23rd Sep 2010 07:00
HAVELOCK EUROPA PLC
("Havelock" or the "Company")
Interim Results
Havelock (HVE.L), the retail and educational interiors and point of sale printing group, announces its results for the half year to 30 June 2010.
Financial highlights
·; Group revenue from continuing operations decreased by 16% to £41.2m (2009 : £49.2m)
·; Underlying* pre-tax loss of £2.4m (2009 : £1.3m)
·; Reported pre-tax loss of £4.6m (2009 : £1.8m)
·; Group net debt increased to £22.3m (December 2009 : £19.4m), reflecting the losses incurred in the first six months
·; The Group continues to operate within its new bank facilities
* Underlying excludes exceptional costs of £2.1 m (2009:£0.4m) and amortisation of intangibles (other than software) of £0.1m (2009: £0.1m)
Operational highlights
·; Resolution of 2009 operational issues and completion of integration of Retail Interiors and ESA McIntosh businesses have delivered cost savings totalling £3.0m per annum, providing a foundation for recovery
·; Point of sale printing division revenues up 11% to £10.5m (2009 : £9.5m) driven by World Cup and new business wins
·; Post the period end, the Board appointed Eric Prescott as Chief Executive Officer
Outlook
·; Continued focus on efficiency drive across all Group businesses with cost saving benefits to be seen in 2011
·; Despite termination of Building Schools for the Future programme, the level of education programmes already in progress or confirmed by the government represents significant amount of potential new business
·; Encouraging increase in order levels from retail financial institutions
·; Point of sale printing benefitted from recent investment in digital printing and large format litho equipment and secured further new customers
Malcolm Gourlay said:
"This has been a period of substantial change for the business as we focused on improving and delivering overall efficiency and cost savings to provide us a strong foundation for recovery. Our re-financing and cost saving programme has led to non-recurring exceptional costs and further cost reductions are expected in the second half of the year. The benefits of these initiatives will fully materialise in 2011.
The Board believes that its cost saving and efficiency programmes will deliver solid benefits in the future and that this, coupled with the resolution of last year's operational difficulties, lays the foundation for a return to Group profitability. The long anticipated news of Government spending cuts will affect the level of work from educational customers, although not immediately since there remains a significant amount of work to win from confirmed programmes. The expectation of this was one reason for the decision to integrate the Retail and Educational Interiors businesses in 2009. The integrated operation will seek to offset the impact of this decline by winning more work from other business areas, including retail and banking customers.
We are also delighted to welcome Eric Prescott as CEO and look forward to working with him to take the business forward."
Enquiries
|
Havelock Europa |
01383 820044 |
|
Malcolm Gourlay, Chairman Eric Prescott, Chief Executive Grant Findlay, Finance Director |
|
|
Investec James Grace Keith Anderson
|
020 7597 4000
|
|
Cardew Group |
020 7930 0777 |
|
Robert Ballantyne Shan Shan Willenbrock Sophie Leigh-Pemberton |
|
Website: www.havelockeuropa.com
INTERIM STATEMENT
The Company continues to operate in a difficult economic environment. As outlined in the preliminary announcement for 2009, the first half of the year has been affected by low levels of revenue, particularly in the Interiors business which reflects the demand of our retail and education customers. However, the resolution of the operational issues encountered at the end of 2009, cost savings of £3.0m per annum and an improved order intake provide the foundation for recovery in the second half of the year.
FINANCIAL REVIEW
As stated in the preliminary announcement for 2009, the first half of the year has been affected by low levels of revenue, particularly in the Interiors business.
Group revenue from continuing operations for the six months ended 30 June 2010 decreased by 16% to £41.2m (2009 : £49.2m). The loss before exceptional items and taxation was £2.5m (2009 : £1.4m). After exceptional non-recurring costs of £2.1m (2009 : £0.4m), the pre-tax loss was £4.6m (2009 : £1.8m). The exceptional non-recurring costs related to the refinancing of the Group's bank debt undertaken in April, the cost of Board reorganisation and further cost saving initiatives at the Group's Interiors and Print businesses.
