LTC.L Regulatory News (LTC)

12 Nov 2007 07:00

Latchways PLC12 November 2007 LATCHWAYS PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 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 up 3% to £17.03 million (2006: £16.58 million). •Excluding the Specialist Fixing division, group revenues up 11%. •Operating profit increased by 8% to £4.33 million (2006:£4.02 million). •Profit before tax increased by 7% to £4.41 million (2006:£4.10 million). •Diluted earnings per share increased by 10% to 27.19 pence (2006:24.82 pence). •Interim dividend increased by 20% to 7.10 pence (2006: 5.92 pence). •Launch of new product range •Acquisition of Height Solutions Limited Commenting on the results, the Chairman, Paul Hearson said: "I am pleased to report further growth for the Latchways group. The SafetyProducts and Safety Services divisions have both built on the excellent progressmade in recent years, although as we highlighted earlier in the year overallresults have been adversely affected by a poor first half for the SpecialistFixing division. This business is expected to see a substantial improvement inthe second half. Prospects for the second half are good and we expect once again to report stronggrowth for the full year. With the pipeline for new products in excellent shape,we remain confident in our ability to generate continued profitable growth." Enquiries: Latchways plc Tel: 01380 732700 David Hearson, Chief Executive Rex Orton, Financial Director Threadneedle Communications Tel: 020 7936 9605 Graham Herring Chairman's Statement This has been a particularly busy period for the group, with the acquisition ofHeight Solutions Limited and the recent launch of our new Self RetractingLifeline range. Product development continues apace with further additions tothe range planned by the year end. Following the exceptional performance across the business that was achieved inthe first half of 2006/07, I am pleased to report further growth for theLatchways group. The Safety Products and Safety Services divisions have bothbuilt on the excellent progress made in recent years. As I have mentioned inearlier statements, overall results have been adversely affected by a poor firsthalf for the Specialist Fixing division. This business is expected to see asubstantial improvement in the second half, with October trading well ahead offirst half levels. Results Group revenue was £17.02 million (2006:£16.58 million), an increase of 3% on thesame period last year. Excluding the Specialist Fixing division, group revenueswere up 11%, with significantly enhanced contributions from the UK wind powerindustry and Mainland European installer business. Operating profit increased by 8% to £4.33 million (2006:£4.02 million). Profitbefore tax was 7% higher at £4.41 million (2006: £4.10 million). Dilutedearnings per share rose by 10% to 27.19 pence (2006:24.82 pence). Gross margins reduced by 0.9% to 53.2% (2006 restated: 54.1%). This was due toincreased stainless steel commodity costs and a slightly lower margin productmix. The world market price for stainless steel increased sharply during theearly part of the year before partly falling back in September. Administrative expenses were 5% lower than last year, reflecting reduced costsin the services divisions and timing of marketing and new product developmentspend. Group net cash balances (cash and cash equivalents less bank debt) have reducedby £1.0 million since the year end from £4.1 million to £3.1 million (2006: £5.9million). This is due to the £0.8 million acquisition of Height SolutionsLimited in June and increases in inventory relating to new products and supplyagreements. The group has ample working capital and financing to service ourongoing investments. Dividends In view of the excellent performance of the core business segments, and theexpected recovery of the Specialist Fixing division in the second half, theboard is confident of continued strong cash generation this year. As a result,the board has declared an interim dividend of 7.10 pence per share (2006: 5.92pence), a 20% increase. The interim dividend will be paid on 7 March 2008 toshareholders on the register as at 8 February 2008. Review This has been an important period for Latchways with significant productdevelopment activity and the acquisition of Height Solutions Limited. Ouremphasis on providing the best quality and customer service continues to delivergrowth in our core business. The UK market had another strong period, with product revenues up 11%. Windpower and electricity transmission tower business was particularly strong in theperiod, with Latchways rapidly becoming the system of choice to the wind powergeneration business. Our UK installer business, our most mature market, alsoperformed well. Mainland Europe generated excellent growth again, with an increase in revenuesof 26% driven by progressive enforcement of EU regulations in a number ofcountries. We have continued with our successful strategy of partnering withlocal