Havelock Europa (HVE)

 

LSE:HVE: Final Results and New Financing Arrangements

Havelock Europa

25 Apr 2017 07:00:11

Havelock Europa PLC

RNS Number : 2181D
Havelock Europa PLC
25 April 2017
 

HAVELOCK EUROPA PLC

("Havelock" or the "Group")

 

Final Results and New Financing Arrangements

 

Havelock Europa (HVE.L), the international interiors solutions group, announces its results for the year to 31 December 2016.

 

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

 

Financial Highlights

·      Pre-tax profit before exceptional items of £0.4m (2015: loss of £0.8m).

·      Like for like revenue, excluding the loss of business from a major financial services client announced in November 2015, was 21% ahead of 2015 at £59.4m (2015: £49.2m).

·     Group operating profit before exceptional items of £0.5m (2015: operating loss £0.6m) reflecting higher contract margins and improved efficiency following the restructuring in 2015.

·      Earnings per share before exceptional items of 0.7p (2015: loss per share of 3.0p).

·      Net assets per share 14.1p (2015: 31.6p) due mainly to the impact of lower corporate bond yields on the pension scheme deficit which rose to £9.4m.

·      Net debt of £2.7m (2015: net cash £1.1m) due to investment in the ERP system and increased working capital.

 

Operational Highlights

·      Business now organised into three market-focused divisions, Retail & Lifestyle, Corporate Services and Public Sector. 

·      Leadership teams strengthened.

·      Strong progress in broadening the customer base across all sectors, with a number of new clients secured.

·      Within the Public Sector, Healthcare and "early years" Education products updated and launched.

·      International activity accounted for 20% of Group turnover (2015: 15%).

 

Financing

·      New overdraft facility agreed which provides £6.0m of funding over the traditional busy summer period, reducing to £5.0m on 1 November 2017.

·      A two year unsecured £0.3m loan facility, obtained from Godden Associates Pension Fund, an associate of Ian Godden, Chairman of the Company, which represents a related party transaction in accordance with AIM Rule 13.

·      Agreement reached with the trustees of the Company's pension fund regarding the deferral of deficit funding payments of £0.7m scheduled in 2017 into 2018.

 

Outlook

·      Drive to make the business more agile and able to respond to customer demand, which is showing clear results.

·      Strong pipeline of opportunities in Retail & Lifestyle and Corporate Services.

·      Project delays in Public Sector will result in the 2017 result being heavily weighted to the second half of the year.

·      New major national customers won through strengthening commercial team.

·      ERP system, live from early 2017, will deliver ongoing efficiency improvements.

·      Current order book for 2017 delivery of £32m secured, in addition to work expected from existing framework contracts, slightly lower than last year (£35m).

·      Major review of longer term vision, mission and strategy underway.

 

Ian Godden, Havelock Chairman, said:

"2016 was a challenging year due to the significant reduction in revenue. Nevertheless we have made considerable progress in realising the benefits from the restructuring of the business with a substantial improvement in margins and a return to profitability.  The business continues to concentrate on simplifying its structure and processes and on improving its commercial skills to make it more agile and to generate more operating profit and cash flow."

 

Enquiries

Havelock Europa                                                                                    www.havelockeuropa.com

David Ritchie, Chief Executive                                                               Tel. 01592 648480

Ciaran Kennedy, Finance Director

 

WH Ireland Group plc (Nomad)                                                            Tel. 020 7220 1650

Chris Fielding

 

Charlotte Street Partners (media enquiries)                                            Tel. 0131 516 5310

Rob Ballantyne

David Gaffney

 

 

 

CHAIRMAN'S STATEMENT

 

During 2016, the benefits of the restructuring and right sizing of the business that we initiated in late summer 2015 have been recognised in the substantial improvement in operating margins during the year from 10.2% to 13.2%. Consequently, the Group is able to report an operating profit despite the reduction in turnover. The business continues to concentrate on simplifying its structure and on improving its commercial skills to make it more agile and better able to generate profit and cash flow.

