RNS Number:4446J
Havelock Europa PLC
01 April 2003
1 April 2003
HAVELOCK EUROPA PLC - PRELIMINARY ANNOUNCEMENT
* Havelock, the educational and retail interiors and point of sale
display business, announces that its results for 2002 mark a major step forward
for the Group and that 2003 has started well, with further progress expected.
* Assisted by the inclusion for the full year of ESA McIntosh, the UK
market leader in educational science laboratories, Havelock's turnover increased
to #87.4m (2001: #63.1m), producing a profit before tax of #3.9m (2001: loss
#2.6m) and basic earnings per share of 9.8p (2001: loss 7.3p).
* Underlying pre-tax profit, before goodwill amortisation and
exceptionals, was #3.8m (2001: #1.2m) and earnings per share were 9.4p (2001:
3.3p).
* The reduction in the Group's exposure to the Middle East, following
the sale of the Middle East Joint Venture in February 2003, has reduced
borrowings and lowered the Group's risk profile.
* Net debt at the year end reduced to #11.3m from #15.7m in 2001,
bringing down gearing from 209% at 31 December 2001 to 117% at 31 December 2002.
It declined further to a pro forma 88% when the proceeds of sale of the Middle
East Joint Venture in February 2003 are included.
* Dividends per share total 2.4p (2001: 2.0p), up 20%, covered 3.9
times.
Michael Kennedy, Chairman, stated "The Group's trading results for 2002,
combined with the reorganisation of the Retail Interiors Division and a
significant strengthening of the balance sheet, have created a strong base for
further progress in 2003. Whilst the outcome for the year for the Point of Sale
Division is more difficult to predict, prospects in the other two divisions are
encouraging: ESA McIntosh is experiencing record levels of enquiries from Local
Authorities and can expect a further useful advance in the volume of PFI work
and the reshaped Retail Interiors Division entered the New Year with its best
order book and business outlook for some years."
Enquiries:
Havelock Europa PLC 01383 820044
Hew Balfour (Chief Executive) 07801 683851
Graham MacSporran (Finance Director) 07801 683803
Bankside Consultants Limited
Charles Ponsonby 020-7444 4166
PRELIMINARY ANNOUNCEMENT
As predicted in the preliminary announcement a year ago, Havelock Europa's
results for 2002 mark a major step forward for the Group. 2003 has started well
and further progress is expected.
FINANCIAL REVIEW
Assisted by the inclusion for a full year of ESA McIntosh, which was acquired in
September 2001, Havelock's turnover increased to #87.4 million (2001: #63.1
million), producing a profit before tax of #3.9 million (2001: loss #2.6
million) and basic earnings per share of 9.8p (2001: loss 7.3p).
Underlying pre-tax profit was #3.8 million (2001 : #1.2 million) and earnings
per share were 9.4p (2001 : 3.3p), excluding the exceptional profit of #0.4
million on the sale, in June 2002, of the Retail Interiors Division factory in
Nottingham (2001: an exceptional charge of 3.7 million in connection with its
closure) and the goodwill amortisation charge of
#0.3 million (2001 : #0.1 million).
Of Havelock's four businesses, the educational interiors subsidiary, ESA
McIntosh, performed particularly well; the Point of Sale Division performed
well; whilst the Retail Interiors Division achieved a small positive
contribution, notwithstanding that for the first six months of the year it
carried the full costs of an empty factory and much of the associated workforce.
The Middle East Joint Venture performed creditably, although, as expected, at
a considerably lower level than the outstanding performance of 2001.
Net debt at the year end reduced to #11.3 million (2001 : #15.7 million). This
was an excellent achievement given that the net proceeds of #3.15m from the sale
of the Nottingham factory were more than offset by the cash outflow arising from
its closure and by the payment of the first earn-out consideration for ESA
McIntosh of #2.5 million.
Despite the increase in Group turnover, the strong cash generative nature of the
Group's businesses combined with tight working capital controls resulted in
gearing at 31 December 2002 of 117% (2001 : 209%). Interest cover before
exceptionals increased to a healthy 4.1 times (2001 : 2.2 times).
