LTC.L Regulatory News (LTC)

11 Jun 2007 07:00

Latchways PLC11 June 2007 LATCHWAYS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2007 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 •Profit before tax increased by 26% to £7.81 million (2006: £6.20 million) •Basic earnings per share up 27% to 50.97 pence (2006: 40.20 pence) •Diluted earnings per share up 27% to 50.55 pence (2006: 39.79 pence) •Final dividend increased by 21% to 11.84 pence (2006: 9.80 pence) •Total dividend for the year 47.76 pence (2006: 13.65 pence), including 30.00 pence special dividend •Revenue and profit growth across the business •Strong cash generation from operating activities •Increased investment in new product development Commenting on the results, Paul Hearson, Chairman, said "I am pleased to report another year of substantial growth for the Latchwaysgroup. Once again all areas of the business have enhanced their contribution togroup profits, with all segments trading at record profit levels. The new year has started well, with a healthy order book and robust sales. Withthe increased investment now being made in new products, and the earlierinvestments in new markets beginning to show results, we are confident ofcontinuing our record for delivering profitable growth both for the current yearand the future." Enquiries: Latchways plc Threadneedle Communications David Hearson, Chief Executive Graham Herring Rex Orton, Financial Director Tel: 01380 732700 Tel: 020 7936 9605 LATCHWAYS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2007 Chairman's Statement I am pleased to report another year of substantial growth for the Latchwaysgroup. Once again all areas of the business have enhanced their contribution togroup profits, with all segments trading at record profit levels. During the year we have seen increasing acceptance of Latchways' fall protectionproducts around the world, with significant new business being gained in areasoutside our traditionally strong UK and European markets. Our Safety Services arm, which specialises in the installation and inspection offall protection equipment, enjoyed further growth in both revenue and profitsduring the year, whilst our Specialist Fixing division consolidated on strongrevenue growth in the previous year with further efficiency improvements. These impressive results have enabled us to continue to invest significantly inthe future of our business, whilst still growing profits substantially. Results Group revenue for the year ended 31 March 2007 was £31.9 million (2006: £28.1million), 14% ahead of last year. Group profit before tax was 26% higher than last year at £7.8 million (2006:£6.2 million). Diluted earnings per share rose 27% to 50.55 pence (2006: 39.79 pence) Dividends As I mentioned in my interim report, Latchways has a strongly cash-generativebusiness model which results in an excellent conversion of earnings to cash. Weconcluded last year that our ongoing business could sustain a higher level ofdividend, and began the process of addressing this. I am pleased to report thatwe have enjoyed a further period of strong cash generation, and therefore theboard proposes a final dividend for the year of 11.84 pence, a 21% increase onlast year. Taken together with the interim payment of 5.92 pence, the totaldividend (excluding the Special dividend) for 2007 of 17.76 pence per sharerepresents a 30% increase on the prior year (2006: 13.65 pence). With the exception of 2002, when dividend levels were maintained, Latchways hasnow increased its dividend every year since flotation in 1997.Also, during the year the board declared and paid a special dividend of 30 penceper share (2006: nil), returning £3.3 million to shareholders. This decisionreflected the fact that, in the view of the board, our organic growth is, and toa large extent will remain, self financing, whilst funding of small acquisitionswill be possible without recourse to shareholders. The board will, in keepingwith good practice, continue to review its cash requirements going forward. Our trading environment The fall protection market continues to evolve around the world and our strategyhas evolved with it. We have continued to concentrate on what we do best,providing optimal fall protection solutions with the highest levels of customerservice and support. This continues to be achieved through our excellent andcommitted network of independent agents. Whilst our traditional markets continueto perform well and to show excellent growth, new markets have also provensuccessful in other parts of the world, where legislators have