 

Financial overview

Total revenue for the year was £60.8m (2015:£70.3m). There was a major increase in public sector sales in 2016, especially in the education sector. Financial sector sales were much lower following the decision by a major customer in 2015 to reduce its refurbishment and development spend. On a like for like basis, after eliminating the loss of sales from this customer, as detailed in the reconciliation below, revenue for 2016 was 21% higher than in 2015. Profit before tax was £0.2m (2015: loss £2.7m). This is stated after exceptional restructuring costs of £0.2m (2015: £1.9m).With the management action to increase margin and reduce costs, an operating profit before exceptional items of £0.5m was earned (2015: loss of £0.6m) as shown below.

 

Reconciliation of underlying measures

 

The table below shows like for like revenue excluding sales to a major financial services customer.

 

                                                                                  2016                         2015

                                                                                   £000                        £000

 

Total revenue                                                          60,809                     70,263

Sales to major financial services customer              (1,410)                  (21,076)

                                                                                ______                    _______

Like for like revenue                                               59,399                     49,187

                                                                                ______                    ______

 

Operating profit

 

Profit/(loss) before tax                                              183                      (2,682)

Finance costs                                                            174                           273

Exceptional costs                                                      174                        1,883

Discontinued activities                                                 -                           ( 41)

                                                                                _____                        ______

Result before exceptional items from                    

continuing operations                                                531                         (567)

                                                                                _____                      ______

 

Financial position

On 24 April 2017, the Group agreed a new overdraft facility of £6.0m over the traditionally busy summer period through to 31 October 2017, reducing to £5.0m thereafter. The overdraft facility remains repayable on demand and is subject to review in April 2018.

 

We continued to develop our new Enterprise Resource Planning ("ERP") system and costs in the year totalled £1.7m. A phased implementation of the system commenced in June 2016 and the system became fully operational in February 2017. As well as offering cost and efficiency benefits, this system should provide a platform for better implementation of the new operational plan and enable the business to become more agile and responsive.

 

In common with many UK companies the pension deficit has widened. This is principally as a result of reduced corporate bond rates. As at 31 December the pension deficit rose to £9.4m (2015:£1.0m), this being the principal reason for the reduction in shareholders' funds from £12.2m to £5.4m.

 

Dividends

No dividend is proposed for this year. When the Group's trading performance has improved, the Board will consider the resumption of dividend payments.

 

Future strategy

The newly refreshed Board is conducting a major review of its longer term vision, mission and strategy.  This strategy will be shared with the shareholder base later in 2017, showing leaner processes, with the objective of achieving a stronger operating cash flow and profit growth. Havelock is seeking to re-establish market leadership and a much higher level of design innovation in each of its three UK market sectors. The Board and executive team are also exploring this year how they can create a growth strategy by "following the wealth" in the UK and in selected international markets where Havelock has profitable entry or expansion opportunities. The addition of two very experienced business-oriented non-executive directors, a new CFO and the upgrading of the senior market-facing executive team are crucial first steps in that direction. Despite the political uncertainties in the UK and the prospect of accelerated inflation and interest rates, the Board is confident of finding a path to growth in profits.

 

 

 

 

The Board

 

Hew Balfour, Chief Executive of the Company from 1989 to 2010, was appointed a non-executive director on 28 April 2016 and replaced Alastair Kerr, who resigned on 10 June 2016, having been a non-executive director for four years. 

 

David MacLellan resigned as a non-executive director on 25 January 2017. David had been a director for six years and chairman for the last four years.

 

I was appointed a non-executive director and chairman after the EGM on 25 January 2017 to replace David.  I would like to thank David and Alastair, on behalf of the Board, for their contribution to the business during a very difficult period in Havelock's history.

 

Ciaran Kennedy, Group Finance Director, resigned from the Board on 25 April to take up his new position as Director for Scotland at Clancy Docwra. He departs with our heartfelt thanks and best wishes.

 

Donald Borland will succeed Ciaran as CFO on 26 April 2017. His overall experience and success and his particular experience in adjacent construction and property markets will be very valuable for Havelock's future positioning.

 

In what was a challenging year, I would like to pay tribute to the continued positive attitude and focus on customer delivery displayed by our staff as they undertook the restructuring process and, on behalf of the Board, I would like to register our thanks to all members of the Havelock team for their contribution during this difficult time.

 

Outlook for 2017

 

The first half of the year will, as usual, be challenging, with orders secured of £32m, slightly lower than last year's £35m, albeit with increased expectations from our framework agreements. Although the business is continuing to progress, it still retains a high dependence on second half orders which restricts our visibility for the full year outturn. Nevertheless the prospects for the full year are encouraging with a stronger order book in the Retail & Lifestyle sector and signs of growth potential in the corporate sector. The current emphasis on simplifying the business, embedding benefits from the new ERP system, maximising the customer experience and upgrading the commercial skills and focus in the Company are starting to pay off.

