Havelock Europa, the Fife-based manufacturer which announced 50 redundancies a month before Christmas, has said the medicine is working.
The interiors group calmed investors yesterday with a trading statement which saw the shares jump by 42per cent to 8.5p, two months after the loss of a major customer sparked a 40 per cent crash.
The AIM-listed group said: “The business ‘right-sizing’ and simplification programme, announced on 1 September, is gaining momentum and the cost reductions identified as a result of the programme were achieved by 31 December.”
It said trading in the final quarter was as expected and so the board expected the results for 2015 to be in line with September’s expectations.
“The business continues to focus on careful management of its working capital and the board is pleased to report that, as at 31 December, the group was debt- free with net cash of £1m.” The cash of £1.9m, offset by finance leases of £900,000, compared favourably with the net position of £200,000 a year earlier.
David Ritchie, chief executive, said: “We are beginning to see the benefits of the measures taken in late 2015 and, although trading continues to be challenging, particularly in the retail sector, we are encouraged to enter 2016 with an order book of £23m for in-year delivery which is 15per cent up on 2015.”
Mr Ritchie took over last May, and in September he had to announce a second profit warning in 10 months along with plans to cut the workforce by 10 per cent or 50 jobs - the group employed around 400 at its headquarters and manufacturing plant in Kirkcaldy and a further 100 in the UK and China.
Later that month the group reported an underlying loss of £1.8m in the traditionally weaker first half, a slight improvement on 2014.
International retail, which is focused on China and the Far East, was said to be growing and on course to be 15 per cent of total revenue by the end of 2015 year. but demand in the financial services sector was said to be weak.
Then on November 18 Havelock revealed that its biggest financial services client, known to be Lloyds Banking Group, was slashing its refurbishment budgets from January 1 and the group could expect to lose all of the current year’s £14m of contracting revenue – around half Havelock’s turnover from financial services. The group would, however, “be retained as the preferred furniture provider to the client”. The shares fell from 11.75p to 7.12p
Mr Ritchie said at the time: “The simplified business model we are implementing will also help us maximise the customer experience across that broader portfolio of clients. We are committed to delivering that change and thus mitigating the impact of this decision in 2016 and beyond.”
A week later, Havelock said it would make another 50 redundancies within its workforce before the year end.
Mr Ritchie said any decision to reduce jobs was incredibly difficult “but we must respond quickly and decisively to this loss of income for the long-term good of the business and the wider workforce”.
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