12th Jan 2010 07:55
12 January 2010
HAVELOCK EUROPA PLC
Trading Update
Havelock (HVE.L), the Educational and Retail Interiors and Point of Sale Printing Group, announces a trading update for the 12 months ended 31 December 2009.
Severe weather in the last two weeks of November and the month of December caused significant disruption to trading in Havelock's Educational Interiors Division.
The floods in Northern Ireland and western and south-western Scotland in the third week of November slowed progress on schools in three of Havelock's major PFI programmes, which were due to complete in 2009. Disruption to these sites and many others was exacerbated by heavy snowfalls and freezing conditions throughout Britain for the whole of the second half of December.
As a result, significant slippage in programmes, forecast to complete in 2009, occurred in the Educational Interiors Division. There were also additional costs arising from aborted deliveries to construction sites and unrecovered labour costs for site installation teams who were unable to complete projects.
Reference was made in the Interim Management Statement on 17 November 2009 to the costs and operational issues arising from the integration of the Educational and Retail Interiors Divisions. It is now expected that the costs associated with these issues will be greater than originally anticipated. Significant progress has been made in solving the IT and other operational issues, and the benefits of this progress will become apparent towards the end of the first quarter of 2010.
Notwithstanding a strong performance within the supplies and classroom accessories businesses, the estimated impact of the weather related factors and the operational issues referred to above is likely to reduce the expected contribution from the Educational Interiors Division by approximately £1.6 million.
The Point of Sale Printing Division also had a slower November and December than expected due to a much lower level of promotional activity by retailers in the run up to Christmas than has been experienced in the previous two years.
In addition to the cost savings arising from integrating the Retail and Educational Interiors Divisions, announced at the time of the Interim Results in August 2009, further costs saving opportunities have been identified in the Group's other businesses and the costs of implementing these additional savings, amounting to approximately £500,000 over and above £2.7 million exceptional costs identified at the time of the Interim Results, will also be treated as exceptional costs in 2009.
Overall, the Company anticipates that the Group's results for 2009 are likely to be significantly below current market expectations, although it still expects to report an operating profit before exceptional costs and interest.
The Group's bankers have been kept fully informed of the situation and are supportive. The company is currently discussing revised terms for its facilities and has obtained from its bank a waiver of the year end interest cover convenant test.
Although the Board is not expecting a return to normal trading conditions in 2010, particularly in the Retail sector, the cost savings generated from the integration of the Group's Retail and Educational Interiors businesses, together with a realistic expectation of orders for the year ahead, continues to give the Board reason to believe that there will be an improvement in trading in 2010.
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Enquiries: |
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Havelock Europa PLC |
01383-820 044 |
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Hew Balfour (Chief Executive) |
07801-683 851 |
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Grant Findlay (Finance Director) |
07768-745 960 |
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Bankside Consultants Limited |
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Charles Ponsonby |
020-7367 8851 |
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