FIFE manufacturing business Havelock Europa has postponed the announcement of its 2017 financial results after experiencing what it termed a “complex technical issue” in calculating the deficit on its defined benefit pension scheme.
The firm, which last year warned that its profits for the 12 months to the end of December would “fall considerably below expectations”, was due to file its accounts today.
However, in an announcement to the stock exchange, the AIM-listed firm said that it is delaying the release until later this month “primarily because the company, its actuaries and other advisers are in discussion about a complex technical issue which has arisen over the calculation of the deficit in the company’s defined benefit scheme”.
Read more: Jobs safe for now as Havelock Europa warns on profits
The scheme, which has been closed to new entrants and future accruals for a number of years, has seen its deficit balloon in recent years, going from £1.3m in the 2013 financial year to £9.4m in 2016. It was due to undergo its triennial valuation in October this year but that was brought forward to October 2017.
Under rules set out by the Pensions Regulator, businesses with defined benefit pensions are required to commission full actuarial valuations of their scheme every three years.
As these are based on long-term assumptions about how long scheme members will live and how the fund’s investments will perform, they can result in significant movements in a scheme’s funding position.
Having been granted a payment holiday in 2017, the firm had been due to make a contribution of £700,000 to the pension this year.
After bringing forward the valuation, however, Havelock agreed what it termed “revised deficit reduction contributions" with the scheme's trustees.
While it did not reveal what the new arrangements are, it is understood that the sum now due this year is lower than £700,000.
Read more: Havelock installs new CEO in bid to reverse losses
The announcement on the results has come in the same week that former Havelock director Andrew Burgess, who owns just under 20 per cent of the company’s shares, successfully lobbied to have PwC senior risk assurance consultant Hakeem Yesufu appointed to the firm’s board.
France-based Mr Burgess had taken up a position on the firm’s board in November 2013 but resigned in June 2015.
At the time the company said Mr Burgess had stood down because he had “assumed a full-time role overseas which means that he will not be able to continue in his non-executive position with Havelock”. At that point Mr Burgess owned 19% of Havelock’s shares.
Mr Yesufu has been appointed in addition to an as-yet unidentified director that the company is seeking to replace Donald Borland, who resigned from the post of chief financial officer last month.
In an announcement made in March, Havelock said Mr Borland would leave the firm “following board approval of the results for the year ended 31 December 2017”. Companies House records show that Mr Borland, who took up the role in April 2017, left the firm on April 6.
His departure came after that of chief executive David Ritchie, who was replaced by Shaun Ormrod, the former boss of Farnborough International, last September.
As part of a strategic review of the business Mr Ormrod is looking to radically overhaul Havelock’s labour practices by moving its 400-strong workforce to annualised hours contracts.
As opposed to normal shift patterns, annualised hours see employees work a fixed number of hours across the whole year, with the time split into short shifts or time off in quiet periods and longer shifts during busier times.
It is thought that moving to annualised hours would give the firm greater certainty over staff costs as it would reduce the need to pay for over-time during busier periods.
It comes amid a challenging period for the firm, which is still trying to recover from the loss of a major client - thought to be Lloyds Banking Group – in 2015.
Read more: Fife firm plans annual hours move after government bailout
Having previously retained Havelock for its branch refurbishment work, the bank pulled the plug on those contracts as part of a strategic shift that saw it place a greater emphasis on its online operations.
The firm’s accounts reveal that the client contributed £21.1m of the firm’s £70.3m turnover in 2015 but just £1.4m of its 2016 turnover of £60.8m.
In the wake of losing the client, Havelock reduced its workforce by more than 100, with its headcount going from 522 in 2015 to 414 in 2016.
The move cut its annual wage bill from £16m to £12m.
Earlier this year Havelock negotiated an £8m funding package, with part of the cash coming from Scottish Government development agency Scottish Enterprise and the rest from Bank of Scotland.
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