Group net debt increased to £22.3m (December 2009 : £19.4m), reflecting the losses incurred in the first six months and higher working capital , which followed an increase in activity towards the end of the period. The Group has initiated a programme to improve working capital and the benefits of this will be seen in the second half of the year.
TRADING REVIEW
Following the integration of the Retail Interiors and ESA McIntosh businesses into a combined Interiors business, the Group's reporting segments have been modified. The Interiors business is now reported as a single segment and the Educational Supplies segment comprises the three smaller educational businesses which formerly were part of the Educational Interiors segment.
Interiors
Revenue in the Interiors business was down 23% to £26.6m (2009 : £34.4m) on the comparable period last year, as anticipated. Within this, activity on educational projects was most impacted and showed a decline of 50% to £11.0m (2009 : £21.7m), whilst revenue from existing and new retail customers grew in the period by 22% to £15.6m (2009 : £12.7m). The educational decline reflected principally the timing of major BSF and PFI projects, although Direct to School revenues were lower reflecting pressure on local school budgets. Operational efficiency improved and the issues which affected the delivery of projects at the end of 2009 following the integration of the retail and educational interiors businesses, were resolved. Cost savings of £3.0m, on an annualised basis, have been made and the benefits of these will be seen in future trading.
The business has, throughout, maintained its reputation for high quality products and services. Feedback from customers continues to be excellent and this is evidenced by very high levels of customer retention.
Educational Supplies
Revenue in this segment was down 27% to £4.8m (2009 : £6.6m) on the comparable period of 2009. Gross margins were maintained and the businesses continued to report a profit in the period. The lower revenues reflect reduced orders from schools and universities. Levels of activity were also impacted by the lower level of BSF projects in the Interiors Division since this business is an important customer for the Educational Supplies businesses. This trend is expected to reverse in the second half of the year with the Interiors division having an increased number of schools scheduled for completion.
Point of Sale Printing
The performance of this division recovered strongly, with revenues up by 11% to £10.5m (2009 : £9.5m) on the comparable period last year. Activity related to the World Cup was a contributing factor, but the division has also been successful in winning new customers and has secured new business following recent investment in digital printing and large format litho equipment.
As part of the Group's measures to improve operating efficiency, the decision was taken to close the Bristol printing facility and centralise all operations at the Letchworth site which has been extended over recent years. The cost of this closure, amounting to £0.4m, has been charged as part of the exceptional non-recurring costs included in the Group income statement.
BOARD
Since the half year end, the Board announced the appointment of Eric Prescott as a Director and Chief Executive Officer. Eric Prescott is a former UK President and Managing Director of rail group Alstom Transport and former Managing Director of Balfour Beatty Rail Infrastructure Services. His most recent position was Chief Executive of Leonard Cheshire Disability. He replaces David Hurcomb, the interim Chief Executive Officer who was appointed in March following the departure of Hew Balfour. David Hurcomb resigned as a Director on 17 September 2010.
On 22 February 2010, Michael Derbyshire retired from the Board following three years as a Non-executive Director. On 16 August 2010, David MacLellan joined the Board as a Non-executive Director. David is Chairman of RJD Partners, a mid-market private equity business, and was previously Group Managing Director of Murray Johnstone.
The Board would like to welcome Eric Prescott and David MacLellan and to thank David Hurcomb, Michael Derbyshire and Hew Balfour for their dedication and contribution during a challenging time for the Company and wish them well for the future.
DIVIDENDS
As previously announced, the Board does not propose, at this stage, to pay any dividend in 2010.
AIM
After the end of the period, shareholders approved a resolution to cancel the company's shares from the Official List and on 30 July 2010 the shares were admitted to trading on AIM. This move was undertaken to save costs and because AIM is a more suitable market for a company of Havelock's size.
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 2009.
GOING CONCERN
During the period, the Group entered into new finance facilities, details of which were included in the Annual Report for 2009. The Group expects to operate within the conditions set out in the facility agreement and, accordingly, the accounts have been prepared on the going concern basis.
