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27th June 2006
Havelock Europa PLC AGM - Chairman's StatementOrder input for the first six months of the year has been healthy in all divisions and particularly in the Education and Retail Interiors Divisions. Many of these orders are for delivery in the second half which is traditionally the Group’s peak period for activity.
ESA McIntosh, the UK market leader in fitted furniture and equipment for schools, has experienced record levels of orders in its core "direct to schools" market and has achieved start dates in line with its expectation for business in the PFI arena, with activity now underway in 14 of the 16 contracts scheduled for commencement this year. The consolidation of the management teams responsible for ESA McIntosh and Retail Interiors into a single operating board has been completed and the benefits, in relation to manufacturing and procurement efficiencies, are starting to come through.
Orders and enquiries in the Group's two classroom accessory businesses, TeacherBoards and Clean Air, are also running ahead of last year.
Within the Retail Interiors Division, Marks & Spencer has returned as a significant customer and activity in the financial services area has been robust. Despite fears of a slow down in the High Street, the diversification of the customer base within this division and the entry last year into the healthcare market have created a wider spread of opportunity and some lowering of exposure to retail volatility.
The Point of Sale Division has suffered the loss of a major customer, as a result of the sale of Kwik Save by Somerfield, which has affected both the business and the level of activity at the Group's printing subsidiary in Bristol. Nevertheless, early action to consolidate this operation under the management team of Showcard Print, headquartered in Letchworth, is beginning to show benefits. An extensive redundancy programme has taken place which will generate significant savings and this, together with the rationalisation of both property and plant, will, in due course, help to mitigate the effect of the reduction in revenue on profit. In Letchworth, both orders and sales are running at a substantially higher level than last year as a result of the addition of a number of new customers.
As pointed out on earlier occasions, the requirement under IFRS to recognise revenue after completion of the installation process, particularly in the education businesses, continues to weight the seasonal bias towards the second half of the year, during which period almost all of the Group's profit will be earned.
The Board remains enthusiastic about the markets in which it is operating. The temporary hiatus in the PFI education sector, which followed the withdrawal of Jarvis, in late 2004, is now over and there appear to be positive indications from Government of continuing commitment towards the refurbishment and renewal of education infrastructure well beyond 2008. The Board expects to make further progress in the full year and anticipates continuing growth in 2007, particularly in the education and healthcare sectors.
The Group remains interested in making further acquisitions in existing and related markets, exhibiting long term growth.
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