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Fall protection specialist Latchways continues to defy gravity after reporting solid growth. That reflects the legislation-driven nature of its business, which cushions the group from much of the gloom enveloping the construction industry. Finance director Rex Orton reckons believes that, while fewer buildings are being built, more of these now incorporate Latchways' systems than in the past.
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France, Germany and Spain are increasingly enforcing EU-wide safety regulations - indeed, continental Europe has now overtaken the UK as the group's largest market. Mr Orton also points to the acquired walkways and guardrails businesses as growth areas. The self-retracting lifeline product offers further growth potential, too - that's worth an estimated $200m (£126m) a year worldwide, of which Latchways is targeting 10 per cent within five years, although this will require cracking the key US market. The roll-out of systems to electricity transmission and wind power companies slowed, but this is expected to pick up in the second half. Sterling's weakness against the dollar and euro boosted revenue, but is also increasing the cost of Far Eastern components.
Prior to these results, Brewin Dolphin was forecasting full-year pre-tax profit of £10.2m, and EPS of 63p.
| LATCHWAYS (LTC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 669p | MARKET VALUE: | £74.5m | |
| TOUCH: | 650-700p | 12-MONTH HIGH: | 1,048p | LOW: 585p |
| DIVIDEND YIELD: | 3.3% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 182p* | NET CASH: | £3.7m | |
| Half-year to 30 Sep |
Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 17.0 | 4.41 | 27.3 | 7.10 |
| 2008 | 19.3 | 4.87 | 30.2 | 7.81 |
| % change | +14 | +10 | +11 | +10 |
Ex-div: 4 Feb Payment: 6 Mar *Includes intangible assets of £5.92m, or 53p a share |
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Latchways' growth prospects are underpinned by legislation. But, while the shares have slipped recently, weak sentiment generally doesn't bode well for a re-rating. So, on a forward PE of 11, the shares look fairly priced.
Last IC view: High enough, 870p, 9 Jun 2008
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