Shares in Havelock Europa plummeted almost 40 per cent yesterday after the shopfitting and interiors group jolted the market with a shock profits warning.
The Kirkcaldy-based business announced that it faced a “material” hit to its results next year due to a significant cutback in spending by its biggest client in the financial services sector.
Havelock Europa said the news that the client – who was not identified in the announcement – will be “substantially” lowering its expected spend on refurbishment and development next year was “disappointing”.
The new arrangement takes effect from 1 January, with the contracting revenue Havelock is to receive from them for 2015, for branch refurbishment and development programmes, expected to be unaffected and reach about £14 million.
It is believed that the client involved is Lloyds Banking Group, which owns Bank of Scotland. Havelock and Lloyds both declined to comment on this yesterday.
Havelock said that although the client was keeping the group on as its preferred furniture provider, contracting revenues for these programmes for next year would be “negligible”.
The Fife-based firm said: “There will be little financial impact on 2015 results but the impact on 2016 will be material before mitigating actions are undertaken.”
Shares in Havelock recovered slightly, closing down 4.38p, or 38 per cent, at 7.12p.
Chief executive David Ritchie, formerly the firm’s chief operating officer, said yesterday’s news was “disappointing, clearly, but underlines the importance of our strategy to further diversify our customer base to become less reliant on a small number of contracts”.
Ritchie – who initiated a review of the business after his appointment to the top job in May, replacing former boss Eric Prescott – added: “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.”
It is believed that, given the significance of the client’s contract, it could well lead to further job cuts.
The company had announced in September that it was cutting about 50 jobs, equivalent to 10 per cent of its staff, to bring the headcount down to 450.
At the time, Havelock also marked its exit from the educational supplies business by offloading Teacherboards as part of an effort to save £3m a year.
Havelock said it had stayed in the red in the first six months of the year, amid “subdued” demand from the retail and financial services sectors, and foresaw this lasting the rest of the year.
Its other high-profile financial services clients include Royal Bank of Scotland and Tesco Bank.