14th Jun 2005 07:00
Latchways PLC14 June 2005 14 June 2005 LATCHWAYS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2005 Latchways plc designs, manufactures and sells a complete range of fall arrestsafety systems offering continuous protection to individuals working at height.The systems are sold worldwide through a network of trained installers and areused to provide worker safety on applications as diverse as buildings, bridges,telecommunications towers, manufacturing plants, entertainment arenas andoffshore platforms. Latchways' equipment may be fitted either to new structuresor retrofitted to existing ones. Summary • Profit before tax increased by 30% to £4.31 million (2004: £3.31 million) • Diluted earnings per share up 24% to 26.38 pence (2004: 21.20 pence) • Full year dividend increased by 10% to 10.76 pence (2004: 9.78 pence) • Successful acquisition and integration of the Wingrip aircraft fall protection product range • Strong contribution from both HCL companies • Good cash generation from operating activities Commenting on the results, Paul Hearson, Chairman, said "This has been another excellent year for the Latchways group, with all parts ofthe business performing well. Our latest addition, the Wingrip product, had anoutstanding year. The new year has opened with a healthy order book and businessahead of last year. Whilst uncertainties over raw material costs and the economy do exist, we areconfident that our existing and developing product range, combined with theincreasing influence of safety legislation, will ensure that Latchways continuesto deliver profitable growth for our shareholders." Enquiries: Latchways plc gcg hudson sandler David Hearson, Chief Executive Nick Lyon / James Benjamin Rex Orton, Financial Director Tel: 020 7796 4133 Tel: 01380 732700 LATCHWAYS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2005 Chairman's Statement This has been another excellent year for the Latchways group, with all parts ofthe business performing well. The traditional product business has had another year of growth, with aparticularly strong performance from the UK. HCL has been partly responsible forthis, with an excellent contribution from both the Safety Installation andContracts divisions after the reorganisations effected in the prior year. As a result, I am pleased to report record profits for the group. This wasachieved despite world steel market conditions that have seen stainless steelraw material prices double during the year. It reflects the success of ourproduct re-sourcing activities and ongoing cost control as well as the growth inrevenue. Our latest addition, the Wingrip product, had an outstanding year. Results Group turnover for the year ended 31 March 2005 was £22.4 million (2004: £19.5million), 15% ahead of last year. Turnover from continuing operations (excludingWingrip) was £21.1 million (2004: £19.5 million), a 9% increase. Group operating profit was 26% higher than last year at £4.4 million (2004: £3.5million). Excluding the Wingrip acquisition, the increase was 18% to £4.2million. Diluted earnings per share increased by 24% to 26.38 pence (2004: 21.20 pence). Dividends The continued strength of the group's operational cash flow has enabled us topropose a final dividend of 7.26 pence per share. This results in a proposedtotal dividend for the year of 10.76 pence, 10% up on 2004. The final dividendis expected to be paid on 9th September 2005 to shareholders on the register asat 12th August 2005. Opportunities With an increased emphasis on the enforcement of safety legislation both in theUK and Europe, together with Latchways' continued commitment to quality andcustomer service, we are seeing many new opportunities opening to us across thebusiness, both in Latchways and HCL. The new UK Working at Height Regulations provide an excellent base for ourexisting business, whilst Latchways' free design and advisory services assistsystem specifiers in meeting their greater obligations. On an ongoing basis, thenew requirements for building owners to take greater responsibility for thesafety of those working on such buildings is creating opportunities for HCL toexploit, both on system installation and ongoing maintenance. Overseas, our products continue to achieve greater acceptance, with Europe onceagain leading our growth. We have increased our overseas sales resource duringthe year, in order to ensure that this growth is further developed. The success of the Wingrip product this year, together with our furtherdevelopment thereof, has once again provided evidence of the importance ofgenerating new offerings