recognised theneed for safe working practices. Recognising the need to expand our product offering to maximise opportunities inspecific markets, we have significantly increased our new product developmentresource. This has resulted in an exciting new product pipeline which should addsignificant revenues in the coming years. We continue to seek niche acquisition opportunities, such as those of HCL andWingrip, which will add value to our business. World commodity prices, specifically stainless steel, have continued to increasesharply during the year, which has affected our product costs. However, we haveso far maintained our ability to offset these higher costs through a mixture ofproduct re-sourcing, modest price increases and improved operational efficiency. Social and Environmental Matters Latchways takes its responsibilities towards its stakeholders and theenvironment seriously. I am pleased to report that Latchways achieved its ISO 14001 environmentalaccreditation during the year. As a result, a system of control is now in placeaddressing our waste management processes and energy efficiency measures. People As ever, much of the success of our business is down to the efforts of all ourpeople, at every level. Once again I would like to thank and congratulate themall for a job well done. As a fast growing company it is important not to take our people and theirefforts for granted. During the year, the board instigated a detailed review ofthe group's provision for Human Resources and a number of recommendations weremade. These are being addressed to ensure that we make the most of, andappropriately reward, all our people's talents. Finally, our Senior non-executive director, James Joll, retired during the year.As I stated in our announcement at the time, James made many excellentcontributions to the group during his nine years on the board. His successor,Per Troen, is an international corporate finance lawyer, and his contributionhas already made a positive impact on our business. Current Trading and Prospects The new year has started well, with a healthy order book. Levels of enquiriesand quotations continue to indicate a strong market for our products. With theincreased investment now being made in new products, and the earlier investmentsin new markets beginning to show results, we are confident of continuing ourrecord for delivering profitable growth both for the current year and thefuture. Paul HearsonChairman OPERATING AND FINANCIAL REVIEW The board of Latchways plc is pleased to report these consolidated results forthe year ended 31 March 2007. Financial Results Group revenue for the year was £31.9 million, an increase of 14% over the 2006figure of £28.1 million. This resulted in an operating profit of £7.6 million,up 23% on 2006 (2006: £6.2 million), and a pre-tax profit of £7.8 million (2006:£6.2 million). The consolidated gross margin was in line with last year at 54.1% (2006: 54.3%),with slightly lower product margins offset by improved efficiency in the servicebusinesses. Overheads increased by 6.5% in the year, considerably below the rate of increasein turnover. 2006 saw step-change investments in the support infrastructure forLatchways, and therefore 2007 saw more modest increases. Furthermore, the SafetyServices business achieved further overhead efficiencies during the year. As aresult, operating margins improved by 1.8% to 23.8%. The effective rate of taxation for the year was 27.8% (2006: 29.3%). Thereduction was due to corporation tax relief on share options exercised duringthe year. As a result, basic earnings per share increased by 27% to 50.97 pence (2006:40.20 pence), whilst diluted earnings per share increased by 27% to 50.55 pence(2006: 39.79 pence). On the balance sheet, non-current assets increased by £0.4 million to £6.6million (2006: £6.2 million), reflecting increased expenditure on new producttooling. Other intangible assets of £1.3 million (2006: £1.4 million) comprisethe intellectual property, brand and customer relationships acquired on thepurchase of Wingrip in 2004, internally generated patents and trademarks andongoing development costs capitalised. Tangible assets of £2.9 million (2006:£2.5 million) mainly represent the premises at Devizes, together with productionplant and tooling. The premises consist of a 2,000 square metre warehouse andhead office, together with a further 2 acres of additional land directlyadjacent. The group has detailed planning permission for a second unit on thisland, providing ample scope for foreseeable future expansion. Inventory of £2.5 million was £0.4 