Improved trading for shopfitter
Havelock reaps benefits of turnaround strategy
Restructuring and a reduction in head count, initiated in late summer 2015, have resulted in higher operating margins during the past year from 10.2% to 13.2%.
The group has been able to report an operating profit despite the reduction in turnover.
Chairman Ian Godden (pictured) 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.
“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.”
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.
Profit before tax was £200,000 (2015: loss £2.7m). This is stated after exceptional restructuring costs of £200,000 (2015: £1.9m).
David Ritchie, chief executive, said he was encouraged by the new chairman’s £300,000 purchase of shares.
Mr Ritchie’s strategy is to grow from a small number of large companies to a large number of smaller customers to reduce risk.
The company is diversifying into new areas, such as car showrooms.
· 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.
· 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%).
· 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.
· 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.
· 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.