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Latchways facing headwinds

RESULTS: Sales bounced back in the second quarter at Latchways, but the fall protection specialist still faces significant headwinds
November 12, 2012

Second-quarter sales improved significantly at Latchways (LTC) after a subdued first quarter, but the fall protection systems specialist failed to shrug off the effects of a weak UK construction sector and tough trading in the US. True, an expanded sales team has won new customers and new orders and the company is well placed to benefit from an economic upturn - but such better times remain a distant prospect, leaving the shares too expensively rated.

IC TIP: Sell at 975p

Safety products, which account for 93 per cent of operating profits, saw turnover fall from £16.8m to £15.1m, trimming profits here by 30 per cent to £3.3m. Uncertainty over the timetable for offshore wind projects dented demand for self-retracting lifeline systems, too, although management expects orders to start coming in during the second half. Moreover, its newly introduced Personal Rescue Device product attracted orders from the Ministry of Defence and Alstom worth £0.7m. Sales in Europe, meanwhile, rose 5 per cent on a constant currency basis - although currency movements meant that revenue here fell 4 per cent in sterling terms. North American sales dropped 18 per cent, although steps to win new business are showing some early signs of success.

Broker N+1 Singer is maintaining its full-year forecasts and expects adjusted pre-tax profit of £10.9m, giving EPS of 70.1p (from £9.9m and 63.4p in 2012).

LATCHWAYS (LTC)
ORD PRICE:975pMARKET VALUE:£109m
TOUCH:975-1,015p12-MONTH HIGH:1,190pLOW: 935p
DIVIDEND YIELD:3.5%PE RATIO:17
NET ASSET VALUE:259p*NET CASH:£8.7m

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201120.64.9932.710.0
201218.83.5724.011.0
% change-9-28-27+10

Ex-div: 30 Jan

Payment: 1 Mar

*Includes intangible assets of £6.4m, or 57p a share