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Havelock Europa moves into profit for first time in years

Havelock Europa, the interiors manufacturer employing almost 400 in Fife, has moved into profit for the first time in five years and started to invest again.

The group, which has battled debt and difficult markets since 2009, has launched apprenticeship and graduate training schemes, diversified into healthcare and student accommodation, and is on track to double its overseas work to 10% of turnover.

The AIM-listed company's shares rose 6% to a four-year high yesterday after it unveiled a pre-tax profit of £632,000 for 2013 compared with the previous year's £515,000 loss on continuing business. Debt, which was at £20m three years ago, was slashed from £2.4m to £300,000. The dividend, scrapped in 2010, may resume once profits are stronger, the group said.

Revenues were £3m down at £89.6m due to subdued education activity, but Havelock said Scotland was now leading a UK revival in school investment, and it reported growing demand in its core banking and retail sectors from old and new customers both at home and overseas. The group's client base includes Alliance Boots, Lloyds Banking Group, Marks & Spencer, Primark, Virgin Money and House of Fraser.

Eric Prescott, chief executive, said: "The key thing is the return to profit, it has taken a few years, we are very connected to the broader economy so with retailers struggling we have struggled with them. But what we are now seeing is large-estate retailers have got investment plans which are good to go, some are being released, and we have been able to secure some new customers."

One of those was Kmart Australia, serviced from Havelock's now busy Shanghai office and supplied out of China.

Mr Prescott said: "It is part of our strategy to continue to grow the international business, and if our retail customers want to go abroad we will follow them."

Banks too were on the front foot, with new programmes under way from partner Lloyds but also group brands Halifax and C & G, the new TSB, and the Post Office, the chief executive added.

Mr Prescott said the group had expected a quiet 2014 in the education sector but new UK programmes were now coming through led by the Scottish Futures Trust.

The group's underlying continuing operating profit increased from £200,000 to £1.1m. During the year it invested £700,000 in a new laser cutting machine for the Kirkcaldy factory which drove productivity improvements.

Grant Findlay, finance director, said the reduction of the group's bank facilities from £35m five years ago to £5.5m now had impacted investment. "Until last year the previous three years' level of investment was very low and we were looking to get debt levels down."

He said Havelock was now looking to invest in its IT systems.

Mr Prescott said: "We have successfully entered new markets which will compensate for the education market remaining subdued in 2014, although we expect this to improve in 2015. I am also delighted to announce our new graduate training programme which together with our apprenticeship scheme launched last year demonstrates our commitment to the local community and the future of our business."

David McLellan, chairman, said: "The UK economy is showing signs of recovery and growth and I believe we are now well ­positioned to take advantage of this.

"Although we are a Scotland-based business and many of our employees live in Scotland, we have a UK-wide customer base and a number of overseas customers. It is hoped the economic recovery currently taking place across the UK will not be destabilised by the outcome of the referendum on Scottish independence."

Havelock's shares closed at 23.25p, their highest since January 2010, valuing the group at £8.4m.

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