 

 

Ian Godden

Chairman

 

 

 

 

 

 

CHIEF EXECUTIVE'S REVIEW

Operational review

 

Revenues in the year totalled £60.8m (2015: £70.3m), as a result of the reduction in activity by one of our financial services customers. Excluding sales to this customer in 2015, revenue on a like for like basis rose by 21% in 2016, as detailed in the reconciliation in the Chairman's Statement.

 

Despite the overall reduction in sales, the Group achieved an operating profit before exceptional items from continuing operations of £0.5m (2015: loss £0.6m) as detailed in the reconciliation in the Chairman's Statement.  The principal reasons for this were the improved margins on major public sector contracts in the year and the impact of operational efficiencies following the restructuring exercise at the end of 2015.

 

Retail & Lifestyle sales fell slightly in 2016. Whilst one of our clothing retail customers continued to open new stores in the UK and Europe, some of our major UK customers reduced their activity. We continued to broaden the Retail & Lifestyle customer base and initial orders were received from the leading health food retailer and an electrical goods retailer during the year. International retail sales had another successful year, recording sales of 20% of Group revenue (2015: 15%), substantially above target.

 

With the reduced level of business from our largest financial services customer, Corporate Services had a disappointing year. Excluding sales to this customer, sales in 2016 were comparable to those in 2015. We continue to target opportunities for both furniture and fit out contracting in this sector and we are pleased to report that work has recently been secured from a major new financial services customer.

 

Public sector sales improved substantially in 2016, following major contract wins in the education sector throughout Great Britain.

 

We continued to develop our new Enterprise Resource Planning ("ERP") system during the year and costs in the year totalled £1.7m.

A phased implementation of the system commenced in June 2016 and the system became fully operational in February 2017. As well as offering cost and efficiency benefits, this system should provide a framework for the better implementation of the new business strategy and enable the business to become more agile and responsive.

 

Management and staff

 

I am pleased that throughout the last 9 months we have strengthened the leadership team with the addition of senior appointments in Manufacturing and Operational Excellence and a new Leader in the Corporate Sector. I look forward to working with our new CFO and this enhanced leadership team in the next year.

 

Despite the challenges, we maintained investment in our graduate and apprentice programmes and hope to invest further this year. We are also continuing to invest in training for our key staff to ensure that we are fully responsive to our customers' requirements. It is pleasing to note that we fully comply with the UK and Scottish Governments' programme of paying the living wage to our UK colleagues.

Current trading and prospects

 

We are pleased to have benefitted from improving the customer experience in the last year, thereby securing new major national customers and starting to generate a stronger pipeline for 2017.

 

We continue to pursue opportunities that will include new sector activity. We are now targeting these opportunities to build on the new customers that we have successfully secured within the year and we are working towards converting these opportunities to secure this year's revenue.  We remain cautiously optimistic for the full year and I appreciate the efforts made by colleagues to move the company forward in continuing challenging times.

 

 

David Ritchie

Chief Executive

 

 

 

 

 

 

 

 

FINANCE DIRECTOR'S REVIEW

 

Results for the year and financial position

Revenues, from continuing operations, for the year were £60.8 million. This represents a 13% reduction on 2015 levels (2015:£70.3m) with the reduced activity in the Financial Services sector being the main driver. Profit before tax was £0.2m (2015:loss £2.7m). Despite the reduction in sales, the business made an operating profit of £0.5m (2015:loss of £0.6m) through operational efficiencies, particularly on public sector contracts, as detailed in the Chairman's Statement.

 

Exceptional costs of £0.2m were incurred in the year and these related largely to restructuring and redundancy costs. Overall, the Group made an operating profit of £0.4m (2015:£2.4m loss) for the year on sales of £60.8m (2015:£73.1m).

 

An increase of £8.4m in the pension scheme deficit had a significant impact on the net assets of the Group which finished the year at £5.4m (2015:£12.2m)

 

Taxation

 

The Group continues to carry forward substantial losses and does not expect to be in a tax paying position for some time.