million higher than last year (2006: £2.1million), reflecting a strong closing order book and inventory requirements fornew product ranges. Trade and other receivables increased by £1.1 million to£6.6 million (2006: £5.5 million). Trade receivables were unusually low at theend of March 2006, reflecting the timing of shipments. Creditor days were 36days (2006:42 days). Cash generation is a key performance indicator for the group. Cash generatedfrom operations as a proportion of operating profit was 98% (2006: 130%). Onaverage over the past five years, cash generation has been over 110% ofoperating profit, demonstrating how cash generative the business is. Taxpayments in the year increased by 59% to £2.4 million (2006: £1.5 million). Dueto the growth in their profits over the past two years, both HCL businesses nolonger qualify as smaller companies and therefore now have to make quarterlycorporation tax payments in advance, resulting in higher payments in the year.Capital expenditure on tangible assets increased by £0.3 million in the year,reflecting tooling and machinery for new products, whilst dividend paymentsincreased to £5.1 million (2006: £1.2 million), due to the special dividend andprogressive dividend growth. As a result of the strong operating cash flow, net cash, which represents cashand cash equivalents less bank and other borrowings, at the year end was broadlyunchanged at £4.1 million (2006: £4.1 million). Strategic Overview Latchways is a world leader in the provision of quality fall protectionequipment and related services. Our aim is to maximise shareholder returnthrough providing the most innovative and functional equipment to a largelylegislation-driven market, with a customer support network and after-salesservice that is unrivalled 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 business is broadlycategorized between horizontal business (systems for those working at height, egon rooftops, crane rails etc) and vertical business (systems for those climbingto or from height, eg ladders, telecom masts, electricity transmission towers). The Safety Products business achieved revenue growth of 18% in the year, withthe strongest growth in Europe and the Rest of the World. Operating profits alsoincreased by 18% to £5.5 million. As the Safety Products business operates in a worldwide market, a keyperformance measure is the relative geographic split of revenues. The UK business continues to perform well, with revenue up 11%. Our traditionalinstaller business, our largest market, continued to grow, whilst our verticalbusiness was also strong. Further vertical business has been won with newelectricity transmission customers for 2007/08. This provides further evidenceof Latchways' position as supplier of choice to the industry. Our European business achieved further growth in the year, with revenue up 26%.Europe has been our most significant growth area for a number of years. We seesufficient opportunities in this market to provide continuing growth for manyyears to come. Germany remains a key market, and we are latterly beginning tosee a return on our recent investment here. We are also continuing with ourstrategy of building partnerships in other European countries which is beginningto deliver incremental improvements. The Rest of the World has provided strong growth this year, with revenues up97%. We have seen increasing acceptance in key geographies of the need for fallprotection, which we are exploiting both directly and through our local agents.Whilst legislation in such parts of the world is in its early stages, we areideally placed to take advantage of opportunities as they arise. North American revenues were in line with last year. This business is expectedto benefit from a range of products being launched in 2007 and beyond. The Wingrip product line, which we acquired in 2004, provides height safetysolutions to the aircraft maintenance industry. Wingrip has had anotherexcellent year, with revenues up 23%. Our systems are now used extensively inboth commercial and military applications, and are accepted as the industrystandard in both. We are confident of achieving further growth for this productline going forward. Safety Services Safety Services has had another strong year, with turnover up 13% to £8.6million (2006: £7.6 million) and operating profits 53% higher at £1.2 million(2006: £0.8 million). The focus of this business remains on efficientinstallation and system certification, whilst continuing to provide the"one-stop shop" solution to customers such as telecommunications companies andwind power operators. During the year, Safety Services, as the largest installer of Latchwaysproducts, purchased £2.6 million of product from Latchways, a 17% increase. Specialist Fixing Specialist Fixing revenues were 3% lower than last year at £3.8 million (2006:£3.9 million). 