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Share purchase by fit-out firm’s chairman points to recovery potential

Interior fit-out and refurbishment specialist Havelock Europa (HVE:AIM) has recovery potential at 8.5p.

New chairman Ian Godden recently invested £300,000 in the business, purchasing his 7.69% stake at a premium-priced 10p at a hoped-for point of change for Havelock.

Godden has a healthy understanding of the £3.84m cap, having been a director between 1995 and 2006, as well as pedigree in helping small and large companies grow. Respected fund manager Jeroen Bos is also a backer through the SVS Church House Deep Value Investments (GB00B79XM025) fund.

Havelock Europa’s customers include banks and retailers such as Marks & Spencer (MKS) and Holland & Barrett. Full year results (27 Apr) for 2016 should show the benefits of a late 2015 restructuring coming through, while management continues to cut costs and forge deeper customer relationships.

In a year-end update (25 Jan), chief executive David Ritchie flagged a £21m 2017 order book, although he also drew attention to an ‘increasingly challenging retail sector’. Half year results (22 Sep ‘16) revealed lower sales of £25.4m (2015: £28.9m), weak retail and corporate sector orders offset by strong public sector demand.

Encouragingly, the operating loss in the traditionally quieter half more than halved to £700,000. While burdened by net debt and a pension deficit, Havelock does also trade at a significant discount to half year net assets of £9.36m.

Given Godden’s show of faith and Bos’ backing, Havelock Europa is worthy of interest at 8.5p.

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