 

Cash flow

 

Despite the continued focus on working capital management, the Group has absorbed cash from operating activities of £2.0m in the year to 31 December 2016 (2015:cash generated £1.1m). This was due to the payment of restructuring costs and the working capital impact of the loss of business from a major financial services customer. Capital expenditure of £1.8m (2015:£2.3m) represented the continued investment in the ERP project and other capital expenditure.

 

Net debt and bank facilities

 

On 31 December 2016, total debt was £2.7m, of which bank debt was £2.2 and hire purchase / leasing debt was £0.5m. (2015: net cash £2.0m, leases £0.9m).

 

The Group has the support of the following facilities: 

·      An overdraft facility which is subject to review in April 2018.  This provides £6.0m of funding over the traditionally busy summer period, reducing to £5.0m on 1 November 2017;

·      Finance lease facilities of £0.5m which are fully drawn;

·      On 24 April 2017, the Company entered into a £0.3m loan facility with a pension fund associated with the Chairman. The loan carries interest at 6% pa, payable quarterly following the first anniversary of drawdown, and has the right to be converted into equity in the event of any equity issue by the Company during its term, on the same terms as are available to all other shareholders. The Directors of the Company, other than Mr Godden, consider, having consulted with WH Ireland Limited, the Company's nominated adviser, that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned.

 

Going concern accounting basis

 

The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Chairman's Statement and the Chief Executive's Review. The financial position of the Group, its cash flows and liquidity position are set out in the financial statements.

 

During the year, the Group operated with bank facilities which included HP finance and an overdraft facility which was subject to review in April 2017. On 24 April 2017, the Group's overdraft facility was extended for a further year and the facility is now subject to review in April 2018. The revised facility allows for an increased overdraft of £6.0m over the traditionally busy summer period through to 31 October 2017, reducing to £5.0m thereafter. As set out in Note 1 (Basis of Preparation), the Group expects to be able to comply with the conditions of the Group's bank facilities based on its forecasts. In addition, on 24 April 2017, the Group agreed a £0.3m loan facility with the Chairman and agreed with the trustees of the Company's pension fund the deferral of deficit funding payments of £0.7m, scheduled in 2017, into 2018.

 

The Directors, therefore, have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the annual report and accounts.

 

Principal risks and uncertainties

 

The Group must operate within its bank facilities. As set out in Note 1, the Group's financial forecast shows that this can be achieved. A material disruption to the Company's business or a shortfall in operational or financial performance or a reduction in the ability to secure appropriate credit terms could mean that the Group's ability to operate within its overdraft facility would be at risk. The Group addresses this risk by detailed monitoring of financial performance and of the expected outcome for each measurement period.

 

The Group's business has a strong seasonal element, with a peak of activity in the middle and second half of the year. This could result in peak output requirements exceeding the available capacity. The Group manages this risk by detailed and regular capacity planning reviews, with additional shifts and early production being planned.

 

In 2016, the Group had one client which constituted more than 10% of revenue. The loss of a major client would adversely impact the Group's profitability and cash flow. The business focusses on maintaining a good working relationship with all its customers. We are continuing to pursue our strategy of diversifying the business across and within sectors to increase resilience and reduce dependence on particular markets and customers.

The Group operates in highly competitive markets and deals with major customers which increasingly employ procurement strategies designed to ensure that all purchases, and not just those of stock items, are acquired at the lowest possible cost. The business is addressing this risk by seeking production cost savings including, where appropriate, procurement from lower cost overseas suppliers.

 

The Group is involved as a supplier to major construction projects which can be subject to time delays and slippage caused by both commercial and weather-related issues. The business addresses this risk by building allowance for slippage into its production forecasts and budgets.

 

The Group undertakes work as a sub-contractor under industry standard written contracts. The risks involved in working under such contracts are controlled by the employment of qualified and knowledgeable contract managers and quantity surveyors.

 

The largest element of working capital employed by the Group is trade receivables and accrued income. These are subject to credit risk and, as a consequence, the Group employs credit insurance to cover the risk on most of its commercial debtors. However, in addition to debt owed by the public sector and local government, the Group bears the credit risk on a proportion of receivables where its credit insurers are unwilling to provide cover.  The Group's procedures require that material uninsured credit limits are approved by the Board. The Group also monitors the credit status of its major customers.

 

Key performance indicators

 

Havelock Europa's Board and Group Management monitor a range of financial and non-financial indicators, reported on a periodic basis, to measure the Group's performance over time.

