Havelock Europa Investment First Look


Havelock Europa is an international interior solutions provider. It serves the Retail and Lifestyle, Corporate Services and Public Sector.

The share price is dropping 17% today (which could change during the day), after the release of its annual results.


Finals Results

An interesting result as highlighted below: –

Take like-for-like sales growth of 21%. You would have thought the company achieved stellar growth. But revenue is £59.4m!

Before losing its financial services client, revenue was £73m in 2015.  That client loss was a big loss.

Then there are three major three concerns for investors to digest: –

First, the company net asset per share has collapsed to 14.1 pence per share.

Two, it now runs net debt of £2.7m.

Three, the pension deficit rose to £9.4m from £1m, last year. So, where is the company going to find the money to plug the hole!


When Havelock hasn’t paid a dividend since 2009, there is no point in announcing a resumption to dividend payments. That won’t happen!


Below is a five-year summary of what is trending for Havelock.


Havelock Europa past five years


Havelock’s Profit and Loss

This mediocre company saw falling revenue in the last five years.


2012: £100m; 2016: £60m.

On an interim basis, the pattern resembles this:

 Havelock Europa Interim revenue

At the same gross margins fell by 500 bps. The slight fall in gross margins played a key and sensitive role in whether Havelock makes a profit or not.

Havelock Europa's operating profits

Gross margin is the key indicator for this company. Because if it touches 14%+, Havelock is earning some operating profits.

When gross margin falls to 8.4%, then it turns into an operating loss of £5.4m in 2014.

Although the latest improvement may come a little too late.


Havelock’s Balance Sheet

The biggest noticeable change is the company’s current assets and current liabilities.

Havelock Europa's shrinking current assets and liabilities

Current assets cover less than current liabilities. This is bad for a business not generating free cash flow.

P.S. Averaging £1m negative free cash flow.


Havelock’s cash flow


Apart from the dismal operating cash earnings, which have turned to a negative £2m. A pattern is brewing when the cash balance in the cash flow has gone into overdrafts.

Havelock Europa has made some great efforts to reduce its debts. Now, time is changing.

There is a convergence happening, as it has no choice, but agreed upon a new overdraft facility of £6m.

This draft is repayable at any time.

Havelock Europa's shrinking current assets and liabilities


Havelock Europa is a good business before the financial crisis.

 HAVELOCK EUROPA's share price

The shares were £1.50+ before 2007/08.

And now it struggles to get above 20 pence in the last eight years.

Havelock Europa exceptional costs

The exceptional costs have been exceptional. Since 2011, it totals £12m.

Havelock’s pension deficit has flared up.

Havelock Europa pension obligations

As mentioned earlier, where will they find the money?



Here are your roundups:

-The dividend was lasted paid in 2009.

-Since 2011, revenue went from £100m to £60m.

-Business is struggling, as management reduced borrowings. But, now it has to resume borrowings to survive.

And the agreement of a new overdraft facility of £6m is repayable on demand.

-Exceptional charges remain high and total £12m since 2011.

-The company is sensitive to gross profits margins because a fall below 12% means zero operating profits.

-Cash position is in an overdraft of over £2m.


Final Thoughts

This is a dying business living out its final days as a going concern.


The key staple for this business is the changing retail environment. Also, with public spending cutbacks likely, then the business will struggle to gain traction.

Current valuation is lower at £6.5m with the shares rising 50% in the last two months.

There are some investing activities involving non-executive Andrew Burgress. He been buying the shares and now control 19% of the business.

Maybe, he knows something about this business. But from an outsider perspective, the company looks doom to failure. With shrinking revenues and a tough and changing shopping habits. Europa may not last much longer, maybe two or three years.

It could go under this year if the banks were to call back their loans.

We don’t really know.


Do you think this business will go under in two years?



The opinions expressed by the writer is for entertainment and research purposes. It does not constitute professional investment advice. Data is correct on available information at the time.

Finally, the writer does not own the company’s stock, unless stated otherwise.