(HVE.L) Havelock Europa PLC Buy/Sell

COMMERCIAL HIGHLIGHTS

REORGANISATION

OVERALL PROSPECTS

Enquiries: Havelock Europa PLC

Hew Balfour (Chief Executive) 07801-683 851
Grant Findlay (Finance Director) 07768-745 960

Bankside Consultants Limited
Charles Ponsonby 020-7367 8851
Rose Oddy 020-7367 8853

As outlined at the Group's AGM in June, the first half of the year has proved to be challenging, with Group revenues running below the levels of the same period last year. In what is historically much the quieter of the two halves, this shortfall in revenue has, as expected, resulted in a loss before tax.

FINANCIAL REVIEW

Group revenue from continuing operations, for the six months ended 30 June 2009, decreased by 8% to £49.2 million (2008 : £53.7 million). The underlying pre-tax loss was £1.3 million (2008 : profit from continuing operations £1.2 million), after adding back exceptional costs of £0.4 million (2008: £nil) and the amortisation of intangibles (other than IT software) of £0.1 million (2008 : £0.2 million). The exceptional costs related to the integration of the Educational and Retail Interiors businesses which is described in more detail below. The loss before tax was £1.8 million (2008 : profit £1.0 million). The underlying fully diluted loss per share was 2.4p (2008 : earnings of 1.4p).

Continuing tight working capital controls resulted in net debt remaining unchanged at 30 June 2009 at £15.3 million (30 June 2008 : £15.2 million). Net debt is usually substantially higher at the half year end than at the year end and committed bank facilities continue to provide a comfortable amount of headroom. At 31 December 2008, net debt stood at £11.7 million.

DIVIDEND

The Board is pleased to declare an interim dividend of 1.2p per share (2008 : 1.2p). This dividend will be paid on 28 December 2009 to shareholders on the register on 6 November 2009.

TRADING REVIEW

Educational Interiors

Revenue in this Division was 37% ahead of last year at £27.2 million (2008 : £19.9 million). All of this increase was accounted for by activity on Private Finance Initiative (PFI) and Building Schools for the Future (BSF) projects. Progress on improving the operational efficiency of this Division has been significant and in consequence the Group intends to undertake a further step in the integration of its operations (other than the three smaller Educational Supplies businesses) with the rest of the Group, as set out below.

Retail Interiors

The Retail Interiors Division, as expected, had a difficult first half with revenue declining by 42% to £12.5 million (2008 : £21.7 million), as a result of delays by customers in agreeing and implementing their plans for 2009. Programmes, when agreed, have also been generally smaller, with no significant new builds underway, unlike last year, or immediately in prospect. Both the High Street retailing and retail banking categories have been quiet. Against this background, steps have been taken to ensure our cost base is kept in line with activity levels and, as a consequence, a programme of redundancies took place with additional spare capacity and resources directed to work on Educational projects.

Point of Sale

The Point of Sale Division achieved revenues of £9.5 million, a decline of 22% compared to the same period of the previous year (2008 continuing operations : £12.1 million). This resulted from a generally lower level of promotional spend by customers as they looked to control costs and preserve margin. Following investment in new digital printing technology, we have continued to add new customers.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties which could have a material impact on Havelock's performance over the remainder of the financial year have not changed from those set out in the Annual Report for 2008.

REORGANISATION

Retail and Educational Interiors

The nature of many of the Group's educational interiors projects continues to underline the benefit of creating an integrated Interiors Division, embracing the Retail Interiors and ESA McIntosh businesses, with a common business process and common project management skills.

In the first half, a common IT platform has been successfully put in place and the two businesses are now ready to accelerate the process of integration. Manufacturing at the two production sites at Dalgety Bay and Kirkcaldy has become increasingly interchangeable, with staff moving to support different clients on different sites, according to customer demand, illustrating the opportunity for further efficiencies.

As a consequence, we intend to combine the manufacturing activities and key operational functions of the two businesses on one site at Kirkcaldy, and to merge the overall management of Retail Interiors and ESA McIntosh into a single Interiors business, with Richard Lowery as its Chief Executive.

