Half Yearly Report

LATCHWAYS PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010

Latchways plc designs, manufactures and sells a complete range of fall protection systems offering continuous protection to individuals working at height. The systems are sold worldwide through a network of trained installers and are used to provide worker safety on applications as diverse as buildings, bridges, aircraft, telecommunications towers, manufacturing plants, entertainment arenas and offshore platforms. Latchways' equipment may be fitted either to new structures or retrofitted to existing ones.

Highlights

·; Group revenues increased by 15% to £19.1 million (2009: £16.6 million)

·; Revenue growth in all significant geographies

·; Strong growth in export markets. 68% of products now exported

·; Profit before tax 28% higher at £4.6 million (2009: £3.6 million)

·; Diluted earnings per share up by 28% to 29.27 pence (2009: 22.82 pence)

·; Strong cash generation. Cash balance £9.0 million (2009: £6.2 million)

·; Interim dividend increased by 15% to 8.98 pence (2009: 7.81 pence)

·; Further investment in sales and marketing and new product development

·; Overseas opportunities remain encouraging

Commenting on the results, Chairman, Paul Hearson said:

"I am pleased to report a strong performance for Latchways over the first six months of the year. In spite of the much publicised economic difficulties faced by business in Europe and North America, we have grown revenues across all our product markets.

Uncertainties remain in our traditional markets, but with so much of our growth and opportunity coming from worldwide markets, we are confident that we have the right product offering and strategy to deliver profitable growth this year and long term."

Enquiries: Latchways plc Tel: 01380 732700

David Hearson, Chief Executive

Rex Orton, Financial Director

Threadneedle Communications Tel: 020 7653 9858

Graham Herring/Terry Garrett

Chairman's Statement

I am pleased to report a strong performance for Latchways over the first six months of the year. In spite of the much publicised economic difficulties faced by business in Europe and North America, we have grown revenues across all our product markets. As a result, group revenues and profits are substantially above last year, and we expect our full year growth to be ahead of current market expectations.

This has been achieved by focusing on our core strategy and ensuring that our service offering continues to be second to none. Our products and brand are reaching a widening audience worldwide, delivering growth opportunities which we will continue to exploit.

It is clear that construction markets, particularly here in the UK, are going to remain challenging. These results demonstrate that we can grow the business without help from those markets, whilst remaining ready to capitalise when they recover.

Results

Group revenue increased by 15% to £19.1 million (2009: £16.6 million). Product revenues increased by 26% to £15.0 million, with 68% of this being exported. The growth was achieved across the product range, with particularly encouraging performances from the Self Retracting Lifeline ("SRL") and Wingrip product ranges.

Gross margins were unchanged at 55%. Operating costs were 7% higher at £5.9 million (2009: £5.5 million). The Latchways business model allows us to grow revenues at a considerably faster pace than overheads, whilst ensuring funds are available to invest in future growth through marketing, new product development and increased sales resource.

Group profit before tax was £4.6 million, 28% ahead of last year (2009: £3.6 million). Diluted earnings per share were also up 28% to 29.27 pence (2009: 22.82 pence).

Receivables have increased by £0.7 million to £9.0 million (2009: £8.3 million). This is entirely volume-related, and receivables have reduced by £1.3 million since 31 March. Whilst some customers, particularly in the UK, have had issues with cash flow given the prevailing conditions in the construction industry, these have remained manageable and have not affected Latchways' ability to generate strong cash flows. Inventory levels have increased by £0.4 million to £3.9 million (2009: £3.5 million). This is also volume-driven, and relates in part to the expansion of the SRL product range.

Cash balances of £9.0 million are up £2.8 million on last year (2009: £6.2 million) and £1.8 million on year end. Cash generated from operations has, once again, exceeded operating profit.

Dividends

The board remains convinced that a progressive but prudent dividend policy is the most appropriate for Latchways' business. With this in mind, an interim dividend of 8.98 pence per share (2009: 7.81 pence) will be paid on 4 March 2011 to shareholders on the register as at 4 February 2011. This represents a 15% increase on last year.

Review

This has been an exciting period where the challenges of underlying economic weakness in some of our traditional markets have been more than offset by new markets and geographies starting to deliver results, whilst taking additional market share with our newer product ranges. Both are a testimony to the efforts of our sales team, who have fought hard to maintain and increase market share in the tougher markets, and drive growth in new areas.

Latchways' business is divided into three primary segments; Safety Products, which sells fall protection equipment to global markets from our base in Devizes, Wiltshire; Safety Services, which installs and services a range of fall protection equipment in the UK; and Specialist Fixings, which undertakes a range of structural refurbishment services.

Safety Products

The UK market has remained subdued in the first half, with many construction projects, particularly those with public financing, either delayed or cancelled. Despite this, our UK product sales are up by 13% on last year. This has been achieved by increasing our market share with the Versirail guardrail, and by winning new customers. Our underlying installer business was broadly unchanged on last year.