 

Of these, the key performance indicators (KPIs) are:

 

 

2016

2015

 

 

 

Revenue per employee - £000's

146

141

 

 

 

Opening order book for in year delivery - £m

22

25

 

 

 

Net (debt)/cash  - £m (at year end)

(2.7)

1.1

 

 

 

 

 

 

               

Pension scheme

 

Lower corporate bond rates, which place a higher value on the liabilities, were the main driver in the £8.4m increase in the pension deficit to £9.4m. Given the large volatility associated with the scheme's liabilities, the trustees are continuing to review options within the market place to hedge better some of this risk. The final salary pension scheme has been closed to both new entrants and further accrual for some time.  On 24 April 2017, the trustees agreed to defer the deficit funding payments due in 2017 into the following year.

 

 

Ciaran Kennedy                                                                                                                                                                  

Group Finance Director

 

 

 

 

 

Consolidated Income Statement

 

for the year ended 31 December 2016

 

 

 

Result before

Exceptional

Total

 

 

exceptional costs

costs

 

 

Note

£000

£000

£000

Revenue

 

60,809

-

60,809

Cost of sales

 

(52,753)

 

(52,753)

 

 

_______

_______

________

Gross profit

 

8,056

-

8,056

Administrative expenses

 

(7,525)

(174)

(7,699)

 

 

 

 

 

 

 

______

_______

________

Operating profit/(loss)

 

531

(174)

357

 

 

 

 

 

Net finance costs

 

(174)

-

(174)

 

 

_______

______

______

Profit/(loss) before income tax

 

357

(174)

183

 

 

 

 

 

Income tax charge

5

         (99)

35

(64)

 

 

 

 

 

 

 

 

 

 

 

 

_______

_______

_______

Profit/(loss) for the year (attributable to equity holders of the parent)

 

 

258

(139)

119

 

 

_______

_______

_________

 

 

 

 

 

Basic earnings per share

6

0.7p

 

0.3p

 

 

 

 

 

Diluted earnings per share

6

0.7p

 

0.3p

 

 

 

 

 

 

 

 

Consolidated Income Statement

 

for the year ended 31 December 2015

 

 

 

Continuing

Discontinued

Result before

Exceptional

Total

 

 

operations

activities

exceptional costs

costs

 

 

Note

£000

£000

£000

£000

£000

Revenue

 

70,263

2,862

73,125

-

73,125

Cost of sales

 

(63,093)

(1,965)

(65,058)

 

(65,058)

 

 

_______

_______

_______

_______

________

Gross profit

 

7,170

897

8,067

-

8,067

Administrative expenses

 

(7,737)

(856)

(8,593)

(1,883)

(10,476)

 

 

 

 

 

 

 

 

 

_______

_______

______

_______

________

Operating (loss)/profit

 

(567)

41

(526)

(1,883)

(2,409)

 

 

 

 

 

 

 

Net finance costs

 

(273)

-

(273)

-

(273)

 

 

_______

_______

_______

______

______

(Loss)/profit before income tax

 

(840)

41

(799)

(1,883)

(2,682)

 

 

 

 

 

 

 

Income tax charge

5

(283)

-

(283)

-

(283)

 

 

_______

_______

_______

_______

_______

(Loss)/profit after income tax

 

(1,123)

41

(1,082)

(1,883)

(2,965)

Gain on disposal of discontinued activities net of tax

 

 

-

 

285

 

285

-

 

285

 

 

_______

_______

_______

_______

_______

(Loss) /profit for the year (attributable to equity holders of the parent)

 

 

(1,123)

 

326

 

(797)

(1,883)

(2,680)

 

 

_______

_______

_______

_______

_________

 

 

 

 

 

 

 

Basic loss per share

6

(3.0p)

 

 

 

(7.1p)

 

 

 

 

 

 

 

Diluted loss per share

6

(3.0p)

 

 

 

(7.1p)

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income

 
for the year ended 31 December 2016

 

 

 

    

 

 

2016

2015

 

 

£000

£000

 

 

 

 

Profit/(loss)for the year

 

119

(2,680)

 

 

_______

_______

Items that will not be reclassified to profit or loss

 

 

 

Remeasurement of defined benefit pension scheme

 

(8,420)    