DIVIDENDS
The Board is proposing a 20% increase in the final dividend to 1.8p per share
(2001 : 1.5p). If approved at the Annual General Meeting on 18 June 2003, the
dividend will be paid on 1 July 2003 to shareholders on the Register at the
close of business on 6 June 2003. Including the interim dividend per share of
0.6p (2001 : 0.5p) paid on 27 December 2002, the proposed dividends for the
year total 2.4p per share (2001 : 2.0p), up 20% and covered 3.9 times.
TRADING REVIEW
ESA McIntosh
ESA McIntosh is the UK market leader in the design, manufacture and installation
of educational science laboratories, with 205,000 square feet of facilities in
Kirkcaldy, Fife.
In its first full year of ownership, ESA McIntosh fulfilled expectations,
recording turnover of #18.1 million and reaching its second earn-out target,
triggering the final consideration payment of #2.5 million, which is payable in
the current year.
Significant advances were made in the supply of educational furniture to
construction consortia involved in the building of new schools and the refit of
existing ones through the mechanism of PFI. Turnover in this area doubled from
#4 million to just over #8 million. Work was done the length and breadth of
Britain, from Cornwall in the south to Aberdeen in the north. The two single
largest contracts were for Glasgow and Edinburgh Schools.
Point of Sale Display
The Point of Sale Display Division prints promotional graphics and manufactures
display equipment in Letchworth and Bristol for use in retail and branded goods
businesses, typically as part of marketing rather than capital expenditure
budgets.
Turnover in the Division increased by 14.5% to #25.7 million (2001 : #22.5
million), reflecting expansion of the Division's exposure to the supermarket
sector and further penetration of the point of sale display market for
internationally branded, fast moving consumer goods. New investment took place
at both Letchworth and Bristol in the form of additional warehousing and
collation facilities, as well as in state-of-the-art direct projection
technology and extra printing capacity.
Retail Interiors
The Retail Interiors Division designs, manufactures and installs furniture and
fittings for retailers, banks and hotels. In April, its Nottingham factory was
closed resulting in a significant cut-back in the Division's manufacturing
capacity which is now located wholly at Dalgety Bay, Fife. A new office has
been established at Alfreton, Derbyshire to accommodate the relocated project
management, sales and design staff from Nottingham who service many of the
Division's traditional customers. The office also provides support for the
Division's growing hotels and project management business.
The Division's turnover rose by 32.2% to #39.0 million (2001: #29.5 million),
reflecting the return of House of Fraser as a major customer as well as
increased activity with Lloyds TSB and Boots The Chemists.
As a result of this improvement in turnover together with annualised cost
savings of #2 million following the sale of the Nottingham factory, the Division
was able to make a small positive contribution for the year as a whole despite a
significant loss in the first half.
Middle East Joint Venture
Havelock AHI, which for the whole of 2002 was 49% owned by Havelock, is a
manufacturer and installer of retail and hotel interiors, with facilities
totalling 150,000 square feet in Bahrain.
As expected, after the outstanding result of 2001, the Group's share of turnover
at #4.6 million (2001 : #6.2 million) was down, by 25.8%, reflecting a slow down
in the retail market and a significant depreciation of the Bahraini dinar against
the pound sterling. The Group's share of profit was similarly affected at #0.58
million (2001 : #1.08 million).
STRATEGY
The strategy, set out at the time of the acquisition of ESA McIntosh in
September 2001, to concentrate on UK markets offering substantial opportunities
for profitable growth, is now starting to show early success.
The acquisition of ESA McIntosh has secured for Havelock a market leading
position in educational furniture. The scale of this market, supported by the
increased volumes of Government expenditure already announced, suggest that this
field offers the potential for strong growth over a number of years.
The Point of Sale Display companies have increased their exposure to food
retailers and, during 2002, made useful further inroads into the market for
internationally branded fast moving consumer goods.
The Retail Interiors Division has been successfully realigned to market
conditions. Its manufacturing capacity has been reduced through the closure of
the Nottingham factory, which will produce savings of some #2 million per annum,
enabling the Division to trade profitably at much lower levels of turnover.
