RNS Number:1136M
Latchways PLC
10 June 2003
10 June 2003
LATCHWAYS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2003
Latchways plc designs, manufactures and sells a complete range of fall arrest
safety 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,
telecommunications towers, manufacturing plants, entertainment arenas and
offshore platforms. Latchways' equipment may be fitted either to new structures
or retrofitted to existing ones.
Summary
* Turnover of #18.4m, increased from #9.3m last year. Full year
contribution from HCL Group along with strong recovery in all key sectors of the
business.
* Profit before tax recovered to #2.75m (2002: #0.77m).
* Positive feedback received from Dutch electricity rollout.
* HCL Group achieved financial targets.
* Proposed final dividend 6.28 pence (2002: 6.05 pence) per ordinary
share, making a total for the year of 9.305 pence (2002: 9.075 pence).
Commenting on the results the Chairman, Paul Hearson, said:
"I am pleased to report a strong performance across our business. The recovery
that I described in my interim statement continued throughout the year and, as a
result, profits have recovered well after the poor trading experienced in the
prior year. Although early into the new year, we are confident of building on
this solid foundation and resuming steady growth."
Enquiries: Latchways plc Hudson Sandler
David Hearson, Managing Director Lesley Allan / Wendy Baker
Rex Orton, Financial Director Tel: 020 7796 4133
Tel: 01380 732700
Chairman's Statement
I am pleased to report a strong performance in all areas of our business. The
recovery that I described in my interim statement has continued and, as a
result, profits have recovered well after the poor trading experienced in the
prior year. This performance, during a period of economic uncertainty and
international instability, is particularly gratifying and a tribute to those
involved.
I am encouraged by the contribution made by our subsidiary HCL in its first full
year of being part of the group. It has achieved the objectives set for it at
the time of acquisition and we have benefited greatly from being able to offer
all our end users a considerably broader service.
Results
Group turnover for the year ended 31 March 2003 was #18.4 million (2002: #9.3
million), 98% ahead of last year. This includes a full year's contribution from
HCL Group.
Group operating profit was #2.99 million, 240% ahead of the prior year. Profit
before tax was #2.75 million (2002: #0.77 million), while diluted earnings per
share were 18.13 pence (2002: 5.08 pence).
Dividends
In 2002, the Board maintained the annual dividend despite the poor trading
results, reflecting our view that profitability would recover quickly. This
confidence has proven to be well founded, enabling us to propose a final
dividend for 2003 of 6.28 pence per share, a 3.8% increase. This makes the
proposed total dividend for the year 9.305 pence, 2.5% up on 2002. This is
expected to be paid on 5 September 2003 to shareholders on the register as at 8
August 2003.
Opportunities
We have continued our substantial investment in new product development and in
strengthening our service offering. This investment will allow us to expand into
new business areas and to continue as the leading innovator in the area of fall
arrest systems both in our home market and overseas.
Business partnerships remain an area of focus and we have increased the number
and scope of these during the year. These relationships embrace all areas of the
sales process from the architect or specifier right down the contractual chain.
During the year we trained record numbers of our customers' employees in the
fitting and use of our products. This training will be expanded in the coming
year, complemented by a new course offering system designer training and a
recently implemented design service for specifiers and installers.
The area of our business which addresses vertical systems continues to make good
progress, with strong sales to the Dutch, UK and other electricity and
telecommunications markets. The early success of the rollout of systems to the
Dutch electricity companies has demonstrated our ability to provide cost
effective and reliable systems to a very demanding and technically competent
market. It has already led to our involvement in a number of other significant
projects.
HCL Group
As I explained in last year's statement, the acquisition of HCL Group in
November 2001 was made for the specific purpose of enabling turnkey solutions to
be offered to the telecommunications industry. We have also found that the
interchange of technical and safety information between the group companies has
greatly enhanced activities such as targeted marketing and product development.
These benefits, whilst not unexpected, add to our view that this is proving a
successful acquisition.
People
The Latchways group now employs over 180 people throughout the UK. Each has made
an important contribution to the business this year and on behalf of the board I
would like to thank them all.
Current Trading and Prospects
The current business environment is not without risk with a considerable degree
of uncertainty still apparent. Trading has, however, remained healthy since the
year-end, with installers reporting good activity across the business. Although
early into the new year, we are confident of building on this year's solid
foundation and resuming the steady growth required to maximise shareholder
return.
Paul Hearson, Chairman
OPERATING AND FINANCIAL REVIEW
Financial Review
Consolidated Results
The consolidated results for the year include a full years' contribution from
HCL Group, compared with four months in the prior year.
Turnover for the year was #18.4 million, compared with #9.3 million last year.