Mainland Europe saw revenues increase by 3% in the half. Market conditions vary from country to country, but we are particularly encouraged by the resilience of markets such as Spain and France, which have shown good growth this year. Our Dutch installers have recently successfully bid for Dutch government tenders for the coming two years, underpinning revenues there.

North America has seen particularly strong growth, with revenues up by 90%. The underlying business has performed well, and this has been supplemented by strong growth for the SRL product range, as well as an excellent performance from Wingrip.

The Rest of the World, traditionally a small contributor to Latchways revenues, is now producing good business. Revenues have more than trebled to £1.1 million, with contributions from the Middle East, Australasia, South America and the Far East. We believe that these markets have more to contribute in the future. At the year end I reported new utility customers, and I am pleased to note that we are making further progress in this area.

The Wingrip product line has had a strong first half, with revenues up by over 60%. This has been largely due to sales to the US military, although we have also had success with commercial customers such as British Airways, Airbus and Boeing.

As mentioned earlier the Self Retracting Lifeline continues to gain momentum in the market. Recently we have been awarded an order for systems for the London Array, a 350 turbine wind farm being constructed in the outer Thames Estuary. This utilises the recently launched Sealed SRL, which is specifically designed for offshore use. This variant is also being marketed to the US oil and gas industry through our US partner, a division of 3M.

Safety Services

Given its exposure to both UK construction and publically financed projects, Safety Services' achievement of unchanged revenues in the period is testimony to the resilience of the business and the diligence of our people. This success has been hard won, with margins under pressure from the increased level of competition for each project. However, careful management of operating costs has ensured that the business has maintained its operating profits at last year's levels.

Although we expect the construction market to remain difficult for the foreseeable future, market conditions vary considerably across the country. We have seen positive impacts from projects related to the London 2012 Olympics. A number of flagship structures have already installed Latchways products, and several more are in the pipeline. We have also seen progress with our national accounts, a key focus for the business.

Specialist Fixings

This small division is focused on structural repair of public housing stock, and as such is subject to the effects of spending curbs. Although this remains a profitable business with good prospects in the long term, we are reviewing future options for what is a non-core activity of the group.

New Products

New product innovation remains central to our strategy for growth. We have recently launched a new, self contained variant of the Wingrip range, allowing users safe access to aircraft where no separate air supply is available, such as in-theatre operations for the military. This has been well received and we already have orders from the UK military. Further revenue enhancing product innovations are due for launch later in the year.

In addition to new products, we continue with our long term policy of developing product variants to solve specific issues.

People

Latchways' success is down to our first class team. I have mentioned before that we are in the process of strengthening our sales team in order to ensure that we fully exploit the many opportunities that are presenting themselves worldwide. This process continues, and we are also now addressing the operational infrastructure to ensure this growth is properly supported.

We have taken steps during the period to ensure that those employees whose efforts most directly translate into growth for the business can be rewarded once shareholder value is significantly enhanced. We were grateful for the support from our shareholders for this process.

In our Annual Report we stated that we would be seeking to appoint an additional independent non-executive director during this year. A skills specification has been agreed and meetings are currently in progress with a view to selecting a suitable search agent. We hope to identify a suitable candidate for the role before year end.

Principal Risks

As a provider of fall protection solutions to a global marketplace, the group is subject to a number of external factors which affect its risk profile. The board updates its risk profile at least annually, and the key business risks are analysed in our Annual Report. The most important risks and uncertainties for the remaining six months of this financial year are discussed below.

The continuing uncertainty surrounding the direction of the major Western economies remains a key risk to our business, both in terms of business volume and the potential for bad debts. The recent UK spending review, on top of the existing difficulties in the construction market, is bound to have a negative effect on new projects and thus demand for both our products and services in this market. It is for this reason that we have been increasing our efforts in the retrofit arena, whilst ensuring that we retain and enhance our new-build market share. These efforts are starting to make progress.

Other European markets also have well-publicised problems, and we are working with our agents in these geographies to provide support.

Despite these risks, we continue to see opportunities. In the UK we have made good progress with national accounts, whilst Spain has been a growth market in the first half. We have also seen strong growth in other parts of the world which reduces the potential effects of any localised downturn.

Latchways' products are predominantly made of either marine grade stainless steel or aluminium. As such, fluctuations in the world market price of these commodities can have a substantial impact on our costs. So far this year stainless steel prices have been relatively stable, although they are forecast to increase later in the year. Aluminium prices have been increasing, but to date all such effects have been manageable, as demonstrated by the stable group gross margin.

Currencies, particularly the Euro and the US Dollar, remain an important risk factor for Latchways. All sales to mainland Europe are invoiced in Euros. Part of this exposure is subject to a natural hedge in that we now make a proportion of material purchases in Euros, but the remainder, along with our US Dollar exposure, is subject to exchange risk. This is mitigated where possible using forward exchange contracts.