CURRENT TRADING
The first half of 2010 represents a turning point for the Group. Its emphasis has been on operational efficiency and cost saving. A number of further areas for increased efficiency have been identified and measures to address these will be implemented in the second half of the year. It is expected that, on completion of these programmes, the total annualised cost savings made by the Group will amount to £3.5m. The full benefit of this will be seen in 2011. We are committed to reducing debt, and this is expected to fall below the level of £19.4m seen at the end of 2009.
The recent announcements made by the Government on the Building Schools for the Future programme will result in a reduction in activity levels for the former ESA McIntosh business over the medium term. However, the level of programmes in progress or confirmed by the Government represents a significant amount of work which will be available to win in the near term.
The impact of reduced Direct to School orders is more immediate, and reduced levels of order intake are anticipated during the rest of the year.
The level of interest from retail customers, particularly in the banking sector, has been encouraging and order levels to the end of August 2010 are up 35% on 2009. This increased activity is likely to continue through the balance of the year, although the impact of a change in the VAT rate may, inevitably, have some impact on our customers focused on consumer markets.
Levels of activity in Point of Sale remain good and this business is expected to show a healthy improvement in revenue for the year.
The Board believes that its cost saving and efficiency programmes will deliver solid benefits in the future and that this, coupled with the resolution of last year's operational difficulties, lays the foundation for a return to Group profitability. The long anticipated news of Government spending cuts will affect the level of work from educational customers, although not immediately since there remains a significant amount of work to win from confirmed programmes. The expectation of this was one reason for the decision to integrate the Retail and Educational Interiors businesses in 2009. The integrated operation will seek to offset the impact of this decline by winning more work from other business areas, including retail and banking customers.
J Malcolm Gourlay
Chairman
CONDENSED CONSOLIDATED INCOME STATEMENT
for the 6 months ended 30 June 2010
|
|
|
6 months ended 30.06.10 £000 |
6 months ended 30.06.09 £000 |
year ended 31.12.09 £000 |
|
|
Note |
|
|
|
|
Revenue |
3 |
41,177 |
49,207 |
108,480 |
|
Cost of sales |
|
(35,941) |
(41,436) |
(96,707) |
|
Gross profit |
|
5,236 |
7,771 |
11,773 |
|
|
|
|
|
|
|
Administrative expenses |
|
(8,849) |
(9,108) |
(16,448) |
|
Operating loss |
|
(3,613) |
(1,337) |
(4,675) |
|
|
|
|
|
|
|
Analysed as: |
|
|
|
|
|
Operating loss before exceptional items |
|
(2,020) |
(952) |
(1,214) |
|
Exceptional items |
|
(1,593) |
(385) |
(3,461) |
|
Operating loss |
|
(3,613) |
(1,337) |
(4,675) |
|
|
|
|
|
|
|
Expected return on defined benefit pension plan assets |
|
919 |
696 |
1,380 |
|
Other financial income |
|
- |
- |
69 |
|
Financial expenses - on bank borrowings and finance leases |
|
(506) |
(290) |
(781) |
|
Interest on defined benefit pension scheme liabilities |
|
(932) |
(860) |
(1,709) |
|
Exceptional finance costs |
13 |
(489) |
- |
(180) |
|
Net financing costs |
|
(1,008) |
(454) |
(1,221) |
|
|
|
|
|
|
|
Loss before income tax |
|
(4,621) |
(1,791) |
(5,896) |
|
|
|
|
|
|
|
Income tax credit |
4 |
1,294 |
528 |
1,913 |
|
Loss for the period (attributable to equity holders of the parent) |
