SHARES in Havelock Europa have been suspended at the fit-out company’s request with the firm saying it needs further financing for its immediate working capital needs.
The development will be regarded with concern in Fife where Havelock Europa is a major employer. It has around 300 staff in Kirkcaldy.
The company told investors trading in its shares on the Alternative Investment Market had been suspended pending clarification of the group’s financial position.
This appears to have become increasingly challenging since Havelock posted an annual loss of £5.3m last month.
Read more: Havelock gets two years to stage recovery after tough year
In the results announcement the company referred to a material uncertainty that may cast significant doubt over its ability to continue as a going concern.
The company said yesterday it had experienced an unexpected increasing credit squeeze from its suppliers since publishing the results.
Havelock said it had been seeking further funding but discussions with existing lenders and investors seemed unlikely to result in a positive outcome.
“The Company needs further financing for its immediate working capital needs hence the Board is obliged to consider steps to protect the position of creditors and is in discussions with potentially interested parties in this regard,” it told investors.
Read more: Fife firm plans annual hours move after Government bail out
Havelock did not say how much funding it requires or what steps it might take to protect creditors.
A sector watcher said the business could attract interest from private equity firms specialising in turnarounds.
Any bidder would need to be satisfied the underlying business is sound.
Havelock said it had “substantially utilised” the bulk of the facilities it secured in a refinancing completed in March, when Scottish Enterprise agreed to provide £3m debt.
The company said subsequently Bank of Scotland and Scottish Enterprise had provided strong endorsement of a turnaround plan for the business.
Read more: Pensions issue sees Havelock delay release of 2017 results
Yesterday’s news raises questions about how both will react.
A spokesman for Bank of Scotland owner Lloyds Banking Group said it did not comment on customer affairs.
The news leaves Havelock staff waiting to see what will become of a firm which has been a significant employer in Fife for years but has faced big challenges amid changes in key markets.
The business has roots in the McIntosh cabinetry business started in Fife in 1869.
In the results statement in May chairman Ian Godden said Havelock had recorded one of the worst performances in its history in 2017.
The company felt the effect of cuts in Government spending on schools and reduced activity by retailers.
It has seen activity in the bank branch market impacted by lenders shifting investment to online systems.
The company reduced its workforce by 100 after losing a major client, thought to be Lloyds Banking Group, in 2015.
Chief executive Shaun Ormrod launched a strategic review after replacing David Ritchie in September.
He said subsequently this had entailed a major overhaul of the commercial function, the introduction of a more realistic forecasting process and further cost reductions to right size the company, reducing the break-even point by 15%.
Mr Godden said in May that initial signs were positive that the new business plan was working.
The company said then it needed to turn around its financial performance over two years in order to stay within the various covenants on its debt during that period.
Contributions to its pension scheme deficit are set to rise from £0.7m in 2018 to £1.5m a year from 2022.Sales totalled £53.2m in 2017 against £60.8m in 2016. The firm made £0.2m profit in 2016.
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