19th Sep 2007 07:01
Havelock Europa PLC19 September 2007 Wednesday 19 September 2007 HAVELOCK EUROPA PLC - INTERIM ANNOUNCEMENT Havelock, the Educational and Retail Interiors and Point of Sale Display Group,announces that it increased its pre-tax profit in the first half to 30 June,historically much the quieter of the two halves, and continues to have goodprospects for the full year to 31 December 2007, 2008 and beyond. Financial Highlights • Revenue increased by 23% to £51.6m, reflecting growth in all three Divisions; the like-for-like increase was 19%. • Pre-tax profit increased by 43% to £0.66m (reported) and by 43% to £0.93m (underlying +). • Diluted earnings per share increased by 30% to 1.2p (reported) and by 32% to 1.9p (underlying +). • An interim dividend per share of 1.1p is declared, up 10%. + Underlying excludes the amortisation of intangibles (other than IT software). Commercial Highlights • Revenue from Educational Interiors improved by 34% to £18.2m - a like-for-like 23% increase. The enlarged proportion represented by PFI contracts rather than the direct to schools market will generate a somewhat lower full year contribution than originally expected, but prospects for 2008 are strong. Stage Systems, an educational furniture business acquired in February 2007 for £3.45m, is on track to have a good first year. • Revenue from Point of Sale Display increased by 3% to £11.9m. The savings generated by rationalisation at Bristol are likely to contribute towards an improved full year contribution. • Revenue from Retail Interiors increased by 27% to £21.5m. Full year revenue is likely to be substantially up on the prior year. Malcolm Gourlay, Chairman, stated "With strong performances in the RetailInteriors and Point of Sale Display Divisions, the Board anticipates goodoverall progress in the full year, with further advances to follow in 2008 and2009, as the Educational Interiors Division realises its substantial potential." Enquiries: Havelock Europa PLC 01383-820 044Hew Balfour (Chief Executive) 07801-683 851Grant Findlay (Finance Director) 07768-745 960 Bankside Consultants LimitedCharles Ponsonby 020-7367 8851 Chairman's Statement Continuing a five year trend of rising underlying pre-tax profits, Havelockagain increased its pre-tax profit in the first half, historically much thequieter of the two halves, and continues to have good prospects for the fullyear to 31 December 2007, 2008 and beyond. FINANCIAL REVIEW Group revenue for the six months ended 30 June 2007 increased by 23% to £ 51.6million (2006 : £42.1 million), reflecting growth in all three Divisions: thelike-for-like increase was 19%. Operating profit at £1.2 million (2006 : £1.1million) was up 14%. Profit before tax was £659,000 (2006 : £462,000), anincrease of 43%. Basic and diluted earnings per share were 1.2 p (2006 : 0.9p),an improvement of 30%. Underlying pre-tax profit, after adding back theamortisation of intangibles (other than IT software), increased by 43 % to£927,000 (2006 : £646,000), whilst underlying diluted earnings per share were1.9p (2006: 1.5p), up 32%. Despite significantly higher activity levels, tight working capital controls,particularly on stock and debtors, resulted in net debt declining at 30 June2007 to £16.3 million (2006 : £21.4 million), a reduction of £5.1 million, ofwhich £1.7 million was attributable to a cash placing in February 2007.Typically, net debt is higher at the half year end than at the year end.Interest cover, excluding pension scheme interest, for the half year improved by25% to 1.9x (2006 : 1.5x). DIVIDEND The Board is pleased to declare an interim dividend of 1.1p per share (2006 :1.0p), an increase of 10%. This dividend will be paid on 27 December 2007 toshareholders on the register on 9 November 2007. ACQUISITION OF STAGE SYSTEMS LIMITED In February 2007, £3.2 million was raised through a vendor placing. This issuesubstantially funded the acquisition of Stage Systems, an educational furniturebusiness, for a consideration of £3.45 million. Stage Systems traded well in thefirst five months of its ownership, generating revenue of £1.5 million. TRADING REVIEW Educational Interiors Revenue in the educational furniture and supplies businesses was 34% ahead oflast year at £18.2 million (2006 : £13.6 million). Without Stage Systems, theincrease would still have been a substantial 23%. Most of the like-for-likeincrease reflected a significant improvement in PFI revenues at ESA McIntosh,which were up by 63% in comparison to the first half of 2006. The revenue fromthe direct to schools sector (which in 2006 represented 52% of ESA McIntosh'srevenue) was 38% down on the first half of 2006. The variation in margin betweenthese two sectors means that the profit contribution from this segment ispresently a little behind that of last year. Point of Sale Display The Point of Sale Display Division increased its revenue by 3% to £11.9 million(2006 : £11.6 million) as a result of high levels of activity in the Division'scustomer