For immediate release                                                                                                   12 April 2012

 

The Tanfield Group Plc

("Tanfield", "Group", or "the Company")

 

Preliminary Results for the year ending 31 December 2011

 

Tanfield Group Plc, the leading manufacturer of aerial work platforms, announces its preliminary results for the year ending 31 December 2011.

 

Summary

 

·     Recovery in key markets for aerial lifts

·     Turnover increased 11% to £48.3m (2010: £43.5m)

·     Gross margins increased to 37% (2010: 29%)

·     Operating loss before impairments narrowed to £14.99m (2010: £15.83m)

·     Order book +296% as of 31 December, at  £30.5m (Dec 2010: £7.7m)

·     Supply chain challenges a constraint to speed of recovery

·     Cash discipline maintained: Net cash at 31 December of £3.5m (2010: £3.6m)

·     Successful £12 million institutional placing in March 2012 to invest in growth

·     Net cash at 1 April 2012 of £10.3m

 

Jon Pither, Chairman of Tanfield, said: "Demand for aerial lifts began to return in key markets during 2011 and grew as the year progressed, clearly demonstrated by the order book we brought into 2012.

 

"Bottlenecks within the supply chain slowed our rate of growth, but Tanfield still made good progress towards its near-term break-even target. The Company has recently raised additional funds to eliminate significant supply chain constraints and the Board is confident that this will accelerate Tanfield's growth in 2012."

 

 

For further information:

 

The Tanfield Group Plc                                                                  0845 155 7755

Darren Kell / Charles Brooks

 

WH Ireland                                                                                         020 7220 1666

James Joyce / Nick Field, Nominated Adviser                   

Seb Wykeham / Ruari McGirr, Broking                                  

 

Buchanan                                                                                            020 7466 5000

Charles Ryland / Nicola Cronk / Catherine Breen                             

 

 

 

KEY PERFORMANCE INDICATORS

 

	Key performance indicators			2011	2010	change
	Continuing operations			£000's	£000's	%
	Revenue			48,305	43,500	11.0
	EBITDA(before impairments, associates & disposals)			(13,397)	(14,082)	4.9
	Cash			3,463	3,637	(4.8)
	Headcount (Average no.)			469	428	9.6
	Order book - Powered Access			30,500	7,700	296.1

 

 

CHAIRMAN'S STATEMENT

 

Demand for aerial lifts began to return in key markets during 2011 and grew as the year progressed, clearly demonstrated by the order book brought into 2012.

 

Bottlenecks within the supply chain slowed our rate of growth, but Tanfield still made progress towards a break-even position. The Company has recently raised additional funds to eliminate significant supply chain constraints and the Board is confident that this will accelerate Tanfield's growth in 2012.

 

The sale of Smith Electric Vehicles at the start of the year allowed the Board to fully focus its attention on the Powered Access division, which sells its products under the Snorkel brand. We cross-trained our workforce in anticipation of a ramp up in production and invested in new product development. Both strategies will stand us in good stead as the aerial lift industry maintains its growth curve in 2012 and beyond.

 

I would like to thank all of our EMPLOYEES for their efforts during year that delivered progress but also fresh challenges; and I look forward to working with you in 2012.

 

CHIEF EXECUTIVE'S REVIEW

 

Summary

During the recession, many of the major rental companies embarked on de-fleeting programmes to improve utilisation rates and suspended capital expenditure, preferring instead to age their powered access fleets. A return to growth in the equipment rental and plant hire sector in 2011 drove renewed appetite for aerial work platforms. However, demand outstripped supply throughout the year, as the supply chain struggled to regain capacity it lost during the downturn. Overall, Tanfield grew turnover by 11 per cent to £48.3m, narrowing the loss from continuing operations before impairment to £15.0m for the year.

 

Powered Access & Engineering: Turnover of £48.3m (2010: £43.5m)

Customers began to return in key markets in early 2011 and we delivered an increase in sales of 25% in the first half. Demand further increased in the second half of the year, but we were unable to accelerate our production capacity due to weakness in the industry's supply chain. This is evidenced both in our sales growth for the year and the £30.5m order book we carried into 2012 - almost four times the order book at the end of 2010.