Opportunities are being sought to use the skills base for more profitable work,
particularly in department stores and in the hotel sector, a new market for
Havelock, where early results have been encouraging.
CURRENT TRADING AND PROSPECTS
The Group's trading result for 2002, combined with the reorganisation of the
Retail Interiors Division, has created a strong base for further progress in
2003.
The sale of the Group's share in its Middle East Joint Venture, announced in
January 2003, will generate an exceptional profit of approximately #0.9 million
in the first half of the year. After allowing for costs and the reinvestment in
a 17% stake in the private equity-backed purchaser, some #2 million of cash
resulting from the sale has been applied in further strengthening of the Group's
balance sheet, reducing gearing to 88 per cent on a pro forma basis at 31
December 2002.
Within ESA McIntosh's educational sector, enquiries from Local Authorities are
running at record levels. A further useful advance in the volume of PFI work
across the UK is also expected.
The combination of a traditionally shorter order book than the other Divisions,
current corporate activity in the supermarket sector, and uncertainty in
consumer spending patterns make it more difficult to predict the outcome for the
year for the Point of Sale Display Division. However, Hartcliffe has negotiated
a three year extension to its five year contract for the provision of printing
services to Somerfield and Kwiksave.
The reshaped Retail Interiors Division entered the new year with its best order
book and business outlook for some years. A new store for Fenwick was opened in
Canterbury in February and work is in hand for a new store in the City of
London for House of Fraser, which will open later this year. The Division will
benefit from the availability of savings from the closure of the Nottingham
factory for a whole year, as against just the second half in 2002.
The Directors look forward to a year of further progress.
Michael Kennedy
Chairman
1 April 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2002
2002 2001
(Restated)
Notes #000 #000
Turnover
Group and share of Joint Venture 87,442 63,072
Less: share of Joint Venture's turnover (4,601) (6,206)
_______ ______
Group turnover 82,841 56,866
Operating profit before exceptional items
Group 4,066 931
Exceptional reorganisation credit/(costs) 399 (3,750)
_____ ______
Operating profit/(loss) after exceptional items 4,465 (2,819)
Share of Joint Venture's operating profit 586 1,095
______ _____
Total operating profit/(loss):Group & share of 5,051 (1,724)
Joint Venture
Net interest payable and other similar items
Group (1,115) (904)
Joint Venture (10) (15)
______ ______
Profit/(loss) on ordinary activities before taxation 3,926 (2,643)
Tax (charge)/credit on profit on ordinary 3 (995) 571
activities
______ ______
Profit/(loss) for the financial year 2,931 (2,072)
Dividend (743) (617)
______ ______
Retained profit/(loss) for the year 2,188 (2,689)
______ ______
Basic earnings/(loss) per share 4 9.8p (7.3p)
Basic adjusted earnings per share 4 9.4p 3.3p
Diluted earnings/(loss) per share 4 9.6p (7.3p)
Dividends per share 2.4p 2.0p
All operations are continuing.
