Havelock Europa – Pretty bad, but there are some reasons for hope

PUBLISHED: Apr 27 2016 @ 10:05 | Comments (0) |

Havelock Europa (LSE:HVE) has had a horrible few years. Back in 2007 its share was 160p. After years of losses caused by bad management and exacerbated by the recession I was able to pick up some shares last May for 14.61p.

At the time, it looked OK on the Piotroski metrics (financial distress indicators), and I had reassurance that the management was improving, with new blood, and the oversight of the 18.95% shareholder on the BoD.

Also, the business sector of fitting-out offices, schools, shops, etc., held some promise as the economy recovered and Havelock put past managerial failures behind them.

(previous Newsletters: 20th – 27th May, 11th and 14th September)

Then, in the autumn trading statements, we discovered that they were still piling on the losses.

What made it worse was the performance of arch-rival Styles and Wood. Its sales were bouncing ahead at double digit rates. Managers there were very optimistic about the future. Havelock, meanwhile, spat out statements about losing key customers.

The share fell from 16p to 6p in January. This left it with a market capitalisation of only £2.3m.

Since then it has more than doubled to stand at 12.5p – 14p, a MCap of about £5m. If the company does get its act together on its £70m turnover this £5m will seem a small valuation. It will then be a multi-bagger.

But there are many obstacles in the path for the managers to negotiate, so this share is not for the faint-hearted, nor the undiversified.

The latest results

For the year to 31st December 2015 HVE had sales that were 11% less than in 2014, now down to £70.3m. This is half the level of 2008.

They play games with the profit numbers to try and direct your attention to profits if you ignore exceptional item deductions. Even cutting out these, a loss of about £1m is reported on continuing businesses (in very round terms).

If we throw in the losses caused by exceptionals of just shy of £2m…………………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

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