This will allow the Group to be more flexible in its allocation of resources and will ensure that the Educational Interiors sector benefits from the standards of contract management, procurement and distribution performance that have enabled the Retail Interiors Division to improve its revenues and margins in each of the last four years.

This integration, together with other cost saving measures, will create a one-off exceptional charge in the full year 2009 of around £2.7 million, of which £0.4 million was incurred in the first six months of the year on the initial stages of the integration, involving the alignment of IT systems. It is expected to yield annualised benefits of £1.4 million from 2010, primarily as a result of reducing headcount, as duplication is eliminated and the efficiency savings of operating from one production and distribution site are realised. The Group will enter into a period of consultation with Trade Union and staff representatives over the next few weeks before proceeding to implementation.

PROSPECTS

2009

There is little sign, to date, of any improvement in the sectors of the economy in which Havelock operates. Nevertheless, the second half of the year is traditionally considerably stronger for Havelock and 2009 will be no exception.

In the Educational Interiors Division, activity levels remain strong, particularly in relation to PFI and BSF projects, where Havelock remains the market leader. There has been steady growth in the amount of business won in England. In the current year, thirteen PFI and seven BSF projects are already in progress or due to be commenced. However, prices are under pressure, as the construction sector competes for a reduced supply of building work, and this is likely to have some effect on margins in the second half.

In the Retail Interiors Division, the level of activity in the second half will be significantly higher than in the first half but, nevertheless, is likely to be at a much lower level than for many years. In the current climate, the risks of delay and cancellation remain higher than normal and visibility is very limited.

In the Point of Sale Division, whilst the level of order intake in the second half is expected to be lower than that experienced in 2008, a record year, the shortfall will be less than that experienced in the first half but again, as usual, visibility is limited.

Whilst the outlook for the second half of the year is uncertain, in particular in the Retail sector, it has become clear that the result for the year will be below our earlier expectations.

2010

Looking forward into 2010, against a background of continuing economic uncertainty, the Group is budgeting on the basis that there is unlikely to be a significant increase in the volume of work available in any of the sectors in which it operates. Nevertheless, the forward order book for Educational Interiors exhibits good visibility, with an increasing success rate in the conversion of BSF enquiries to confirmed contracts.

In Retail Interiors, whilst levels of activity are likely to remain muted in the High Street, the volume of enquiries and requests for survey suggest that the reorganisation of the retail banking sector is likely to produce some increase in the amount of work available, particularly towards the end of 2010 and into 2011. There are also signs that department store activity may recover from the very low volumes experienced in the current year.

In the Point of Sale Division, the contraction of the competitor supply base, coupled with the additional capacity created by Havelock's investment programme over the last four years, bodes well for an improved market share in what will otherwise be a fairly static market.

Accordingly, with a cost base benefiting from savings as a result of the completion of the integration of ESA McIntosh and Retail Interiors, the Board believes that Havelock's prospects for 2010 are more encouraging.

Malcolm Gourlay 25 August 2009

Chairman

CONDENSED CONSOLIDATED INCOME STATEMENT

for the 6 months ended 30 June 2009

6 months 6 months year
ended ended ended
30.06.09 30.06.08 31.12.08
£000 £000 £000
Continuing operations: Note
Revenue 3 49,207 53,687 137,577
Cost of sales (41,436) (42,649) (109,733)
Gross profit 7,771 11,038 27,844
Administrative expenses (9,108) (9,495) (19,066)
Operating (loss)/profit (1,337) 1,543 8,778

Analysed as:
Operating (loss)/profit before (952) 1,543 8,778

exceptional items
Exceptional items 12 (385) - -
Operating (loss)/profit (1,337) 1,543 8,778
Expected return on defined 696 940 1,871

benefit pension plan assets
Financial expenses - on bank (290) (585) (1,132)

borrowings and finance leases
Interest on defined benefit (860) (930) (1,842)

pension scheme liabilities
Net financing costs (454) (575) (1,103)
(Loss)/profit before income (1,791) 968 7,675

tax

Income tax credit/(expense) 4 528 (293) (2,230)
(Loss)/profit from continuing (1,263) 675 5,445

operations

Discontinued operation:
Loss from discontinued - (309) (375)

operation, net of tax

(Loss)/profit for the period (1,263) 366 5,070

(attributable to equity holders of the parent)

