3rd Apr 2007 07:01
Havelock Europa PLC03 April 2007 Tuesday 3 April 2007 HAVELOCK EUROPA PLC - PRELIMINARY ANNOUNCEMENT 2006 was a year of significant progress for Havelock, the Education, Financialand Retail Interiors and Point of Sale Display Group. Underlying pre-tax profitincreased substantially for a fifth successive year, with all three Divisionsperforming strongly. Financial Highlights •Revenue increased by 14% to £114.5m. •Underlying+ pre-tax profit increased by 16% to £5.8m and underlying+ fully diluted earnings per share by 13% to 11.6p. •Reported pre-tax profit amounted to £5.4m against £6.0m in 2005 and reported fully diluted earnings per share were 10.6p against 12.1p. The 2005 figures benefited from the inclusion of a non-recurring pension credit of £1.4m. •With the final dividend per share up 11% to 3.0p, the total dividend per share is increased by 11% to 4.0p and is covered 2.9 times by underlying+ EPS. + Underlying excludes amortisation of intangibles (other than IT software) of £0.4m (2005: £0.4m) and a non-recurring pension credit of nil (2005: £1.4m). Commercial Highlights •The Education businesses produced an excellent performance, with revenue up 35% to £39.6m and a marked improvement on the previous year's result, reflecting the resumption in the growth of Government education spend, particularly in the English and Scottish PFI markets. Further progress is anticipated in 2007, with letters of intent or orders having already been received from 14 of the 15 PFI/PPP projects with which the Group expects to be involved during 2007. •The Retail Interiors Division's revenue was up 4% to £47.5m, with significantly increased activity in the Financial Services market. Prospects for 2007 are encouraging, with the order book at the end of the first quarter at a level sizeably up on 2006. •Within the Point of Sale Display Division, the second half of the year proved extremely active in respect of the levels of business transacted for both existing and new customers, enabling the Division to increase revenues by 10% to £27.4m and improve its contribution. Orders for the print business for the first quarter were in line with 2006. Share Placing and Acquisition of Stage Systems Limited •In February 2007, the Group raised £4.9m by placing new shares. This was applied in part to fund the acquisition of Stage Systems Limited, an educational furniture business, for a consideration of £3.45m. Malcolm Gourlay, Chairman, said "Following a year of substantial growth, theGroup has made a healthy start to 2007. As always, Havelock's annual businesscycle will be heavily tilted towards the second half, when the great majority ofthe Group's profit is historically earned. The Board believes that further goodprogress will be made by the Group in the current year as a whole and beyond." Presentations: Today, from 09:00am to 10:00am, a presentation to brokers' analysts will be heldat the offices of Bankside Consultants, 1 Frederick's Place, London EC2R 8AE. On Wednesday 25 April 2007, there will be a lunch in London for private clientbrokers. Those seeking an invitation are asked to contact Charles Ponsonby atBankside Consultants on [email protected] / 020-7367 8851. 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 As stated in the Pre-Close Trading Update issued in early January, 2006 was ayear of significant progress for Havelock. Underlying pre-tax profit increasedsubstantially for a fifth successive year, with all three Divisions performingstrongly. FINANCIAL OVERVIEW Revenue increased by 14% to £114.5 million (2005: £100.2 million). Underlying pre-tax profit increased by 16% to £5.8 million (2005: £5.0 million)after adding back £0.4 million (2005: £0.4 million) in respect of theamortisation of intangibles (other than IT software) and subtracting in, 2005,£1.4 million (2006: nil) in respect of a non-recurring pension credit.Underlying fully diluted earnings per share were 11.6p (2005: 10.3p), up 13%.Reported pre-tax profit was £5.4 million (2005: £6.0 million), the comparablefigure for 2005 being boosted by the non-recurring pension credit of £1.4million, and reported fully diluted earnings per share amounted to 10.6p (2005:12.1p). Net debt reduced to £13.5 million (2005: £14.1 million). Net financing costsreduced to £1.6 million (2005: £1.8 million) and were covered 4.7 times (2005:3.6 times) by underlying operating profit. During the year, Havelock's remaining17% stake in its overseas associate, Havelock AHI, based in Bahrain, was sold,yielding net proceeds of £0.9 million. In February 2007, the Group's financial position was further enhanced by theraising of £4.9 million through the issue of 3.2 million new ordinary shares.This was applied in part to fund the acquisition of Stage Systems Limited, aneducational furniture business, for a total consideration