Half Yearly Report

HAVELOCK EUROPA PLC

("Havelock" or the "Company")

Interim Results

Havelock Europa (HVE.L), the retail and educational interiors group, announces its results for the half year to 30 June 2012.

Financial highlights

·; Group revenue from continuing operations increased by 17% to £38.5m (2011: £32.9m)

·; Pre-tax loss from continuing operations before exceptional items reduced by £1.6m to £1.2m (2011: loss of £2.8m)

·; Group profit after tax of £7.3m (2011: loss of £1.1m) after adjusting to include exceptional £8.0m gain from sale of Print division

·; Group net debt decreased to £2.3m (December 2011: £13.7m)

Operational Highlights

·; Both Retail and Educational sectors contributed to revenue increase

·; New framework agreements signed in the period

·; Disposal of non-core Showcard Print business for a net consideration of £13.0m

·; Continued growth in activity levels outside the UK

Outlook

·; Continuing economic turmoil makes predictions difficult, but there are encouraging signs

·; New educational programmes delivering opportunities

·; Continued progress expected in the second half

Eric Prescott, Havelock CEO, said:

"Significant progress has been made across the Group and I am pleased to report that our focused efforts to control costs, increase efficiency and provide additional services to our customers has improved overall performance. Looking ahead, the markets will continue to remain challenging. However, we are in a much stronger position to deliver continued progress in the second half aided by an increased order book both in the UK and overseas."

Enquiries

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Tom Horsman

The Company today has launched its new corporate website. The information required by AIM Rule 26 is available at this address: www.havelockeuropa.com

INTERIM STATEMENT

I am pleased to be able to report on a further improvement in the performance of our continuing operations in Retail and Educational Interiors for the six months to 30 June 2012. Our losses before exceptional items have reduced by £1.6m as a result of increased revenue and control of costs. At a Group level we are reporting a profit after tax of £7.3m following the exceptional £8.0m gain on the sale of Showcard Print which completed at the end of April 2012.

FINANCIAL REVIEW

Group revenue from continuing operations for the six months ended 30 June 2012 increased by 17% to £38.5m (2011: £32.9m). The loss from continuing operations before taxation and exceptional items was £1.2m (2011: loss of £2.8m). Including the results of the discontinued Showcard Print business and the £8.0m exceptional gain on its sale, the Group reported a profit after tax of £7.3m (2011: loss of £1.1m). Group earnings per share were 19.6p (2011: 3.0p loss) and from continuing operations there was a loss per share of 3.3p (2011: loss of 5.5p).

Group net debt decreased sharply to £2.3m (December 2011: £13.7m). This was principally due to the sale of Showcard Print for net proceeds of £13.0m. This was offset by a cash outflow of £1.1m caused by a seasonal increase in working capital reflecting the higher level of activity underway at the period end.

TRADING REVIEW

Interiors

Revenue in the Interiors business increased by 19% to £34.6m (2011: £29.1m) and losses reduced significantly to £0.1m (2011: loss of £1.3m). This reflected a recovery in retail, ongoing activity in education and a recovery in Direct to School sales. It remains the case that the second half of the year is the busier of the two halves reflecting retailers' deadlines and increased school activity during the holiday closure of educational premises.

Despite the market remaining competitive, margins at the gross level are being maintained due to greater efficiency in our operations. We renewed framework agreements with two of our principal customers during the period and in both cases were able to offer lower prices to secure higher volumes as the result of this increase in efficiency.

Overseas work continues to grow and we are reshaping our China based purchasing unit to enable us to service the growing number of UK based retailers who are opening sites in the country and the Far East.

Educational Supplies

Revenue in this segment increased by 2% to £3.9m (2011: £3.8m). This is the first increase for some years and reflects an easing of pressure in the Direct to School market. We continue to look at developing additional revenues in related supply areas and markets.

Discontinued activity of Point of Sale Printing

This division was sold during the period for net proceeds of £13.0m which generated an exceptional gain of £8.0m. This, together with the trading contribution for the four months until its sale at the end of April 2012, is shown as discontinued activity in the results. The Group continues to hold the long leasehold interest in the principal premises of this business which is let under a ten year lease. The board is considering options for this property which is held on the Group's balance sheet at a value of £1m.

