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LATCHWAYS PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012

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, wind turbines, manufacturing plants, entertainment arenas and offshore platforms. Latchways' equipment may be fitted either to new structures or retrofitted to existing ones.

Highlights

·; Strong second quarter after poor start to year. New sales teams beginning to contribute with order intake considerably improved

·; Group revenues down 9% to £18.8 million (2011: £20.6 million). Euro weakness responsible for £0.7 million of the reduction

·; Group profit before tax of £3.6 million (2011: £5.0 million)

·; Basic earnings per share of 24.00 pence (2011: 32.67 pence)

·; Strong cash generation. Cash balance £8.7 million, £0.3 million higher than year end (2011: £11.5 million)

·; Interim dividend increased by 10% to 11.00 pence per share (2011: 10.00 pence)

·; Successful start for the Personal Rescue Device. Revenue £0.7 million

·; Strong performance from Wingrip

Commenting on the results, Chairman, Paul Hearson said:

"As previously reported, this period has produced mixed fortunes for Latchways. Considerable progress has been made towards our long term goals, with the enhanced sales teams settling into their roles and already beginning to deliver notable successes. This has been set against a backdrop of weakness within our traditional installer business, resulting from the construction recession and fears over the Eurozone. Whilst these market forces resulted in a poor first quarter, we have recovered well and we remain confident of a successful outcome for the year as a whole.

Enquiries: Latchways plc Tel: 01380 732700

David Hearson, Chief Executive

Rex Orton, Financial Director

Newgate Threadneedle Tel: 020 7653 9858

Graham Herring/Terry Garrett

Chairman's Statement

As previously reported, this period has produced mixed fortunes for Latchways. Considerable progress has been made towards our long term goals, with the enhanced sales teams settling into their roles and already beginning to deliver notable successes. This has been set against a backdrop of weakness within our traditional installer business, resulting from the construction recession and fears over the Eurozone. Whilst these market forces resulted in a poor first quarter, we have recovered well and we remain confident of a successful outcome for the year as a whole.

Our new Personal Rescue Device ("PRD"), launched in April, has made a successful start and we expect revenues to gather pace as the year progresses.

Results

Group revenue reduced by 9% to £18.8 million (2011: £20.6 million).

Safety Products revenues decreased by 10% to £15.1 million. Excluding foreign exchange impacts of £0.7 million, resulting from the weakness of the Euro, the reduction would have been 6%.

Gross margins were 1.8% lower than last year at 51.4%. This was mainly due to foreign exchange effects.

The investments made in sales resources resulted in an increase in administrative expenses, although reduced costs elsewhere ensured that the impact was limited. The overall figure was up 2% at £6.1 million (2011: £6.0 million). The group operating margin for the period was 19.0% (2011: 24.1%). The reduction is a natural consequence of the operational gearing of the company and margins will return to normal levels with improved revenues.

Group profit before tax was £3.6 million, 28% below last year (2011: £5.0 million). Basic earnings per share were 26% lower at 24.00 pence (2011: 32.67 pence), whilst diluted earnings per share were 27% lower at 23.03 pence (2011: 31.52 pence).

Our balance sheet remains strong. Receivables at the period end were £11.2 million, £1.0 million less than at year end. Inventories, whilst £0.6 million higher than September last year at £5.2 million (2011: £4.6 million) are £0.2 million lower than at year end, despite necessary increases relating to new products, notably the PRD.

Cash generated from operations in the period was particularly strong at 132% of operating profit, and cash balances have continued to improve as a result. Cash at the period end was £8.7 million (2011: £11.5 million), which is £0.3 million higher than year end. The reduction of £2.8 million on last September is due to the payment of a £4.5 million special dividend in January 2012.

Dividends

The board remains committed to the progressive dividend policy which it has followed for many years. The reduction in revenues and profits seen in this period are considered to be short term in nature which we do not believe should affect either our long term strategy or our dividend policy. Our balance sheet has strengthened further in the period and we expect this to continue going forward. Therefore, as a mark of our continued confidence in the business, the board is declaring an interim dividend of 11.00 pence per share (2011: 10.00 pence), a 10% increase on last year. This dividend will be paid on 1 March 2013 to shareholders on the register as at 1 February 2013.

Review

In recent years we have successfully diversified our business away from its historic exposure to the UK construction market, achieving substantial growth in European markets and introducing products such as Wingrip and the Self Retracting Lifeline range which are less exposed to cyclical industries. This has enabled us to grow our business substantially over the past decade and we believe that this remains the appropriate strategy both in the short and longer term. However, the depth of the UK construction recession, combined with the extraordinary uncertainties surrounding the future of the Eurozone, resulted in a difficult first quarter for the group. Since then, order intake has improved considerably. What is encouraging is that our efforts to expand our representation worldwide have resulted not just in additional customers, but also in meaningful business beginning to flow from them. This gives us confidence both for the second half of this year and into the future.