of £3.45 million. DIVIDENDS The Board is proposing a final dividend per share of 3.0p (2005: 2.7p), up 11%.If approved at the Annual General Meeting on 26 June 2007, the dividend will bepaid on 4 July 2007 to shareholders on the register at close of business on 8June 2007. Including the interim dividend per share of 1.0p (2005: 0.9p), paid on 27December 2006, proposed dividends per share for the year will total 4.0p (2005:3.6p), which is up 11% on 2005 and covered 2.9 times by underlying EPS. TRADING OVERVIEW Education Furniture and Supplies The Education businesses produced an excellent performance, with revenue up 35%to £39.6m (2005: £29.4m) and a marked improvement on the previous year's result.With solid performances in both key markets, PFI school refurbishment and thesupply of fitted furniture and equipment direct to schools and Local EducationAuthorities, this improvement reflects the resumption in the growth ofGovernment education spend, particularly in the English and Scottish PFImarkets. Retail Interiors The Retail Interiors Division's revenue was up 4% to £47.5m (2005: £45.9m).Activity was especially buoyant in the Financial Services market, with revenueup by 21% to £16.6m (2005: £13.7m). The Division also provided significantmanagement and production capacity to support the Group's activities in theEducation sector. Over the winter, the Group commenced the move of its metal fabrication plantfrom Dalgety Bay to Kirkcaldy, which will provide the Group with propertysavings from the second half of 2007, whilst further enhancing the benefitsarising from the integration of the production facilities of the Education andRetail Interiors businesses. Property-related costs of this reorganisation,amounting to £0.4m, were provided for during the second half of 2006. Point of Sale Display Within the Point of Sale Display Division, the second half of the year provedextremely active in respect of the levels of business transacted for bothexisting and new customers, enabling the Division to increase revenues by 10% to£27.4m (2005: £24.9m). This activity, coupled with the full benefits of theintegration of the Bristol and Letchworth sites, following a programme of costsaving measures completed in August, helped improve the Division's contributionto the Group. STRATEGY The Group's strategy is based on a drive to find new growth sectors and improveshareholder value by concentrating on UK markets offering significantopportunities for expansion. This involves a continuing interest in enlargingthe Group's position in education, healthcare and selected retail and financialservices markets, particularly those that value innovative design, quality ofperformance, capacity to supply, and consistency of service. Within the educational sector, the Group has grown particularly strongly in thatpart of the market which is subject to the Private Finance Initiative/PublicPrivate Partnership. There is a continuing concentration on this mechanism inthe future plans of both the Scottish Executive and the Department for Educationand Skills in England through the Building Schools for the Future programme. The improved fortunes of the Retail Interiors Division reflect the focus onthree major areas, all of which provide a high level of repeat business:profitable and successful retailers; major high street banks', and providers ofinstitutional accommodation within the education, healthcare and defencesectors. The push for improved operational efficiency through the sharing ofcommon equipment, production planning and logistics, coupled with low costcountry procurement, are intended to enhance the Group's competitive positionwithin its chosen markets. Within Point of Sale Display, capital investment will keep the Division abreastof digital printing technology and enlarge its capacity to deal with a trend ofrising demand for its services. CURRENT TRADING AND PROSPECTS The Group has made an encouraging start to the year. Following a year of substantial organic advance, the Group plans an increase inits capital investment programme in 2007, to a level somewhat above its annualdepreciation charge of £1.8 million, in order to meet growing demand and todeliver further operating efficiencies at each of its three main manufacturingsites, at Kirkcaldy, Dalgety Bay and Letchworth. Within the Education sector, letters of intent or orders have already beenreceived from 14 of the 15 PFI/PPP projects with which the Group expects to beinvolved during 2007. The value of enquiries in the core direct to schoolssector is running at a record level, with the average value of projects showinga sizeable increase on previous years. Although the full impact of the BuildingSchools for the Future programme in England will not be apparent until 2008,Havelock believes that it is well placed to win a significant