12th Jun 2006 07:01
Latchways PLC12 June 2006 12 June 2006 LATCHWAYS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2006 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 and electricity towers, industrial plants, entertainmentarenas, aircraft wings and offshore platforms. Latchways' systems may be fittedeither to new structures or retrofitted to existing ones. Summary All figures (including comparatives) are compiled in accordance withInternational Financial Reporting Standards ("IFRS") • Profit before tax increased by 38% to £6.20 million (2005: £4.49 million) • Basic earnings per share up 44% to 40.20 pence (2005: 27.94 pence) • Diluted earnings per share up 43% to 39.79 pence (2005: 27.82 pence) • Final dividend increased by 35% to 9.80 pence (2005: 7.26 pence) • Revenue and profit growth in all parts of the business • Strong cash generation from operating activities • Continued investment in operational resources Commenting on the results, Paul Hearson, Chairman, said: "I am pleased to report another strong performance for the Latchways group. Allareas of the business have contributed to a significant increase in groupprofits. The new year has started well with strong sales and order books. "The ongoing improvements in the legislative environment in both the UK andEurope that we have seen in recent years have continued to drive our business.This has been further supported by both an increasing acceptance and enforcementof existing legislation in mainland Europe. This continues to generate excitingopportunities for us and we are making further investments in resources toensure that we take full advantage of those prospects. With further new productlaunches due in the coming year, we remain confident of our ability to deliverprofitable growth for the current year and beyond." Enquiries: Latchways plc Threadneedle CommunicationsDavid Hearson, Chief Executive Graham HerringRex Orton, Financial Director Tel: 020 7936 9605Tel: 01380 732700 12 June 2006 LATCHWAYS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2006 Chairman's Statement I am pleased to report another strong performance for the Latchways group. Allareas of the business have contributed to a significant increase in groupprofits. The Latchways fall protection products business has produced significant growth,with both the UK and mainland European markets leading the way. Our servicerelated businesses, HCL Safety Limited and HCL Contracts Limited, have madeexcellent progress during the year which reflects both their much improved coststructures and a number of important contract wins. The Wingrip product, acquired in 2004, achieved substantial turnover growth inthe year. This reflects its increased acceptance by airlines and aircraftmanufacturers worldwide. It also reflects major product enhancements introducedby Latchways in the last twelve months. As a result of these activities the group has achieved record profits this year.This, combined with excellent cash flows, resulted in a very solid balancesheet. Our results for the year, together with the comparative figures for 2005, havebeen prepared under International Financial Reporting Standards ("IFRS"). Theoverall implications of the restatement of 2005 were explained in our interimfinancial statements and will also be included in the notes to the full yearfinancial statements. Results Group revenue for the year ended 31 March 2006 was £28.1 million (2005: £22.4million), 25% ahead of last year. Group operating profit was 34% higher than last year at £6.2 million (2005: £4.6million). Diluted earnings per share rose 43% to 39.79 pence (2005: 27.82 pence) Dividends Given the continued strength of the underlying business, together with the cashflows emanating from it, the board is recommending a significant increase in thelevel of dividend. We propose to increase the final dividend for the year by 35%to 9.80 pence per share. Taken together with the interim dividend of 3.85 pence,the total dividend for 2006 of 13.65 pence per share represents a 27% increaseon the prior year (2005: 10.76 pence). Under IFRS, the final dividend is not provided for in these accounts. With the exception of 2002, when dividend levels were maintained, Latchways hasnow increased its dividend every year since flotation in 1997. Progress The group remains focused on the successful strategy that has shaped ourbusiness over the past few years. The ongoing improvements in the legislativeenvironment in both the UK and Europe that we have seen in recent years havecontinued to drive our business. This has been further supported by both anincreasing acceptance and enforcement of existing legislation in mainlandEurope. This continues to generate exciting opportunities for us and we aremaking further investments in resources to ensure that we take full advantage ofthose prospects. The success of both the HCL businesses and the Wingrip product line since theiracquisition has demonstrated the value of niche add-ons which provide synergieswith our existing offering. Whilst we are not in the business of makingacquisitions unless the business case is compelling, we will continue to seeksuch additions going forward. World commodity prices, including stainless steel, remain at very high levels.This continues to affect our product costs. However, as