2,326    

Tax on items taken directly to equity

 

1,516

(493)

 

 

_______

_______

Other comprehensive income net of tax

 

(6,904)

1,833

 

 

 

 

Total comprehensive income (attributable to equity holders of the parent)

 

 

 (6,785)

 (847)

 

 

 

 

 

Balance Sheet      

 

as at 31 December 2016

 

 

 

      

 

 

2016

2015

 

 

£000

£000

 

Note

 

 

Assets

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

 

2,999

3,234

Intangible assets

 

9,577

8,066

Deferred tax assets

 

3,046

1,480

 

 

_______

_______

Total non-current assets

 

15,622

12,780

 

 

_______

_______

Current assets

 

 

 

Inventories

7

4,654

6,054

Trade and other receivables

8

10,374

9,433

Cash and cash equivalents

 

-

1,961

 

 

_______

_______

Total current assets

 

15,028

17,448

 

 

_______

_______

Total assets          

 

30,650

30,228

 

 

_______

_______

Liabilities

 

 

 

Current liabilities

 

 

 

Interest-bearing loans and borrowings

9

(2,620)

(391)

Trade and other payables

10

(13,109)

(16,154)

 

 

_______

_______

Total current liabilities

 

(15,729)

(16,545)

 

 

_______

_______

Non-current liabilities

 

 

 

Interest-bearing loans and borrowings

9

(123)

(461)

Retirement benefit obligations

 

(9,356)

(1,031)

 

 

_______

_______

Total non-current liabilities

 

(9,479)

(1,492)

 

 

_______

_______

Total liabilities

 

(25,208)

(18,037)

 

 

_______

_______

Net assets

 

5,442

12,191

 

 

_______

_______

Equity

 

 

 

Issued share capital

 

3,853

3,853

Share premium

 

7,013

7,013

Other reserves

 

2,184

2,184

Revenue reserves

 

(7,608)

(859)

 

 

_______

_______

 

 

 

 

Total equity attributable to equity holders of the parent

 

5,442

12,191

 

 

_______

______

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flow Statement

 

for the year ended 31 December 2016

 

                               

 

         

 

 

2016

2015

 

 

£000

£000

           

 

 

 

Cash flows from operating activities

Note

 

 

Profit/(loss) for the year

 

119

(2,680)

Adjustments for:

 

 

 

Depreciation of property, plant and equipment

 

366

442

Amortisation of intangible assets

 

188

227

Gain on disposal of subsidiary

 

-

(285)

Loss on disposal of property, plant and equipment

 

-

1

Net financing costs

 

174

273

Deferred tax on R&D credit

 

(114)

-

Non-cash exceptional charges

 

91

1,069

   IFRS 2 charge and net movements relating to equity-settled plans

 

36

107

Income tax charge

5

64

283

 

 

_______

_______

Operating cash flows before changes in working capital and provisions

 

924

(563)

(Increase)/decrease in trade and other receivables

 

(941)

2,964

Decrease in inventories

 

1,400

1,259

Decrease in trade and other payables

 

(3,146)

(1,881)

Cash contributions  to defined benefit pension scheme

 

 

(134)

 

(489)

 

 

_______

_______

Cash (used in)/ from operations

 

(1,897)

1,290

 

 

_______

_______

 

 

 

 

Interest paid

 

(125)

(162)

 

 

_______

_______

Net cash (used in)/ from operating activities

 

(2,022)

1,128

 

 

_______

_______

Cash flows from investing activities

 

 

 

Net proceeds from sale of assets held for sale

 

-

750

Net proceeds from sale of subsidiary net of overdraft disposed of

 

 

-

 

1,252

Acquisition of property, plant and equipment

 

(131)

(709)

Acquisition of intangible assets

 

(1,699)

(1,564)

 

 

_______

_______

Net cash used in investing activities

 

(1,830)

(271)

 

 

_______

_______

Cash flows from financing activities

 

 

 

Repayment of bank borrowings

 

-

(3,952)

Repayment of finance lease/HP liabilities

 

(402)

(392)

New finance leases

 

63

34

 

 

_______

_______

Net cash used in financing activities

 

(339)

(4,310)

 

 

_______

_______

Net decrease in cash and cash equivalents

 

(4,191)

(3,453)

Cash and cash equivalents at 1 January

 

1,961

5,414

 

 

