26th Sep 2006 07:00
Havelock Europa PLC26 September 2006 HAVELOCK EUROPA PLC - INTERIM ANNOUNCEMENT Havelock, the Education and Retail Interiors and Point of Sale Display Group,announces an increased pre-tax profit in the first half, which is historicallymuch the quieter of the two periods, and good prospects for the second half,2007 and beyond. FINANCIAL HIGHLIGHTS • Revenue increased by 5% to £42.1m. • Operating profit was up 14% to £1.2m. • Pre-tax profit increased by 116% to £0.46m or, excluding amortisation of intangibles, by 62% to £0.65m. • Basic and diluted earnings per share were 0.9p (2005: 0.3p). • An interim dividend per share of 1.0p is declared, up 11%. COMMERCIAL HIGHLIGHTS • Revenue from Education Furniture and Supplies increased by 21% to £13.6m. ESA McIntosh, the UK market leader in fitted furniture and equipment for schools, achieved a record order intake. Its activity level remains particularly buoyant. • Point of Sale Display broadly maintained its revenue at £11.6m (2005: £11.8m) despite the loss of a major customer in Kwik Save, following its sale by Somerfield (referred to in the 2005 Preliminary Announcement). Although, as a result, this Division's contribution is likely to be lower than in 2005, an encouraging amount of new business has been generated and savings effected will, in the medium term, be highly beneficial. • In the Retail Interiors Division, the level of activity has been strong, with slightly reduced revenue of £16.9m (2005: £17.3m) but a much increased order book and a high volume of work in hand at the period end. Full year revenues are likely to be ahead of last year, as is contribution to the overall Group result. Malcolm Gourlay, Chairman, stated "The Board remains optimistic about theopportunities in the Group's chosen markets. Further progress is expected in thefull year with additional growth in 2007 and beyond, both organically and, whereappropriate, through acquisition." Enquiries: Havelock Europa PLC 01383-820 044 Hew Balfour (Chief Executive) 07801-683 851Grant Findlay (Finance Director) 07768-745 960 Bankside Consultants Limited Charles Ponsonby 020-7367 8851 INTERIM STATEMENT Havelock has increased its pre-tax profit in the first half, which ishistorically much the quieter of the two periods, and has good prospects for thesecond half, 2007 and beyond. FINANCIAL REVIEW Group revenue for the six months ended 30 June 2006 increased to £42.1 million(2005 : £40.3 million), a rise of 4.5%. This reflected a particularly strongperformance from the educational businesses, where revenue grew by 21.6%. Groupoperating profit at £1.2 million (2005 : £1.0 million) was up 14.3%. Groupprofit before tax, was £462,000 (2005 : £214,000). Basic and diluted earningsper share were 0.9 pence (2005 : 0.3 pence). Pre-tax profit, after adding backthe amortisation of intangibles, increased by 62% to £646,000 (2005 : £398,000). Although working capital requirements increased, reflecting higher activitylevels, net debt at 30 June 2006 reduced to £21.4 million (2005 : £22.2million). Interest cover, excluding pension scheme interest, for the half yearimproved by 15% to 1.5 (2005 : 1.3) and is expected to show an improvement inthe full year (2005 : 4.0). DIVIDEND The Board is pleased to declare an interim dividend of 1.0 pence per share(2005: 0.9 pence), an increase of 11%. This dividend will be paid on 27 December2006 to shareholders on the register at 10 November 2006. SALE OF INVESTMENT IN MIDDLE EASTERN ASSOCIATE The Group disposed of its remaining 17% investment in Havelock AHI HoldingsLimited, during the first half of the year, resulting in a non-taxable gain onsale of £98,000 and net proceeds after costs of £943,000. The business wasestablished in 1998 as a 50/50 joint venture with a Bahraini-based retailer,aimed at exploiting the opportunities in the emerging storefitting and hotelrefurbishment markets. A partial divestment took place in 2003, generating anon-taxable gain in that year of £0.9m and net proceeds of £2.6m, when HSBCPrivate Equity Middle East (HPEME) took a controlling stake in the business. Thesale of Havelock's remaining interest to HPEME marks a natural conclusion tothis process. TRADING REVIEW Education Furniture and Supplies ESA McIntosh, the UK market leader in fitted furniture and equipment forschools, achieved record order intake, both in the core "direct to schools"market and in the PFI sector, which augurs well for the second half results.TeacherBoards, specialising in classroom accessories, traded