is demonstrated by ourgross margin, we have maintained our ability to offset these higher coststhrough a mixture of product re-sourcing and modest price increases. Social, Environmental and Employment matters The group takes its responsibilities towards all its stakeholders seriously.During the year, the group adopted a new policy on Corporate SocialResponsibility and Business Ethics, setting out our position on a range ofmatters encompassing the standards of ethical behaviour to be followed both byand in relation to employees, compliance with laws and regulations, faircompetition and dealings with suppliers and customers. Further, the group is committed to working towards ISO accreditation for bothour environmental policies (ISO 14001) and Health and Safety (ISO 18001) during2006. People Whilst Latchways continues to offer the best product range in our markets, wealso recognise that it is the high level of service that we provide to ourcustomers which sets us apart from our competitors. The standard of service thatwe achieve is entirely due to the efforts of our employees. On behalf of theboard I would like to express our thanks to all of them for their continuingsupport. Current Trading and Prospects The new year has started well with strong sales and order books. Opportunitiesfor new business continue to present themselves. With additional investments ininfrastructure and further new product launches due in the coming year, weremain confident of our ability to deliver profitable growth for the currentyear and beyond. Paul HearsonChairman OPERATING AND FINANCIAL REVIEW The board of Latchways plc is pleased to report these consolidated results forthe year ended 31 March 2006. These are the first annual results to be preparedunder International Financial Reporting Standards ("IFRS"). All financial datacontained in these statements, including comparisons with the previous year,reflect the conversion to IFRS, with reconciliations of the conversion to IFRSfrom UK GAAP presented in the notes to the financial statements. Financial Results Group revenue for the year was £28.1 million, an increase of 25% over the 2005figure of £22.4 million. This resulted in an operating profit of £6.2 million,up 34% on 2005 (2005: £4.6 million), and a pre-tax profit of £6.2 million (2005:£4.5 million). The consolidated gross margin improved by 2.5% to 55.9%, reflecting bothoperational efficiency enhancements in our subsidiary companies as well asproduct margin improvements resulting from ongoing efforts to source productoverseas. As a result, operating margins improved by 1.4% to 22.0%. Overheadsincreased by 30% in the year, slightly faster than revenue reflecting thesignificant investments made in sales and customer service resource. The effective rate of taxation for the year was 29.3% (2005: 32.3%). Thereduction resulted from adjustments to prior year tax accruals relating to bothIFRS related changes and also to over-provisions in 2005. In addition, 2005included consolidation charges which were not allowable for tax purposes. As a result, basic earnings per share increased by 44% to 40.20 pence (2005:27.94 pence), whilst diluted earnings per share increased by 43% to 39.79 pence(2005: 27.82 pence). The group balance sheet strengthened considerably during the year. Cashgenerated from operations as a proportion of operating profit was 130% (2005:101%), the fifth consecutive year of cash generation meeting or exceedingoperating profit, despite significant revenue growth. Whilst 2006 cash flow wasparticularly strong, driven by improvements in cash collection and timing ofsales, this performance is indicative of the strongly cash-generative nature ofthe business. Non-current assets were broadly unchanged in the year at £6.2 million (2005:£6.3 million). Intangible assets of £1.4 million (2005: £1.4 million) comprisethe valuable brand, intellectual property and customer relationships acquired onthe purchase of Wingrip in 2004, internally generated patents and trademarks,and ongoing development costs capitalised in accordance with IFRS. Tangibleassets of £2.5 million (2005: £2.5 million) mainly represents the premises atDevizes. These consist of a 2,000 square metre warehouse and head office,together with a further 2 acres of additional land directly adjacent. The grouphas detailed planning permission for a second unit on this land, providing amplescope for foreseeable future expansion. As a result of the strong cash flow, net cash, which represents cash and cashequivalents less bank and other borrowings, at the year end was £4.1 million(2005: net debt of £0.6 million). Inventory of £2.1 million was slightly abovelast year (2005: £2.0 million), reflecting a strong closing order book. Tradereceivables reduced by £1.3 million to £5.5 million (2005: £6.8 million), whilstcreditor days were 42 days (2005:47 days). Strategic Overview Latchways is a world leader in the provision of fall protection equipment andrelated services. Our aim is to maximise shareholder return through providingthe most innovative and functional equipment to a largely legislation-drivenmarket, with a customer support network and after-sales service that isunrivalled in our industry. Our products are sold both directly and through a network of trained independentinstallation companies. We