the year have reduced in comparisonto the prior year. 2008 has started with strong order books in place in both the Retail andEducational Interiors Divisions. Within the Retail Interiors Division, theoutlook remains positive, with a higher than normal percentage of 2008 salesalready visible as a result of significant new store development programmes withHouse of Fraser and Marks & Spencer, and Boots' activity in brand consolidation.Growth in the Educational Interiors Division is also anticipated, with the Grouplikely to be involved in some 17 PFI and BSF (Building Schools for the Future)projects in 2008, in respect of which letters of intent or orders have alreadybeen received for 12. The opening order book for this Division as at 1 January2008 was £43.4m as compared with £10m as at 1 January 2007. These two Divisionswill continue to work closely together under the leadership of Richard Lowery,the main Board Director who is coordinating the business process improvementplan within the Educational businesses. The volume of activity in low-cost country procurement is expected to doubleduring the year, with five full time employees now in place in Shanghai,bringing benefits to both the Retail and Educational Interiors Divisions.Further cost savings from the property rationalisation at Bristol and DalgetyBay undertaken in 2007 will come through in 2008, as planned, and these,combined with further operating efficiencies, will contribute to improvingprofitability. With a strong client base in the Retail Interiors business, including some inthe retail banking sector, many of whom have firm capital expenditure plans, theGroup considers that it is well placed to withstand any temporary downturn inthe economy. Furthermore, the Point of Sale Division has, in the past, benefitedfrom more difficult trading conditions in the retail sector, as retailersincrease their expenditure on promotion to preserve sales volume. Accordingly, Havelock remains on track for a further year of expansion and views2008 with enthusiasm although, as usual, it is expected that the great majorityof the Group's profit will be earned in the second half of the year. Enquiries: Havelock Europa PLC 01383-820 044 Hew Balfour (Chief Executive) 07801-683 851Grant Findlay (Finance Director) 07768-745 960 Bankside Consultants Limited Charles Ponsonby 020-7367 8851 This information is provided by RNS The company news service from the London Stock Exchange