Future Prospects

In our Annual Report we referred to the fact that fall protection is becoming a truly global industry. That trend is reflected in these results, and in our prospects for the future. Uncertainties remain in our traditional markets, but with so much of our growth and opportunity coming from worldwide markets, we are confident that we have the right product offering and strategy to deliver profitable growth this year and long term.

Paul Hearson

11 November 2010

Statement of directors' responsibilities

The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·; An indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·; Material related party transactions in the first six months and any material changes in the related party transactions described in the last Annual Report.

The directors of Latchways plc are listed in the Annual Report.

By order of the Board

DN Hearson

Chief Executive

11 November 2010

RA Orton

Financial Director

11 November 2010

Latchways plc

Statement of Comprehensive Income

The results for the periods arose wholly from continuing operations.

Latchways plc

Consolidated Balance Sheet

Latchways plc

Consolidated Statement of changes in shareholders' equity

Notes to the consolidated interim financial statements

1. General information

Latchways plc is domiciled in England.

This condensed consolidated half-yearly financial information was approved for issue on 10 November 2010.

These interim financial results, which have been neither reviewed nor audited, do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2010 were approved by the Board of directors on 4 June 2010 and have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

2. Forward-looking statements

Certain statements in this half-yearly report are forward-looking. Although the group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

3. Basis of preparation

This condensed consolidated half-yearly information for the half-year ended 30 September 2010 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The half-yearly condensed consolidated financial report should be read in conjunction with the annual financial statements for the year ended 31 March 2010, which have been prepared in accordance with IFRSs as adopted by the European Union.

4. Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 March 2010, as described in those annual financial statements.The group has adopted IFRS 3 (revised) during the period. No restatement of prior period information has been necessary as a consequence of adopting this standard.New accounting standards and interpretations have been issued during the year. The group's approach to these is as follows:The following standards, amendments and interpretations are mandatory for the first time for the current accounting period but are not relevant to the group's operations:

·; Annual Improvements 2009;

·; Amendment to IFRS 2 Share based payments group cash-settled transactions;

·; Amendments to IFRS 1, 'First time adoption'- additional exemptions;

·; Amendment to IAS 32, 'Financial instruments: Presentation', − classification of rights issues;

·; IFRIC 15, 'Agreements for construction of real estates';

·; IFRIC 18, 'Transfer of assets from customers'.

The following interpretations to existing standards have been published that are mandatory for the group's future accounting periods but which the group has not early adopted:

·; IFRS 9, 'Financial instruments' −classification and measurement'.

The following interpretations to existing standards have been published that are mandatory for the group's future accounting periods but which are not relevant to the group's operations:

·; Amendment to IFRS 1, 'First time adoption' − financial instrument disclosures;

·; Annual Improvements 2010;

·; IFRIC 19, 'Extinguishing financial liabilities with equity instruments';

·; Amendment to IFRIC 14, 'Prepayments of a minimum funding requirement'.

5. Segment information

6. Income taxes

Income tax expense is recognised in these interim financial statements based on management's best estimates of the weighted average annual effective tax rate expected for the full year. The estimated average annual tax rate used for the year to 31 March 2011 is 29.0% (the estimated tax rate for the 6 months to 30 September 2009 was 29.0%).

7. Earnings per Share

Earnings per share attributable to equity holders of the company arise from continuing operations as follows:

8. Dividends

A dividend of £2,001,000 that related to the year ended 31 March 2010 was paid in September 2010 (2009: £1,739,000).

An interim dividend of 8.98 pence per share (2009: 7.81 pence), totaling £1,000,000 (2009: £869,000) has been declared and will be paid on 4 March 2011 to shareholders on the register as at 4 February 2011.

In accordance with IAS 10 "Events after the balance sheet date", these interim financial statements do not reflect this dividend payable.

9. Reconciliation of operating profit to cash flow from operations

11. Share capital

12. Contingent liabilities

There were no contingent liabilities as at 30 September 2010, 31 March 2010 or at 30 September 2009.

13. Events occurring after the balance sheet date

Details of the interim dividend declared are given in Note 8.

14. Related party transactions

During the period, Latchways plc made sales of £1,325,000 (2009: £1,215,000) to HCL Safety Limited. At the period end the balance outstanding to Latchways plc from HCL Safety Limited was £583,000 (2009: £602,000).

During the period, Sigma 6 d.o.o made sales of £504,000 (2009: £443,000) to Latchways plc. At the period end, the trading balance outstanding to Sigma 6 from Latchways plc was £88,000 (2009: £40,000). In addition, Latchways made loans to Sigma 6 amounting to £275,000 (2009: £365,000).

At the period end, Latchways plc owed HCL Group Plc £350,000 (2009: £nil)

15. Interim Report

Copies of this interim report will be sent to all shareholders. Additional copies will be available from the group's registered office at Hopton Park, Devizes, Wiltshire SN10 2JP, or will be available for download from the group's website at www.latchways.com.