to our customers. During the coming year we willcontinue to both develop and seek out new products which will provide furtherenhancements to the Latchways offering. HCL Group I am delighted to report that both HCL Safety and HCL Contracts have respondedvery well to the restructuring undertaken in the prior year and have both postedrecord profits this year. The Safety division, which installs safety systems and carries out maintenanceand certification thereof, has performed well during the year. Most notable,however, has been its throughput of Latchways product, which is now more thandouble the level that it was when acquired three years ago. Significantinvestment is being made in the inspection and certification services arm of thebusiness, which should ensure good growth for our service revenues. The Contracts division, which carries out structural repairs to both domesticand commercial property, was refocused during 2003/04, and has proven verysuccessful. The business is steadily building a portfolio of housing associationclients which should provide a growing revenue stream for some years to come,whilst maintaining a low cost base. Wingrip As I mentioned in my interim statement, the Wingrip product has proven anexcellent investment and is exceeding our expectations. Wingrip is the safetysystem of choice for many major airlines and aircraft manufacturers. Sinceacquisition in April last year, we have further enhanced the product bycombining it with our lifeline system to provide total protection for thoseworking on aircraft wings. The combined system has been well received andinitial orders have been encouraging. Environmental Policy We take our responsibilities towards the environment seriously. For this reason,we have upgraded our environmental policy during the year and are workingtowards ISO 14001 accreditation. People The group now employs over 200 people in eleven locations throughout the UK,together with a growing number of overseas sales staff. Each has played theirpart in the success of the group over the past year and on behalf of the board,I would like to express our appreciation for their efforts. Current Trading and Prospects The new year has opened with a healthy order book and business ahead of lastyear. Whilst uncertainties over raw material costs and the economy do exist, weare confident that our existing and developing product range, combined with theincreasing influence of safety legislation, will ensure that Latchways continuesto deliver profitable growth for our shareholders. Paul HearsonChairman Operating and Financial Review Financial Review Group turnover for the year was £22.4 million, compared with £19.5 million lastyear. £1.3 million of the increase related to the Wingrip acquisition. Thisresulted in an operating profit of £4.4 million (2004: £3.5 million) and apre-tax profit of £4.3 million (2004: £3.3 million). Gross margin was 0.4% lower at 53.3% (2004: 53.7%), reflecting the higherproportion of turnover that was generated by the HCL operations. Latchways'underlying product gross margins were broadly unchanged at 57%, as the costincreases resulting from increased steel market prices were offset by productre-sourcing activities. Group operating margins improved by 1.8% to 19.8%. This reflects continuedcontrol of operating expenses, which were up 8% compared with the 15% increasein turnover. The effective rate of taxation for the year was 33.1% (2004: 30.3%). Theincrease was primarily due to increased goodwill amortisation and intra-groupconsolidation adjustments, which were not allowable for corporation taxpurposes. Inventory levels were higher at the year end at £2.0 million (2004: £1.5million). The increase resulted from the strong order book for April deliveriesand was significantly reduced by the end of April. Debtor balances were £1.0million higher than last year at £6.8 million (2004: £5.8 million), primarilydriven by the increase in turnover, most particularly in the fourth quarter atHCL Contracts. Cash generation was once again strong in the year, with net cash generated fromoperations 102% of operating profit (2004: 121%). Despite the £1.2 million cashacquisition of Wingrip early in the year, net debt was still reduced by £0.4million to £0.6 million. Operating Review This year we have reaped the benefits of the hard work put into reshaping theHCL businesses in the previous year. Both HCL Safety and HCL Contracts underwentsignificant rationalisation and refocusing last year, and we are delighted withthe results. Both companies have generated increased turnover and profitability,such that they are