agents to drive business in each country. North America saw a 10% reduction in revenues in the first half, due both totiming of installations of systems by a large end user and the effect of adeclining dollar. The recent launch of new products into this market shouldensure a stronger second half. Other parts of the world saw revenues reduce by 26%. This was mainly due totiming of electricity tower business, which saw a particularly strongperformance in 2006. By its nature this business is lumpy and customerrelationships remain strong. The growing acceptance of the need for fallprotection worldwide continues to create opportunities which we are pursuingvigorously. The Wingrip product line saw a slight reduction in revenue against last year.2006 included substantial business with Airbus for its UK manufacturingoperations which has not been repeated this year. 2007 has seen good sales intoEuropean airlines such as Lufthansa and KLM, as well as initial orders withBoeing in the US. Height Solutions Limited was acquired by the group in June 2007 for a net cashconsideration of £0.8 million. The business manufactures and sells UPVCwalkways, primarily for the commercial rooftop industry. Walkways are acomplementary product to the existing Latchways range and we expect to achieveexcellent cross-selling opportunities. This transaction is in accordance withour stated strategy of growth through new product development and targeted nicheacquisitions. The Safety Services division has consolidated upon the strong growth in recentyears with improved gross margins and well-controlled operating costs. This hasenabled it to increase profit before tax by 20% based on a 2% revenue increase. The Specialist Fixing division, which provides external repair services to bothindustrial and residential buildings, has experienced a significant downturn inthe first half, with revenues reduced by 55%. This was due to two factors.Firstly, existing contracts to repair Housing Association stocks were impactedby a younger mix of housing stock, resulting in considerably lower requirementsfor external repair. Secondly, expected business was put back due to delays inconversion of local authorities to Housing Associations. Business for Octoberand November is well ahead of first half levels and we are confident of asignificantly improved performance in the second half. New Products We launched the Retractable Lifeline product range into North America inOctober. Initial feedback has been very positive and we are confident that thisrange will grow to become a significant contributor to our business. Furtheradditions to the range are planned for the coming months, with other newproducts also due to launch around the end of the financial year. We havecontinued to invest in this progressively important aspect of our business. Principal Risks 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 boardupdates its risk profile at least annually, and the key business risks areanalysed in our Annual Report. The most important risks and uncertainties forthe remaining six months of this financial year are discussed below. As the majority of Latchways' components are made of Marine Grade StainlessSteel, fluctuations in the world market price directly impact on our costs. Theprice of Stainless Steel has risen steeply in the past year and peaked duringthe summer, falling back since. Although this has had some effect on margins inthe first half, we have mitigated the risk by continued re-sourcing efforts. All sales to Mainland Europe are invoiced in Euros, whilst certain sales toNorth America are in US Dollars. The weakness in the US Dollar exposes us topotentially lower margins in North America, although the current strength of theEuro will more than offset this if it is maintained. The currency risks in allour main markets are mitigated where possible using forward exchange contracts. Future Prospects The growth achieved in this period despite the difficulties in Specialist Fixingunderline the continuing strength of our core business. Prospects for the secondhalf are good and we expect once again to report strong growth for the fullyear. We have demonstrated through our actions and our results over the years that ourstrategy is the right one for our business. With the pipeline for new productsin excellent shape, we remain confident in our ability to generate continuedprofitable growth. Paul Hearson, Chairman 12 November 2007 Statement of directors' responsibilities The directors confirm that this condensed set of financial statements has beenprepared in accordance with IAS 34 as adopted by the European Union, and thatthe interim management report herein includes a fair review of the informationrequired by DTR 4.2.7 and DTR 4.2.8. The directors of Latchways plc are listed in the annual report. By order of the Board DN HearsonChief Executive12 November 2007 RA OrtonFinancial Director12 November 2007 Latchways plc Consolidated Income Statement (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Year