in a similar rangeto last year; whilst sales at Clean Air, which manufactures fume cupboards,benefited from a strong showing in the university market. Revenue withinEducation rose to £13.6 million (2005 : £11.2 million), an increase of 21.6%. Point of Sale Display The Point of Sale Display Division broadly maintained its revenue at £11.6million (2005 : £11.8 million) despite the loss of a major customer as a resultof the sale of Kwik Save by Somerfield, during the first quarter of the year,which was referred to in the Preliminary Announcement of 4 April 2006. Earlyaction was undertaken to consolidate the two Print operations at Letchworth andBristol under the management team of Showcard Print. An extensive redundancyprogramme has now been completed which will generate significant savings in thesecond half and this, together with the rationalisation of both property andplant, will help to mitigate the effect on profit of the reduction in revenue .At Letchworth, both orders and sales have run at a substantially higher levelthan last year as a result of the addition of new customers. Retail Interiors In the Retail Interiors Division, the level of activity has been strong,maintaining revenue broadly at the same level as last year at £16.9 million(2005 : £17.3 million) but with a much increased order book and a high volume ofwork in hand at the period end . Marks & Spencer has returned as a significantcustomer. Activity in the financial services area has been robust, with a majorinflow of work from Bank of Scotland (Ireland) and substantially enhanced levelsof business with The Royal Bank of Scotland. The diversification of the customerbase within this Division and the entry, last year, into the healthcare markethave created a wider spread of opportunity and some lowering of exposure toretail volatility. PROSPECTS As pointed out on earlier occasions, the requirement under IFRS to recogniserevenue after completion of the installation process, particularly in theeducation businesses, continues to weight the seasonal bias towards the secondhalf of the year, during which period substantially all of the Group's pre-taxprofit will be earned. Within the education businesses, ESA McIntosh's level of activity remainsparticularly buoyant. Order flow in the core "direct to schools" market hascontinued at good levels into the second half, whilst, within the PFI sector,work is well underway on 15 projects. In addition, a further PFI project isbeing handled by the Retail Interiors Division, making 16 in all. Of theseprojects, seven are likely to have additional work for 2007. Whilst the start ofthe "Building Schools for the Future" (BSF) programme in England has beendelayed, with only a small amount of revenue likely to be available during 2007,the volume of work under Phase II of the PFI programme for Scotland continues torise and prospects for 2007 are encouraging. At TeacherBoards, revenues are likely to be modestly up on the prior year butmore substantially so at Clean Air, which, like ESA McIntosh, is benefiting fromthe marked uplift in PFI activity. New management teams are in place within bothbusinesses, following the retirement of the vendors. July and August have proved brisker months in the point of sale sector than inprevious years. Although the level of contribution from this Division is likelyto be lower in 2006, compared to 2005, as a consequence of the reduction inbusiness with Somerfield, following its sale of Kwik Save, and the cost of theresulting redundancy programme at Bristol, there has been an encouraging amountof new business generated at both plants and within the Display operation atLetchworth. The savings generated from the integration of the management teamsof the two print businesses, along with property rationalisation at both Bristoland Letchworth, will, in the medium term, be highly beneficial. The Retail Interiors Division is performing strongly, as a result of continuingsuccess in financial services and the diversification of its customer base.Revenues are likely to be ahead of last year, as is contribution to the overallGroup result. The integration of the accounting and manufacturing disciplines ofthe Retail Interiors Division at Dalgety Bay with those of the educationfurniture business at Kirkcaldy, is continuing to improve the procurement of rawmaterials, productivity and capacity utilisation at both plants. It is pleasing to report that changes made in the last 15 months to the Group'ssenior management structure