Latchways cushions declining profit with increased dividend

Latchways, a company which designs, makes and sells a range of fall protection systems, has posted a decline in group pre-tax profit as a result of what it describes as a 'poor start to the year'.

In the six months ended September 30th, group revenues dropped 9% year-on-year from £20.6m to £18.8m, of which £0.7m was caused by euro weakeness. This pushed pre-tax profit from £5.0m to £3.6m, and earnings per share totalled 24p, compared to 32.67p in the same period the previous year.

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.

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"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."

Much of the decline was seen in Safety Products, in which revenues decreased by 10% to £15.1m. The division accounts for 74% of group revenues and 93% of operating profits in the period.

Overall gross margins were 1.8% lower than last year at 51.4%, which was mainly due to foreign exchange effects.

Administrative expenses edged 2% higher to £6.1m, as the company made investments in sales resources.

The group operating margin for the period declined to 19.0% (2011: 24.1%), which the firm said was a "natural consequence of the operational gearing of the company" and is confident that margins will return to normal levels with improved revenues.

The firm said that because the reduction in revenues and profits seen in this period are considered to be short term it is continuing with its progressive dividend policy, and as such declared an interim dividend of 11p, up from 10p the same period the previous year.

Looking ahead the company says it is feeling confident: "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."

The share price fell 1.24% to 995p by 13:20.

NR