To Restated 30.09.07 30.09.06 31.03.07 £'000 £'000 £'000 Revenue 17,025 16,583 31,938 Cost of Sales (7,963) (7,609) (14,648)________________________________________________________________________________ Gross profit 9,062 8,974 17,290 Administrative expenses (4,732) (4,959) (9,672)________________________________________________________________________________ Operating profit 4,330 4,015 7,618 Interest payable andsimilar charges (22) (48) (86) Interest receivable 100 134 280________________________________________________________________________________ Profit before taxation 4,408 4,101 7,812 Taxation (1,367) (1,343) (2,171)________________________________________________________________________________ Profit for the periodattributable to equity shareholders 3,041 2,758 5,641________________________________________________________________________________ Earnings per share expressedin pence per share- Basic 27.33 25.05 50.97- Diluted 27.19 24.82 50.55________________________________________________________________________________ The results for the periods arose wholly from continuing operations. Latchways plc Consolidated Balance Sheet (Unaudited) (Unaudited) (Audited) as at as at as at 30.09.07 30.09.06 31.03.07 £'000 £'000 £'000AssetsNon-current assetsGoodwill 2,607 2,208 2,208 Intangible assets 1,775 1,267 1,336 Property, plant and equipment 3,357 2,572 2,900 Deferred income tax assets 201 65 201________________________________________________________________________________ 7,940 6,112 6,645________________________________________________________________________________Current assetsInventories 3,076 1,925 2,474Financial assets- Derivative financial instruments - - 14Trade and other receivables 8,047 6,781 6,587Cash and cash equivalents 3,532 6,967 4,819________________________________________________________________________________ 14,655 15,673 13,894________________________________________________________________________________LiabilitiesCurrent liabilitiesFinancial liabilities- Borrowings (440) (652) (652)Trade and other payables (4,121) (3,161) (4,043)Current tax liabilities (1,506) (1,879) (960)________________________________________________________________________________ (6,067) (5,692) (5,655)________________________________________________________________________________Net current assets 8,588 9,981 8,239________________________________________________________________________________Non-current liabilitiesFinancial liabilities- Borrowings - (439) (117)Deferred income tax liabilities (265) (212) (265)________________________________________________________________________________ (265) (651) (382)________________________________________________________________________________Net assets 16,263 15,442 14,502________________________________________________________________________________Shareholders' equityOrdinary share capital 556 556 556Share premium 1,793 1,780 1,780Other reserves 245 171 221Retained earnings 13,669 12,935 11,945________________________________________________________________________________Total shareholders' equity 16,263 15,442 14,502 Latchways plc Consolidated Statement of changes in shareholders' equity Share Share Retained Capital Share Total Capital Premium Earnings Redemption Based Reserves Reserve Payments £'000 £'000 £'000 £'000 £'000 £'000 1 April 2006 545 1,072 11,266 111 45 13,039 Net Profit - - 2,758 - - 2,758 Share options Proceeds from 11 708 - - - 719shares issued Value of employee - - - - 15 15services Dividends - - (1,089) - - (1,089)__________________________________________________________________________________________________________At 30 September 556 1,780 12,935 111 60 15,4422006 Net Profit - - 2,883 - - 2,883 Share options Value of - - - - 50 50employee services Deferred taxation on - - 124 - - 124share options Dividends - - (3,997) - - (3,997)__________________________________________________________________________________________________________At 31 March 2007 556 1,780 11,945 111 110 14,502 Net Profit - - 3,041 - - 3,041 Share options Proceeds from - 13 - - - 13shares issued Value of - - - - 24 24employee services Dividends - - (1,317) - - (1,317)__________________________________________________________________________________________________________At 30 September 556 1,793 13,669 111 134 16,2632007__________________________________________________________________________________________________________ Latchways plc Consolidated Cash Flow Statement (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Year To 30.09.07 30.09.06 31.03.07 £'000 £'000 £'000 Cash generated from operationsCash generated from operations (Note 10) 2,820 2,986 7,484Interest paid (22) (48) (79)Tax paid (856) (744) (2,451)Tax received - 75 75________________________________________________________________________________Net cash from operating activities 1,942 2,269 5,029________________________________________________________________________________Cash