DIVIDENDS

As previously announced, the Board does not propose to pay any dividend in 2012.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties are set out in the notes to this statement and remain unchanged from those set out in the Annual Report for 2011.

GOING CONCERN

The current economic conditions create uncertainty over the demand for the Group's products and services. The financial position of the Group, its cash flows and liquidity position are set out in the interim financial statement.

The Group operates under a bank facility which was renewed during the period and comprises a revolving credit and an overdraft facility. As set out in the notes, the Board expects to be able to comply with the conditions of the Group's bank facilities based on its forecasts.

The Directors, therefore, have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the annual report and accounts.

CURRENT TRADING

The markets that your company addresses continue to suffer from economic turmoil; consequently predicting future trading is not easy. However there are some encouraging signs resulting from recent efforts by the enhanced management team.

The continuing business showed a significantly reduced loss before taxation and exceptional items of £1.2m in the first half of the year compared to the same period last year mainly as a result of increased revenues and a continued focus on cost control. In addition, the level of order intake has grown at the same rate as revenue so the Group enters the second half with an increased order book in comparison with the equivalent period last year.

Overall the retail sector continues to be highly challenging; our efforts remain focussed on developing new customers and providing additional services to existing customers. Levels of activity overseas continue to rise and we expect to show an increase in the number of projects completed in 2012 compared to last year.

The educational sector has continued to be robust despite the run off of the Building School for the Future programme (BSF) which has provided significant revenue in the current period. New programmes are now delivering schemes which will to some extent offset the inevitable decline in BSF activity over the next few years.

Despite difficult economic conditions, your Board believes that the recovery of the Group is progressing satisfactorily and expects to see continued progress in the second half of the year.

BOARD

Malcolm Gourlay retired as Chairman following the AGM in June. Malcolm joined the board in 1999 and was appointed Chairman in 2004; with his extensive experience, he has guided the board through one of the most difficult periods for the UK economy in living memory. We are all grateful to Malcolm for his substantial contribution over the last few years and wish him a long and healthy retirement.

As previously noted, huge challenges continue particularly in the retail and educational markets that your Company addresses; I am very pleased therefore that Alastair Kerr has agreed to join the board as a non executive director; Alastair has extensive retailing experience which will provide valuable insight to our efforts to win new customers and develop our service to existing ones.

David MacLellan

Chairman

Consolidated Income Statement

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED BALANCE SHEET

as at 30 June 2012

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

for the 6 months ended 30 June 2012

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NOTES TO THE FINANCIAL STATEMENTS

1. Basis of preparation

These interim financial statements represent the condensed consolidated financial information of the company and its subsidiaries (together referred to as "the Group") for the 6 months ended 30 June 2012. They have been prepared in accordance with the Disclosure and Transparency Rules of the UK's Financial Services Authority and the requirements of IAS 34 Interim Financial Reporting as adopted by the EU. The interim financial statements were approved by the Board of Directors on 11 September 2012. The interim financial statements do not include all of the information and disclosures required for full annual financial statements. They should be read in conjunction with the Annual Report 2011 which is available on request from the company's registered office or to download from www.havelockeuropa.com.

The financial information contained in this report in respect of the year ended 31 December 2011 has been extracted from the Annual Report 2011 which has been filed with the Registrar of Companies. The auditors report on these financial statements was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The interim statements have been prepared on a going concern basis. The reasons for this are outlined in the Chairman's Statement.

The interim financial statements are unaudited and have not been reviewed by the Company's auditor.

 2. Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group as disclosed in its consolidated financial statements as at and for the year ended 31 December 2011. Although the group has adopted a number of new interpretations and amendments to existing standards in the period, the application of these has not had any impact on the net assets or results of the group. The amendment to IAS19 Employee Benefits is issued but not effective for the current financial year and has not been adopted early. The group is currently assessing the impact of this amendment.

3. Segmental reporting

Management information is presented to the main board (the chief operating decision maker) based upon business segments. There has been no change to the operating segments during the period. The reported segments are:

4. Income tax

A credit for current taxation has been included at 24% (2011 26%), being the effective rate likely to be applied to the result for the full year to 31 December 2012.

A reduction in the rate from 25% to 24% (effective from 1 April 2012) was substantively enacted on 26 March 2012 and the deferred tax liability/asset has therefore been calculated based on the rate of 24%.