share of this newmarket. The volume of work in the Scottish PFI sector is encouraging, with afurther three projects still to be released to the market. In the first quarter,order intake at Teacherboards and Clean Air was well up on 2006.The completion of the acquisition of Stage Systems took place on 12 February2007, at which point the net cash in the business amounted to £1.0 million, ahigher than anticipated level and an effective reduction in the £3.45macquisition cost. Stage Systems specialises in the design and distribution ofdemountable stages and postural furniture for primary and secondary schools. In the Retail, Financial Services and Healthcare sectors, the value of the orderbook at the end of the first quarter was at a level sizeably up on 2006. Houseof Fraser will return as a customer in 2007, with the commencement of a majorprogramme for four new stores. Marks and Spencer, HBOS, The Royal Bank ofScotland and Primark are also likely to be significant customers in the currentyear. The integration of the Group's Point of Sale print facilities at Bristol andLetchworth is now complete and a programme of capital investment is in hand, atLetchworth, which is expected to increase capacity significantly. This willbecome operational in late June. Orders for the print business for the firstquarter were in line with 2006. Following a year of substantial growth, the Group has made a healthy start to2007. As always, Havelock's annual business cycle will be heavily tilted towardsthe second half, when the great majority of the Group's profit is historicallyearned. The Board believes that further good progress will be made by the Groupin the current year as a whole and beyond. Malcolm GourlayChairman 3 April 2007 CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2006 2006 2005 £000 £000 Note Revenue 4 114,504 100,194Cost of sales (91,767) (78,790) _______ _______Gross profit 22,737 21,404Non-recurring pension curtailment - 1,389Other administrative expenses (15,868) (15,290) _______ _______Operating profit 4 6,869 7,503 Expected return on defined benefit pension plan 1,484 1,259assetsNet financial expenses - on bank borrowings and (1,561) (1,616)finance leasesInterest on defined benefit pension scheme (1,479) (1,411)liabilities _______ _______Net financing costs (1,556) (1,768) _______ _______ Share of profit of associates 24 294Gain on sale of interest in associate 98 - Profit before tax and non-recurring pension 5,435 4,640curtailmentNon-recurring pension curtailment - 1,389 Profit before tax 5,435 6,029 Income tax expense 5 (1,743) (1,839) _______ _______Profit for the year (attributable to equity 4 3,692 4,190holders of the parent) _______ _______ Basic earnings per share 6 10.8p 12.3p Diluted earnings per share 6 10.6p 12.1p STATEMENTS OF RECOGNISED INCOME AND EXPENSE for the year ended 31 December 2006 2006 2005 £000 £000 Note Exchange differences on translation of 11 (21) 63 overseas associate Actuarial gain/(losses) on defined 622 (1,039) benefit pension plan Tax on items taken directly to equity (187) 312 Cash flow hedges: Effective portion of changes in fair 11 303 (153) value _______ _______ Net expense recognised directly in 717 (817) equity Profit for the year 3,692 4,190 _______ _______ Total recognised income and expense 11 4,409 3,373 (attributable to equity holders of the parent) BALANCE SHEET as at 31 December 2006 2006 2005 £000 £000 Note Assets Non-current assets Property, plant and equipment 12,321 12,902 Intangible assets 12,470 12,852 Deferred tax assets 1,927 2,318 _______ _______ Total non-current assets 26,718 28,072 _______ _______ Current assets Inventories 7 11,791 8,923 Non-current assets classified as held 348 842 for sale Trade and other receivables 8 25,279 20,261 Cash and cash equivalents 2,080 2,089 _______ _______ Total current assets 39,498 32,115 _______ _______ Total assets 4 66,216 60,187 _______ _______ Liabilities Current liabilities Interest-bearing loans and borrowings 9 (3,591) (6,817) Derivative financial instruments (15) (318) Income tax payable (1,160) (590) Trade and other payables 10 (26,603) (22,069) _______ _______ Total current liabilities (31,369) (29,794) _______ _______ Non-current liabilities Interest-bearing loans and borrowings 9 (11,964) (9,331) Retirement benefit obligations (6,424) (7,725) Deferred tax liabilities (1,132) (1,072) _______ _______ Total non-current liabilities (19,520) (18,128) _______ _______ Total liabilities 4 (50,889) (47,922) _______ _______ Net assets 15,327 12,265 _______ _______ Equity Issued share capital 11 3,486 3,479 Share premium 11 2,020 1,987 Other reserves 11 3,163 2,881 Revenue reserves 11 6,658 3,918 _______ _______ Total equity attributable to equity 15,327 12,265 holders of the parent _______ _______ CASH FLOW STATEMENTS for the year ended 31 December 