now significant contributors to group profit. With thecontinued investment in people and systems for HCL Safety, the outlook for bothbusinesses is promising. Overall, HCL turnover was up 22% in the year. Latchways' product turnover was up 13% in the year, although 10% of this was dueto Wingrip. The traditional installer business in the UK, Europe and the Rest ofthe World continued to grow well, but timing of Dutch and Belgian electricitynetwork maintenance programmes resulted in a fall in revenue from this market. UK turnover was up 16%, reflecting the strength of the underlying installerbusiness. The recovery of HCL Safety resulted in a significant increase inproduct throughput, while two new installers joined the Latchways fold fromcompetitors. European installer sales were up 35%, the third consecutive year of stronggrowth, with Holland again leading the way. We have made further investment insales resource in other EU countries in our ongoing efforts to replicate thissuccess. As mentioned above, European utility sales were down by 24% due to the timing ofnetwork maintenance programmes. We maintain excellent relationships with ourcustomers and the programmes suggest improved shipments for the coming year. North American sales increased 9% to £2.2 million. We have recruited anexperienced sales manager to help us develop the North American market further,in partnership with our existing installers. Operations We remain committed to our strategy of maintaining and developing closerelationships with key customers. The success of our business in recent yearshas been based on these relationships, and on ensuring that those customersreceive the best customer service whether directly by ourselves or via our loyaland experienced network of installers. During the year, we have taken on orexpanded sales resource in North America, France, Spain and Holland, as well asthe UK, in order to build on our successes to date. The HCL Safety business has benefited from an increased emphasis on customerservice during the year, and further investment in this area is alreadyunderway. We are focused on providing complete, packaged solutions to majorcustomers and on expanding the range of services we can offer. To this end,substantial investment in the maintenance and certification part of thebusiness, both in terms of systems and manpower, have been made. The success of the Wingrip acquisition has further demonstrated the strength ofboth the Latchways brand and our ability to make the most of niche fallprotection opportunities. We continue to actively seek other such opportunitiesto add to the Latchways offering. We remain concerned by the continuing rise in stainless steel commodity prices.However, as demonstrated in the past year, we are able to maintain marginsthrough our ongoing product re-sourcing without having to pass significantincreases on to our customers. Product Development Considerable development effort during the year has been directed towards theWingrip product line. A number of customers, both airlines and aircraftmanufacturers, identified the need for a fall protection solution that providesprotection along the entirety of an aircraft wing, as a longer term solutionthan the existing Wingrip product. The result was a Latchways' cable-basedsystem attached to a series of Wingrip pads. This has been very well received bycustomers and is now in full production. Also, a free-standing guardrail system was released during the year. This issuitable for situations where edge access is not required and is designed moreaesthetically than current competitive products. As ever, given the importance of new products to our strategy, a number ofinnovative new products are currently in development and are expected to belaunched this year. International Financial Reporting Standards ("IFRS") With effect from 1 April 2005, the group is required to prepare its financialstatements in accordance with IFRS. We have conducted a review of the likelyimpacts of IFRS on the results of the business, and will be publishing an IFRSto UK GAAP comparison for the year ended 31 March 2005 with our interimstatement in November. Prospects The past year has been strong across the group and we have used this opportunityto invest in our sales infrastructure. This, together with the strengtheninglegislative environment, will ensure that we continue to lead our industry incustomer service and product offering. Following the success of the Wingrip integration, we will continue to seekfurther products to enhance our range, both from product development and, whereappropriate, niche