 

We continued to execute our strategy of enhancing the Snorkel product portfolio, launching a new range of boom lifts that share a common chassis. We have appointed a dedicated team to target Latin America, which continues to experience strong growth in the adoption of aerial work platforms; and strengthened our sales team in North America. Snorkel sells through a worldwide network of independent distributors. In 2011 we appointed new distributors in China, Czech Republic, Romania and Turkey.

 

Zero Emission Vehicles

Tanfield successfully completed the sale of the Smith Electric Vehicles division to its associate company, Smith Electric Vehicles US Corp ("SEVUS"), on 1 January 2011. The assets of the UK entity were sold to SEVUS for $15m, payable in 20 equal monthly instalments. All payments due to date have been met in line with our expectations.  On 7 March 2011 SEVUS completed a private placing to raise $58m, triggering a pre-payment of the deferred consideration totalling $5m and entitling SEVUS to a 203 day repayment holiday in respect of the deferred consideration. 

 

On 24 October 2011, SEVUS completed a private placing to raise $30m, triggering a payment of further deferred consideration, plus accrued interest, of approximately $5.6m.  At the same time, Tanfield converted $1.99m of deferred consideration into a convertible note and warrant that converted into a new class of preferred equity securities in SEVUS on 3 November 2011. Subsequently Tanfield held 5,259,192 ordinary shares in SEVUS which represented, on a fully diluted basis, approximately 27.22 per cent of the enlarged ordinary share capital of SEVUS.

 

On 14 February 2012, SEVUS announced an additional private placement of $40m. On the assumption that the Placing is subscribed in full, Tanfield's holding is diluted to 24.13 per cent of the enlarged ordinary share capital of SEVUS.

SEVUS continued to execute its business development strategy throughout 2011. It strengthened its Board of Directors; expanded its customer base in North America and Europe; established a joint venture to build all-electric school buses and announced it was opening a second production facility in the Bronx, New York.

 

In February 2012, the UK Government approved the Smith Edison all-electric 3.5t light commercial vehicle for the Plug-In Van Grant. This allows fleets to purchase Smith Edison vehicles at an £8,000 discount to the list price, thereby significantly increasing the value proposition for the Edison.

 

Outlook

In March 2012, Tanfield completed a £12m placing, the net proceeds of which have provided additional working capital to allow significant reductions in Snorkel product lead times. This influx of working capital allows the Company to place larger orders with its principal suppliers, make investments in strategic supply channels and, where necessary, offer incentives to prioritise supply chain commitments from key supply chain partners.

 

We begin 2012 with an extremely healthy order book and a clear strategy to realise this as sales. Despite the ongoing economic uncertainty in some key markets, we believe that replacement of aged equipment alone will deliver growth this year. 

 

Working capital is critical to the Company's growth strategy this year. Tanfield is therefore not proposing to pay a dividend for the period.  The directors believe the business is now well positioned to deliver growth and a return to profitability.

 

FINANCE DIRECTOR'S REPORT

 

The 11% increase in revenue for the year to £48.3m (2010 £43.5m) reflected the improved market conditions constrained by supply chain capacity and working capital constraints in 2011.

 

As in 2010, the cost base has been held as low as possible without damaging the overall Group infrastructure.  The limited growth in the year resulted in the business reporting a reduced loss before tax and results from associate of £15.1m (2010 £16.7m). Expenses in all categories were very similar to 2010 and improved performance is dependent upon increased volumes.