The Budget on 21 March 2012 announced that the UK corporation tax rate will reduce from 24% to 22% over a period of 2 years from 2012. It has not yet been possible to quantify the full anticipated effect of this rate reduction, although this will further reduce the company's future current tax charge and reduce the company's net deferred tax asset accordingly.

5. Earnings per share

The calculation of basic earnings per share and underlying earnings per share for the period ended 30 June 2012 is based on the profit attributable to ordinary shareholders as follows:

Continuing operations:

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

Basic earnings per share

Diluted earnings per share

6. Equity dividends

No dividends have been declared or proposed for 2012.

7. Property, plant and equipment

Contracts placed for future capital expenditure not provided in the financial statements amount to £26,000 (30 June 2011: £3,000,

31 December 2011: £95,000)

8. Intangible assets

9. Analysis of net cash and financial liabilities

10. Related parties

Transactions with key management personnel

Group key management personnel receive compensation in the form of salaries and short-term benefits, post-employment benefits and share-based payments. Group key management received total compensation of £572,000 for the six months ended 30 June 2012 (six months ended 30 June 2011: £ 864,000). This included no compensation for loss of office (six months ended 30 June 2011: £90,000).

11. Pension liabilities

During the period, the pension deficit, net of deferred tax, increased to £3.3 million (December 2011: £3.1 million) as a result of a decrease in the value of the fund's investments and an increase in its liabilities.

12. Exceptional costs

13. Discontinued operations

On 26 April 2012, the Group sold the Showcard Print business which comprised the Point of Sale Division. Showcard Print was classified as held for sale at 31 December 2011. Comparatives have been restated accordingly. The results of the discontinued activity are shown in the income statement.

Cash flows from discontinued operation

Effect of disposal on the financial position of the Group

14. Principal risks and uncertainties

The principal risks and uncertainties facing the group for the remainder of 2012 are shown below and have not changed from those disclosed in the Annual report for 2011.

The Group's loan facilities contain covenants as to EBITDA, asset cover and cash performance. These covenants are tested quarterly and failure to meet these constitutes an event of default under the facility agreement, giving the Bank the right to require immediate repayment of all amounts loaned. The Group's financial forecasts show that these covenants can be met. However, any material disruption to operational and financial performance could result in a shortfall against the standard of performance required. The Group addresses this risk by detailed monitoring of financial performance and the expected outcome for each measurement period.

The Group's businesses have a strong seasonal element, with a peak of activity in the middle and second half of the year. This could result in peak output requirements exceeding the available capacity. The Group manages this risk by detailed and regular capacity planning reviews, with additional shifts and early production being planned.

In the current economic climate, there is less certainty for all businesses about future trading. This is particularly true in the retail sector, where customers may change their plans and programmes at short notice. The Group manages this risk by reviewing trading outlook more frequently, including the review of weekly order intake figures.

The Retail Interiors business operates in a highly competitive market and deals with major customers which increasingly employ procurement strategies designed to ensure that all purchases, and not just those of stock items, are acquired at the lowest possible cost. The business is addressing this risk by seeking production cost savings including, where appropriate, procurement from lower cost overseas suppliers.

The Educational Interiors business is involved as a supplier to major construction projects which can be subject to time delays and slippage caused by both commercial and weather-related issues. The business addresses this risk by building allowance for slippage into its production forecasts and budgets.

The Retail and Educational Interiors businesses work as sub-contractors under industry standard written contracts. The risks involved in working under such contracts are controlled by the employment of qualified and knowledgeable contract managers and quantity surveyors.

The largest element of working capital employed by the Group is trade receivables. These are subject to credit risk and, as a consequence, the Group employs credit insurance to cover the risk on most of its commercial debtors. However, in addition to debt owed by the public sector and local government, the Group bears the credit risk on a proportion of receivables where its credit insurers are unwilling to provide cover. At present, credit insurers continue to be prudent with the amount of cover they are willing to provide and consequently the level of uninsured debtors has increased. The Group's procedures require that material uninsured credit limits are approved by the Board. The Group also monitors the credit status of its major customers.

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

·; the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union;

·; the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 Eric Prescott Grant Findlay

Chief Executive Finance Director

11 September 2012