base, with sizeable increases in revenue from Tesco and BHS. The finalstage of consolidation of the two print operations at Letchworth and Bristol hasbeen completed and significant new capacity has been added through theinstallation and commissioning at Letchworth of a new KBA large format digitallitho printing press. Retail Interiors The Retail Interiors Division had a buoyant first half, helped by strong salesto Marks & Spencer, Primark, Boots the Chemists and HBOS. Revenue in theDivision was up 27% at £21.5 million (2006 : £16.9 million). Business Process Further progress has been made in exploiting the synergies available between theeducational and retail interiors operations. In this connection, the programmeto relocate the Group's metal working facilities from Dalgety Bay to vacantspace at ESA McIntosh's Kirkcaldy site was completed on time and on budget inApril. The Group continues to expand its "low cost country" procurement activities andwill have a team of five full time staff operating in Shanghai by the end of theyear. It is intended that the benefits of this activity, currently concentratedon the Retail Interiors Division, will be extended to include the EducationalInteriors Division. PROSPECTS Within the Educational Interiors Division, a further increase in revenue fromthe PFI sector is anticipated in 2007. Although the order flow in the direct toschools market has improved in July and August, it is apparent that the BuildingSchools for the Future (BSF) programme, in England and Wales, is consolidatingactivity from this part of the market into larger and more complex projects,with a resultant delay on the timing of their execution. As a consequence ofthis change, the Group's direct to schools revenues are expected to be lower in2007 than those for 2006. Whilst the Division will return a somewhat lowercontribution for the year than was originally expected, reflecting thedifference in margin between the direct to schools and the PFI sectors as wellas the resolution of difficulties on two specific PFI contracts, 2008 will openwith a much enhanced order book. Stage Systems, a business designing and producing demountable stages andpostural furniture, is performing well up to expectations and is on track tohave a good first year. July and August have been busy months in the Point of Sale Display Division. Thesavings generated as a consequence of property and workforce rationalisation atBristol are likely to benefit the overall results of this Division, giving animproved contribution for the year. The Retail Interiors Division is performing well, with revenues likely to besubstantially up on the prior year stemming from a robust performance generallyand the return of House of Fraser as a significant customer, through its newstores being built in Belfast and High Wycombe. Orders from financial servicesproviders have recently been more subdued than expected and, in the currentclimate, we are more cautious about prospects in this sector. The management team at Retail Interiors has proved its strength and resilienceover the last five years. Its capacity to take on additional work, along withthe evolution of tight management and contracting disciplines, have alreadyallowed the Group to carry out supplementary work in the educational sector,particularly in the PFI arena, where contracts are increasingly complex andnumerous. Given the substantial growth that is expected to take place in 2008 asa result of growing demand in the BSF and PFI sectors, the educational andretail interiors operational teams will work together as one unit to optimisethe efficient use of resources and to ensure the implementation of commonbusiness processes. With strong performances in the Retail Interiors and Point of Sale DisplayDivisions, the Board anticipates good overall progress in the full year, withfurther advances to follow in 2008 and 2009, as the Educational InteriorsDivision realises its substantial potential. J Malcolm Gourlay 19 September 2007Chairman CONSOLIDATED INCOME STATEMENT for the 6 months ended 30 June 2007 (unaudited) Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.07 30.06.06 31.12.06 £000 £000 £000 Note Revenue 51,629 42,122 114,504Cost of sales (41,158) (34,065) (91,767) _______ _______ _______Gross profit 10,471 8,057 22,737Administrative expenses (9,233) (6,967) (15,868) _______ _______ _______Operating profit 1,238 1,090 6,869 Expected return on defined benefitpension plan assets 900 730 1,484Financial expenses - on bankborrowings and finance leases (669) (750) (1,561)Interest on defined benefit pensionscheme liabilities (810) (730) (1,479) _______ _______ _______Net financing costs (579) (750) (1,556) Share of profit of associate - 24 24Gain on sale of interest in associate 98 98 _______ _______ _______Profit before tax 659 462 5,435 Income tax expense 2 (200) (141) (1,743) _______ _______ _______Profit for the period (attributable toequity holders of the parent) 459 321 3,692 ======= ======= ======= Basic earnings per share 3 