 

Reassessment of carrying value of associate

The holding in Smith Electric Vehicles Corp was increased in the year by participating in its Series C fundraising through conversion of $1.99m (£1.28m) of the deferred consideration owed by Smith Electric Vehicles Corp to Tanfield following the sale of Smith Electric Vehicles UK on 1 January 2011 into equity.  Subsequently Smith Electric Vehicles Corp has issued a Series D fundraising.  Applying the Series D valuation to the additional stake would value that stake at $2.6m (£1.6m).  We are required to account for our investment in this associate at cost less our share of accumulated losses.  Given that Smith Electric Vehicles Corp is a start up, its cumulative losses exceed our stake and is therefore valued at nil in our consolidated accounts.  This results in a full write down of our additional investment in the year of £1.28m (2010 nil).

 

Loss from operations

The Loss from Operations before impairments in the period was £14.99m (2010 £15.83). This was a trading loss reflecting low sales volumes given the constraints to growth. 

 

Finance income

The level of finance income in the period of £470k (2010: £108k) benefited from an increase in the value ofthe interest rate collar of £165k and interest income on deferred consideration of £220k. 

 

Taxation

In spite of the consolidated losses, a tax charge of £186k arose in a specific fiscal jurisdiction (Japan) in the period (2010 £35k).  There is no brought forward deferred tax asset, and none was recognised in the period resulting in no adjustment to deferred tax (2010 charge £1,915k).

 

 

 

Loss from continuing operations

Given the above, loss from continuing operations was £16.5m, (2010 £18.6m), the most significant differences between 2011 and 2010 being the lower trading loss, and deferred tax charge offset by the reassessment of the investment in Smith Electric Vehicles.

Discontinued Operations

The Smith Electric Vehicles division was sold on 1 January 2011 resulting in a profit on disposal recognised in the year of £173k.  There was no trading impact from that discontinued operation in 2011 (2010: Loss for the year £5.4m).

 

Total comprehensive income for the year

The total comprehensive income for the year was a loss of £15.7m, (2010: £21.5m), after reduced benefit from currency translation differences of £0.7m (2010: £2.5m).

 

Earnings per share

Loss per share from continuing operations was 17.5p (2010: Loss 23.2p).  No dividend has been declared (2010: nil).

 

Valuation of associate

Our associate, Smith Electric Vehicles US Corp is valued at cost less any cumulative losses, with a minimum value of nil, and is therefore valued at nil.  During the year Smith Electric Vehicles raised new equity at a valuation that would value the Tanfield Group plc stake in this associate at £54.0m.

 

Net Cash

At 31 December 2011, the Group had cash of £3.5m (2010: £3.6m). Although the business has reported a loss of £16.4m in the period, the net cash used was £0.2m.  This difference was funded largely by £7.8m of installments of consideration from its sale of the Smith Electric Vehicles division to its associate on 1 January 2011 and a further reduction in working capital in the period, specifically inventory.   

 

Since the year end the business has raised £12m before expenses in a placing of new ordinary shares with institutional and other investors. The additional cash will allow an increase in working capital to fund growth.  Given absence of any charges against the company's assets, if necessary, asset based borrowing capacity should be available to accelerate the growth.