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

Safety Products

Safety Products is the largest division of the group, accounting for 74% of group revenues and 93% of operating profits in the period. Our products are sold through a flexible distribution base comprising a network of primarily independent installers, distributing agents and also direct sales to key end customers in specific industries. The sales performance for the division is monitored on a geographic and product line basis.

Overall, the Safety Products business produced revenues of £15.1 million (2011: £16.8 million). Operating profits were £3.3 million (2011: £4.7 million).

Total UK revenues fell by 11% compared with last year. This reflects the ongoing weakness of the UK economy, affecting our installer business. We expect to see an improvement in this area in the second half due to significant store refurbishment projects with B&Q and Sainsbury's. UK SRL sales were also down, due mainly to the timing of offshore wind projects, of which a number are expected to produce business in the second half. UK revenues were bolstered by a good performance from the Personal Rescue Device, with customers such as the Ministry of Defence and Alstom taking initial volumes.

European revenues were down 4% in the period. On a constant currency basis this would have shown an increase of 5%, reflecting the resilience of our diversified product offering despite the economic problems. Our traditional installer-based business has faced a considerable economic headwind. Our other product ranges have performed well, with the SRL being selected for a number of offshore wind energy projects, whilst we achieved further Wingrip sales into Airbus's Bremen and Toulouse plants.

North America remains disappointing, with an 18% fall in revenues. In previous statements I have alluded to the need to increase our representation in this market. I am pleased to report that we have already signed agreements with several new customers in both the United States and Mexico. One of these customers is already delivering significant business.

The period saw a reduction in North American SRL sales, due to a reorganisation at a major customer which we believe will benefit us over the medium term but which resulted in a short term dip in product throughput.

The Rest of the World saw revenues fall by 28%. This was due to the timing of electricity transmission system sales. We have been successful in selling our systems to a number of transmission companies worldwide, but the timing of revenues is dependent upon customer maintenance schedules and, as such, is prone to being lumpy. We expect this timing difference to reverse in the second half, based on requirements advised to date.

As in North America, our success in the Rest of the World is dependent upon establishing high quality representation in key markets. Hence much of our efforts are devoted to finding and establishing installers in key geographies worldwide. We now have installers in several South American countries, as well as India, the Middle East and China. All of these are beginning to produce revenues. In India, we have recently supplied systems for airport terminals and industrial plants, whilst we have a number of major prospects in the Middle East. We are actively supporting our agents in these geographies to build a pipeline of business.

From a product perspective, Wingrip sales were up 13% in the period, with strong sales to Airbus and commercial airlines. With a number of significant prospects currently under discussion, we expect Wingrip to produce strong growth for the full year. Bombardier in Canada have recently joined Airbus and Boeing in selecting Wingrip for their aircraft construction plants, whilst our military offering has been enhanced by the development of a Wingrip system for the A400M transport plane, which is operated by a number of European Air Forces. We have already delivered initial systems to the French and Belgian Air Forces.

The PRD has made a promising start, with £0.7 million revenue achieved in its first six months. We are excited by the response to this product in the market. We are in discussions with a number of large companies in the industrial sector who are looking to make PRDs mandatory on their sites. Arcelor Mittal have recently approved the product for their plants, whilst several insurance companies are looking at the PRD for use by their field inspectors. The product has had a further positive impact by providing us enhanced access to the industrial sector for our other product ranges.

Although SRL revenues have reduced in this period, we have made substantial progress on building this business for the future. As noted above, we have supplied a number of European offshore wind energy projects in the period, when previously the majority have been for the UK. Our sealed SRL is now the product of choice for both the UK and European offshore wind energy markets. Furthermore, we have seen initial successes in the Oil & Gas arena, having recently achieved vendor approval from one of the largest offshore drilling contractors. Our sealed SRLs have also been specified for a new fleet of jack up rigs currently under construction. These successes give us confidence that we will achieve renewed growth.

Safety Services

The continued recession in UK construction has put further pressure on both revenues and margins in the Safety Services division. With less construction in progress, competition for installations remains fierce. Against this backdrop the division has performed relatively well in the period, with revenues down 6%. Improved efficiency in the Inspection and Certification department has enabled us to maintain overall gross margins, and with administrative expenses flat the division's operating profit has fallen 26% to £0.3 million. We are in the process of a cost reduction programme which will have little effect this year but will generate savings of around £0.2 million per annum going forward.

New Products

The initial success of the PRD demonstrates the importance of new products to the Latchways business. Products such as the SRL, Wingrip and others have all gone on to become significant contributors to the Latchways growth story, and we have no doubt that the PRD will also do so. Follow up variants for the PRD are currently under development, and we are further expanding the SRL range.

In addition to the headline-making new product launches, much work is currently underway to improve and enhance existing products, as well as cost engineering to ensure that we are able to protect margins without having to increase prices to our customer base. Although less visible than brand new product launches, these efforts are just as important to the future profitability of the business.