Basic (loss)/earnings per 5 (3.4p) 1.0p 13.5p

share
Diluted (loss)/earnings per 5 (3.4p) 0.9p 13.1p

share

Continuing operations:
Basic (loss)/earnings per 5 (3.4p) 1.8p 14.5p

share
Diluted (loss)/earnings per 5 (3.4p) 1.7p 14.1p

share

for the 6 months ended 30 June 2009

6 months 6 months year
ended ended ended
30.06.09 30.06.08 31.12.08
£000 £000 £000

Other comprehensive income

Actuarial gain/(loss) on defined 379 (2,400) (2,169)

benefit pension plan
Tax on items taken directly to (106) 672 607

equity Cash flow hedges:
Effective portion of changes in 47 167 (348)

fair value
Other comprehensive income for the 320 (1,561) (1,910)

period

(Loss)/profit for the period (1,263) 366 5,070

Total comprehensive income for the period
(attributable to equity holders of (943) (1,195) 3,160

the parent)

as at 30 June 2009

as at as at as at
30.06.09 30.06.08 31.12.08
£000 £000 £000
Note

Assets Non-current assets
Property, plant and equipment 7 12,608 13,611 13,025
Intangible assets 8 14,704 14,581 14,714
Deferred tax asset 1,708 2,089 1,803
29,020 30,281 29,542

Current assets
Inventories 16,487 15,279 12,593
Trade and other receivables 24,824 25,312 32,233
Income tax repayable 4 403 - -
Derivative financial instruments - 116 -
Cash and cash equivalents 9 808 2,914 4,736
42,522 43,621 49,562
Total assets 71,542 73,902 79,104

Liabilities Current liabilities
Interest-bearing loans and borrowings 9 (1,552) (1,987) (1,531)
Derivative financial instruments (352) - (399)
Income tax payable 4 - (731) (1,148)
Trade and other payables (24,714) (25,008) (28,240)
(26,618) (27,726) (31,318)

Non-current liabilities
Interest-bearing loans and borrowings 9 (14,598) (16,144) (14,880)
Retirement benefit obligations (6,100) (7,500) (6,441)
Deferred tax liabilities (918) (1,007) (907)
(21,616) (24,651) (22,228)
Total liabilities (48,234) (52,377) (53,546)
Net assets 23,308 21,525 25,558

Equity
Issued share capital 3,853 3,853 3,853
Share premium 7,013 7,013 7,013
Other reserves 2,826 3,294 2,779
Revenue reserves 9,616 7,365 11,913
Total equity (attributable to equity 23,308 21,525 25,558

holders of the parent)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

for the 6 months ended 30 June 2009

6 months 6 months year
ended ended ended
30.06.09 30.06.08 31.12.08
£000 £000 £000

Cash flows from operating activities
(Loss)/profit for the period (1,263) 366 5,070

Adjustments for:
Depreciation of property, plant and 903 899 1,811

equipment
Amortisation of intangible assets 220 263 441
(Gain)/loss on sale of property, - (2) 1

plant and equipment
Loss on sale of asset held for - 300 379

resale
Impairment losses on assets - 168 244

classified as held for sale
Net financing costs 454 575 1,103
IFRS 2 charge relating to equity 4 70 210

settled plans
Income tax (credit)/expense (528) 160 2,084

Operating cash flows before changes in working capital
and provisions (210) 2,799 11,343
Decrease/(increase) in trade and 7,409 1,060 (5,861)

other receivables
Increase in inventories (3,894) (3,946) (1,260)
(Decrease)/increase in trade and (4,837) (2,332) 2,214

other payables
Movement relative to defined (126) (58) (867)

benefit pension scheme
Cash (absorbed by)/generated from (1,658) (2,477) 5,569

operations

Interest paid (290) (567) (1,121)
Income taxes paid (1,023) (519) (1,905)
Net cash from operating activities (2,971) (3,563) 2,543