acquisitions. David HearsonChief Executive Latchways plcConsolidated Profit and Loss Account for the year ended 31 March 2005 Results Amortisation Results before of goodwill after amortisation amortisation of goodwill of goodwill 2005 2005 2005 2004 £'000 £'000 £'000 £'000 Turnover Continuing operations 21,121 - 21,121 19,460 Acquisitions 1,261 - 1,261 - 22,382 - 22,382 19,460 Cost of sales (10,439) - (10,439) (9,008) Gross profit 11,943 - 11,943 10,452 Administrative expenses - excluding goodwill amortisation (7,215) - (7,215) (6,834) - goodwill amortisation - (296) (296) (100) (7,215) (296) (7,511) (6,934) Group operating profit Continuing operations 4,261 (96) 4,165 3,518 Acquisitions 467 (200) 267 - 4,728 (296) 4,432 3,518 Interest receivable and similar 34 31income Interest payable and similar charges (159) (243) Profit on ordinary activities before taxation 4,307 3,306 Tax on profit on ordinary activities (1,426) (1,002) Profit on ordinary activities after taxation 2,881 2,304 Dividends (1,171) (1,067) Retained profit for the year 1,710 1,237 Basic earnings per share (pence) 26.50 21.21 Diluted earnings per share (pence) 26.38 21.20 There are no recognised gains or losses except for the profit as stated aboveand therefore no separate statement of total recognised gains and losses isshown. Latchways plcConsolidated Balance Sheetas at 31 March 2005 2005 2004 £'000 £'000Fixed assetsIntangible assets 3,068 2,161Tangible assets 2,774 2,789 5,842 4,950Current assetsStocks 2,041 1,485Debtors 6,795 5,769Cash at bank and in hand 1,434 2,273 10,270 9,527 Creditors: amounts falling due within one year (5,843) (5,305) Net current assets 4,427 4,222 Total assets less current liabilities 10,269 9,172 Creditors: amounts falling due after more than one (1,420) (2,070)year Provisions for liabilities and charges (93) (81) Net assets 8,756 7,021 Capital and reservesCalled up share 544 655capitalCapital redemption reserve 111 -Share premium account 999 974Profit and loss 7,102 5,392account Equity shareholders' funds 8,756 7,021 Latchways plcConsolidated Cash Flow Statement for the year ended 31 March 2005 2005 2004 £'000 £'000 Net cash flow from operating activities 4,499 4,284 Returns on investment and servicing of financeInterest received 34 31Interest paid (150) (237) Net cash outflow from returns on investment and servicing of finance (116) (206) TaxationUK Corporation tax paid (1,216) (963)UK Corporation tax received - 12 Net cash outflow on taxation (1,216) (951) Capital expenditurePurchase of intangible fixed assets (63) (38)Purchase of tangible fixed assets (430) (438) Net cash outflow on capital expenditure (493) (476) AcquisitionsPayments for acquisitions (1,150) -Costs incurred on acquisitions (46) - Net cash outflow from acquisitions (1,196) - Equity dividends paid (1,099) (1,029) Net cash inflow before financing 379 1,622 FinancingRepayments of bank loans (779) (292)Conversion of loan notes (464) (116)Issue of ordinary shares 25 54 Net cash outflow from financing (1,218) (354) (Decrease)/Increase in cash in the (839) 1,268year NOTES 1. Basis of accounting The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 March 2004 and 2005. The financial information in respect of 2005 is unaudited. Statutory accounts for the year ended 31 March 2004, on which the auditors gave an unqualified report pursuant to section 235 of the Companies Act 1985, have been filed with the Registrar of Companies. 2. Earnings per share The calculation of basic earnings per ordinary share is based on a weighted average of 10,872,940 ordinary shares in issue and ranking for dividend (2004: 10,862,430) and on a profit of £2,881,000 (2004: £2,304,000). The calculation of diluted earnings per share is based on a weighted average of 10,922,021 ordinary shares (2004: 10,867,638), and uses an average market price for the year of £3.747 (2004: £2.963). 3. Dividends Dividends for the year ended 31 March 2005 represent an interim dividend of 3.50p per ordinary share, paid on 4 March 2005, and a proposed final dividend of 7.26p per ordinary share. 4. The Annual Report and Accounts The Annual Report and Accounts for Latchways plc for the year ending 31 March 2005 will be posted to shareholders on or before 29 July 2005 and copies will be available from the registered office, Latchways plc, Hopton Park, Devizes, Wiltshire, SN10 2JP. 5. The Annual General Meeting The Annual General Meeting will be held at Hopton Park, Devizes, Wiltshire, SN10 2JP on 2 September 2005 at 12 noon. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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