_______

_______

Cash and cash equivalents at 31 December

 

(2,230)

1,961

 

 

_______

_______

 

 

 

Statement of Changes in Equity

 

for the year ended 31 December 2016

 

 

 

Share

capital

Share

premium

Merger

reserve

Other

reserve

Revenue

reserve

Total

 

£000

£000

£000

£000

£000

£000

Current period

 

 

 

 

 

 

At 1 January 2016

3,853

7,013

2,184

-

(859)

12,191

Profit for the year

-

-

-

-

119

119

Other comprehensive income for the year

-

-

-

-

(6,904)

(6,904)

Movements relating to share-based payments and the ESOP trust

-

-

-

-

36

36

At 31 December 2016

3,853

7,013

2,184

-

(7,608)

5,442

 

 

 

 

 

 

 

Previous period

 

 

 

 

 

 

At 1 January 2015

3,853

7,013

2,184

994

(1,113)

12,931

Loss for the year

-

-

-

-

(2,680)

(2,680)

Other comprehensive income for the year

-

-

-

-

1,833

1,833

Transfer on disposal of property

-

-

-

(994)

994

-

Movements relating to share-based payments and the ESOP trust

-

-

-

-

107

107

At 31 December 2015

3,853

7,013

2,184

-

(859)

12,191

 

 

 

 

 

Notes to the financial statements

 

1.  The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015 but is derived from the 2016 accounts.  Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered in due course.  The auditor has reported on those accounts; his reports  (i) were unqualified, (ii) did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying his reports and (iii) did not contain statements under either section 498(2) or section 498(3) of the Companies Act 2006.

 

Basis of preparation

 

The consolidated financial statements comprise Havelock Europa PLC and its subsidiaries. The financial statements of subsidiaries are prepared to the same reporting date using accounting policies consistent with those of the parent company.  Intra-group transactions and balances, including any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in full.

 

Cash flow forecasts have been prepared for the period through to 31 December 2018, including sensitivity analyses, taking account of the risks and uncertainties facing the Group as detailed in the Finance Director's Review. Since the year end, the Group has agreed with its bankers a renewal of the existing £4.75m overdraft facility in place at the year-end. The renewal allows for an increased facility of £6.0m over the traditionally busy summer period, through to 31 October 2017, reducing to £5.0m thereafter. The facility has no covenants, is repayable on demand and is subject to review in April 2018. The cash flow forecast incorporates certain mitigating actions which have been implemented by the Board.  Specifically as set out in the notes the Chairman has provided a loan facility of £0.3m and the pension Trustees have agreed to a deferral of pension deficit payments of £0.67m.

 

The Group is projected to operate within this facility for the foreseeable future although mitigating action may be required during periods when headroom is tight. These mitigating actions may include, as in previous years, that the payment terms with some of the Group's debtors and creditors will be carefully managed during the periods of peak working capital requirement.

 

While the directors cannot envisage all possible circumstances that may impact the Group in the future, the directors believe that, taking account of the forecasts, sensitised forecasts, future plans and committed funding levels, the Group has sufficient resources  to meet all debts as they fall due for the foreseeable future.

 

Accordingly, after making reasonable enquiries, the directors have a reasonable expectation that the Group can continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis in preparing the financial statements.

 

Further information regarding the Company's business activities, together with the factors likely to affect its future development, performance and position, is set out in the Chief Executive's Review.

 

 

2. Segment reporting

 

No segmental analysis has been presented as, following the sale of Teacherboards (1985) Limited in the prior year, continuing operations consist of a single segment and therefore segmental disclosure has, in effect, been presented on the face of the income statement with the continuing operations representing the interiors segment and the discontinued operations representing the educational supplies segment.

 

No geographical analysis has been presented as exports constitute less than 20% of revenue. Sales to Primark represent 14% of revenue in 2016. Sales in 2015 to Lloyds Banking Group plc represented 30% of revenue. No other client represents more than 10% of revenue.

