Half Yearly Report

HAVELOCK EUROPA PLC

("Havelock" or the "Company")

Interim Results

Havelock Europa (HVE.L), the retail and educational interiors and point of sale printing group, announces its results for the half year to 30 June 2011.

Financial highlights

·; Group revenue increased by 4% to £42.9m (2010: £41.2m)

·; Reported pre-tax loss reduced to £1.5m (2010 : £4.6m loss after exceptional costs of £2.1m)

·; Group net debt decreased to £17.2m (December 2010 : £19.7m)

Operational Highlights

·; Progress made in securing new business in overseas markets with high quality retailers

·; Further projects secured in the UK with high street brands including Lloyds Banking Group, Marks and Spencer and Virgin Money

·; Strengthened sales team with new appointment of a Sales and Business Development Director

·; Project Horizon continues to deliver cost savings

Outlook

·; The trading environment remains challenging and competitive

·; Focus on growing our overseas business with major retailers

·; An integrated approach to broaden the services provided to our existing customer base

·; Continued emphasis on cost control and improvements in working capital

Eric Prescott, Havelock CEO, said: I am pleased with the progress made across the entire group, and I would like to thank our workforce for their continuing commitment. In particular, we are seeing good growth internationally and we continue to work closely with strong blue chip partners.

Enquiries

Rob Ballantyne

Shan Shan Willenbrock

Sophie Leigh Pemberton

www.havelockeuropa.com

INTERIM STATEMENT

I am pleased to be able to report on a continued improved performance for the six months to 30 June 2011. The first half of our financial year is generally quieter. However, despite this, we have significantly reduced our losses compared to the same period last year. Our results show growth in revenue, which has been particularly driven by the performance of our high quality Retail customers. The operational performance of the business has been strong and, during the period, debt levels have been reduced through improved control of working capital.

FINANCIAL REVIEW

Group revenue for the six months ended 30 June 2011 increased by 4% to £42.9m (2010: £41.2m). The loss before taxation was £1.5m (2010: £4.6m loss after exceptional costs of £2.1m). The loss per share was 3.0p (2010 : 8.9p loss, excluding exceptional items : 4.9p loss).

Group net debt decreased to £17.2m (December 2010: £19.7m), with improvements in working capital contributing to the reduction as a consequence of a successful programme to improve working capital efficiency which was implemented last year. In addition, the sale of a surplus property in Bristol for £0.7m was completed which offset a £1m payment on the digital press acquired in the previous period.

TRADING REVIEW

Interiors

Revenue in the Interiors business increased by 9% to £29.1m (2010: £26.6m) on the comparable period last year. This reflected a continuing recovery in Retail and ongoing activity in the Education sector on larger schools programmes including the projects which were delayed by adverse weather in December 2010. Direct to school sales, however, remain weak with activity again declining in the first half.

During the period, the Group completed projects in China, Hong Kong, Ireland, the Netherlands and Germany. These overseas activities continue to be an important source of growth. Our business with Marks and Spencer has increased considerably as we have started to undertake store fit-out contracts as well as being a main shopfitting supplier. Since the end of the period, we have completed our first projects for Virgin Money and are working on future plans with this customer. Our performance in the Education sector continues to be robust. We have strengthened our new business development activities and have made an appointment to the new senior role in the Interiors Business of Sales & Business Development Director, as well as expanding our sales teams.

The operational performance of the business continued to improve throughout the period, with the factory achieving increasing levels of efficiency and our on-time deliveries to sites at levels above internal targets.

Further cost savings have been made during the period and Project Horizon, which is the focus for our performance improvement initiatives, continues to be active with further opportunities being developed.

Educational Supplies

Revenue in this segment was down 6% to £3.8m (2010: £4.0m) on the comparable period of 2010. The lower revenues reflect continuing fragility in the direct to school market. To compensate, the businesses are looking to increase their involvement with the commercial market and are achieving some success in this. We have generated cost savings and the businesses continue to operate more closely to ensure that sales leads are maximised and integrated product offerings are made, particularly to the large building contractors who are increasingly looking to shorten their supply chains.

Point of Sale Printing

This division continues to operate strongly in a competitive market. Revenue fell slightly to £10.0m (2010 : £10.5m) reflecting the ending of our contract to supply Somerfield which terminated in the second half of last year following the takeover of Somerfield by the Co-op. Management at the business has successfully secured other customers to replace this business. The business is operating at full capacity at peak times and options to increase capacity are currently being reviewed.

DIVIDENDS

As previously announced, the Board does not propose, at this stage, to pay any dividend in 2011.

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 2010.

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 includes a term loan, a revolving credit, HP finance and an overdraft facility. The Group's bankers remain supportive and during the period the overdraft facility has been renewed and certain covenant conditions relaxed. As set out in the notes, the Group 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 trading environment remains challenging and competitive. However, we believe the actions we are taking will position us for further improvement and recovery. Our focus currently continues to be to broaden the range of services that we supply to our existing customer base. This does not involve us providing new services but simply ensuring that we adopt an integrated approach and offer services taken by one customer to all others. At the same time we are seeking to develop new customers, particularly in overseas markets, and, to this end, we have expanded our sales resources considerably.