2006 2006 2005 £000 £000 Cash flows from operating activities Note Profit before tax 5,435 6,029 Adjustments for: Depreciation of property, plant and 1,818 1,826 equipment Amortisation of intangible assets 466 510 Gain on sale of property, plant and (11) (26) equipment Gain on sale of interest in associate (98) Net financing costs 1,556 1,768 Share of profit of associates (24) (294) IFRS 2 charge relating to equity settled 177 70 plans Operating cash flows before changes in 9,319 9,883 working capital and provisions Increase in trade and other receivables (5,018) (3,484) (Increase)/decrease in inventories (2,868) 706 Increase in trade and other payables 4,627 2,954 Movement relative to defined benefit (674) (1,924) pension scheme _______ _______ Cash generated from operations 5,386 8,135 _______ _______ Interest paid (1,585) (1,768) Income taxes paid (909) (1,392) _______ _______ Net cash from operating activities 2,892 4,975 _______ _______ Cash flows from investing activities Proceeds from sale of property, plant and 64 26 equipment Proceeds from sale of interest in 943 - associate Acquisition of property, plant and (1,105) (1,041) equipment Acquisition of intangible assets (84) (125) Acquisition of subsidiaries, net of cash (246) (1,185) balances acquired Dividends received from associate - 127 _______ _______ Net cash outflow from investing activities (428) (2,198) _______ _______ Cash flows from financing activities Proceeds from the issue of share capital 40 228 Increase in bank loans 782 1,244 Movements in relation to purchase of own (99) (374) shares Repayment of loan notes (532) - Repayment of bank borrowings (1,250) (1,250) Repayment of finance lease liabilities ( 72) (72) Dividends paid 11 (1,288) (1,145) _______ _______ Net cash outflow from financing activities (2,419) (1,369) _______ _______ Net increase in cash and cash equivalents 45 1,408 Cash and cash equivalents at 1 January 2,035 627 _______ _______ Cash and cash equivalents at 31 December 2,080 2,035 _______ _______ NOTES TO THE STATEMENTS 1. The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2006 or 2005 but is derivedfrom the 2006 accounts. Statutory accounts for 2005 have been delivered to theRegistrar of Companies and those for 2006 will be delivered in due course. Theauditors have reported on those accounts; their reports (i) were unqualified,(ii) did not include references to any matters to which the auditors drewattention by way of emphasis without qualifying their reports and (iii) did notcontain 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 itssubsidiaries, together with the Group's share of the results of its formerassociate. The financial statements of subsidiaries are prepared to the samereporting date using accounting policies consistent with those of the parentcompany. Intra-group transactions and balances, including any unrealised gainsand losses or income and expenses arising from intra-group transactions areeliminated in full. 3. Profit before tax Cost of Administrative Total sales costs 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000Profit before tax is stated after Notecharging/ (crediting): Depreciation of property, plant and 1,463 940 355 886 1,818 1,826equipment Amortisation of intangible assets - - 466 510 466 510 Gain on sale of property, plant and - - (11) (26) (11) (26)equipment Dilapidations and non-recurring - - 545 260 545 260property costs 4. Segment reporting Segment information is presented in respect of the Group's business segments andis 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 asegment 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 andcorporate assets, liabilities and expenses. Segment capital expenditure is the total cost incurred during the period toacquire 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 continuingoperations: • Retail - design, manufacture and installation of interiors for retailers, financial services, hotels and healthcare premises; • Education - design, manufacture and installation of science laboratories, 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 and branded goods businesses. Business segments Retail Education Point of Elimination Consolidated sale display 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Revenue from 47,507 45,896 39,623 29,386 27,374 24,912 - - 114,504 100,194externalcustomers Inter-segment 368 148 167 102 573 415 (1,108) (665) - -revenue Total revenue 47,875 46,044 39,790 29,488 27,947 25,327 (1,108) (665) 114,504 100,194 Segmentresult beforepensioncreditand 1,124 1,476 4,154 3,235 3,806 3,549 - - 9,084 8,260amortisationofintangibles Pension - 1,016 - - - 165 - - - 1,181credit Amortisation - - (368) (368) - - - - (368) (368)ofintangibles Segmentresult afterpensioncreditand 1,124 2,492 3,786 2,867 3,806 3,714 - - 8,716 9,073amortisationofintangibles