place significant importance on developing strategicpartnerships with key customers around the world, and on developing productswhich address their needs. In addition, as demonstrated by the Wingripacquisition in 2004, we continue to seek opportunities to acquire niche productsto add to our offering. Operating Review The Latchways business is organised and run over three separate segments, eachof which is managed independently with strategic input from the group board.These segments are as follows: Safety Products This is the main Latchways product business, operating out of the group headquarters in Devizes.Safety Services The principal activity of this business is the installation and servicing of safety products.Specialist Fixing This business is involved with a range of technical services including structural building refurbishment and specialist fixing solutions. All three divisions have achieved record trading performances in the past year. Safety Products Latchways designs and manufactures fall protection equipment for people workingat height. This equipment is sold worldwide, both directly to end users and alsothrough a network of independent, trained installers. The Safety Products business achieved revenue growth of 26% in the year. Allgeographical sectors saw growth, with the strongest growth in the UK andmainland Europe. Although a substantial proportion of the increased gross profitwas reinvested back into the business during the year, operating profitsincreased by 18% to £4.6 million, with strong cash flows. The UK business continues to perform well, with revenue up 32%, driven by theincreasing legislative environment and the strength of the commercialconstruction sector. During the year we have further strengthened our sales andcustomer support team. Through our partnerships with key roofing manufacturersand customers, we are able to provide the most comprehensive product range withthe most proficient back-up service in the market. The introduction of theWorking At Height Regulations in 2005 should serve to reduce the importance ofthe new-build roofing sector and begin to open up the potentially large retrofitmarket. Our European business achieved further growth in the year, with revenue up 27%.Since January, we have significantly increased our presence in Germany, inpartnership with our largest European installer. Early signs look promising withsignificant quote activity and positive feedback from potential customers.Germany has historically failed to achieve its potential as a market forLatchways' products, but we believe that this increased focus will produceresults. We continue our efforts to seek new customers for our electricity tower systemsboth in the UK and Europe. By their nature these are long term prospects andtiming of both contract wins and rollouts is unpredictable. This year sawreduced product sales into Europe due to the timing of planned maintenance workby our Dutch and Belgian customers, although good orders have been received forthe new financial year. Both North America and the Rest of the World made further progress in the year,with revenue up 9% and 6% respectively. The legislative drivers that assist theUK and Europe are largely not present in these markets. However, the highlylitigious nature of North American business continues to provide us withopportunities as customers seek to reduce their exposure to claims. We haveidentified potential new products specific to that market, which we arecurrently progressing. The Wingrip product has built further on its widespread market acceptance duringthe year, with key targets such as Airbus and the RAF joining our customer listduring the period. We will continue to invest in the marketing and developmentof this product, which has become a significant contributor to Latchways profitsin the two years since it was acquired. Safety Services This division continued to enjoy the benefits of the far-reachingreorganisations carried out two years ago. While revenue increased by 8% to £7.6million (2005: £7.0 million), operating profits increased by 144% to £0.8million (2005: £0.3 million). This was achieved through a combination of tightcost control, combined with improved efficiency in both installation andrecertification operations. In addition, the business continues to be the largest customer of Latchwayssafety products, representing well over £2 million of Safety Products' UKrevenue. Specialist Fixing As with Safety Services, this division continued to benefit from the earlierreorganisation. In addition, through focusing on its core skills, the businesshas won a number of contracts which have enabled it to grow revenue by 62% overthe prior year to £3.9 million (2005: £2.4 million) and operating profits by 73%to £0.7 million (2005: £0.4 million). The Operational Environment As a provider of fall protection solutions to a global marketplace, the group issubject to a number of external factors which affect its risk profile. The moreimportant of these are discussed below. The Legislative Environment The increasing emphasis on Health and Safety legislation throughout the EuropeanUnion has been one of the key drivers of the fall protection business over thepast decade. The UK and certain other EU countries which have interpreted thisinto specific fall-protection