Cost control continues to be a focus and we believe that there are opportunities to make further savings in a number of areas within the business. Cash control continues to improve, with further improvements in working capital being sought.

Overall, the Board is encouraged by the Group's recovery; however, it continues to look for further opportunities to improve the Group's trading performance as well as opportunities to reduce the Group's debts.

J Malcolm Gourlay

Chairman

CONDENSED CONSOLIDATED INCOME STATEMENT

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED BALANCE SHEET

as at 30 June 2011

 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

for the 6 months ended 30 June 2011

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 2011. 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 6 September 2011. 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 2010 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 2010 has been extracted from the Annual Report 2010 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 Group has reported an operating loss for the period ended 30 June 2011 of £0.9 million and the current economic environment remains challenging. As at 30 June 2011, the net debt position was £17.2 million with headroom of £9.4 million on committed facilities at that point.

Cash flow forecasts have been prepared for the period through to 31 December 2012, including sensitivity analyses, taking account of the risks and uncertainties facing the Group as detailed in Note 15. The Group's bankers remain supportive andduring the period the directors have agreed a relaxation in certain covenant tests in relation to the relevant forecast period reviewed by directors. The Group is currently in compliance with these revised borrowing covenants, continues to operate within its facility requirements and is forecast to remain covenant compliant during the relevant forecast period, if necessary by taking mitigating steps in periods when the headroom is small. Notwithstanding this, the directors nevertheless believe the level of overall Group net debt should be reduced and are currently considering relevant options to give effect to this.

While the directors cannot envisage all possible circumstances that may impact the Group in the future, the directors believe that, taking account of the forecasts, sensitised forecasts, future plans and committed funding levels, the Group has sufficient resources to remain compliant with the relevant covenants and conditions attached to the Group's banking facilities and to meet all debts as they fall due for the foreseeable future.

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

 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 2010 except for the impact of the standards disclosed below:

New standards

The following standards and amendments to standards are effective for the first time in the current financial period and, where relevant, have been adopted by the Group with no impact on its consolidated results or financial position:

·; IAS 24 Related Party Disclosures (revised 2009)

·; Amendments to IFRIC 14 - Prepayments of a Minimum Funding Requirement

·; Amendments to IFRS 1 First - time Adoption of IFRSs

·; Amendment to IFRS 7 Financial Instruments: Disclosures

·; Amendment to IAS 34 Interim Financial Reporting - Significant events and transactions

·; Amendment to IFRIC 13 Customer Loyalty Programmes

3. Segmental reporting

Management information is presented to the main board (the chief operating decision maker) based upon business segments. The reported segments are:

4. Income tax

A credit for current taxation has been included at 26% (2010 28%), being the effective rate likely to be applied to the result for the full year to 31 December 2011.

The Budget on 23 March 2011 announced that the UK corporation tax rate will reduce from 26% to 23% over a period of 3 years from 2011. It has not yet been possible to quantify the full anticipated effect of this 3% rate reduction, although this will further reduce the Group's future current tax charge and reduce the Group's net deferred tax asset accordingly.

5. Loss per share

The calculation of basic loss per share and underlying loss per share for the period ended 30 June 2011 is based on the profit attributable to ordinary shareholders as follows:

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 for 2011.

7. Property, plant and equipment

Contracts placed for future capital expenditure not provided in the financial statements amount to £3,000 (30 June 2010: £108,000, 31 December 2010: £nil)

8. Intangible assets

9. Inventories

At 30 June 2011, interim applications outstanding and payments received in respect of contract work in progress amounted to £2,182,000 (30 June 2010: £699,000, 31 December 2010: £542,000).

10. Assets held for resale

On 30 June and 31 December 2010, a property at Cater Road in Bristol and certain items of machinery met the criteria for classification as non-current assets held for sale under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. As such, the relevant carrying values were reclassified from Property, plant and equipment to Non-current assets classified as held for sale. The sale of this property was completed on 30 June 2011.

11. Analysis of net cash and financial liabilities

12. 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 £ 864,000 for the six months ended 30 June 2011 (six months ended 30 June 2010: £ 1,114,000). This included £90,000 compensation for loss of office (six months ended 30 June 2010: £431,000).

13. Pension liabilities

During the period, the pension deficit, net of deferred tax, decreased to £2.1 million (December 2010: £2.2 million) as a result of an increase in the value of the fund's investments and a decrease in its liabilities.

14. Exceptional costs

(a) The integration of the Havelock Interiors business with ESA McIntosh, which commenced in 2009, was completed during the previous period. The costs comprise redundancy and exceptional operating costs directly related to the integration.

(b) Compensation for loss of office and fees related to recruitment of a new CEO.

(c) Redundancy and other costs were incurred in the closure of the Bristol Point of Sale Printing facility and the Paisley administration centre and in the restructuring of the Educational Supplies businesses.

(d) Fees relating to and in connection with the renewal of banking facilities.

15. Principal risks and uncertainties

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 its 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 Point of Sale business operates in a market where new digital printing technology to produce the product is increasingly sophisticated and, unless regular investment takes place, the business could lose competitive advantage. The Group has an ongoing investment plan for the Point of Sale business which has seen the acquisition of new digital presses.

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

6 September 2011