Latchways

A leader in legislation-driven markets, fall protection safety systems specialist Latchways has remained profitable in spite of recession and is reaping the benefits of overseas growth initiatives.

Sales and pre-tax profits reduced by 8% in the year to March, to £33.9m and £7.6m respectively, as Latchways, whose systems protect workers operating on everything from commercial buildings to wind power turbines and aircraft wings, felt the impact of recession on construction-facing markets, primarily in the UK. European markets proved more resilient, whilst the North American business saw strong growth last year.

‘UK commercial construction’, explained finance director Rex Orton, ‘represents a quarter of our revenues, but we are reducing our exposure’. He refers to last year’s 6% export growth to a record £16.7m (now 66% of product revenues), as Latchways made inroads into the Middle East, Australasia, South America, Poland and even India.

In terms of products, early successes were seen in the offshore wind turbine market with the new ‘sealed Self-Retracting Lifeline (SRL)’ system, with potential in additional markets including oil and gas. ‘The SRL is unlocking more doors’, purrs Orton, noting that another key product, ‘Wingrip’, has been warmly received by customers including the US military.

Still strongly cash generative and closing the year with more than £7m cash in the coffers, Latchways’ financial strength allowed the board to up the final dividend 15% to 18p, thereby increasing total dividends 10% to 26p. And with orders running ahead of last year and product acquisitions under consideration, Latchways looks strongly placed to capitalise on more buoyant market conditions.

For March 2011, analysts are forecasting pre-tax profits of £8.4m on £36.1m of turnover, with an improved 28.4p dividend likely, payable from earnings of 53.8p. Modestly-priced and offering a forecast yield of 4.2%, the shares, originally backed by Growth Company Investor at 315p in 2003, now occupy strong buy territory.