People

The new sales teams are now in place and, as shown above, are already beginning to make their mark. This has enabled us to adopt a much more proactive approach to our business in new geographies further afield. As a result, we are now seeing progressively more business prospects in such locations as South America, the Middle East and India, which although small today have the potential to become significant parts of our business.

In addition to the sales resources, we have also strengthened our support activities, with new resources in Business Analysis, Engineering and Quality. We will continue to assess the needs of the business to ensure that we are able to provide the very best customer service wherever and whenever it is required.

There has been much discussion in the media recently regarding the UK Living Wage as a target for business to pay. Latchways committed to the UK Living Wage two years ago for all employees and continues to meet this commitment.

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 reviews its risk profile regularly throughout the year, 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.

Latchways' product range is predominantly of a capital nature and business confidence is critical to the capital expenditure decision making process. Therefore the global economic situation, and in particular that of the UK and Eurozone, is a key risk to our business. The ongoing recession in UK Construction and many Eurozone countries has resulted in a reduction in construction related projects. This situation is likely to persist for the foreseeable future, and our response to this has been to concentrate our growth efforts on less affected industries and geographies.

Latchways' products are predominantly made of either marine grade stainless steel or aluminium. As such, fluctuations in the market price of these commodities can have a substantial impact on our costs. Commodity prices have been relatively benign over the period, reflecting subdued global demand.

Currencies, particularly the Euro and the US, Australian and New Zealand Dollars, 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 Dollar exposures, is subject to exchange risk. This is mitigated where practicable using forward exchange contracts. The past six months has seen Euro weakness resulting from concerns over the future of the Eurozone, which has impacted both revenues and, to a lesser extent, margins.

Future Prospects

We believe that our strategy of using our enhanced sales teams and excellent product range to grow our customer base across a range of key geographies and industries remains the way forward. The current level of activity and prospects give us confidence in a strong performance over the second half of the year and in the future.

Paul Hearson

12 November 2012

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

12 November 2012

RA Orton

Financial Director

12 November 2012

The results for the periods arose wholly from continuing operations.

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 2012.

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 2012 were approved by the Board of directors on 8 June 2012 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 2012 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 2012, 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 2012, as described in those annual financial statements.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: 

·; IFRS 7 Financial instruments: Disclosures;

·; Amendments to IAS 12, 'Income taxes' on deferred tax; 

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

·; IFRS 10 Consolidated financial statements 

·; IFRS 12 Disclosure of interest in other entities 

·; IFRS 13 Fair Value Measurement 

·; Amendments to IAS 1 - Presentation of Items of Other Comprehensive Income 

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: 

·; IFRS 11, 'Joint arrangements'; 

·; Amendments to IAS 19, 'Employee Benefits'; 

·; Revised IAS 27 Separate Financial Statements 

·; Revised IAS 28, 'Investment in Associates and Joint Ventures'.

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 2013 is 25.0% (the estimated tax rate for the 6 months to 30 September 2011 was 27.0%).

7. Earnings per Share

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

The impact of dilutive share options in the period results from potential ordinary shares in relation to the Latchways plc 2010 Value Creation Plan, together with pre-existing share options.

8. Dividends

A dividend of £2,539,000 that related to the year ended 31 March 2012 was paid in September 2012 (2011: £2,308,000). A special dividend of 40.00 pence per share, totalling £4,468,000 was paid in January 2012.

An interim dividend of 11.00 pence per share (2011: 10.00 pence), totalling £1,229,000 (2011: £1,117,000) has been declared and will be paid on 1 March 2013 to shareholders on the register as at 1 February 2013.

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

9. Reconciliation of operating profit to cash flow from operations

12. Contingent liabilities

There were no contingent liabilities as at 30 September 2012, 31 March 2012 or at 30 September 2011.

13. Related party transactions

During the period, Latchways plc made sales of £1,172,000 (2011: £1,414,000) to HCL Safety Limited. At the period end the balance outstanding to Latchways plc from HCL Safety Limited was £519,000 (2011: £854,000).

During the period, Latchways plc made sales of £596,000 (2011: £1,065,000) to Latchways Australia Pty Ltd. At the period end the balance outstanding to Latchways plc from Latchways Australia Pty Ltd was £281,000 (2011: £366,000).

During the period, Latchways plc made sales of £9,000 (2011: £79,000) to Sigma 6 d.o.o. Sigma 6 d.o.o made sales to Latchways plc of £584,000 (2011: £544,000). At the period end the net trading balance outstanding to Sigma 6 d.o.o from Latchways plc was £13,000 (2011: £48,000). In addition, Latchways had loans outstanding to Sigma 6 amounting to £284,000 (2011: £220,000).

At the period end, Latchways plc owed HCL Group Plc £350,000 (2011: £350,000)

14. 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.