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Company spotlight: James Latham


ON THE face of it, shifting to the Alternative Investment Market appears to have been good for materials distributor James Latham.Pre-tax profits galloped in at a thumping £21.8 million in the year to March 2005 as turnover rose £10.7 million to £97.5 million.

That headline profit figure is slightly misleading as Latham sold a former depot at Clapton last year for £17.8 million but underlying profits still came in £1 million ahead at £4 million.

The core panel and timber distribution arm continues to drive the business.

Sales, gross margins and net profits are all up, albeit helped by temporary price increases.

Trading should be enhanced after Latham expanded to Gateshead, buying a branch from FH Thompson & Sons.

Ceiling, drylining and partitioning distributing subsidiary Nevill Long also improved, but the future may not be so buoyant.

The proceeds from the Clapton sale will not be ploughed into expansion but into extra contributions to Latham's pension scheme, which remains in deficit.

In addition, the firm reports 'intensifying' competition, despite sales in April and May being well ahead of the same period a year ago.

Extra competition is not what Latham needs when existing customers are becoming unsettled by declining consumer spending and the firm does not expect to rely on price rises to boost margins.

With the family well in control - Peter Latham replaces retiring chairman Roger Latham with Pippa Latham joining the board as non-executive - investors'say is marginalised and the stock looks best avoided in the short term.