flows from investing activitiesAcquisition of subsidiary, net of cash acquired (795) - -Interest received 100 134 283Purchase of property, plant and equipment (618) (185) (658)Sale of property, plant and equipment - - 4Purchase of intangible assets (148) (52) (185)Development expenditure capitalised (135) (54) (182)________________________________________________________________________________Net cash used in investing activities (1,596) (157) (738)________________________________________________________________________________Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 13 719 719Repayment of borrowings (329) (329) (659)Dividends paid to shareholders (1,317) (1,089) (5,086)________________________________________________________________________________Net cash used in financing activities (1,633) (699) (5,026)________________________________________________________________________________Net (decrease)/increase in cash and cash equivalents (1,287) 1,413 (735)Cash and cash equivalents at 1 April 4,819 5,554 5,554________________________________________________________________________________Cash and cash equivalents at end of period 3,532 6,967 4,819________________________________________________________________________________ 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 9 November 2007. These interim financial results, which have been neither reviewed nor audited, do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 March 2007 were approved by the Board of directors on 8 June 2007 and have been delivered to theRegistrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not containany statement under Section 237 of the Companies Act 1985. 2. Forward-looking statements Certain statements in this half-yearly report are forward-looking. Although thegroup 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 aresult of new information, future events or otherwise. 3. Basis of preparation This condensed consolidated half-yearly information for the half-year ended 30 September 2007 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 2007, which have been prepared in accordance with IFRSs as adopted by the European Union. 4. Accounting policies The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 March 2007, as described in those annual financial statements. The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year ending 31 March 2008: . IFRS 7, 'Financial instruments: Disclosures', effective for annual periods beginning on or after 1 January 2007. IAS 1, 'Amendments to capital disclosures', effective for annual periods beginning on or after 1 January 2007. As this interim report contains only condensed financial statements, and as there are no material financial instrument-related transactions in the period, full IFRS 7 disclosures are not required at this stage. The full IFRS 7 disclosures, including the sensitivity analysis to market risk and capital disclosures required by the amendment of IAS 1, will be given in the annual financial statements. . IFRIC 8, 'Scope of IFRS 2', effective for annual periods beginning on or after 1 May 2006. This interpretation has not had any impact on the recognition of share-based payments in the group. . IFRIC 9 'Reassessment of embedded derivatives', effective for annual periods beginning on or after 1 June 2006. This interpretation has not had any impact on the reassessment of embedded derivatives as the group already assessed if embedded derivatives should be separated using principles consistent with IFRIC 9. . IFRIC 10, 'Interims and Impairment', effective for annual periods beginning on or after 1 November 2006. This interpretation has not had any impact on the group's accounts. The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year ending 31 March 2008 and have not been early adopted: . IFRS 8, 'Operating segments', effective for annual periods beginning on or after 1 January 2009, subject to EU endorsement. Management do not currently foresee any changes to the group's business segments. . IFRIC 11, 'IFRS 2 - Group and treasury share transactions', effective for annual periods beginning on or after 1 March 2007. Management do not expect this interpretation to be relevant for the group. . IFRIC 12, 'Service concession arrangements', effective for annual periods beginning on or after 1 January 2008. Management do not expect this interpretation to be relevant for the group. 