Havelock Europa racks up heavy loss but points to evidence of turnaround

● Firm describes 2017 as one of the worst in its history after sales and margins hit

Havelock Europa, the Fifebased interiors fit-out firm, racked up pre-tax losses of almost £6 million last year as it counted the cost of lower orders and major IT issues.

A lack of finance also impacted on the firm’s ability to source materials although it has since received an £8m funding package boost from Scottish Enterprise and Bank of Scotland to back its turnaround plans. Chairman Ian Godden admitted that the group’s recovery after several difficult years had got off to a slow start and described 2017 as “one of the worst performances in Havelock’s history”.

However, the firm said that there was evidence that a radical change in the running of the business instigated in the final months of 2017 was now starting to pay dividends.

A new senior leadership team led by chief executive Shaun Ormrod, who was appointed in September, has overseen a significant improvement in earnings in the first four months of 2018.

The firm said it was also seeing strong demand from existing customers in the private sector together with opportunities with new customers in the hotel and leisure sectors in particular.

The firm’s 2017 results, publication of which had been delayed while further calculations were made on pension deficits, showed revenue from continuing operations fell to £53.2m from £60.8m, blamed on subdued demand in public sector business and working capital constraints.

Havelock, which had already warned the full-year results would be poor, posted a loss before tax of £5.3m compared to a 2016 profit of £22,000, reflecting lower sales, reduced margins and stock write-offs. Exceptional costs took the total pre-tax loss to £5.9m.

The firm’s performance was also impacted by disruption caused from the implementation of a new enterprise resource planning system. The firm said the challenges had now been resolved and that the system should bring cost and efficiency benefits.

Godden said the new management team is this year focused on cash flow, cost reduction and margin improvement and that the outlook for 2019 and beyond is positive, with strong demand from an increased portfolio of clients.

“With a reduced cost base as part of the restructuring of the business, fresh financing, the removal of planning based on over-optimism and a new executive team in place, the group is much better placed to improve its performance as this work flows through,” he said.