 

 

 

3. Profit/(loss) before tax

                 

 

 

    Cost of

     sales

Administrative

costs

Total

 

 

 2016

 2015

 2016

 2015

 2016

 2015

 

Note

£000

£000

£000

£000

£000

£000

Profit/(loss) before tax is stated after charging:

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

164

210

202

232

  366

  442

Amortisation of intangible assets

 

        -

        -

188

227

188

227

Loss on sale of property, plant and equipment

 

      -

      -

-

1

-       

1       

Operating lease charges:

 

 

 

 

 

 

 

   - plant and machinery

 

      114

     144

-

2

114

146

   - others

 

297

430

505

637

802

1,067

 

 

4. Exceptional costs

 

An analysis of exceptional costs is as follows:

 

 

 

 

 

2016

2015

 

Note

£000

£000

Restructuring costs

a

174

1,495

Severance payments in relation to Board change

b

-

388

 

 

 

 

Total exceptional costs

 

174

1,883

 

(a) Redundancy and other costs incurred in the restructuring of the Interiors and Educational Supplies businesses.

 

(b) Compensation for loss of office.

 

 

5. Income tax expense

 

Recognised in the income statement

 

 

2016

2015

 

Note

£000

£000

 

 

 

 

Current tax expense

 

 

 

Current year

 

-

-

Adjustments for prior years

 

-

-

 

 

-

-

Deferred tax charge

 

 

 

Origination and reversal of temporary differences

 

 

 

-     non-exceptional

 

(94)

(38)

-     exceptional

 

35

-

Adjustments for prior years

 

-

(95)

Adjustments for change in deferred tax rate

 

(5)

(150)

 

 

(64)

(283)

Total income tax charge recognised in the consolidated income statement

 

(64)

(283)

 

 

6. Earnings per share

The calculation of basic earnings per share and underlying earnings per share at 31 December 2016 is based on the profit attributable to ordinary shareholders as follows:

 

2016

2015

2016

2015

 

Profit

Loss

per share

per share

 

£000

£000

pence

pence

Basic

119

(2,680)

0.3

(7.1)

Adjusted for:

 

 

 

 

Discontinued activities

-

(326)

-

(0.9)

 

119

(3,006)

0.3

(8.0)

Exceptional costs (net of associated tax credit)

139

1,883

0.4

5.0

Continuing operations before exceptional costs

258

(1,123)

0.7

(3.0)

Diluted basic profit/(loss) per share

 

 

0.3

(7.1)

Adjusted diluted profit/(loss) per share - continuing operations

 

 

0.7

(3.0)

 

 

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

 

Undiluted earnings per share

In thousands of shares

 

 

 

 

 

2016

2015

Issued ordinary shares at 1 January

 

38,532

38,532

Effect of own shares held

 

(165)

(693)

Weighted average number of ordinary shares for the year ended 31 December

 

38,367

37,839

 

 

Diluted earnings per share

In thousands of shares

 

 

 

 

 

2016

2015

Weighted average number of ordinary shares for the year ended 31 December

 

38,367

37,839

Effect of share options in issue

 

1,182

1,314

Weighted average number of ordinary shares (diluted) for the year ended 31 December

 

39,549

39,153

 

 

7. Inventories

   

       

 

2016

2015

 

£000

£000

Raw materials and consumables            

1,647

1,858

Work in progress   

1,883

2,871

Finished goods

1,124

1,325

 

4,654

6,054

 

 

8. Trade and other receivables

    

     

 

2016

2015

 

£000

£000

Trade receivables and accrued income

9,438

8,652

Other receivables   

380

195

Prepayments

556

586

 

10,374

9,433

 

 

 

9. Interest-bearing loans and borrowings

 

 

     

Current liabilities

2016

2015

 

£000

£000

Overdraft

2,230

-

Obligations under hire purchase contracts and finance leases

390

391

 

2,620

391

 

 

      

Non-current liabilities

 

 

2016

 

2015

 

£000

£000

Obligations under hire purchase contracts and finance leases

123

461

 

 

10. Trade and other payables

 

Amounts disclosed in current liabilities

 

         

 

2016

2015

 

£000

£000

Trade payables

8,944

10,354

Other taxes and social security

1,251

2,113

Accruals

2,914

3,687

 

13,109

16,154

 

 

11. Post balance sheet events

 

On 31 January 2017, 3,000,000 new ordinary shares were issued to the Chairman in consideration for cash.  The number of ordinary shares in issue has, therefore, increased to 41,532,050.

 

During April 2017, the Chairman agreed to provide an unsecured loan of £0.3m to the company.  The loan carries an interest rate of 6%, is for a two year term and can be converted into shares in the event of a future rights issue or placing.


This information is provided by RNS
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