Cash flows from investing activities
Acquisition of property, plant and (486) (320) (720)

equipment
Acquisition of intangible assets (210) (191) (502)
Disposal of discontinued operation - 273 192

net of cash disposed of
Net cash outflow from investing (696) (238) (1,030)

activities Cash flows from financing activities
Repayment of loan notes - - (476)
New finance leases - 2,350 2,350
Repayment of bank borrowings - - (997)
Repayment of finance lease (261) (82) (329)

liabilities
Dividends paid - - (1,772)
Net cash from financing activities (261) 2,268 (1,224)
Net (decrease)/increase in cash and (3,928) (1,533) 289

cash equivalents
Cash and cash equivalents at 1 4,736 4,447 4,447

January
Cash and cash equivalents at end of 808 2,914 4,736

period

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the 6 months ended 30 June 2009

Share Share Merger Hedging Other Revenue Total
capital premium Reserve Reserve Reserve Reserve £000
£000 £000 £000 £000 £000 £000

Current interim period
At 1 January 2009 3,853 7,013 2,184 (399) 994 11,913 25,558
Total comprehensive income for - - - 47 - (990) (943)

the period
Ordinary dividends - - - - - (1,310) (1,310)

Movements relating to share-based payments
and ESOP Trust - - - - - 3 3
At 30 June 2009 3,853 7,013 2,184 (352) 994 9,616 23,308

Previous interim period
At 1 January 2008 3,853 7,013 2,184 (51) 994 9,967 23,960
Total comprehensive income for - - - 167 - (1,362) (1,195)

the period
Ordinary dividends - - - - - (1,310) (1,310)

Movements relating to share-based payments
and ESOP Trust - - - - - 70 70
At 30 June 2008 3,853 7,013 2,184 116 994 7,365 21,525

Prior year
At 1 January 2008 3,853 7,013 2,184 (51) 994 9,967 23,960
Total comprehensive income for - - - (348) - 3,508 3,160

the year
Ordinary dividends - - - - - (1,772) (1,772)

Movements relating to share-based payments
and ESOP Trust - - - - - 210 210
At 31 December 2008 3,853 7,013 2,184 (399) 994 11,913 25,558

1. Basis of preparation

These interim financial statements represent the condensed consolidated financial information of the company and its subsidiaries (together referred to as "the Group") for the 6 months ended 30 June 2009. They have been prepared in accordance with the Disclosure and Transparency Rules of the UK's Financial Services Authority and the requirements of IAS 34 Interim Financial Reporting as adopted by the EU. The interim financial statements were approved by the Board of Directors on 26 August 2009. The interim financial statements do not constitute financial statements as defined in section 240 of the Companies Act 1985 and do not include all of the information and disclosures required for full annual financial statements. They should be read in conjunction with the Annual Report 2008 which is available on request from the company's registered office or to download from www.havelockeuropa.com

The financial information contained in this report in respect of the year ended 31 December 2008 has been extracted from the Annual Report 2008 which has been filed with the Registrar of Companies. The auditors report on these financial statements was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985.

The interim financial statements for the current and comparative periods are unaudited. The auditors have carried out a review of the interim financial statements and their report is set out below.

2. Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group as disclosed in its consolidated financial statements as at and for the year ended 31 December 2008 except for the impact of the standards disclosed below:

New standards

IFRS 8 'Operating Segments'

IFRS 8 replaces IAS 14, Segment reporting. It requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes to the chief operating decision maker which has been identified as the board. The adoption of IFRS 8 has led to a change in the segmental information disclosed, but has had no impact on the Group's reportable segments or on the reported results or financial position of the group. Further information can be found at note 3.

IAS 1 (revised) 'Presentation of Financial Statements'

The revised standard has resulted in a number of changes in presentation and disclosure, most significantly changing the title of the Consolidated Statement of Recognised Income and Expense to Consolidated Statement of Comprehensive Income and the introduction of the Statement of Changes in Equity as a primary statement. It has had no impact on the reported results or financial position of the group.

The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year ending 31 December 2009 but have had no impact on the results of the group.
* IAS 23 (amendment) Borrowing costs.
* IFRS 2 (amendment) Share-based payment.
* IAS 32 (amendment) Financial instruments: Presentation.
* IFRIC 13 Customer loyalty programmes.
* IFRIC 15 Agreements for the construction of real estate.
* IFRIC 16 Hedges of a net investment in a foreign operation.

