05 April 2011

 

The Tanfield Group Plc

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

 

Preliminary Results for the year ending 31 December 2010

 

Tanfield Group Plc, the leading manufacturer of aerial work platforms, announces its preliminary results for the year ending 31 December 2010.

 

Summary*

 

·     Turnover of £43.5m (2009: £43.1m)

·     Operating loss before impairments of £15.8m (2009: £16.0m)

·     Net cash at 31 December of £3.6m (2009: £5.4m)

·     Net cash at 01 April of £4.8m

·     Return to growth in 2011

 

*results do not include sales from the Zero Emission Vehicles division, which was sold at the end of 2010 to our associate company Smith Electric Vehicles US, and is therefore treated as a discontinued operation.

 

Jon Pither, Chairman of Tanfield, said: "As the market for aerial lifts is now beginning to return to growth, we expect that 2011 will be a transitional year, where we move closer to a break-even position. With a healthy cash balance and no debt, I believe Tanfield is on the right path to recovery and a secure future."

 

 

 

For further information:

 

The Tanfield Group Plc Darren Kell, CEO Charles Brooks, FD	+44 (0) 845 155 7755
Arbuthnot Securities Limited (Nominated Adviser & Broker) James Steel / Ed Groome	+44 (0) 207 012 2000

 

KEY PERFORMANCE INDICATORS

 

			2010	2009
Continuing operations			£000's	£000's	%
Revenue			43,500	43,102	0.9
Operating margin %			29%	26%	3.0
EBITDA(before impairments)			(14,082)	(14,208)	0.9
Cash			3,637	5,414	(32.8)
Headcount (No)			428	455	(5.9)
Order book - Powered Access			7,700	2,200	250.0

 

CHAIRMAN'S STATEMENT

 

2010 was equally as challenging as 2009, with no material improvement in demand for aerial work platforms. However we have since successfully completed the sale of Smith Electric Vehicles, to our associate company Smith Electric Vehicles US, which has positively impacted on our net cash position and we remain debt-free.

 

We have stuck to our guns in terms of preserving our people and core skills for the longer term recovery, rather than chasing inappropriate short term reductions in overhead, and we continue to enhance and expand the Snorkel product range and distribution channels.

 

As the market for aerial lifts is now beginning to return to growth, we expect that 2011 will be a transitional year, where we move closer to a break-even position. With a healthy cash balance and no debt, I believe Tanfield is on the right path to recovery and a secure future.

 

I would like to thank all of our people for their efforts during another challenging year and look forward to working with you in 2011.

 

 

CHIEF EXECUTIVE'S REVIEW

 

During 2010, the paucity of access to credit, allied to a depressed demand, continued to prevent many of our customers from investing in new aerial lifts. Turnover remained stable at £43.5m, resulting in a loss from continuing operations before impairment of £15.9m for the year; virtually echoing our performance in 2009.

 

Following the actions we implemented in 2009 to reduce our cost base, we focused on cash generation ahead of profitability, whilst preserving our debt capacity for the eventual market recovery, thereby preserving the core skills of our workforce and maintaining the best possible operational position for that recovery.

 

Powered Access: Turnover of £41.0m (2009: £41.7m)

 

The overall performance of this division, which produces the Snorkel range of aerial lifts, was in line with the performance of the wider market and our peers. During the period the UpRight brand, under which the division operated in the European, Middle Eastern, African and certain Asian markets, was subsumed into the more powerful and recognised Snorkel brand, predominant in USA, Latin America,  Asia, Australia and New Zealand markets, and the entire Powered Access business division now operates globally under this single identity. 

 

As predicted, the major equipment rental companies, which globally account for approximately two-thirds of all aerial lift purchases, maintained their moratorium on spend.  The market throughout 2010 therefore mirrored 2009 in being both depressed and highly competitive, particularly in Europe and North America.

 

We continued to execute our strategy of enhancing the Snorkel product portfolio and the worldwide network of independent distributors. In 2010 we appointed new distributors in Europe, Scandinavia, Latin America, and South-East Asia.