|
(3,327) |
(1,263) |
(3,983) |
|
|
|
|
|
|
|
Basic loss per share |
5 |
(8.9p) |
(3.4p) |
(10.7p) |
|
Diluted loss per share |
5 |
(8.9p) |
(3.4p) |
(10.7p) |
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the 6 months ended 30 June 2010
|
|
6 months ended 30.06.10 £000 |
6 months ended 30.06.09 £000 |
year ended 31.12.09 £000 |
|
Loss for the period |
(3,327) |
(1,263) |
(3,983) |
|
Actuarial (loss)/gain on defined benefit pension plan |
(2,577) |
379 |
474 |
|
Tax on items taken directly to equity |
722 |
(106) |
(133) |
|
Cash flow hedges: |
|
|
|
|
Effective portion of changes in fair value |
23 |
47 |
48 |
|
Net income/(expense) recognised directly in equity |
(1,832) |
320 |
389 |
|
|
|
|
|
| Total comprehensive income for the period |
|
|
|
|
(attributable to equity holders of the parent) |
(5,159) |
(943) |
(3,594) |
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 June 2010
|
|
|
as at 30.06.10 £000 |
as at 30.06.09 £000 |
as at 31.12.09 £000 |
|
|
Note |
|
|
|
| Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Property, plant and equipment |
7 |
11,453 |
12,608 |
11,780 |
|
Intangible assets |
8 |
14,402 |
14,704 |
14,641 |
|
Deferred tax asset |
|
2,184 |
1,708 |
1,478 |
|
|
|
28,039 |
29,020 |
27,899 |
|
Current assets |
|
|
|
|
|
Inventories |
|
12,703 |
16,487 |
10,551 |
|
Non-current assets classified as held for sale |
9 |
834 |
- |
- |
|
Trade and other receivables |
|
23,193 |
24,824 |
28,431 |
|
Current income tax asset |
4 |
1,480 |
403 |
1,971 |
|
Cash and cash equivalents |
10 |
1,964 |
808 |
461 |
|
|
|
40,174 |
42,522 |
41,414 |
|
|
|
|
|
|
|
Total assets |
|
68,213 |
71,542 |
69,313 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Interest-bearing loans and borrowings |
10 |
(2,592) |
(1,552) |
(2,572) |
|
Derivative financial instruments |
|
(328) |
(352) |
(351) |
|
Trade and other payables |
|
(20,589) |
(24,714) |
(23,382) |
|
|
|
(23,509) |
(26,618) |
(26,305) |
|
Non-current liabilities |
|
|
|
|
|
Interest-bearing loans and borrowings |
10 |
(21,651) |
(14,598) |
(17,311) |
|
Retirement benefit obligations |
|
(7,800) |
(6,100) |
(5,279) |
|
Deferred tax liabilities |
|
(540) |
(918) |
(556) |
|
|
|
(29,991)) |
(21,616) |
(23,146) |
|
|
|
|
|
|
|
Total liabilities |
|
(53,500)(53,859) |
(48,234) |
(49,451) |
|
|
|
|
|
|
|
Net assets |
|
14,713 |
23,308 |
19,862 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Issued share capital |
|
3,853 |
3,853 |
3,853 |
|
Share premium |
|
7,013 |
7,013 |
7,013 |
|
Other reserves |
|
2,850 |
2,826 |
2,827 |
|
Revenue reserves |
|
997 |
9,616 |
6,169 |
|
Total equity (attributable to equity holders of the parent) |
|
14,713 |
23,308 |
19,862 |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the 6 months ended 30 June 2010
|
|
6 months ended 30.06.10 £000 |
6 months ended 30.06.09 £000 |
year ended 31.12.09 £000 |
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Loss for the period |
(3,327) |
(1,263) |
(3,983) |
|
Adjustments for: |
|
|
|
|
Depreciation of property, plant and equipment |
907 |
903 |
1,821 |
|
Amortisation of intangible assets |
276 |
220 |
475 |
|
Loss on sale of property, plant and equipment |
- |
- |
157 |
|
Net financing costs |
519 |
454 |
1,041 |
|
IFRS 2 charge relating to equity settled plans |
10 |
4 |
(330) |
|
Income tax credit |
(1,294) |
(528) |
(1,913) |
|
|
|
|
|
|
Operating cash flows before changes in working capital |
|
|
|
|
and provisions |
(2,909) |
(210) |
(2,732) |
|
|
|
|
|
|
Decrease in trade and other receivables |
5,238 |
7,409 |
3,802 |
|
(Increase)/decrease in inventories |
(2,152) |
(3,894) |
2,042 |
|