legislation have become significant markets forthe Latchways product range. Within the UK, the most obvious examples of thislegislation are the Workplace (Health, Safety & Welfare) Regulations 1992, theConstruction (Design and Management) Regulations 1994, and, most recently, theWorking at Height Regulations 2005. Latchways sees the development ofappropriate, workable safety regulations as of critical importance, not just toits own business but to business as a whole. As a result, we have Latchwaysrepresentatives on a number of key legislative standards committees, both in theUK and overseas. The Commercial Construction Market With over 50% of our product sales being exported, Latchways has a diverse andgrowing range of markets in which we operate. This ensures that we are notexcessively dependent on one market for our growth. The largest individualmarket is the UK commercial construction market, a cyclical business which iscurrently enjoying a period of strong growth. The 2005 Working at HeightRegulations, which increase the responsibilities of building owners to providefall protection for personnel working in their buildings, together with theinvestments in infrastructure that will precede the 2012 London Olympics, giveus confidence that growth opportunities will continue in the years ahead. Stainless Steel Commodity Prices The majority of Latchways' product range is made of Marine Grade StainlessSteel, which has seen significant increases in cost over the past three years.During that same period we have been actively re-sourcing some of our highervolume products overseas, and have been able to offset the resulting costincreases. Currency Risk Latchways has significant exposure to fluctuations in the Sterling/Euro exchangerate, as our European sales are invoiced in Euros. There is also some exposureto the Sterling/USD exchange rate. Both risks are mitigated where possible usingforward exchange contracts. New Product Development During the year, significant variants of our vertical systems have beendeveloped to address new customers' requirements, in both the telecommunicationsand electricity transmission sectors. These are now in production. In addition, a range of architectural eyebolts were developed and launchedduring the year. These offer enhanced visual appeal for prestige projects whilstretaining all the strength and reliability of traditional eyebolts. Product innovation remains a cornerstone of our strategy. The success of theWingrip Line system, developed during 2004/05, demonstrates the importance ofbeing able to respond to specific customer needs. This was developed incooperation with Airbus, both for their manufacturing operations and forafter-sales maintenance on their aircraft. Latchways employs its own team ofengineers and designers whose role we see as central to the future success ofour business. This team is dedicated to delivering a stream of new andinnovative products to extend our range going forward. Prospects Over the past two years the group has made significant investments in both salesand operational resources, to protect the progress achieved so far and tocontinue to move the business forward. This investment will continue in the newfinancial year. We remain confident in our business model and in the commercial environments inwhich we operate. By combining quality and customer service with new productofferings, whether internally developed or via niche acquisitions, we willmaintain our position as the leaders of our industry. David HearsonChief Executive Latchways plc Consolidated Income Statementfor the year ended 31 March 2006 2006 2005 £'000 £'000 Revenue 28,079 22,382 Cost of sales (12,394) (10,439) ------- -------Gross profit 15,685 11,943 Administrative expenses (9,506) (7,330) ------- ------- Group operating profit 6,179 4,613 Interest receivable 158 34 Interest payable and similar charges (140) (159) ------- -------Profit on ordinary activities before taxation 6,197 4,488 Tax on profit on ordinary activities (1,819) (1,450) ------- -------Profit on ordinary activities after taxation 4,378 3,038 ------- ------- Basic earnings per share (pence) 40.20 27.94 Diluted earnings per share (pence) 39.79 27.82 The directors propose a final dividend of 9.80 pence per share (2005: 7.26pence) at an estimated cost of £1,069,000 (2005: £790,000), which will besubject to shareholder approval at the Annual General Meeting on 1 September2006. Latchways plc Consolidated Balance Sheetas at 31 March 2006 2006 2005 £'000 £'000AssetsNon-current assetsGoodwill 2,208 2,208Intangible assets 1,386 1,449Property, plant and equipment 2,537 2,531Deferred income tax assets 65 149 ------- ------- 6,196 6,337 ------- -------Current assetsInventories 2,102 2,041Trade and other receivables 5,454 6,795Cash and cash equivalents 5,554 1,434 ------- ------- 13,110 10,270 ------- -------LiabilitiesCurrent LiabilitiesFinancial liabilities- Borrowings (652) (652)- Derivative financial instruments (28) -Trade and other payables (3,402) (3,600)Current tax liabilities (1,205) (771) ------- ------- (5,287) (5,023) Net current assets 7,823 5,247 Non-current liabilitiesFinancial liabilities- Borrowings (768) (1,420)Deferred income tax liabilities (212) (408) ------- ------- (980) (1,828) ------- ------- ------- -------Net assets 13,039 