Shopfitting and interiors group Havelock Europa has swung to profit in 2016, but described the year and start to 2017 as “challenging” in the aftermath of losing a major client.
The Kirkcaldy-based firm saw its share price drop by 12.5 per cent despite revealing that pre-tax profit before exceptional items reached £400,000 in the year, from an £800,000 loss in 2015.
Like-for-like revenue jumped by about a fifth to £59.4 million, excluding the loss of business from the major financial-services client, believed to be Lloyds Banking Group, announced in late 2015. Havelock said that year that it was cutting 50 jobs after the client tightened expenditure.
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Total revenue for 2016 was £60.8m, down from £70.3m in the previous year when the major client contributed £21.1m. Havelock also highlighted a major increase in public-sector sales last year, especially in education.
Chairman Ian Godden said the “significant” drop in revenue made for a “challenging” 2016. “Nevertheless, we have made considerable progress in realising the benefits from the restructuring of the business, with a substantial improvement in margins and a return to profitability.”
The business, which said in January that it expected its trading results for 2016 to be in line with market expectations, reported that its operating margins saw major improvement in the year, growing from 10.2 per cent to 13.2 per cent, and driven by the results of adjustments to the business.
However, “in common with many UK companies” its pension deficit widened, to £9.4m from £1m at 31 December, which it mainly attributed to lower corporate bond rates.
Havelock also said it is now organised into three market-focused divisions, namely retail and lifestyle, corporate services and public sector, with global activity accounting for a fifth of group turnover, up from a quarter in 2015.
Looking ahead, Godden said the first half “will, as usual, be challenging, with orders secured of £32m, slightly lower than last year’s £35m”. He added: “Although the business is continuing to progress, it still retains a high dependence on second-half orders, which restricts our visibility for the full-year outturn.” That said, he also saw full-year prospects as “encouraging”.
The firm also said its board is carrying out a major review of its longer-term vision, mission and strategy, which it will share with investors later this year.