5. Segment information Business segment Safety Safety Specialist ConsolidationSix months ended Products Services Fixing Adjustments Group30 September 2007 £'000 £'000 £'000 £'000 £'000__________________________________________________________________________________________________Continuing operations Revenue 12,689 4,557 973 (1,194) 17,025__________________________________________________________________________________________________Segment result 3,507 677 157 (11) 4,330__________________________________________________________________________________________________Business segment Safety Safety Specialist ConsolidationSix months ended Products Services Fixing Adjustments Group30 September 2006 £'000 £'000 £'000 £'000 £'000__________________________________________________________________________________________________Continuing operations Revenue 11,355 4,459 2,171 (1,402) 16,583__________________________________________________________________________________________________Segment result 2,883 566 566 - 4,015__________________________________________________________________________________________________ The group was involved in one major transaction in June 2007: . Acquisition of a new subsidiary, Height Solutions Limited, the principal activity of which is the manufacture and sale of uPVC walkways for commercial access applications (Note 14). Its results are incorporated in the Safety Products segment. 6. Operating profit During the prior year the group reclassified certain expenditure from administrative expenses to cost of sales as management believe this more appropriately reflects the nature of this expenditure. The effect of this was to increase cost of sales and reduce administrative expenses in the 6 months to 30 September 2006 by £310,000. 7. Income taxes Income tax expense is recognised in these interim financial statements based onmanagement'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 2008 is 31.0% (the estimated tax rate for the 6 months to 30 September 2006 was 32.7%). 8. Earnings per Share Earnings per share attributable to equity holders of the company arises from continuing operations as follows: 6 months to 30.9.07 6 months to 30.09.06 Earnings Weighted average Per share Earnings Weighted average Per share number of shares amount number of shares amount £'000 Thousands Pence £'000 Thousands Pence Basic EPSEarnings attributed 3,041 11,126 27.33 2,758 11,010 25.05to ordinary shareholders Effect of dilutive 59 (0.14) 104 (0.23)share options________________________________________________________________________________________________________________________ Diluted EPS 3,041 11,185 27.19 2,758 11,114 24.82 ________________________________________________________________________________________________________________________ 9. Dividends A dividend that related to the year to 31 March 2007 and that amounted to £1,317,000 was paid in September 2007 (2006: £1,089,000). An interim dividend of 7.10 pence per share (2006: 5.92 pence), costing £790,000 (2006: £659,000) has been declared and will be paid on 7 March 2008 to shareholders on the register as at 8 February 2008. In accordance with IAS 10 "Events after the balance sheet date", these interim financial statements do not reflect this dividend payable. 10. Reconciliation of operating profit to cash flow from operations (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Year to 30.09.07 30.09.06 31.03.07 £'000 £'000 £'000 Net profit for the period 3,041 2,758 5,641Taxation 1,367 1,343 2,171Net interest received (78) (86) (194)________________________________________________________________________________Operating profit for the period 4,330 4,015 7,618Adjustments for:Depreciation of property, plant and equipment 176 150 294Profit on disposal of property, plant and equipment - - (4)Amortisation of intangible assets 132 114 264Amortisation of development costs - 111 153Share option charge 24 15 65Movement on financial instruments 14 - (42)________________________________________________________________________________Operating cash flows before movements in 4,676 4,405 8,348 working capitalMovement in inventories (549) 177 (372)Movement in trade and other receivables (1,232) (1,327) (1,133)Movement in trade and other payables (75) (269) 641________________________________________________________________________________Cash generated by operations 2,820 2,986 7,484________________________________________________________________________________ 11. Capital expenditure Tangible and Intangible Assets (including Goodwill) £'000________________________________________________________________________________Six months ended 30 September 2006 Opening net book amount as at 1 April 2006 6,131 Additions 291 Disposals - Depreciation, amortisation, impairment and other movements (375)________________________________________________________________________________ Closing net book amount as at 30 September 2006 6,047________________________________________________________________________________ Six months ended 30 September 2007 Opening net book amount as at 1 April 2007 6,444 Acquisition of subsidiary (Note 14) 702 Additions 901 Disposals - Depreciation, amortisation, impairment and other movements (308)________________________________________________________________________________ Closing net book amount as at 30 September 2007 7,739________________________________________________________________________________ 12. Share capital Number of Ordinary Share Shares Shares Premium TotalCapital (Thousands) £'000 £'000 £'000________________________________________________________________________________Opening balance 1 April 2006 10,905 545 1,072 1,617 Proceeds from shares issued -Employee share option scheme 221 11 708 719________________________________________________________________________________ At 30 September 2006 11,126 556 1,780 2,336________________________________________________________________________________ Opening balance 1 April 2007 11,126 556 1,780 2,336 Proceeds from shares issued -Employee share option scheme 3 - 13 13________________________________________________________________________________ At 30 September 2007 11,129 556 1,793 2,349________________________________________________________________________________ Employee share option scheme options exercised during the first half to 30 September 2007 resulted in 3,000 shares being issued (2006: 221,000 shares), with exercise proceeds of £13,000 (2006: £719,000). The related weighted average price at the time of exercise was £11.40 (2006: £7.80) per share. 13. Borrowings and loans 30 September 30 September 31 March 2007 2006 2007Capital £'000 £'000 £'000________________________________________________________________________________ Non-current - 439 117 Current 440 652 652________________________________________________________________________________ 440 1,091 769________________________________________________________________________________ Movements in borrowings are analysed as follows: Six months ended 30 September 2006Opening amount as at 1 April 2006 1,420Repayments of borrowings (329)________________________________________________________________________________ Closing amount as at 30 September 2006 (1,091)________________________________________________________________________________ Six months ended 30 September 2007Opening amount as at 1 April 2007 769Repayments of borrowings (329)________________________________________________________________________________ Closing amount as at 30 September 2007 (440)________________________________________________________________________________ 14. Business combinations On 28 June 2007, the group acquired 100% of the share capital of Height Solutions Ltd, a company that manufactures and sells uPVC walkways for commercial applications. The acquired business contributed revenues of £195,000 and net profit of £38,000to the group for the period from acquisition to 30 September 2007. If the acquisition had occurred on 1 April 2007, consolidated revenue and consolidated net profit for the half-year ended 30 September 2007 would have been £17,234,000and £3,088,000 respectively. Details of net assets acquired and goodwill are as follows: £'000Purchase consideration: - cash paid 853 - direct costs relating to the acquisition 62________________________________________________________________________________ Total purchase consideration 915 - fair value of net identifiable assets acquired (see below) 516________________________________________________________________________________ Goodwill 399________________________________________________________________________________ The goodwill is attributable to Height Solutions Ltd's unique position in the market and to the significant cross-selling opportunities expected to arise after its acquisition by Latchways plc. The group has yet to finalise the amount of the fair value of the net identifiable assets acquired. The assets and liabilities arising from the acquisition are as follows: Acquiree's carrying Provisional amount fair value £'000 £'000________________________________________________________________________________ Cash and cash equivalents 120 120Property, plant and equipment 16 16Customer relationships - 200Intellectual property - 87Receivables 228 228Payables (190) (190)Inventories 55 55________________________________________________________________________________ Net identifiable assets acquired 229 516________________________________________________________________________________ Outflow of cash to acquire business, net of cash acquired: - cash consideration plus direct costs 915 - cash and cash equivalents in subsidiary acquired (120)________________________________________________________________________________ Cash outflow on acquisition 795________________________________________________________________________________ 15. Contingent liabilities There were no contingent liabilities as at 30 September 2007, 31 March 2007 or at 30 September 2006. 16. Events occurring after the balance sheet date Details of the interim dividend declared are given in Note 9. 17. Related party transactions During the period, Latchways plc made sales of £1,194,000 (2006: £1,402,000) toHCL Safety Limited. At the period end the balance outstanding to Latchways plc from HCL Safety Limited was £555,000 (2006: £589,000). 18. 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. This information is provided by RNS The company news service from the London Stock Exchange