GROUP BALANCE SHEET
as at 31 December 2002
2002 2001
(Restated)
Notes #000 #000
Fixed assets
Intangible assets - goodwill 4,077 4,332
Tangible assets 12,649 16,088
Investment in own shares 368 250
Investment in Joint Venture
- goodwill 112 136
- share of assets 2,551 2,569
- share of liabilities (1,005) (1,492)
______ ______
1,658 1,213
______ ______
18,752 21,883
______ ______
Current assets
Stocks 5 7,317 5,793
Debtors 6 16,725 17,531
Cash at bank and in hand 902 -
______ ______
24,944 23,324
Creditors: Amounts falling due within one year 7 (24,568) (26,315)
______ ______
Net current assets/(liabilities) 376 (2,991)
______ ______
Total assets less current liabilities 19,128 18,892
Creditors: amounts falling due after more than one year 8 (9,399) (11,372)
Provision for liabilities and charges (79) -
______ ______
Net assets 9,650 7,520
______ ______
Capital and reserves
Called up share capital 3,097 3,083
Share premium account 9 879 844
Revaluation reserve 9 1,318 1,762
Profit and loss account 9 4,356 1,831
______ ______
Equity shareholders' funds 9,650 7,520
______ ______
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 December 2002
Notes 2002 2001
(Restated)
#000 #000
Profit/(loss) for the financial year 2,931 (2,072)
Exchange (loss)/gain on investment in Joint Venture (107) 13
______ ______
Total recognised gains/(losses) relating to the year
2,824 (2,059)
______
Prior year adjustment 9 (732)
_____
Total gains recognised 2,092
______
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 December 2002
Notes 2002 2001
(Restated)
#000 #000
Profit/(loss) for the financial year 2,931 (2,072)
Dividend (743) (617)
______ ______
Retained profit/(loss) for the financial year 2,188 (2,689)
Other recognised gains and losses relating to the year (107) 13
New share capital issued 49 882
______ ______
Net increase/(decrease) in shareholders' funds 2,130 (1,794)
Opening shareholders' funds 8,252 9,592
Prior year adjustment 9 (732) (278)
______ ______
Opening shareholders' funds - as restated 7,520 9,314
______ ______
Closing shareholders' funds 9,650 7,520
______ ______
STATEMENT OF HISTORICAL COST PROFITS AND LOSSES
2002 2001
(Restated)
#000 #000
Reported profit/(loss) on ordinary activities before taxation 3,926 (2,643)
Realisation of property revaluation gains of previous years 444 -
Difference between a historical cost depreciation charge and the
actual depreciation charge of the year calculated on the
revalued amount (4) (10)
_____ _____
Historical cost profit/(loss) on ordinary activities before
taxation 4,366 (2,653)
_____ _____
Historical cost profit/(loss) for the year retained after
taxation and dividends 2,628 (2,699)
_____ _____
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2002
2002 2001
#000 #000
Cash inflow from operating activities 10 7,047 2,801
Dividends from Joint Venture - 456
Return on investments and servicing of finance
Interest received 5 36
Interest paid (1,114) (1,016)
______ _______
(1,109) (980)
______ ______
Taxation 498 (322)
______ ______
Capital expenditure and financial investment
Purchases of tangible fixed assets (1,807) (1,187)
Proceeds from sale of tangible fixed assets 3,324 40
Loan to ESOP trust (118) (28)
______ ______
1,399 (1,175)
______ ______
Acquisitions
Purchase of subsidiary undertaking (238) (476)
Net overdraft acquired with subsidiary undertaking - (3,449)
______ ______
(238) (3,925)
______ ______
Equity dividends paid (682) (471)
______ ______
Cash inflow/(outflow) before use of liquid
resources and financing 6,915 (3,616)
______ ______
Financing and management of liquid resources
Repayment of loan by Joint Venture - 186
Repayment of loan notes issued on acquisition of subsidiaries (4,344) (181)
Capital element of finance lease rental payments (516) (455)
Repayment of long term loan (1,251) (312)
Bank loan and other advances 2,000 -
Issue of new shares 49 -
______ ______
(4,052) (762)
______ ______
Increase/(decrease) in cash for the year 2,863 (4,378)
______ ______
NOTES TO THE STATEMENT
1. The profit and loss account, balance sheet and abridged cash flow
statement do not constitute the Company's statutory accounts for 2002 or 2001
but are derived from those accounts. The statutory accounts for 2001, on which
the auditors have given an unqualified report, have been delivered to the
Registrar of Companies. Those for 2002 will be delivered following the Annual
General Meeting. The auditors have reported on those accounts which were
unqualified and did not contain a statement under Section 237(2) of the
Companies Act 1985.
2. Basis of consolidation
The consolidated profit and loss account and balance sheet include the financial
statements of the Company, its subsidiaries and its interests in a joint venture
made up to 31 December 2002. The group's share of profits, and profits of the
joint venture, is included in the consolidated profit and loss account, and its
interests in their net assets, is included in the balance sheet.
