Investment Column: Havelock's balancing act

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The Independent Online
Havelock Europa, the Scottish shopfitting group, is struggling to get over last October's profit warning when its shares lost almost a quarter of their value overnight. After bouncing initially, they have been on the slide since the new year and yesterday three directors took the opportunity to move into the market at 288p in a public show of confidence. The price remained unimpressed, closing 1.5p off at 285p.

That was to be expected after full-year profits emerged bang in line with forecasts in February at the time of the acquisition of Hartcliffe. That business is involved in retail displays, rather than its core shelves and other display units, which Havelock hopes will help it even the cyclical shopfitting market.

Profits of pounds 5.9m were 12 per cent higher than the pounds 5.3m achieved in 1995, representing a fourth year of record returns. Earnings per share were 8 per cent better at 14.6p and the well-covered dividend of 4.3p was a 19 per cent improvement.

Havelock is building a much better balanced business, which is just as well given its exposure to non-food retail clients, whose refurbishments come in unsustainable waves, and banks, where changing technology and consolidation mean fewer and smaller branches are being kitted out.

On the basis of forecast profits of pounds 8.2m this year and up to pounds 9.9m next time, the shares trade on a prospective p/e of 15 falling to 12. That is not expensive for a fundamentally sound, growing business and last year's plunge provides a good opportunity to follow the directors' lead. Good value.