This resulted in an operating profit of #2.99 million (2002: #0.88 million),
generating a pre tax profit of #2.75 million (2002: #0.77 million).
It is gratifying that gross margins at 52% were largely unchanged, despite the
inclusion of a full year's results from HCL Group, and an increased proportion
of lower margin vertical business within Latchways.
The increase in operating expenses, after adjusting for HCL Group, was
significantly lower than the increase in turnover. Planned uplifts in new
product development and marketing expenditure, as well as both internal and
external sales commissions and bonuses, accounted for the majority of the
increase.
Earnings per share of 18.15 pence were 256% up on last year (2002: 5.09 pence)
while diluted earnings per share were 18.13 pence (2002: 5.08 pence).
This was a satisfactory year for cash generation, with cash generated from
operations in line with operating profit. Net debt was reduced by #0.6 million
to #2.2 million. All financial covenants remain well covered and are expected to
remain so for the foreseeable future.
Operating Review
The combined UK turnover of the group increased to #13.3 million from #6.8
million in the previous year. This represents a strong turnaround. We have
focused our efforts on broadening our offering to system specifiers such as
architects and roofing contractors. We now offer a complete design and
specification service for all types of fall arrest system design. On the product
side, the Constant Force Post range has been increased to cover all major
manufacturers' roof types. These actions have helped to ensure that when
Latchways' product is specified it is increasingly difficult for competitors to
change that specification.
Sales to the telecommunications industry were badly hit in the prior year by the
effects of the Foot and Mouth outbreak. This year, sales made a strong recovery
and we remain the system of choice for all major mast operators.
European sales performed well in the year, with good contributions from both the
Dutch Electricity industry and our traditional installer base, as well as some
strong performances from new installers. As a result, European sales were up 61%
to #2.9 million. We expect to make further progress this year as the new
installers continue to grow. Although relatively small to date, the impact of
these installers will justify the long-term effort that we have put into
developing their businesses.
The Dutch electricity rollout has gone well during the year, with all of the
major companies taking delivery of significant volumes of product. The feedback
we have received has been positive and we have learned a great deal which will
further improve our offering going forward. We remain the supplier of choice to
the electricity industry.
After last year's poor trading in North America, sales have come back strongly
with revenues of #1.8 million in the year, compared with #0.2 million in 2002.
It is particularly encouraging that the recovery has taken place across all of
our customers, with each making a significant contribution. Our faith in the
long-term prospects for our North American business remains strong.
Operations
The specification sale is an important concept in our industry and one on which
we have placed great emphasis in recent years. In any new build project, it is
important to ensure that the fall arrest product is specified early in the
design process, and then to ensure that this specification is maintained
throughout the build phase. Latchways has used a number of means to ensure that
our product is specified. This is achieved though a combination of targeted
marketing, direct sales, technical support to architects, contractors and
installers, and product quality. We also seek to build long-term relationships
with key customers and decision makers. These customers have recognised and
specified Latchways as their system of choice, after long and thorough technical
appraisals.
Product Development
Although the Constant Force Post has been important to our business over the
past 18 months, it is by no means the only new product that has been launched
over the past year. Latchways is the only company that consistently designs
industry specific solutions. For example, an overhead system was specifically
developed for the North American rail car industry, and launched in the fourth
quarter. This addresses the limitations of existing product offerings in the
marketplace. Early indications from customers are of a high level of acceptance
and, although not likely to generate significant business directly, it
demonstrates once again our unique ability to respond to customer needs and to
develop fall arrest solutions that are practical, reliable and cost effective.
Our intellectual property remains of central importance to our business. We have
continued to invest considerable funds in both registering and defending our
patents.
In recognition of the importance of new product development we have further
increased our design resource during the year. This will ensure that we remain
at the forefront of our industry.
Future Prospects
Our commitment to quality and future growth was undiminished despite the poor
trading of the previous year. This year has seen the benefits of this approach
and growth has been restored. There will be continued focus on quality and
customer service. We have a solid foundation for growth in the UK and Europe,
whilst further progress in North America will be achieved through close
cooperation with our installer base.
We will continue to concentrate on the vertical market in order to maximise the
potential opportunities we have in this area. Our impressive customer list and
a track record of over 20,000 vertical systems installed over the past 10 years
will help us ensure that we retain our number one position in this market.