2006 revenues included around £0.5 million of low marginsub-contract business, which was not repeated this year. Therefore, despite theslightly reduced revenue, margins improved and operating profit increased by 33%to £1.0 million (2006: £0.7 million) Risks and 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 (revised in 2007), and 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 Latchways operates in a diverse and growing range of markets. This ensures thatwe are not excessively dependent on one market for our growth. The largestindividual market is the UK commercial construction market, a cyclical businesswhich is currently enjoying a period of strong growth. The 2005 Working atHeight Regulations, which increase the responsibilities of building owners toprovide fall protection for personnel working in their buildings, together withthe investments in infrastructure that will precede the 2012 London Olympics,give us confidence that growth opportunities will continue in the years ahead. During 2007, as a result of high growth in overseas business, the degree towhich Latchways is affected by the UK construction market reduced further. Stainless Steel Commodity Prices The majority of Latchways' products are made of Marine Grade Stainless Steel,which has seen significant increases in cost over the past four years, with thepace of increase rising more recently. Whilst to date we have been successful inoffsetting these increases through a mixture of product resourcing and modestprice increases, we have also begun to research alternative materials as amethod of reducing our exposure to a single commodity. This research willcontinue alongside our ongoing cost reduction programmes. 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 This year has been the most active year of new product development in Latchways'history. Whilst our existing product range continues to provide strong growth,we have identified a number of opportunities to introduce product ranges, forboth existing applications and also new concepts. As a result, we have doubledour development team during the year, and also acquired the rights to someexternally generated inventions. We expect to launch a number of new productsduring the coming year and beyond, which should make valuable contributions torevenue growth, as well as providing important new business for both domesticand overseas markets. Prospects Over the past five years, Latchways has generated outstanding returns for ourshareholders by providing the best products and customer service in ourindustry. Significant investments have been and will continue to be made inensuring that this continues. Strategic partnerships, both in terms of geographic expansion and new productintroduction, will remain at the centre of our strategy and we are confidentthat these will provide us with further profitable growth into the future. David HearsonChief Executive Latchways plc Consolidated Income Statement for the year ended 31 March 2007 2007 2006 (Restated) £'000 £'000 Revenue 31,938 28,079 Cost of sales (14,648) (12,821) Gross profit 17,290 15,258 Administrative expenses (9,672) (9,079) Group operating profit 7,618 6,179 Interest receivable 280 158 Interest payable and similar (86) (140)charges Profit before taxation 7,812 6,197 Taxation (2,171) (1,819) Profit for the year attributable to equityshareholders 5,641 4,378 Basic earnings per share (pence) 50.97 40.20 Diluted earnings per share (pence) 50.55 39.79 The directors propose a final dividend of 11.84 pence per share (2006: 9.80pence) at an estimated cost of £1,317,000 (2006: £1,069,000), which will besubject to shareholder approval at the Annual General Meeting on 7 September2007. Latchways plc Consolidated Balance Sheet as at 31 March 2007 2007 2006 £'000 £'000 AssetsNon-current assetsGoodwill 2,208 2,208Other intangible assets 1,336 1,386Property, plant and equipment 2,900 2,537Deferred income tax assets 201 65 6,645 6,196Current assetsInventories 2,474 2,102Financial assets - Derivative financial instruments 14 -Trade and other receivables 6,587 5,454Cash and cash equivalents 4,819 5,554 13,894 13,110 LiabilitiesCurrent LiabilitiesFinancial liabilities- Borrowings (652) (652)- Derivative financial instruments - (28)Trade and other payables (4,043) (3,402)Current tax liabilities (960) (1,205) (5,655) (5,287) Net current assets 8,239 7,823 Non-current liabilitiesFinancial liabilities- Borrowings (117) (768)Deferred income tax liabilities (265) (212) (382) (980) Net assets 14,502 13,039 Shareholders'equityOrdinary shares 556 544Share premium 1,780 1,072Other reserves 221 156Retained earnings 11,945 11,266 Total shareholders' equity 14,502 13,039 Latchways plc Consolidated Cash Flow Statement for the year ended 31 March 2007 2007 2006 £'000 £'000 Cash flows from operatingactivitiesCash generated from operations 7,484 8,013Interest paid (79) (121)Taxation paid (2,376) (1,498)Net cash from operating activities 5,029 6,394 Cash flows from investing activitiesInterest received 283 148Purchase of property, plant and equipment (658) (359)Sale of property, plant and equipment 4 -Purchase of intangible assets (185) (174)Development expenditure capitalised (182) (95)Net cash used in investing activities (738) (480) Cash flows from financing activitiesNet proceeds from issue of ordinary sharecapital 719 74Repayment of borrowings (659) (658)Dividends paid to shareholders (5,086) (1,210)Net cash used in financing (5,026) (1,794)activities Net (decrease)/increase in cash and cashequivalents (735) 4,120 Cash and cash equivalents at 1 April 5,554 1,434 Cash and cash equivalents at 31 March 4,819 5,554 Latchways plc Consolidated Statement of Changes in Shareholders' Equity for the year ended 31 March 2007 Share Share Retained Other Total Capital Premium Earnings Reserves Reserves £'000 £'000 £'000 £'000 £'000 1 April 2005 544 999 8,098 136 9,777Net profit - - 4,378 - 4,378Share options:- Proceeds from sharesissued 1 73 - - 74- Value of employeeservices - - - 20 20Dividends - - (1,210) - (1,210)At 31 March 2006 545 1,072 11,266 156 13,039Net profit - - 5,641 - 5,641Share options:- Proceeds from sharesissued 11 708 - - 719- Value of employeeservices - - - 65 65Deferred taxation onshare options - - 124 - 124Dividends - - (5,086) - (5,086)At 31 March 2007 556 1,780 11,945 221 14,502 NOTES 1. Basis of accountingThe financial information set out above does not constitute the Group'sstatutory accounts for the years ended 31 March 2006 and 2007. The financialinformation in respect of 2007 has been extracted from the audited financialstatements for the year ended 31 March 2007 which have not yet been delivered tothe Registrar of Companies. The information has been prepared in accordance with the EU-adoptedInternational Financial Reporting Standards (IFRS) and IFRIC interpretations andwith those parts of the Companies Act 1985 which are applicable to companiesreporting under IFRS. During the year the Group reclassified certain expenditure from administrativeexpenses to cost of sales. The effect of this was to increase cost of sales andreduce administrative expenses in 2006 by £427,000. 2. Accounting Policies The accounting policies applied by the group were published in the Annual Reportand Accounts for the year ended 31 March 2006, which is available on the group'swebsite at www.latchways.com, and they will also be included in the AnnualReport and Accounts for the year ended 31 March 2007. 3. Earnings per shareThe calculation of basic earnings per ordinary share is based on a weightedaverage of 11,067,482 ordinary shares in issue and ranking for dividend (2006:10,890,680) and on a profit of £5,641,000 (2006: £4,378,000). The calculation of diluted earnings per share is based on a weighted average of11,158,434 ordinary shares (2006: 11,005,875), and uses an average market pricefor the year of £9.37 (2006: £5.163) 4. Dividends 2007 2006 £'000 £'000Final Paid 9.80p (2006: 7.26p) per 5p share 1,089 790Special Paid 30.00p (2006: nil) per 5p share 3,338 -Interim Paid 5.92p (2006: 3.85p) per 5p share 659 420 Total Paid 5,086 1,210 In addition, the directors are proposing a final dividend in respect of thefinancial year ending 31 March 2007 of 11.84p (2006:9.80p) per share which willabsorb an estimated £1,317,000 of shareholders' funds (2006: £1,069,000). Itwill be paid on 14 September 2007 to shareholders who are on the register ofmembers on 17 August 2007. 5. The Annual Report and AccountsThe Annual Report and Accounts for Latchways plc for the year ending 31 March2007 will be posted to shareholders on or before 29 July 2007 and copies will beavailable from the registered office, Latchways plc, Hopton Park, Devizes,Wiltshire, SN10 2JP. 7. The Annual General MeetingThe Annual General Meeting will be held at Hopton Park, Devizes, Wiltshire, SN102JP on 7 September 2007 at 12 noon. 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