Trading Statement

07 October 2014

Latchways plc

Trading Statement

The board of Latchways plc, the designer and manufacturer of fall protection systems for working at height, provides the following update on trading in advance of its interim results for the year to 31 March 2015.

The challenging European market conditions that we referred to in our interim management statement of 5 August 2014 have continued to affect revenues in what is our core geographic market. Customers have delayed capital projects in the light of the poor economic outlook.

Furthermore, we have seen delays in the European offshore wind energy business, due to uncertainties over feed-in tariffs and connection to the grid. These issues are now largely resolved, and we are seeing increased activity on wind farm projects, but these are at too early a stage to avoid the delays impacting this year's revenues.

In North America, we have made good progress in expanding our customer base and improving service levels, but in the short term de-stocking by one of our largest customers has substantially curtailed revenues. This process included the cancellation of around £1.5 million of orders placed for our Self Retracting Lifeline products, which we expected to deliver in the first half. Although we are disappointed with the rate at which these products have been rolled out, we are confident that the appropriate resources are now in place to accelerate product sales going forward.

On a more positive note, the upturn in our UK Horizontal business has been maintained throughout the summer, with our customers reporting increased activity throughout the construction market. We have also continued to make progress in Latin America. We are seeing an improving outlook for our Vertical systems, with several significant prospects in the pipeline for 2015/16.

The negative revenue impacts outlined above are of a temporary nature, but the operational gearing of the business means they are of such impact as to lead us to expect that full year earnings will now be materially below last year's levels. We expect full year profit before tax to be in the range from £4.5 to £5.5 million. We have taken steps to limit spending except on sales resources and new product development, where investment will continue.

Despite these setbacks the company remains cash generative with a strong balance sheet. Cash balances at the end of September were in excess of £10 million. Given the temporary nature of the current challenges, we expect to maintain our dividend for the current year with the expectation of resuming profitable revenue growth next year.

Interim results for the six months ended 30 September 2014 will be published on Monday, 17th November.

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