David Hearson
Managing Director
Latchways plc
Consolidated Profit and Loss Account
for the year ended 31 March 2003
Results Amortisation Results
before of goodwill after
amortisation amortisation
of goodwill of goodwill
2003 2003 2003 2002
#'000 #'000 #'000 #'000
Turnover 18,449 0 18,449 9,328
Cost of sales (8,924) 0 (8,924) (4,344)
Gross profit 9,525 0 9,525 4,984
Administrative Expenses
- excluding goodwill amortisation (6,435) 0 (6,435) (4,072)
- goodwill amortisation 0 (100) (100) (33)
(6,435) (100) (6,535) (4,105)
Total operating profit 3,090 (100) 2,990 879
Interest receivable and similar income 14 5
Interest payable and similar charges (250) (115)
Profit on ordinary activities before taxation 2,754 769
Tax on profit on ordinary activities (787) (217)
Profit on ordinary activities after taxation 1,967 552
Dividends (1,008) (983)
Retained profit/(loss) for the year 959 (431)
Basic earnings per share (pence) 18.15 5.09
Diluted earnings per share (pence) 18.13 5.08
There are no recognized gains or losses except for the profit as stated above
and therefore no separate statement of total recognised gains and losses is
shown.
All activities relate to continuing operations.
Latchways plc
Consolidated Balance Sheet
as at 31 March 2003
2003 2002
#'000 #'000
Fixed Assets
Intangible assets 2,291 2,361
Tangible assets 2,791 2,698
5,082 5,059
Current assets
Stocks 1,440 1,606
Debtors 6,277 5,254
Cash at bank and in hand 1,144 586
8,861 7,446
Creditors: amounts falling due within one year (5,368) (5,182)
Net current assets 3,493 2,264
Total assets less current liabilities 8,575 7,323
Creditors: amounts falling due after more than one year (2,748) (2,451)
Provisions for liabilities and charges (97) (101)
Net assets 5,730 4,771
Capital and reserves
Called up share capital 653 653
Share premium account 922 922
Profit and loss account 4,155 3,196
Equity shareholders' funds 5,730 4,771
Latchways plc
Consolidated Cash Flow Statement
for the year ended 31 March 2003
2003 2002
#'000 #'000
Net cash flow from operating activities 2,982 2,194
Returns on investment and servicing of finance
Interest received 14 5
Interest paid (250) (112)
Interest paid on finance leases 0 (3)
Net cash outflow from returns on investment and servicing of finance (236) (110)
Taxation
UK Corporation tax paid (514) (822)
UK Corporation tax received 75 0
Net cash outflow on taxation (439) (822)
Capital expenditure and financial investments
Purchase of intangible fixed assets (80) (86)
Purchase of tangible fixed assets (508) (419)
Sale of tangible fixed assets 6 15
Net cash outflow on capital expenditure (582) (490)
Acquisitions
Payments to acquire subsidiary undertakings 0 (650)
Costs incurred on acquisition of subsidiary undertakings 0 (282)
Net overdraft acquired on acquisition of subsidiary undertakings 0 (242)
Net cash outflow from acquisitions 0 (1,174)
Equity dividends paid (983) (983)
Net cash inflow/(outflow) before financing 742 (1,385)
Financing
Bank loans received 1,150 2,164
Repayments of bank loans (180) (500)
Conversion of loan notes (1,150) 0
Principal payment under finance leases 0 (18)
Net cash (outflow)/inflow from financing (180) 1,646
Increase in cash in the year 562 261
NOTES
1. Basis of accounting
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 March 2002 and 2003. The financial
information in respect of 2003 is unaudited. Statutory accounts for the year
ended 31 March 2002, on which the auditors gave an unqualified report pursuant
to section 235 of the Companies Act 1985, have been filed with the Registrar of
Companies.
2. Earnings per share
The calculation of basic earnings per ordinary share is based on a weighted
average of 10,836,590 ordinary shares in issue and ranking for dividend (2002:
10,836,590) and on a profit of #1,967,000 (2002 : #552,000).
The calculation of diluted earnings per share is based on a weighted average of
10,849,178 ordinary shares (2002: 10,867,952), and uses an average market price
for the year of #2.44 (2002: #3.21)
3. Dividends
Dividends for the year ended 31 March 2003 represent an interim dividend of
3.025p per ordinary share, paid on 7 March 2003, and a proposed final dividend
of 6.28p per ordinary share.
4. The Annual Report and Accounts
The Annual Report and Accounts for Latchways plc for the year ending
31 March 2003 will be posted to shareholders on or before 31 July 2003 and
copies will be available from the registered office, Latchways plc, Hopton Park,
Devizes, Wiltshire, SN10 2JP.
6. The Annual General Meeting
The Annual General Meeting will be held at Hopton Park, Devizes, Wiltshire, SN10
2JP on 29 August 2003 at 12 noon.
This information is provided by RNS
The company news service from the London Stock Exchange
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