Decrease in trade and other payables |
(3,872) |
(4,837) |
(4,788) |
|
Movement relative to defined benefit pension scheme |
(69) |
(126) |
(1,017) |
|
Cash used in operations |
(3,764)) |
(1,658) |
(2,693) |
|
|
|
|
|
|
Interest paid |
(427) |
(290) |
(691) |
|
Income taxes received/(paid) |
1,785 |
(1,023) |
(1,365) |
|
Net cash used in operating activities |
(2,406) |
(2,971) |
(4,749) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Acquisition of property, plant and equipment |
(414) |
(486) |
(733) |
|
Acquisition of intangible assets |
(37) |
(210) |
(402) |
|
Disposal of discontinued operation net of cash disposed of |
- |
- |
(91) |
|
Net cash outflow from investing activities |
(451) |
(696) |
(1,226) |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Increase in bank loans net of facility fees paid |
4,641 |
- |
5,000 |
|
Repayment of bank borrowings |
- |
- |
(996) |
|
Repayment of finance lease liabilities |
(281) |
(261) |
(532) |
|
Dividends paid |
- |
- |
(1,772) |
|
Net cash from financing activities |
4,360 |
(261) |
1,700 |
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
1,503 |
(3,928) |
(4,275) |
|
Cash and cash equivalents at 1 January |
461 |
4,736 |
4,736 |
|
Cash and cash equivalents at end of period |
1,964 |
808 |
461 |
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 6 months ended 30 June 2010
|
|
Share capital £000 |
Share premium £000 |
Merger Reserve £000 |
Hedging Reserve £000 |
Other Reserve £000 |
Revenue Reserve £000 |
Total £000 |
|
Current interim period |
|
|
|
|
|
|
|
|
At 1 January 2010 |
3,853 |
7,013 |
2,184 |
(351) |
994 |
6,169 |
19,862 |
|
Total comprehensive income for the period |
- |
- |
- |
23 |
- |
(5,182) |
(5,159) |
|
Movements relating to share-based payments |
|
|
|
|
|
|
|
|
and ESOP Trust |
- |
- |
- |
- |
- |
10 |
10 |
|
At 30 June 2010 |
3,853 |
7,013 |
2,184 |
(328) |
994 |
997 |
14,713 |
|
Previous interim period |
|
|
|
|
|
|
|
|
At 1 January 2009 |
3,853 |
7,013 |
2,184 |
(399) |
994 |
11,913 |
25,558 |
|
Total comprehensive income for the period |
- |
- |
- |
47 |
- |
(990) |
(943) |
|
Ordinary dividends |
- |
- |
- |
- |
- |
(1,310) |
(1,310) |
|
Movements relating to share-based payments |
|
|
|
|
|
|
|
|
and ESOP Trust |
- |
- |
- |
- |
- |
3 |
3 |
|
At 30 June 2009 |
3,853 |
7,013 |
2,184 |
(352) |
994 |
9,616 |
23,308 |
|
Prior year |
|
|
|
|
|
|
|
|
At 1 January 2009 |
3,853 |
7,013 |
2,184 |
(399) |
994 |
11,913 |
25,558 |
|
Total comprehensive income for the year |
- |
- |
- |
48 |
- |
(3,642) |
(3,594) |
|
Ordinary dividends |
- |
- |
- |
- |
- |
(1,772) |
(1,772) |
|
Movements relating to share-based payments |
|
|
|
|
|
|
|
|
and ESOP Trust |
- |
- |
- |
- |
- |
(330) |
(330) |
|
At 31 December 2009 |
3,853 |
7,013 |
2,184 |
(351) |
994 |
6,169 |
19,862 |
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 2010. 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 23 September 2010 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 2009 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 2009 has been extracted from the Annual Report 2009 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 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 2009 except for the impact of the standards disclosed below:
New standards
The following 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:
* IFRS 3 Business Combinations (revised 2008)
* IAS 27 Consolidated and Separate Financial Statements (amended 2008)
* Amendments to IFRIC 9 Reassessment of Embedded Derivatives
* Amendments to IAS 39 Financial Instruments: Recognition and Measurement - Eligible hedged items