 

In February 2010, we signed a licensing and manufacturing agreement with Pop-Up Products Ltd. Pop-Up is the market leader in the production of low-cost, compact, portable personnel lifts for low-level access, which is the fastest growing market segment in the aerial lift industry. Under the agreement, Snorkel owns the global rights to market this UK innovation and we have transferred production of Pop-Up lifts to our Vigo Centre headquarters. Our design engineers continue to work with Pop-Up Products to grow and enhance the product range.

 

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 cash, payable in 20 equal monthly instalments. All payments due to date have been met in line with our expectations.  On 7^th 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.  Following this private placement Tanfield Group now holds 32.2% of the enlarged US entity. For accounting purposes, this is reported as a discontinued operation.

 

Other: Turnover of £2.5m (2009: £1.4m)

 

Tanfield's Engineering business supplies sub-assemblies and fabrications to the construction equipment sector. These customers continued to experience low sales during 2010, reflected in low turnover for this business unit.

 

Outlook

 

Snorkel's order intake substantially increased in the first quarter of 2011, indicating that a recovery may be underway, albeit from very low levels.  It is too early to say whether the current levels will be sustained as it is likely that some of the recent orders contain some short term replenishment of inventory at dealers.

 

However, the prolonged recession has severely impacted our supply chain's capabilities to react and ramp up production and this will restrict the pace of our growth during 2011. We therefore see this year as one of transition, where we grow sales and move closer towards profitability. Having preserved our debt capacity for this eventual recovery, we are now examining the potential to introduce some debt into the business to help finance our return to growth.

 

As we continue to focus on working capital optimisation, Tanfield is not proposing to pay a dividend for the period.  The directors believe the business remains well positioned, it has a stable balance sheet bolstered by the sale of Smith Electric Vehicles with cash and un-utilised debt capacity to finance future growth and a return to profitability.

 

FINANCE DIRECTOR'S REPORT

 

The sale of Smith Electric Vehicles on 1 January 2011 has resulted in that division being treated as a discontinued operation in the Consolidated Statement of Comprehensive Income for 2010 and 2009.  Comparatives have been restated to adopt the same treatment.  In the Consolidated Balance Sheet, the assets and liabilities of the Smith Electric Vehicle division are classified as held for sale in 2010, but remain unchanged in 2009. 

 

The Revenue for the year of £43.5m (flat with 2009 revenue of £43.1m) reflected the ongoing poor market conditions suffered throughout 2010.

 

Whilst cost base has been held as low as possible without damaging the overall group infrastructure, the continued reduced volumes and the low level of pricing resulted in a Loss before Tax of £16.7m (2009 £16.9m).   Expenses in all categories were very similar to 2009.

 

Impairment of trade receivable

A further review of the carrying values of the assets was undertaken.  A further impairment of £650k was believed to be necessary.  Impairments in 2009 totaled £600k.  

 

Loss from operations

The Loss from continuing operations before impairment in the period was £15.8m (2009 £16.0).  This was a trading loss reflecting the continuing poor trading conditions. 

 

Finance expenses

The reduction in interest cost of the period, excluding the interest rate collar, of £176k (2009: £394k) was offset by the decrease in the value of the interest rate collar of £10k (2009 income of £127k).

 

Taxation

Changes to the assumptions in relation to deferred tax has resulted in a tax charge of £1,950k, (2009 £1,066k recovery).  There is no deferred tax asset carried forward meaning that in any future periods there will be no tax charge where profits are covered by brought forward tax losses. 

 

Loss from continued operations

Given the above, Loss from continued operations was £18.6m, (2009 £15.9m), the most significant difference between 2010 and 2009 being the tax charge.

 

Discontinued Operations

The Smith Electric Vehicles division was sold during the year.  The performance in the year was similar to 2009 with turnover of £14.8m (2009 £15.1m) and a loss of £5.4m (2009 £5.5m loss).

 

Total comprehensive income for the year

The total comprehensive income for the year was a loss of £21.5m, (2009 £21.8m), this resulted from £2.5m of positive currency translation differences (2009 loss of £367k).

 

Earnings per share

Loss per share from continuing operations was 23.2p (2009: Loss 21.0p).  No dividend has been declared (2009: nil).

 

 

Valuation of associate

Under IFRS our associate, Smith Electric Vehicles US Corp is required to be valued at cost less any cumulative losses, minimum value nil, and is therefore valued at nil.  In fact Smith Electric Vehicles raised a total of $58m of new equity on at a valuation that would value the Tanfield Group plc stake in this associate at £37m.