Unallocated - 208pensioncredit Unallocated (1,847) (1,778)expenses Profit from 6,869 7,503operationsbeforefinancingcosts Net financing (1,556) (1,768)costs Gain on sale 98 -of interestin associate Share of 24 294profit fromassociates Income tax (1,743) (1,839)expense Profit for 3,692 4,190the year Segment 18,184 15,953 29,528 23,081 13,233 13,508 - - 60,945 52,542assets Assets 348 348 842classified asheld for sale Unallocated 4,923 6,803assets Total assets 66,216 60,187 Segment (18,055) (15,277)(4,122) (3,499) (4,013) (4,938) - - (26,190)(23,714)liabilities Unallocated (24,699)(24,208)liabilities Total (50,889)(47,922)liabilities Capital (567) (209) (756) (304) (394) (603) - - (1,717) (1,116)expenditure Unallocated (5) (50)capitalexpenditure Depreciation (502) (548) (449) (443) (853) (773) - - (1,804) (1,764) Unallocated (14) (62)depreciation Amortisation (24) (54) (407) (400) (20) (35) - - (451) (489)of intangibleassets Unallocated (15) (21)amortisationof intangibleassets 5. Income tax expense Recognised in the income statement 2006 2005 £000 £000Current tax expense NoteCurrent year ( 1,559) (1,028)Adjustments for prior years 80 - (1,479) (1,028) Deferred tax expenseOrigination and reversal of temporary (207) (737)differencesAdjustments for prior years (57) (74) (264) (811) Total income tax expense in the consolidated (1,743) (1,839)income statement 6. Earnings per share The calculation of basic earnings per share and underlying earnings per share at31 December 2006 is based on the profit attributable to ordinary shareholders asfollows: 2006 2005 2006 2005 Earnings Earnings EPS EPS £000 £000 pence penceBasic 3,692 4,190 10.8 12.3Adjusted for:Non-recurring pension curtailment gain - (1,389) - (4.0)- tax relief thereon - 417 - 1.2Amortisation of intangibles that attract no 368 368 1.1 1.1tax deductionAdjusted 4,060 3,586 11.9 10.6Diluted basic earnings per share 10.6 12.1Diluted adjusted earnings per share 11.6 10.3 Amortisation of intangible assets 2006 2005 £000 £000Total amortisation of intangible assets 466 510Less amortisation of computer software (98) (142)Amortisation of intangibles that attract no tax deduction 368 368 The weighted average number of shares used in each calculation is as follows: Undiluted earnings per share In thousands of shares 2006 2005 Issued ordinary shares at 1 January 34,789 34,300Effect of own shares held (656) (673)Effect of shares issued in 2005 - 351Effect of shares issued in 2006 50 -Weighted average number of ordinary shares at 31 34,183 33,978December Diluted earnings per share In thousands of shares 2006 2005 Weighted average number of ordinary shares at 31 34,183 33,978DecemberEffect of share options on issue 724 713Weighted average number of ordinary shares (diluted) 34,907 34,691at 31 December 7. Inventories 2006 2005 £000 £000Raw materials and consumables 3,161 3,371Work in progress 3,783 2,176Finished goods 4,847 3,376 11,791 8,923 8. Trade and other receivables 2006 2005 £000 £000Trade receivables 22,719 18,761Other receivables 466 336Prepayments 2,094 1,164 25,279 20,261 9. Interest-bearing loans and borrowings Current liabilities 2006 2005 £000 £000Bank overdraft - 54Secured bank loans 3,021 5,705Loan notes 476 1,008Obligations under hire purchase contracts and 94 50finance leases 3,591 6,817 Non-current liabilities 2006 2005 £000 £000Secured bank loans and overdraft 11,547 9,331Obligations under hire purchase contracts and 417 -finance leases 11,964 9,331 10. Trade and other payables 2006 2005 £000 £000Trade payables 15,045 15,222Other taxes and social security 3,981 3,441Accruals 7,577 3,160Deferred consideration relating to - 246business combinations 26,603 22,069 11. Capital and reserves Reconciliation of movement in capital and reserves Share Share Merger Trans- Hedging Other Revenue Total capital premium reserve lation reserve reserve reserve reserve £000 £000 £000 £000 £000 £000 £000 £000 Balance at 1 January 3,430 1,808 2,184 (42) (165) 994 1,904 10,1132005 Total recognised income - - - 63 (153) - 3,463 3,373and expense for theperiod Movements relating to - - - - - - (304) (304)share-based paymentsand ESOP trust Shares issued 49 179 - - - - - 228 Dividends to - - - - - (1,145) (1,145)shareholders Balance at 31 December 3,479 1,987 2,184 21 (318) 994 3,918 12,2652005 Balance at 1 January 3,479 1,987 2,184 21 (318) 994 3,918 12,2652006 Total recognised income - - - (21) 303 - 4,127 4,409and expense for theperiod Movements relating to - - - - - - (99) (99)share-based paymentsand ESOP trust Shares issued 7 33 - - - - - 40 Dividends to - - - - - (1,288) (1,288)shareholders Balance at 31 December 3,486 2,020 2,184 - (15) 994 6,658 15,3272006 12. The accounts for the year ended 31 December 2006 were approved by theDirectors on 3 April 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Havelock Europa