have had a positive impact on performance and leavethe Group well placed to manage further expansion. The Board remains optimistic about the opportunities in the Group's chosenmarkets. The temporary hiatus in the PFI education sector, which followed thewithdrawal of Jarvis, in late 2004, is now over and there appear to be goodindications from Government of continuing commitment towards the refurbishmentand renewal of education infrastructure well beyond 2008. Further progress is expected in the full year with additional growth in 2007 andbeyond, both organically and, where appropriate, through acquisition. Malcolm Gourlay Chairman 26 September 2006 CONSOLIDATED INCOME STATEMENT for the 6 months ended 30 June 2006 (unaudited) Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.06 30.06.05 31.12.05 £000 £000 £000 Note Revenue 42,122 40,310 100,194 Cost of sales (34,065) (32,949) (78,790) _______ _______ _______ Gross profit 8,057 7,361 21,404 Administrative expenses (6,967) (6,322) (15,290) Non-recurring pension curtailment - - 1,389 _______ _______ _______ Operating profit before financing costs and gain on disposal of associate 1,090 1,039 7,503 Gain on sale of interest in associate 9 98 - - _______ _______ _______ Operating profit before financing costs 1,188 1,039 7,503 Expected return on defined benefit pension plan assets 730 623 1,259 Financial expenses - on bank borrowings and finance leases (750) (807) (1,616) Interest on defined benefit pension scheme liabilities (730) (711) (1,411) _______ _______ _______ Net financing costs (750) (895) (1,768) Share of profit of associate 24 70 294 _______ _______ _______ Profit before tax 462 214 6,029 Income tax expense 2 (141) (117) (1,839) _______ _______ _______ Profit for the period attributable to equity holders of the parent 321 97 4,190 _______ _______ _______ Basic earnings per share 3 0.9p 0.3p 12.3p Diluted earnings per share 3 0.9p 0.3p 12.1p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the 6 months ended 30 June 2006 (unaudited) Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.06 30.06.05 31.12.05 £000 £000 £000 Exchange differences on translation of overseas associate - 40 63Actuarial gain/(loss) on defined benefit pension plan 2,173 (1,357) (1,039)Tax on actuarial (gain)/loss (668) 407 312Cash flow hedges:Effective portion of changes in fair value 211 (235) (153) _______ _______ _______Net income/(expense) recognised directly in equity 1,716 (1,145) (817) Profit for the period 321 97 4,190 _______ _______ _______Total recognised income and expense for theperiod attributable to equity holders of the parent 2,037 (1,048) 3,373 _______ _______ _______ CONSOLIDATED BALANCE SHEET as at 30 June 2006 (unaudited) Unaudited Unaudited Audited as at as at as at 30.06.06 30.06.05 31.12.05 £000 £000 £000 NoteAssets Non-current assetsProperty, plant and equipment 13,131 13,066 12,902Intangible assets 5 12,630 14,321 12,852Investments in associates - 722 -Deferred tax asset 1,650 3,000 2,318 _______ _______ _______Total non-current assets 27,411 31,109 28,072 _______ _______ _______Current assetsInventories 6 15,361 13,337 8,923Trade and other receivables 7 22,334 16,596 20,261Cash and cash equivalents - - 2,089 _______ _______ _______Total current assets 37,695 29,933 31,273Non-current asset classified as held for sale - - 842 _______ _______ _______Total assets 65,106 61,042 60,187 _______ _______ _______LiabilitiesCurrent liabilitiesBank overdraft (5,675) (5,385) -Other interest-bearing loans and borrowings (2,997) (2,418) (6,817)Derivative financial instruments (107) (400) (318)Income tax payable (518) (947) (590)Trade and other payables 8 (23,234) (18,558) (22,069) _______ _______ _______Total current liabilities (32,531) (27,708) (29,794) _______ _______ _______Non-current liabilitiesInterest-bearing loans and borrowings (12,686) (14,431) (9,331)Retirement benefit obligations (5,500) (10,000) (7,725)Deferred tax liabilities (1,072) (742) (1,072) _______ _______ _______Total non-current liabilities (19,258) (25,173) (18,128) _______ _______ _______Total liabilities (51,789) (52,881) (47,922) _______ _______ _______Net assets 13,317 8,161 12,265 _______ _______ _______EquityIssued share capital 3,484 3,476 3,479Share premium 2,017 1,971 1,987Other reserves 3,072 3,177 2,881Revenue reserves 4,744 (463) 3,918 _______ _______ _______Total equity attributable to equity holders of the parent 10 13,317 8,161 12,265 _______ _______ _______ CONSOLIDATED STATEMENT OF CASH FLOWS for the 6 