3. Tax (charge)/credit on profit/(loss) on ordinary activities
2002 2001
(Restated)
# 000 # 000
UK corporation tax
- current year at 30 % - 432
- prior year (44) 29
Deferred tax
- current year (1,031) 137
- prior year 80 (27)
______ ______
(995) 571
______ ______
The tax charge for the year differs from 30% of the pre-tax profit because
the Joint Venture profit of #576,000 (2001:#1,080,000) is not subject to
taxation, there is no tax charge on the sale of the Nottingham property, and the
utilisation of unrelieved tax losses. The tax charge for the year is principally
deferred tax representing timing differences.
4. Earnings per share
Based on a profit after tax of #2,931,000 (2001: loss: #2,072,000) and
29,940,303 shares (2001: 28,192,578) the basic profit per share was 9.8p (2001:
loss: 7.3p). Based on a profit of #2,809,000 (2001: #935,000) before exceptional
costs, goodwill amortisation and after tax and 29,940,303 shares (2001:
28,192,578), being the weighted average number of shares in issue during the
year, the basic adjusted profit per share was 9.4p (2001: 3.3p).
2002 2001
Earnings Earnings per
Earnings per share Earnings share
#000 #000
Basic 2,931 9.8p (2,072) (7.3p)
Exceptional (credit)/costs (399) (1.3p) 3,750 13.3p
Tax relief on exceptional costs - - (879) (3.1p)
Goodwill amortisation 277 0.9p 136 0.4p
_______ ______ ______ ______
Adjusted basic 2,809 9.4p 935 3.3p
_______ ______ ______ ______
Diluted 2,931 9.6p (2,072) (7.3)p
______ ______ ______ ______
2002 2001
Number Number
of shares of shares
000's 000's
For basic and adjusted earnings per share 29,940 28,193
Effect of exercise of share options 650 -
_______ _______
For diluted earnings per share 30,590 28,193
________ _________
Earnings per share are calculated for the issued shares excluding those held by
the ESOP Trust in accordance with UITF 13.
5. Stocks
2002 2001
#000 #000
Raw materials and consumables 2,027 1,861
Work in progress 3,514 1,455
Less: Payments to account (787) -
Finished goods 2,563 2,477
_____ _____
7,317 5,793
_____ ______
6. Debtors
2002 2001
(Restated)
#000 #000
Trade debtors 15,029 15,149
Other debtors 351 566
Deferred tax asset - 872
Prepayments 1,345 944
______ ______
16,725 17,531
______ ______
7. Creditors: amounts falling due within one year
2002 2001
#000 #000
Bank overdraft (secured) 1,250 3,211
Loan notes 1,310 3,144
Trade creditors 12,610 8,192
Corporation tax 80 -
Other taxes and social security 2,258 2,112
Accruals 3,750 2,657
Provision for Nottingham closure - 3,500
Dividend proposed 557 496
Obligations under hire purchase contracts & finance 253 503
leases
Provision for deferred consideration 2,500 2,500
______ ______
24,568 26,315
______ ______
The loan notes are repayable at par on the holder giving one month's
notice. The Company's obligations under these notes are guaranteed by Bank of
Scotland. The notes relating to the acquisition of Hartcliffe were redeemed in
full by the Company on 5 January 2003 at par. In so far as the notes relating to
the acquisition of ESA McIntosh have not already been redeemed, they will be
redeemed in full by the Company on 31 December 2004 at par. The Company has made
full provision for deferred consideration in relation to ESA McIntosh. It is
expected that this will be satisfied by the issue of loan notes in 2003 and
these will be redeemable six months and one day after issue.
