School spending cuts bite
Havelock Europa slump ‘one of worst’ to hit firm
Ian Godden: ‘a more challenging year than expected’
Fife-based shop and office fitter Havelock Europa reported a loss last year as the company suffered from a slump in orders, including lower spending by the government on schools.
Delayed results for the year to end December show a loss before tax of £5.3m before exceptionals (2016: profit £0.2m). The loss in the second half of the year was higher than originally anticipated.
Following a review of operations headcount has been cut by more than 13%, offices shut and underperforming commercial management have been replaced.
Chairman Ian Godden, who took over in January last year, said: “2017 had proved to be a much more challenging year than expected when I became chairman.
“The recovery, which I sought to trigger, has got off to a slow start. 2017 was one of the worst performances in Havelock’s history.”
He said the Kirkcaldy-headquartered company had seen lower Government spending on schools, weaker fixed cost coverage and serious internal administration issues.
A new executive team, with experience of turnarounds, was brought in, including the appointment of a new CEO in September 2017.
New financing was negotiated, with an injection of £3m and a two-year bank arrangement in place by the first quarter of 2018.
The business was reduced in size and “over-optimistic forecasting” was eliminated.
“As a result of these actions in the last six months, I believe the company has taken a major step forward in its recovery plan, which is not reflected in the historical 2017 results and prior year adjustments,” said Mr Godden.
Ebitda for the first four months of 2018 is “well ahead” of prior year and tracking closely to expectations.
The company sees significant opportunities with new customers in the hotel and leisure industries and an expectation of business growth from recent investment in its Dublin-based resource.
Hakeem Yesufu, at the recommendation of Andrew Burgess (the largest shareholder), was appointed post period, on 1 May, as a non-executive director to add his financial experience to the turnaround.
Chief executive Shaun Ormrod said: “We remain focused on cost control and improving margins and cash flow through enhanced operational performance, strengthening the commercial team and the pursuit of further efficiencies.”
- Revenue from continuing operations of £53.2m (2016: £60.8m), down due to subdued demand in public sector business and working capital constraints
- Gross profit reduced to £2.8m (2016: £8.1m) reflecting the combined effect of lower revenues and changes to business mix towards lower margin business
- Under-absorption of fixed costs due to the lower volumes and major short-term disruption to activities on implementation of the ERP project.
- An increased loss before tax of £5.3m before exceptionals (2016: profit £0.2m) reflecting lower volume levels of £1.2m, margin leakage attributed to cash shortages and the resulting delivery cost increase of £3.3m and stock write-off of £1.0m
- Year-end result also includes exceptional costs of £0.7m and a deferred tax asset write-off of £1.4m
- Net debt increased to £3.7m (2016: £2.7m)
- Funding of £3m received post year end from Scottish Enterprise and Bank debt in place until 2020
- Pension deficit increased by £0.4m, to £11.8m, from the restated 2016 position