months ended 30 June 2006 (unaudited) Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.06 30.06.05 31.12.05 £000 £000 £000 Cash flows from operating activitiesProfit before tax 462 214 6,029Adjustments for:Depreciation 912 940 1,826Amortisation of intangible assets 222 236 510Loss/(gain) on sale of property, plant and equipment 11 - (26)Net financing costs 750 895 1,768Share of profit of associate (24) (70) (294)Gain on sale of interest in associate (98) - - _______ _______ _______Operating cash flows before changes in working capital 2,235 2,215 9,813 (Increase)/decrease in trade and other receivables (2,073) 181 (3,484)(Increase)/decrease in inventories (6,438) (3,708) 706Increase/(decrease) in trade and other payables 432 (2,508) 2,954Movement relative to defined benefit pension scheme (52) (55) (1,924)IFRS 2 charge - - 70 _______ _______ _______Cash (absorbed by)/generated from operations (5,896) (3,875) 8,135 _______ _______ _______Interest paid (761) (737) (1,768)Income taxes paid (213) (231) (1,392) _______ _______ _______Net cash from operating activities (6,870) (4,843) 4,975 _______ _______ _______Cash flows from investing activitiesProceeds from sale of property, plant and equipment 35 - 26Proceeds from sale of interest in associate 993 - -Acquisition of property, plant and equipment (1,187) (320) (1,041)Acquisition of intangible assets - (88) (125)Repayment of loan notes and deferred consideration (778) (1,274) (1,185)Dividends received from associate - - 127 _______ _______ _______Net cash from investing activities (937) (1,682) (2,198) _______ _______ _______Cash flows from financing activitiesProceeds from the issue of share capital 35 210 228Increase in bank loans 782 1,255 1,244Purchase of own shares and proceeds from exercise of share options (59) (291) (374)Repayment of bank borrowings (625) (625) (1,250)Repayment of finance lease liabilities (36) (36) (72)Dividends paid - - (1,145) _______ _______ _______Net cash from financing activities 97 513 (1,369) _______ _______ _______Net (decrease)/increase in cash and cash equivalents (7,710) (6,012) 1,408Cash and cash equivalents at 1 January 2,035 627 627 _______ _______ _______Cash and cash equivalents at end of period (5,675) (5,385) 2,035 _______ _______ _______ NOTES TO THE FINANCIAL STATEMENTS 1. Principal accounting policies Havelock Europa PLC is a company domiciled in the United Kingdom. Theconsolidated interim financial statements for the six months ended 30 June 2006comprise the Company and its subsidiaries (together referred to as the Group)and the Group's interest in its associate. The directors approved theconsolidated interim financial statements on 26 September 2006. Basis of preparation This interim financial information has been prepared applying the accountingpolicies and presentation that were applied in the preparation of the Company'spublished consolidated financial statements for the year ended 31 December 2005. Status of financial information The figures for the financial year ended 31 December 2005 are not the Company'sstatutory accounts for that financial year. The statutory accounts for the yearended 31 December 2005, which were prepared in accordance with InternationalFinancial Reporting Standards ("IFRSs") as adopted by the EU, have been reportedon by the Company's auditors and delivered to the Registrar of Companies. Thereport of the auditors (i) was unqualified, (ii) did not include references toany matters to which the auditors drew attention by way of emphasis withoutqualifying their report and (iii) did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2. Income tax A charge for current taxation has been included at 30% (2005: 33%), being theeffective rate likely to be applied to the result for the full year to 31December 2006. The results of the associate, being a Middle East entity, are notsubject to taxation. 