* Improvements to International Financial Reporting Standards 2009
* IFRIC 17 - Distributions of Non-Cash Assets to Owners
* IFRIC 18 - Transfers of Assets from Customers
3. Segmental reporting
Management information is presented to the main board (the chief operating decision maker) based upon business segments. The composition of the reported segments was revised with effect from 1 January 2010. The figures for prior periods have been restated accordingly. Following the integration in 2009 of the Retail Interiors business with ESA McIntosh, the principal business within the Educational Interiors division, the integrated business is now reported as a separate Interiors segment. The Educational Supplies segment now includes only the three smaller Supplies businesses: Teacherboards, Clean Air and Stage Systems. The reported segments are:
|
·; Interiors - design, manufacture and installation of interiors for schools, retail, financial services, hotels and other accommodation premises; |
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|
|
||||
|
·; Educational Supplies - design, manufacture, supply and installation teaching aids, display boards and fume cupboards for the education sector; |
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|
|
||||
|
·; Point of Sale - printing of promotional graphics for use in retail, financial services and branded goods businesses. |
||||
|
|
6 months ended 30.06.10 |
6 months ended 30.06.09 Restated - see above |
year ended 31.12.09 Restated - see above |
|
|
|
£000 |
£000 |
£000 |
|
|
Total revenue from external customers |
|
|
|
|
|
Interiors |
26,599 |
34,394 |
77,855 |
|
|
Educational Supplies |
4,045 |
5,354 |
10,923 |
|
|
Point of Sale |
10,533 |
9,459 |
19,702 |
|
|
Total revenue from external customers |
41,177 |
49,207 |
108,480 |
|
|
Inter-segment revenue |
|
|
|
|
|
Interiors |
(18) |
- |
18 |
|
|
Educational Supplies |
795 |
1,282 |
2,557 |
|
|
Point of Sale |
11 |
14 |
34 |
|
|
Total inter-segment revenue |
788 |
1,296 |
2,609 |
|
|
Total revenue |
|
|
|
|
|
Interiors |
26,581 |
34,394 |
77,873 |
|
|
Educational Supplies |
4,840 |
6,636 |
13,480 |
|
|
Point of Sale |
10,544 |
9,473 |
19,736 |
|
|
Total revenue |
41,965 |
50,503 |
111,089 |
|
|
Eliminate inter-segment revenue |
(788) |
(1,296) |
(2,609) |
|
|
Consolidated revenue |
41,177 |
49,207 |
108,480 |
|
|
|
|
|
|
|
|
Segment result |
|
|
|
|
|
Interiors |
(2,681) |
(1,626) |
(3,795) |
|
|
Educational Supplies |
81 |
301 |
1,053 |
|
|
Point of Sale |
1,444 |
1,460 |
3,105 |
|
|
Amortisation of intangibles (element relating to Educational Supplies segment) |
(112) |
(112) |
(223) |
|
|
Total segment result from continuing operations |
(1,268) |
23 |
140 |
|
|
Unallocated expenses (excluding exceptional costs) |
(752) |
(975) |
(1,354) |
|
|
Operating loss from continuing operations |
(2,020) |
(952) |
(1,214) |
|
|
Net financing costs (excluding exceptional finance costs) |
(519) |
(454) |
(1,041) |
|
|
Loss before income tax and exceptional costs |
(2,539) |
(1,406) |
(2,255) |
|
|
Exceptional costs |
(2,082) |
(385) |
(3,641) |
|
|
Loss before income tax |
(4,621) |
(1,791) |
(5,896) |
|
|
Income tax |
1,294 |
528 |
1,913 |
|
|
Loss for the period |
(3,327) |
(1,263) |
(3,983) |
|
|
Segment assets |
|
|
|
|
Interiors |
36,849 |
42,263 |
40,831 |
|
Educational Supplies |
13,390 |
14,409 |
13,193 |
|
Point of Sale |
11,967 |
10,216 |
10,302 |
|
Unallocated |
6,007 |
4,654 |
4,987 |
|
Total assets |
68,213 |
71,542 |
69,313 |
4. Income tax
A credit for current taxation has been included at 28% (2009 28%), being the effective rate likely to be applied to the result for the full year to 31 December 2010.
