Gamble of the week: A bet on workplace safety

Have you ever fancied working at the top of a tall building? Perhaps not. But people in that position want peace of mind that if they should slip or fall, then there will be something in place to make sure they don't come to any harm.

This is the bread and butter of this Wiltshire- based company, which makes specialist workplace safety kit.It has been going through a bit of a hard time over the last couple of years. Weak European economies have meant that construction companies haven't been busy and haven't bought a lot of itskit.

On Tuesday this week,Latchways (LSE: LTC)announced that things had got even worse. Wind-farm projects in Europe have been delayed, while a key American customer has apparently got too many of Latchways' products and doesn't need to order as many this year.

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Despite places such as the UK and Latin America doing better, pre-tax profits for the year to March 2015 are expected to be between £4.5m and £5.5m, compared to £6.8m last year. The shares were duly hammered and fell by 17%. Investors were probably wishing that there was a bit of safety kit to keep the shares from falling further.

Yet Latchways' management insiststhat this is a temporary blip and thatthe future will be much brighter.The directors have pledged to maintain last year's 39.5p dividend and hope that the 4.8% yield will persuade people to be patient. On top of this, there's more than £10m of cash in the bank and nodebt in other words, there's no riskof the company getting into financialdifficulties.

For example, onprofits of just £4.5m it would still bemaking a return on capital employed of18%, which is pretty decent. Two yearsago, that figure would have been over40% not many companies are capableof that.

Latchways' shares were over £14 back inNovember last year and don't look likereturning to those levels anytime soon.However, if you believe the managementwhen it says that profits can reboundstrongly over the next couple of years,then the shares could be a good buy forcontrarian investors.

Verdict: a buy for the brave at 830p

Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.