Sale of Dalgety Bay premises

HAVELOCK EUROPA PLC

("Havelock" or the "Company" or the "Group")

Sale of Dalgety Bay premises and change of stock holding policy

Havelock Europa (HVE.L), the international interior solutions provider, announces that it has signed Heads of Terms for the sale of the Company's Dalgety Bay premises and has instituted changes to its stock holding policy to improve operational efficiencies.

Head Office

In 2009, Havelock consolidated the manufacturing operations of the Interiors Division from two sites at Dalgety Bay and Kirkcaldy into one site at Kirkcaldy. The Dalgety Bay site was retained as the Head Office of the Group and as warehousing for stock.

The site at Dalgety Bay, which comprises 29,600 sq ft of office space and 89,000 sq ft of warehousing, requires considerable repairs in order to address a backlog of maintenance spending. The site is also situated 17 miles from the Kirkcaldy factory.

As such, the Company has entered into an agreement with Fife Council, the terms of which are as follows:

· Fife Council will acquire the freehold of the Dalgety Bay site for a cash consideration of £750,000. The sale of the Dalgety Bay site will result in a book loss of approximately £1.0m ; and

· The Group will enter into a lease agreement with Fife Council of a modern 23,600 sq ft office building in Kirkcaldy which is situated three miles from the Kirkcaldy manufacturing site. The lease is for an initial term of 10 years, with an option to extend for a further five years.

The Group anticipates that it will cost approximately £700,000 to fit out the new offices and relocate the Head Office. It is anticipated that there will be no redundancy costs. The occupancy costs of the new Head Office (including rent) are expected to be the same as those of the Dalgety Bay site but the Group will benefit from the operational efficiencies of a modern building and from the reduced distance between its offices and its main manufacturing site.

The Company anticipates that the sale of the site at Dalgety Bay and the lease of the new office in Kirkcaldy will complete in March 2015, with the Head Office expected to move in May 2015.

Stock Rationalisation

Commercially, the Group has changed its operating procedures and is rationalising its stock holding policy to hold fewer and newer lines so that it no longer needs to carry so much stock. As a result, the reduction in warehousing facilities will have no adverse operational effect on the Company. The surplus stock will, where possible, be disposed and the Group will make a £2.1m provision against its carrying value.

Financial Impact

Proceeds from the sale of the site at Dalgety Bay will cover the costs of fitting out and moving to the new Head Office in Kirkcaldy. Accordingly, the net effect of the sale of the Dalgety Bay site, the move to the new Head Office and the stock rationalisation are expected to be cash neutral.

Further to the Trading Statement issued on 28 November 2014, in which exceptional costs for the current year relating to senior management changes and the restructuring of Stage System were expected to be £0.52m and £0.38m respectively, total exceptional costs for the business for the year are now expected to be:

Save for the exceptional items referred to above, the Company is trading in line with its expectations.

Eric Prescott, Chief Executive Officer of Havelock Europa, commented: "the disposal of Dalgety Bay and the change in stock holding policy will increase operational efficiencies and are the next steps in the process we have initiated to make the Company more efficient and better able to deliver sustainable profitability."

Cautionary Statement

This announcement contains certain forward-looking statements with respect to the financial condition and operational results of Havelock Europa plc. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, Havelock Europa plc has no obligation to update the forward-looking statements or to correct any inaccuracies therein.

Enquiries

Shan Shan Willenbrock

Tom Horsman