The Emergency Budget on 22 June 2010 announced that the UK corporation tax rate will reduce from 28% to 24% over a period of 4 years from 2011. The first reduction in the UK corporation tax rate from 28% to 27% was substantively enacted subsequent to 30 June 2010 and will be effective from 1 April 2011. This will reduce the company's future current tax charge accordingly. If the rate change from 28% to 27% had been substantively enacted on or before the balance sheet date it would have had the effect of reducing the net deferred tax asset recognised at that date by £59,000. It has not yet been possible to quantify the full anticipated effect of the announced further 3% 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 2010 is based on the profit attributable to ordinary shareholders as follows:
|
|
6 months ended 30.06.10 £000 |
6 months ended 30.06.09 £000 |
year ended 31.12.09 £000 |
6 months ended 30.06.10 EPS (pence) |
6 months ended 30.06.09 EPS (pence) |
year ended 31.12.09 EPS(pence) |
|
|
|
|
|
|
|
|
|
Basic |
(3,327) |
(1,263) |
(3,983) |
(8.9) |
(3.4) |
(10.7) |
|
Adjusted for: |
|
|
|
|
|
|
|
Amortisation of intangibles that attract no tax deduction |
112 |
112 |
223 |
0.3 |
0.3 |
0.6 |
|
Exceptional costs |
2,082 |
385 |
3,641 |
5.5 |
1.0 |
9.5 |
|
Tax relief on exceptional costs |
(583) |
(108) |
(1,020) |
(1.5) |
(0.3) |
(2.5) |
|
Adjusted |
(1,716) |
(874) |
(1,139) |
(4.6) |
(2.4) |
(3.1) |
|
Diluted basic loss per share |
|
|
|
(8.9) |
(3.4) |
(10.7) |
|
Diluted adjusted loss per share |
|
|
|
(4.6) |
(2.4) |
(3.1) |
The weighted average number of ordinary shares used in each calculation is as follows:
Basic earnings per share
|
|
6 months ended 30.06.10 |
6 months ended 30.06.09 |
year ended 31.12.09 |
|
In thousands of shares |
|
|
|
|
|
|
|
|
|
Issued ordinary shares at 1 January |
38,532 |
38,532 |
38,532 |
|
Effect of own shares held |
(1,261) |
(1,267) |
(1,264) |
|
|
|
|
|
|
Weighted average number of ordinary shares for the period |
37,271 |
37,265 |
37,268 |
|
|
|
|
|
Diluted earnings per share
|
|
6 months ended 30.06.10 |
6 months ended 30.06.09 |
year ended 31.12.09 |
|
In thousands of shares |
|
|
|
|
Weighted average number of ordinary shares |
37,271 |
37,265 |
37,268 |
|
Effect of share options in issue |
1,058 |
1,080 |
1,085 |
|
|
|
|
|
|
Weighted average number of ordinary shares (diluted) for the period |
38,329 |
38,345 |
38,353 |
|
|
|
|
|
6. Equity dividends
No dividends have been declared for 2010.