8. Creditors: amounts falling due after more than one year
2002 2001
#000 #000
Bank loans (secured) 9,187 8,438
Obligations under finance leases 212 434
Provision for deferred consideration - 2,500
______ ______
9,399 11,372
______ ______
9. Reserves
Share Revaluation Profit and
premium reserve loss account
#000 #000 #000
At 1 January 2002 (as previously reported)
- - 2,563
Prior year adjustment (see below) - - (732)
______ ______ ______
At 1 January 2002 (restated) 844 1,762 1,831
Retained profit for the year - - 2,188
Exchange loss on investments - - (107)
New shares issued under SAYE share scheme
35 - -
Revalued asset sold - (444) 444
______ ______ ______
At 31 December 2002 879 1,318 4,356
______ ______ ______
As a result of the adoption of FRS19: Deferred Tax, a prior year adjustment has been made in respect
of the recognition of a deferred tax asset (#732,000). This has resulted in a reduction in goodwill
on the acquisition of ESA McIntosh (#1,604,000). The net effect of this adjustment is to decrease
net assets by #1,603,000 (2001: #732,000), reduce the goodwill amortisation by #80,000 (2001: nil)
and increase the tax charge by #951,000 (2001: #454,000).
10. Cash Flow Statement
2002 2001
#000 #000
(a) Reconciliation of operating profit/(loss) to net cash inflow
from operating activities
Operating profit/(loss) after exceptional items 4,465 (2,819)
Depreciation 2,165 2,116
Amortisation of goodwill 277 136
Gain on disposal of fixed tangible assets (145) (8)
(Increase)/decrease in stocks (1,524) 126
(Increase)/ decrease in debtors (528) 3,440
Increase/(decrease) in creditors 2,337 (190)
______ ______
Net cash inflow from operating activities 7,047 2,801
______ ______
(b) Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash for the year 2,863 (4,378)
Finance lease creditor acquired with acquisition - (318)
Finance lease payments 516 455
Inception of new finance leases (44) (293)
Loan notes issued in the year (2,500) (2,080)
Loan notes repaid 4,334 181
Bank loan repaid 1,251 312
New bank loan (2,000) -
______ ______
Movement in net debt in the year 4,420 (6,121)
Opening net debt (15,730) (9,609)
______ ______
Closing net debt (11,310) (15,730)
______ ______
(c) Analysis of net debt
At 1 Other At 31
January Cash Non-cash December
2002 flow changes 2002
#000 #000 #000 #000
Cash at bank and in hand - 902 - 902
Overdraft (1,961) 1,961 -
______ ______ ______ ______
Total (1,961) 2,863 - 902
______ ______ ______ ______
Debt due within one year
Bank loans (1,250) 1,250 (1,250) (1,250)
Loan notes (3,144) 4,334 (2,500) (1,310)
Finance lease creditor (503) 516 (266) (253)
______ ______ ______ ______
(4,897) 6,100 (4,016) (2,813)
______ ______ ______ ______
Debt due after one year
Finance lease creditor (434) - 222 (212)
Bank loans (8,438) (1,999) 1,250 (9,187)
______ ______ ______ ______
(8,872) (1,999) 1,472 (9,399)
______ ______ ______ ______
Total net debt (15,730) 6,964 (2,544) (11,310)
______ ______ ______ ______
11. Pension Costs
Pension costs SSAP24 basis
The most recent actuarial valuation of the defined benefit section
was at 31 October 2000. At the valuation date the defined benefit section had
assets with a total market value of #15.9m, which represented approximately 101%
of the value of the benefits that had accrued to members, after allowing for
expected future increases in pensionable pay for defined benefit members.
Pension costs FRS17 basis
The last full valuation of 31 October 2000 has been updated to 31
December 2002 by qualified independent actuaries, using revised assumptions that
are consistent with the requirements of the new accounting standard, FRS17. The
new standard requires certain disclosures this year under the transitional
arrangements. In summary, the UK defined benefits pension scheme has assets at
a current market value of #12.8m (2001:#14.7m) and liabilities, discounted at
the AA bond yield, of #19.5m (2001:#19.2m). Using this valuation method, there
is a deficit of #6.7m (2001:#4.5m) which is partially offset by deferred tax of
#2.0m (2001:#1.3m) giving a net deficit of #4.7m (2001:#3.2m).
The defined benefit section has been closed to new entrants. The
contribution rates for members have been increased from 5% to 9% of pensionable
salary and that for the Company increased from 12% to 20% of pensionable salary.
12. The accounts for the year ended 31 December 2002 were approved by the
Directors on 1 April 2003.
This information is provided by RNS
The company news service from the London Stock Exchange
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