3. Earnings per share Basic earnings per share The calculation of basic earnings per share for the period ended 30 June 2006was based on the profit attributable to ordinary shareholders of £321,000 (2005:£97,000) and a weighted average number of ordinary shares outstanding during theperiod ended 30 June 2006 of 34,173,249 (2005:33,832,907 ), calculated asfollows: Profit attributable to ordinary shareholders Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.06 30.06.05 31.12.05 £000 £000 £000 Profit for the period 321 97 4,190 _______ _______ _______ Weighted average number of ordinary sharesIn thousands of shares Issued ordinary shares at 1 January 34,789 34,300 34,300Effect of own shares held (656) (691) (673)Effect of shares issued in 2005 - 224 351Effect of shares issued in 2006 40 - - _______ _______ _______Weighted average number of ordinary shares at end of period 34,173 33,833 33,978 _______ _______ _______ Diluted earnings per share The calculation of diluted earnings per share at 30 June 2006 was based onprofit attributable to ordinary shareholders of £321,000 (2005: £97,000) and aweighted average number of dilutive ordinary shares outstanding during theperiod ended 30 June 2006 of 34,560,754 (2005: 34,529,434), calculated asfollows: Weighted average number of ordinarysharesIn thousands of sharesWeighted average number of ordinary shares 34,173 33,833 33,978Effect of share options on issue 388 696 713 _______ _______ _______Weighted average number of ordinary shares (diluted) at end of period 34,561 34,529 34,691 _______ _______ _______ 4. Equity dividends The directors declared an interim dividend per equity share of 1.0p after thebalance sheet date. In accordance with IFRS accounting requirements, thisdividend has not been accrued in the interim consolidated financial statements. 5. Intangible assets Unaudited Unaudited Audited as at as at as at 30.06.06 30.06.05 31.12.05Carrying amount £000 £000 £000 Computer software 144 238 184Goodwill 11,173 12,403 11,173Brands 601 675 638Customer relationships 260 389 323Contracted customer relationships 42 64 53Non-compete clauses 48 144 96Design rights 362 408 385 _______ _______ _______ 12,630 14,321 12,852 _______ _______ _______ The amortisation charge in the consolidated income statement in respect of theseitems was £222,000 (June 2005: £236,000; December 2005: £510,000). 6. Inventories Unaudited Unaudited Audited as at as at as at 30.06.06 30.06.05 31.12.05 £000 £000 £000 Raw materials and consumables 3,615 3,545 3,371Work in progress 6,233 2,442 2,176Finished goods 5,513 7,350 3,376 _______ _______ _______ 15,361 13,337 8,923 _______ _______ _______ 7. Trade and other receivables Unaudited Unaudited Audited as at as at as at 30.06.06 30.06.05 31.12.05 £000 £000 £000 Trade debtors 20,320 15,076 18,761Other debtors 446 560 336Prepayments 1,568 960 1,164 _______ _______ _______ 22,334 16,596 20,261 _______ _______ _______ 8. Trade and other payables Unaudited Unaudited Audited as at as at as at 30.06.06 30.06.05 31.12.05 £000 £000 £000 Amounts disclosed in current liabilitiesTrade creditors 15,299 12,156 15,222Other taxes and social security 1,568 1,330 3,441Accruals 5,427 2,787 3,160Dividends 940 823 -Deferred consideration relating to business combination - 1,462 246 _______ _______ _______ 23,234 18,558 22,069 _______ _______ _______ 9. Sale of interest in associate On 27 April 2006, the Group sold its remaining investment in Havelock AHIHoldings Limited to HSBC Private Equity Middle East. The gain on sale wascalculated as follows: £000 Investment at 1 January 2006 842 Share of profit for the period 24 ____ Investment at disposal 866 ____ Proceeds of sale less expenses 943 Release of translation reserve 21 ____ Gain on sale 98 ____ 10. Reconciliation of changes in equity Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.06 30.06.05 31.12.05 £000 £000 £000 Total equity at beginning of period 12,265 10,278 10,278Implementation of IAS 32 and 39 - (165) (165) _______ _______ _______Adjusted equity at beginning of period 12,265 10,113 10,113 _______ _______ ________Total recognised income and expense for the period 2,037 (1,048) 3,373Ordinary dividends (940) (823) (1,145)Issue of ordinary shares 35 210 228Release of translation reserve on disposal of interest in associate (21) - -Movements relating to share-based payments and ESOP trust (59) (291) (304) _______ _______ _______Total equity at end of period 13,317 8,161 12,265 _______ _______ _______ Independent review report to Havelock Europa PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the Consolidated IncomeStatement, the Group Balance Sheet, the Group Cash Flow Statement, the GroupStatement of Recognised Income and Expense and the related notes. We have readthe other information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the UK. A review consistsprincipally of making enquiries of management and applying analytical proceduresto the financial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. KPMG Audit PlcChartered Accountants191 West George StreetGlasgowG2 2LJ26 September 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Havelock Europa