|
Amounts recognised as distributions to equity holders in prior period |
6 months ended 30.06.10 |
6 months ended 30.06.09 |
year ended 31.12.09 |
|
|
£000 |
£000 |
£000 |
|
Final dividend for the year ended 31 December 2008 of 3.4p per share |
- |
1,310 |
1,310 |
|
Interim dividend for the year ended 31 December 2009 of 1.2 per share |
- |
- |
462 |
|
|
- |
1,310 |
1,772 |
|
|
|
|
|
7. Property, plant and equipment
|
|
6 months ended 30.06.10 £000 |
6 months ended 30.06.09 £000 |
year ended 31.12.09 £000 |
|
Carrying amount |
|
|
|
|
At beginning of the period |
11,780 |
13,025 |
13,025 |
|
Additions at cost |
1,414 |
486 |
733 |
|
Transferred to assets held for sale |
(834) |
- |
- |
|
Disposals |
- |
- |
(157) |
|
Depreciation charge for the period |
(907) |
(903) |
(1,821) |
|
At end of the period |
11,453 |
12,608 |
11,780 |
|
|
|
|
|
Contracts placed for future capital expenditure not provided in the financial statements amount to £108,000 (30 June 2009 £1,013,000, December 2009: £1,929,000)
8. Intangible assets
|
|
6 months ended 30.06.10 £000 |
6 months ended 30.06.09 £000 |
year ended 31.12.09 £000 |
|
Carrying amount |
|
|
|
|
At beginning of the period |
14,641 |
14,714 |
14,714 |
|
Additions |
37 |
210 |
402 |
|
Amortisation for the period |
(276) |
(220) |
(475) |
|
At end of the period |
14,402 |
14,704 |
14,641 |
|
|
|
|
|
9. Assets held for resale
On 30 June 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 have been reclassified from Property, plant and equipment to Non-current assets classified as held for sale.
10. Analysis of net cash and financial liabilities
|
|
as at 30.06.10 £000 |
as at 30.06.09 £000 |
as at 31.12.09 £000 |
|
|
|
|
|
|
Cash and cash equivalents per cash flow |
1,964 |
808 |
461 |
|
|
|
|
|
|
Secured bank loans |
(2,000) |
(1,000) |
(2,000) |
|
Finance lease obligations |
(592) |
(552) |
(572) |
|
Current financial liabilities (excluding bank overdrafts) |
(2,592) |
(1,552) |
(2,572) |
|
|
|
|
|
|
Secured bank loans net of facilities fees paid |
(20,622) |
(12,977) |
(15,981) |
|
Finance lease obligations |
(1,029) |
(1,621) |
(1,330) |
|
Non-current financial liabilities |
(21,651) |
(14,598) |
(17,311) |
|
|
|
|
|
|
Net cash and financial liabilities |
(22,279)(22,638) |
(15,342) |
(19,422) |
11. 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 £ 1,114,000 for the six months ended 30 June 2010 (six months ended 30 June 2009: £ 878,000). This included £431,000 compensation for loss of office (six months ended 30 June 2009: £85,000).
12. Pension liabilities
During the period, the pension deficit, net of deferred tax, increased to £5.6 million (December 2009: £3.8 million) as a result of a decline in the value of the fund's investments and an increase in its liabilities.
13. Exceptional costs
The exceptional costs include redundancy and other costs related to completion of the Interiors and ESA McIntosh integration, the closure of the Bristol Point of Sale Printing facility and the reorganisation of the Board. The costs comprise:
£000
Redundancy 1,209
Fees and other costs 384
1,593
Charged to financing costs:
Bank charges and fees related to agreement of new banking facilities 489
Total exceptional costs 2,082
14. Principal risks and uncertainties
The principal risks and uncertainties which could have a material impact on Havelock's performance over the remainder of the financial year have not changed from those set out in the Annual Report for 2009:
The Group's loan facilities contain covenants as to EBITDA, asset cover and cash performance. These covenants are tested three monthly and failure to meet these is an event of default under the facility agreement, giving the Bank the right to require immediate repayment of all amounts lent. 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 level 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 final quarter 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. The Group manages this risk by reviewing trading outlook more frequently, including the review of weekly order intake figures.
The 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 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 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 has 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, in respect of which the Group does not purchase credit insurance, 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
23 September 2010
Related Shares:
Havelock Europa