HAVELOCK Europa shares slipped two per cent as it reported an underlying loss of £1.8 million just weeks after announcing plans to cut around 10 per cent of its work force.
The results for the first half of the year at the fit-out and interiors business underline the scale of the challenge facing new chief executive David Ritchie, who was only appointed in May.
However the loss for the period, which is traditionally the weaker part of Havelock’s trading year, is slightly narrower than the £1.88m reported for the same period of 2014.
The company said the underlying performance was helped by reducing its operating costs by around £460,000.
Pre-tax losses including exceptional costs and the results of the Teacherboards educational supplies business, which Havelock recently sold, widened from £2.28m to £2.37m.
Revenue from continuing operations was down five per cent from £30.5m to £28.9m in the six months to June this year amid ongoing weakness in the retail and financial services sector.
Havelock said many of its UK retail customers are re-evaluating their investment plans but it has managed to win some new business with some well-known high street names.
International retail, which is focused on China and the Far East, is said to be growing and on course to be 15 per cent of total revenue by the end of this year.
Demand within the financial services sector continues to dip as many banks reduce the number of their high street branches.
Havelock said a framework won late last year has not yet delivered the expected benefits as the client’s roll-out has been delayed but it continues to work on upgrading the Post Office estate around the UK.
But Mr Ritchie confirmed there has yet to be any tangible improvement in the financial services and retail markets and said: “Clients are looking at their money more carefully and seeing what kind of return they can get. They are just taking their time and taking longer to think about their jobs.”
The education, student accommodation and healthcare sectors are said to have strong order books for the remainder of this year but some projects have suffered from on-site delays.
At the start of this month AIM-listed Havelock issued a profit warning and said it was shedding in the region of 50 jobs as part of a savings drive aimed at trimming around £3m of costs.
The company employs around 400 at its headquarters and manufacturing plant in Kirkcaldy, Fife, plus a further 100 across sales roles around the UK as well as an office in Mansfield and a site in Shanghai, China.
Mr Ritchie said the company still expects in the region of 50 job cuts as the 30 day consultation process draws to a close.
He said: “The idea is that in 2015 these things are implemented and in 2016 we have a different start [point].”
Finance director Ciaran Kennedy said: “About £2.5m of the cost reduction is out of the overhead so we are getting ourselves into a position that even on a much lower turnover next year the business will be profitable. That leaves the foundations for what we think will be growth after that.”
Mr Ritchie outlined that Havelock continues to look at new business areas including high-end office fit-outs.
He said: “We can’t control the market but we can do things to be much more nimble. If clients want a fit-out in an office we can give them a turn-key package with the design, manufacture and the fit out. That is what we are heading towards.”
Havelock’s house broker Stifel said the cost cutting was “on track and expected to be fully in place by [the] end [of] 2015”.
In a note Ken Rumph from the broker said it has a buy rating and a 25p target price on the Havelock stock as it believes there is scope for “significant return to profitability” in 2016.
Havelock saw its net debt rise from £2.6m to £3.1m which it said was mainly as a result of investment in a new enterprise resource planning system.
The company’s pension deficit fell from £3.7m to £2.4m.
Clients have included the likes of Alliance Boots, Lloyds Banking Group, Marks & Spencer, Primark, Virgin Money, Tesco, The North Face, Harvey Nichols and House of Fraser.
Shares closed down 0.25p at 11.75p.
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