9,756 ------- ------- Shareholders' equityOrdinary shares 545 544Share premium 1,072 999Other reserves 156 136Retained earnings 11,266 8,077 ------- -------Total shareholders' equity 13,039 9,756 ------- ------- Latchways plc Consolidated Cash Flow Statementfor the year ended 31 March 2006 2006 2005 £'000 £'000 Cash flows from operating activitiesCash generated from operations 8,013 4,648Interest paid (121) (150)Taxation paid (1,498) (1,216) ------- -------Net cash from operating activities 6,394 3,282 ------- ------- Cash flows from investing activitiesAcquisition of businesses (net of cashacquired) - (1,196)Interest received 148 34Purchase of property, plant and equipment (359) (247)Purchase of intangible assets (174) (246)Development expenditure capitalised (95) (149) ------- -------Net cash used in investing activities (480) (1,804) ------- ------- Cash flows from financing activitiesNet proceeds from issue of ordinary sharecapital 74 25Repayment of borrowings (658) (1,243)Dividends paid to shareholders (1,210) (1,099) ------- -------Net cash used in financing activities (1,794) (2,317) ------- ------- ------- -------Net increase/(decrease) in cash and cashequivalents 4,120 (839) Cash and cash equivalents at 1 April 1,434 2,273 ------- -------Cash and cash equivalents at 31 March 5,554 1,434 ------- ------- Latchways plc Consolidated Statement of Changes in Shareholders' Equityfor the year ended 31 March 2006 Share Share Retained Other Total Capital Premium Earnings Reserves Reserves £'000 £'000 £'000 £'000 £'000 1 April 2004 655 974 6,138 - 7,767Net profit - - 3,038 - 3,038Cancellationof deferred shares (111) - - 111 -Share options:- Proceeds from shares issued - 25 - - 25- Value of employee services - - - 25 25Dividends - - (1,099) - (1,099) ------ ------- ------ ------ ------- -------At 31 March 2005 544 999 8,077 136 9,756Adoption of IAS 39 - - 21 - 21 ------ ------- ------ ------ ------- -------At 1 April 2005 544 999 8,098 136 9,777Net profit - - 4,378 - 4,378Share options:- Proceeds from shares issued 1 73 - - 74- Value of employee services - - - 20 20Dividends - - (1,210) - (1,210) ------ ------- ------ ------ ------- -------At 31 March 2006 545 1,072 11,266 156 13,039 ------ ------- ------ ------ ------- ------- 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 2005 and 2006. The financial information in respect of 2006 is unaudited. The information has been prepared in accordance with the EU-adopted International Financial Reporting Standards (IFRS) and IFRIC interpretations and with those parts of the Companies Act 1985 which are applicable to companies reporting under IFRS. The information includes comparative IFRS financial information for the year ended 31 March 2005. Therefore the group's IFRS transition date is 1 April 2004, being the first day of the comparative period. A detailed reconciliation of the effect of the transition to IFRS was published in the interim report for the period ended 30 September 2005, and will be included in the Annual Report and Accounts. A summary reconciliation of 2005 profit before tax is shown in note 5 below. 2. Accounting Policies The accounting policies applied by the group were published in the interim report for the period ended 30 September 2005, which is available on the group's website at www.latchways.com, and they willalso be included in the Annual Report and Accounts. 3. Earnings per share The calculation of basic earnings per ordinary share is based on a weighted average of 10,890,680 ordinary shares in issue and ranking for dividend (2005: 10,872,940) and on a profit of £4,378,000 (2005:£3,038,000). The calculation of diluted earnings per share is based on a weighted average of 11,005,875 ordinary shares (2005: 10,922,021), and uses an average market price for the year of £5.163 (2005: £3.747). 4. Dividends 2006 2005 £'000 £'000 Final Paid 7.26p (2005: 6.60p) per 5p share 790 718 Interim Paid 3.85p (2005: 3.50p) per 5p share 420 381 ------- ------- Total Paid 1,210 1,099 ------- ------- In addition, the directors are proposing a final dividend in respect of the financial year ending 31 March 2006 of 9.80p (2005:7.26p) per share which will absorb an estimated £1,069,000 of shareholders' funds (2005: £790,000). It will be paid on 8 September 2006 to shareholders who are on the register of members on 11 August 2006. 5. Reconciliation of 2005 profit before tax from UK GAAP to IFRS basis £'000 UK GAAP Profit before tax 4,307 IFRS 3 reversal of goodwill amortisation not allowed under IFRS 296 IFRS 3 amortisation of intangible assets identified on Wingrip acquisition (148) IFRS 2 charge recognising share based payments (25) IAS 38 net impact of capitalising and amortising development costs 58 ------- IFRS Profit before tax 4,488 ------- 6. The Annual Report and Accounts The Annual Report and Accounts for Latchways plc for the year ending 31 March 2006 will be posted to shareholders on or before 29 July 2006 and copies will be available from the registered office, Latchways plc, Hopton Park, Devizes, Wiltshire, SN10 2JP. 7. The Annual General Meeting The Annual General Meeting will be held at Hopton Park, Devizes, Wiltshire, SN10 2JP on 1 September 2006 at 12 noon. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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