1.2p 0.9p 10.8p Diluted earnings per share 3 1.2p 0.9p 10.6p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the 6 months ended 30 June 2007 (unaudited) Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.07 30.06.06 31.12.06 £000 £000 £000 Exchange differences on translation ofoverseas associate - - (21)Actuarial gain on defined benefit pensionplan 2,293 2,173 622Tax on items taken directly to equity (727) (668) (187)Cash flow hedges:Effective portion of changes in fair value 173 211 303 _______ _______ _______Net income recognised directly in equity 1,739 1,716 717 Profit for the period 459 321 3,692 _______ _______ _______Total recognised income and expense for theperiod (attributable to equity holders of theparent) 2,198 2,037 4,409 ======= ======= ======= CONSOLIDATED BALANCE SHEET as at 30 June 2007 (unaudited) Unaudited Unaudited Audited as at as at as at 30.06.07 30.06.06 31.12.06 £000 £000 £000 NoteAssets Non-current assetsProperty, plant and equipment 14,956 13,131 12,321Intangible assets 14,693 12,630 12,470Deferred tax asset 1,200 1,650 1,927 _______ _______ _______Total non-current assets 30,849 27,411 26,718 _______ _______ _______Current assetsInventories 5 14,033 15,361 11,791Non-current assets classified as heldfor sale 631 - 348Trade and other receivables 6 22,905 22,334 25,279Derivative financial instruments 158 (107) (15)Cash and cash equivalents - - 2,080 _______ _______ _______Total current assets 37,727 37,588 39,483 _______ _______ _______Total assets 68,576 64,999 66,201 _______ _______ _______LiabilitiesCurrent liabilitiesBank overdraft (2,163) (5,675) -Other interest-bearing loans andborrowings (3,595) (2,997) (3,591)Income tax payable (504) (518) (1,160)Trade and other payables 7 (24,713) (23,234) (26,603) _______ _______ _______Total current liabilities (30,975) (32,424) (31,354) _______ _______ _______Non-current liabilitiesInterest-bearing loans and borrowings (10,573) (12,686) (11,964)Retirement benefit obligations (4,000) (5,500) (6,424)Deferred tax liabilities (1,132) (1,072) (1,132) _______ _______ _______Total non-current liabilities (15,705) (19,258) (19,520) _______ _______ _______Total liabilities (46,680) (51,682) (50,874) _______ _______ _______Net assets 21,896 13,317 15,327 ======= ======= =======EquityIssued share capital 3,851 3,484 3,486Share premium 7,003 2,017 2,020Other reserves 3,337 3,072 3,163Revenue reserves 7,705 4,744 6,658 _______ _______ _______Total equity (attributable to equityholders of the parent) 9 21,896 13,317 15,327 ======= ======= ======= CONSOLIDATED STATEMENT OF CASH FLOWS for the 6 months ended 30 June 2007 (unaudited) Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.07 30.06.06 31.12.06 £000 £000 £000 Cash flows from operating activitiesProfit before tax 659 462 5,435Adjustments for:Depreciation of property, plant and equipment 869 912 1,818Amortisation of intangible assets 323 222 466Loss/(gain) on sale of property, plant andequipment 28 11 (11)Gain on sale of asset held for resale (306) - -Provision for accelerated depreciation andrationalisation costs 280 - -Gain on sale of interest in associate - (98) (98)Net financing costs 579 750 1,556Share of profit of associate - (24) (24)IFRS 2 charge relating to equity settledplans 179 - 177 Operating cash flows before changes in _______ _______ _______working capital and provisions 2,611 2,235 9,319 Decrease/(increase) in trade and otherreceivables 2,847 (2,073) (5,018)Increase in inventories (2,300) (6,438) (2,868)(Decrease)/increase in trade and otherpayables (4,027) 432 4,627Movement relative to defined benefit pensionscheme (43) (52) (674) _______ _______ _______Cash (absorbed by)/generated from operations (912) (5,896) 5,386 _______ _______ _______Interest paid (603) (761) (1,585)Income taxes paid (856) (213) (909) _______ _______ _______Net cash from operating activities (2,371) (6,870) 2,892 _______ _______ _______Cash flows from investing activitiesProceeds from sale of property, plant andequipment 19 35 64Proceeds from sale of asset held for resale 653 - -Proceeds from sale of interest in associate - 993 943Acquisition of property, plant and equipment (3,568) (1,187) (1,105)Acquisition of intangible assets (153) - (84)Acquisition of subsidiary, net of cashbalances acquired (2,535) - -Repayment of loan notes and deferredconsideration - (778) (246) _______ _______ _______Net cash outflow from investing activities (5,584) (937)) (428) _______ _______ _______Cash flows from financing activitiesProceeds from the issue of share capital 5,098 35 40Increase in bank loans - 782 782Movements in relation to purchase of ownshares - (59) (99)Repayment of loan notes - - (532)Repayment of bank borrowings (1,339) (625) (1,250)Repayment of finance lease liabilities (47) (36) (72)Dividends paid - - (1,288) _______ _______ _______Net cash from financing activities 3,712 97 (2,419) _______ _______ _______Net (decrease)/increase in cash and cashequivalents (4,243) (7,710) 45Cash and cash equivalents at 1 January 2,080 2,035 2,035 _______ _______ _______Cash and cash equivalents at end of period (2,163) (5,675) 2,080 ======= ======= ======= 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 2007comprise the Company and its subsidiaries (together referred to as the Group) .The directors approved the consolidated interim financial statements on 19September 2007. 