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
				2011	2010
			Notes	£000's	£000's
Continuing operations
Revenue			1	48,305	43,500
Changes in inventories of finished goods and WIP			18	(2,848)	(7,689)
Raw materials and consumables used				(33,250)	(27,025)
Staff costs			6	(17,143)	(14,747)
Depreciation and amortisation expense			7	(1,595)	(1,745)
Other operating expenses			8	(8,461)	(8,121)
Loss from continuing operations before impairments				(14,992)	(15,827)
Impairment of receivables				(250)	(650)
Loss from continuing operations after impairments				(15,242)	(16,477)
Finance expense			9	(286)	(294)
Finance income			9	470	108
Net finance income (expense)				184	(186)
Loss from continuing operations before tax and associate				(15,058)	(16,663)
Reassessment of carrying value of associate			17	(1,280)	-
Loss before taxation				(16,338)	(16,663)
Taxation			10	(186)	(1,950)
Loss for the year from continuing operations				(16,524)	(18,613)
Discontinued operations
Profit on disposal of operations			4	173	-
Loss for the year from discontinued operations			3	-	(5,375)
Loss for the year				(16,351)	(23,988)
Other comprehensive income, net of tax:
Currency translation differences				694	2,509
Total comprehensive income for the year				(15,657)	(21,479)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2011
				2011	2010
				£000's	£000's
Loss for the year attributable to:
Owners of the parent
From continuing operations				(16,510)	(18,611)
From discontinued operations				173	(5,375)
				(16,337)	(23,986)
Non-controlling interest
From continuing operations				(14)	(2)
Loss for the year				(16,351)	(23,988)
Total comprehensive income for the year attributable to:
Owners of the parent				(15,643)	(21,477)
Non-controlling interest				(14)	(2)
Total comprehensive income for the year				(15,657)	(21,479)
Loss per share
Loss per share from continuing operations
Basic (p)			11	(17.5)	(23.2)
Diluted (p)			11	(17.5)	(23.2)
Loss per share from discontinued operations
Basic (p)			11	0.2	(6.7)
Diluted (p)			11	0.2	(6.7)
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2011
				2011	2010
				£000's	£000's
Non current assets
Intangible assets				5,023	5,546
Property, plant and equipment				3,324	3,879
Associate				-	-
Trade and other receivables				-	250
Investments in subsidiaries				-	-
				8,347	9,675
Current assets
Inventories				21,495	25,408
Trade and other receivables				10,753	10,510
Investments				498	395
Current tax assets				-	11
Deferred consideration				341	-
Cash and cash equivalents				3,463	3,637
				36,550	39,961
Assets classified as held for sale				-	13,194
				36,550	53,155
Total assets				44,897	62,830
Current liabilities
Trade and other payables				13,034	11,293
Provisions				621	272
Tax liabilities				189	83
Obligations under finance leases				60	197
Other creditors				-	2,294
				13,904	14,139
Liabilities directly associated with assets classified as held for sale				-	3,832
				13,904	17,971
Non-current liabilities
Obligations under finance leases				208	-
Deferred tax liabilities				375	375
				583	375
Total liabilities				14,487	18,346
Equity
Share capital				4,728	4,704
Share premium				3,097	827
Share option reserve				1,785	1,764
Special reserve				66,837	66,837
Merger reserve				1,534	1,534
Translation reserve				12,126	11,432
Profit and loss account				(59,680)	(42,611)
Equity attributable to the owners of the parent				30,427	44,487
Non controlling interests				(17)	(3)
Total equity				30,410	44,484
Total equity and total liabilities				44,897	62,830

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2011

Attributable to the owners of the parent Share capital Share premium Share option reserve Merger reserve Special reservea Translation reserve Retained earnings Non-controlling interests Total £000's £000's £000's £000's £000's £000's £000's £000's £000's Balance at 1 January 2010 3,704 - 1,764 1,534 66,837 8,923 (18,625) (1) 64,136 Comprehensive income Loss for the year - - - - - (23,986) (2) (23,988) Other comprehensive income    Currency translation differences - - - - - 2,509 - - 2,509 Total other comprehensive income for the year - - - - - 2,509 - - 2,509 Total comprehensive income for the year - - - - - 2,509 (23,986) (2) (21,479) Transactions with owners in their capacity as owners:-    Issue of shares (note 24) 1,000 827 - - - - - - 1,827 At 31 December 2010 4,704 827 1,764 1,534 66,837 11,432 (42,611) (3) 44,484 Comprehensive income Loss for the year - - - - - (16,337) (14) (16,351) Other comprehensive income    Currency translation differences - - - - - (57) - - (57) Total other comprehensive income for the year - - - - - (57) - - (57) Total comprehensive income for the year - - - - - (57) (16,337) (14) (16,408) Transactions with owners in their capacity as owners:-    Issue of shares to settle deferred consideration (note 22) 23 2,270 - - - 751 (751) - 2,293    Share based payments (note 28) 1 - 21 - - - 19 - 41 At 31 December 2011 4,728 3,097 1,785 1,534 66,837 12,126 (59,680) (17) 30,410

a The company's special reserve relates to the reclassification of the share premium account.