* IAS 39 (amendment) Financial instruments: Recognition and measurement.

3. Segmental reporting

The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. After undertaking an exercise to assess the impact of the new standard, the Group has concluded that there is currently no change to the previously reported segments. Management information is presented to the main board (the chief operating decision maker) based upon business segments and comprises the following segments:

6 months 6 months year
ended ended ended
30.06.09 30.06.08 31.12.08
£000 £000 £000

Total revenue from external customers
Retail Interiors 12,518 21,682 60,449
Educational Interiors 27,230 19,856 52,055
Point of Sale 9,459 12,149 25,073
Total revenue from external 49,207 53,687 137,577

customers Inter-segment revenue
Retail Interiors 318 318 1,380
Educational Interiors 392 141 551
Point of Sale 14 14 39
Total inter-segment revenue 724 473 1,970

Total revenue
Retail Interiors 12,836 22,000 61,829
Educational Interiors 27,622 19,997 52,606
Point of Sale 9,473 12,163 25,112
Total revenue 49,931 54,160 139,547
Eliminate inter-segment (724) (473) (1,970)

revenue
Discontinued operations - 1,001 1,001
Consolidated revenue 49,207 54,688 138,578

Segment result
Retail Interiors (1,016) 1,025 3,728
Educational Interiors (309) (876) 2,939
Point of Sale 1,460 2,497 4,665
Amortisation of intangibles (112) (186) (296)

(all relating to Education segment)
Total segment result from 23 2,460 11,036

continuing operations
Unallocated expenses (975) (917) (2,258)
Operating (loss)/profit from (952) 1,543 8,778

continuing operations
Net financing costs (454) (575) (1,103)
(Loss)/profit before income (1,406) 968 7,675

tax and exceptional costs
Exceptional costs (385) - -
(Loss)/profit before income (1,791) 968 7,675

tax
Income tax 528 (293) (2,230)
Discontinued operations, net - (309) (375)

of tax
(Loss)/profit for the period (1,263) 366 5,070

Segment assets
Retail Interiors 15,497 18,091 21,816
Educational Interiors 41,175 34,927 37,788
Point of Sale 10,216 14,836 12,024
Unallocated 4,654 6,048 7,476
Total assets 71,542 73,902 79,104

4. Income tax

A charge for current taxation has been included at 29.5% (2008 half year: 30%, 2008 full year: 28.5%), being the effective rate likely to be applied to the result for the full year to 31 December 2009.

5. Earnings per share

The calculation of basic earnings per share and underlying earnings per share for the period ended 30 June 2009 is based on the profit attributable to ordinary shareholders as follows:

6 months 6 months year 6 months 6 months year
ended ended ended ended ended ended
30.06.09 30.06.08 31.12.08 30.06.09 30.06.08 31.12.08
£000 £000 £000 EPS (pence) EPS (pence) EPS(pence)
Basic (1,263) 366 5,070 (3.4) 1.0 13.5

Adjusted for:
Amortisation of intangibles 112 186 296 0.3 0.5 0.7

that attract no tax deduction
Exceptional costs 385 - - 1.0 - -
Tax relief on exceptional (108) - - (0.3) - -

costs
Adjusted (874) 552 5,366 (2.4) 1.5 14.2
Diluted basic (loss)/earnings (3.4) 0.9 13.1

per share
Diluted adjusted (2.4) 1.4 13.9

(loss)/earnings per share

Continuing operations

6 months 6 months year 6 months 6 months year
ended ended ended ended ended ended
30.06.09 30.06.08 31.12.08 30.06.09 30.06.08 31.12.08
£000 £000 £000 EPS (pence) EPS (pence) EPS(pence)
Basic (1,263) 675 5,445 (3.4) 1.8 14.5

Adjusted for:
Amortisation of intangibles 112 186 296 0.3 0.5 0.7

that attract no tax deduction
Exceptional costs 385 - - 1.0 - -
Tax relief on exceptional (108) - - (0.3) - -

costs
Adjusted (874) 861 5,741 (2.4) 2.3 15.2
Diluted basic (loss)/earnings (3.4) 1.7 14.1

per share
Diluted adjusted (2.4) 2.2 14.9

(loss)/earnings per share

The weighted average number of ordinary shares used in each calculation is as follows:

Basic earnings per share

6 months 6 months year
ended ended ended
30.06.09 30.06.08 31.12.08

In thousands of shares

Issued ordinary shares at 1 38,532 38,532 38,532

January
Effect of own shares held (1,267) (802) (852)
Weighted average number of 37,265 37,730 37,680

ordinary shares for the period

Diluted earnings per share

6 months 6 months year
ended ended ended
30.06.09 30.06.08 31.12.08

In thousands of shares
Weighted average number of 37,265 37,730 37,680

ordinary shares
Effect of share options in issue 1,080 1,009 985
Weighted average number of 38,345 38,739 38,665

ordinary shares (diluted) for the period

6. Equity dividends

The directors declared an interim dividend per equity share of 1.2p after the balance sheet date. In accordance with IFRS accounting requirements, this dividend has not been accrued in the interim consolidated financial statements.

Amounts recognised as
distributions to equity holders 6 months 6 months year
in the period ended ended ended
30.06.09 30.06.08 31.12.08
£000 £000 £000
Final dividend for the year ended 1,310 - -

31 December 2008 of 3.4p per share
Final dividend for the year ended - 1,310 1,310

31 December 2007 of 3.4p per share
Interim dividend for the year - - 462

ended 31 December 2008 of 1.2 per share
1,310 1,310 1,772

7. Property, plant and equipment

6 months 6 months year
ended ended ended
30.06.09 30.06.08 31.12.08
£000 £000 £000

Carrying amount
At beginning of the period 13,025 14,117 14,117
Additions at cost 486 320 720
Transferred from assets held for - 73 -

sale
Disposals - - (1)
Depreciation charge for the (903) (899) (1,811)

period
At end of the period 12,608 13,611 13,025

Contracts placed for future capital expenditure not provided in the financial statements amount to £1,013,000 (30 June 2008 £391,000 , December 2008: £220,000)

8. Intangible assets

6 months 6 months year
ended ended ended
30.06.09 30.06.08 31.12.08
£000 £000 £000

Carrying amount
At beginning of the period 14,714 14,653 14,653
Additions 210 191 502
Amortisation for the period (220) (263) (441)
At end of the period 14,704 14,581 14,714

9. Analysis of net cash and financial liabilities

as at as at as at
30.06.09 30.06.08 31.12.08
£000 £000 £000
Cash and cash equivalents per cash flow 808 2,914 4,736
Secured bank loans (1,000) (1,000) (1,000)
Loan notes - (476) -
Finance lease obligations (552) (511) (531)
Current financial liabilities (excluding (1,552) (1,987) (1,531)

bank overdrafts)

Secured bank loans (12,977) (13,974) (12,977)
Finance lease obligations (1,621) (2,170) (1,903)
Non-current financial liabilities (14,598) (16,144) (14,880)
Net cash and financial liabilities (15,342) (15,217) (11,675)

10. Related parties

Transactions with key management personnel

Group key management personnel receive compensation in the form of salaries and short-term benefits, post-employment benefits and share-based payments. Group key management received total compensation of £ 878,000 for the six months ended 30 June 2009 (six months ended 30 June 2008: £ 895,000)

11. Pension liabilities

During the period, the pension deficit, net of deferred tax, fell to £4.4 million (December 2008 : £4.6 million) as a result of an increase in the value of the fund's investments.

12. Exceptional costs

Costs relating to the integration of the Retail Interiors and ESA businesses

Redundancies and other related costs £385,000

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Hew Balfour Grant Findlay
Chief Executive Finance Director

25 August 2009

A list of current directors and their respective responsibilities can be found on page 15 of the Annual Report 2008. INDEPENDENT REVIEW REPORT TO HAVELOCK EUROPA PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement, the Condensed Consolidated Statement of Changes in Equity and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in 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 for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

M Ross

for and on behalf of KPMG Audit Plc Chartered Accountants 191 West George Street

Glasgow

G2 2LJ

25 August 2009

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