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 2006. Status of financial information The figures for the financial year ended 31 December 2006 are not the Company'sstatutory accounts for that financial year. The statutory accounts for the yearended 31 December 2006, 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% (2006: 30%), being theeffective rate likely to be applied to the result for the full year to 31December 2007. 3. Earnings per share The calculation of basic earnings per share and underlying earnings per sharefor the period ended 30 June 2007 is based on the profit attributable toordinary shareholders as follows: Unaudited Unaudited Audited Unaudited Unaudited Audited 6 months 6 months year 6 months 6 months year ended ended ended ended ended ended 30.06.07 30.06.06 31.12.06 30.06.07 30.06.06 31.12.06 £000 £000 £000 EPS (pence) EPS(pence) EPS(pence) Basic 459 321 3,692 1.2 0.9 10.8Adjustedfor:Amortisationof intangiblesthat attractno tax deduction 268 184 368 0.8 0.6 1.1 -------- ------- ------- -------- --------- --------Adjusted 727 505 4,060 2.0 1.5 11.9 -------- ------- ------- -------- --------- --------Dilutedbasic earnings per share 1.2 0.9 10.6Dilutedadjustedearnings pershare 1.9 1.5 11.6 The weighted average number of ordinary shares used in each calculation is asfollows: Undiluted earnings per share Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.07 30.06.06 31.12.06In thousands of shares Issued ordinary shares at 1 January 34,859 34,789 34,789Effect of own shares held (656) (656) (656)Effect of shares issued in 2006 - 40 50Effect of shares issued in 2007 2,659 - - _______ _______ _______Weighted average number of ordinary sharesfor the period 36,862 34,173 34,183 _______ _______ _______ Diluted earnings per share Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.07 30.06.06 31.12.06In thousands of sharesWeighted average number of ordinary shares 36,862 34,173 34,183Effect of share options on issue 1,016 388 724 _______ _______ _______Weighted average number of ordinary shares(diluted) for the period 37,878 34,561 34,907 _______ _______ _______ 4. Equity dividends The directors declared an interim dividend per equity share of 1.1p after thebalance sheet date. In accordance with IFRS accounting requirements, thisdividend has not been accrued in the interim consolidated financial statements. 5. Inventories Unaudited Unaudited Audited as at as at as at 30.06.07 30.06.06 31.12.06 £000 £000 £000 Raw materials and consumables 4,436 3,615 3,161Work in progress 4,364 6,233 3,783Finished goods 5,233 5,513 4,847 _______ _______ _______ 14,033 15,361 11,791 _______ _______ _______ 6. Trade and other receivables Unaudited Unaudited Audited as at as at as at 30.06.07 30.06.06 31.12.06 £000 £000 £000 Trade receivables 21,542 20,320 22,719Other receivables 412 446 466Prepayments 951 1,568 2,094 _______ _______ _______ 22,905 22,334 25,279 _______ _______ _______ 7. Trade and other payables Unaudited Unaudited Audited as at as at as at 30.06.07 30.06.06 31.12.06 £000 £000 £000 Amounts disclosed in current liabilitiesTrade payables 15,134 15,299 15,045Other taxes and social security 2,581 1,568 3,981Accruals 5,843 5,427 7,577Dividends 1,155 940 - _______ _______ _______ 24,713 23,234 26,603 _______ _______ _______ 8. Acquisition of Stage Systems On 12 February 2007, the Company acquired 100% of the equity of Stage SystemsLimited for a purchase price of £3.45 million plus £0.41 million in costs. £3.2million was satisfied in cash raised in a placing of 2,091,504 shares at 153peach. The balance of £0.25 million was paid by the issue to the vendors of159,236 shares at 157p each. Cost of business acquisition 2007 £000Shares issued 250Cash 3,200Directly attributable costs of business combination 409 _____Total purchase consideration 3,859 _____ 9. Reconciliation of changes in equity Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30.06.07 30.06.06 31.12.06 £000 £000 £000 Total equity at beginning of period 15,327 12,265 12,265Total recognised income and expense for theperiod 2,198 2,037 4,409Ordinary dividends (1,155) (940) (1,288)Issue of ordinary shares 5,347 35 40Release of translation reserve on disposal ofinterest in associate - (21) -Movements relating to share-based paymentsand ESOP trust 179 (59) (99) _______ _______ _______Total equity at end of period 21,896 13,317 15,327 ======= ======= ======= 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 2007 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 2007. KPMG Audit PlcChartered Accountants191 West George StreetGlasgowG2 2LJ19 September 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Havelock Europa