 

Net Cash

At 31 December 2010, the Group had cash of £3.6m (2009 £5.4m). Although the business has reported a loss of £24.0m in the year, the net cash used in operating activities was £3.2m.  This difference was funded largely by a reduction in working capital in the period, specifically inventory.  In addition the business benefited from the proceeds of £1.8m from a successful Open Offer in October 2010.    Since the year end the business has received installments of consideration from its sale of the Smith Electric Vehicles division to its associate.  The cash allows the business to trade without exposure to financial covenants from banks or other institutions.  In the event of a sustained recovery, causing growth that requires increased working capital, asset based borrowing capacity should be available to support the growth.

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2010
				2010	2009
				£000's	£000's
Continuing operations
Revenue				43,500	43,102
Changes in inventories of finished goods and WIP				(7,689)	(6,080)
Raw materials and consumables used				(27,025)	(29,607)
Staff costs				(14,747)	(13,413)
Depreciation and amortisation expense				(1,745)	(1,860)
Other operating expenses				(8,121)	(8,159)
Loss from continuing operations before impairments				(15,827)	(16,017)
Share of results of associates				-	(51)
Impairment of receivables				(650)	(600)
Loss from continuing operations after impairments				(16,477)	(16,668)
Finance expense				(294)	(474)
Finance income				108	207
Net finance expense				(186)	(267)
Loss before taxation				(16,663)	(16,935)
Taxation				(1,950)	1,066
Loss for the year from continuing operations				(18,613)	(15,869)
Discontinued operations
Loss for the year from discontinued operations				(5,375)	(5,520)
Loss for the year				(23,988)	(21,389)
Other comprehensive income, net of tax:
Currency translation differences				2,509	(367)
Total comprehensive income for the year				(21,479)	(21,756)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2010
				2010	2009
				£000's	£000's
Loss for the year attributable to:
Owners of the parent
From continuing operations				(18,611)	(15,868)
From discontinued operations				(5,375)	(5,520)
				(23,986)	(21,388)
Non-controlling interest
From continuing operations				(2)	(1)
Loss for the year				(23,988)	(21,389)
Total comprehensive income for the year attributable to:
Owners of the parent				(21,477)	(21,755)
Non-controlling interest				(2)	(1)
Total comprehensive income for the year				(21,479)	(21,756)
Loss per share
Loss per share from continuing operations
Basic (p)				(23.2)	(21.0)
Diluted (p)				(23.2)	(21.0)
Loss per share from discontinued operations
Basic (p)				(6.7)	(7.3)
Diluted (p)				(6.7)	(7.3)
CONSOLIDATED BALANCE SHEET (Company registration number 04061965)
AS AT 31 DECEMBER 2010
				Group
				2010	2009
				£000's	£000's
Non current assets
Goodwill				-	356
Intangible assets				5,546	13,825
Property, plant and equipment				3,879	5,200
Deferred tax assets				-	1,915
Associate				-	-
Trade and other receivables				250	900
Investments				-	-
				9,675	22,196
Current assets
Inventories				25,408	44,615
Trade and other receivables				10,510	11,878
Investments				395	275
Current tax assets				11	72
Cash and cash equivalents				3,637	5,414
				39,961	62,254
Assets classified as held for sale				13,194	-
				53,155	62,254
Total assets				62,830	84,450
Current liabilities
Trade and other payables				11,293	16,178
Provisions				272	527
Tax liabilities				83	45
Obligations under finance leases				197	480
Other creditors				2,294	2,553
				14,139	19,783
Liabilities directly associated with assets classified as held for sale				3,832	-
				17,971	19,783
Non-current liabilities
Obligations under finance leases				-	156
Deferred tax liabilities				375	375
				375	531
Total liabilities				18,346	20,314
Equity
Share capital				4,704	3,704
Share premium				827	-
Share option reserve				1,764	1,764
Special reserve				66,837	66,837
Merger reserve				1,534	1,534
Capital reduction reserve				-	-
Translation reserve				11,432	8,923
Profit and loss account				(42,611)	(18,625)
Equity attributable to the owners of the parent				44,487	64,137
Non controlling interests				(3)	(1)
Total equity and total liabilities				62,830	84,450