The Tanfield Group Plc

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

 Interim Results for the six month period to 30 June 2010

18th August 2010

Tanfield Group Plc, the leading manufacturer of aerial work platforms and commercial electric vehicles, announces its unaudited interim results for the six month period to 30 June 2010.

·     Turnover of £28.1m (H1 2009: £29.9m / H2 2009 £28.2m)

·     Operating loss reduced to £9.8m  (H1 2009: Operating loss of £11.0m / H2 2009 Operating  loss £10.4m)

·     Net cash at 30 June of £2.2m (31 December 2009: £5.4m)

·     Return to growth in Electric Vehicles division

·     Initial signs of stability in Powered Access end markets

·     Negotiations on-going to consolidate Electric Vehicle businesses to optimise shareholder value

·     Review of alternative near-term funding possibilities pending successful completion of  consolidation of the Electric Vehicle business

Darren Kell, CEO of Tanfield, said: "Both of the principal business units performed in line with our expectations, during another extremely challenging period for the global economy.

"We maintained tight control of cash and moved closer towards a break-even position, while still retaining all our core people and skills.

"Tanfield continues to leverage its status as the world leader in commercial electric vehicles, while we are also seeing signs that the global market for aerial lifts is stabilising, albeit at very low levels."

For further information:

The Tanfield Group Plc                                                                                                  +44 (0) 845 155 7755

Darren Kell, CEO / Charles Brooks, FD

Arbuthnot Securities, Nomad & Broker                                                                 +44(0)20 7012 2000

James Steel

Media Enquiries                                                                                                               +44 (0) 7536 092682

Dan Jenkins                                                       

 

Summary

We maintained our focus on cash preservation, whilst retaining our infrastructure and skills base for the eventual market recovery. Turnover in the first half was £28.1m, resulting in a loss of £9.8m, a significant improvement over the operating loss of £11.0m in the corresponding period of 2009. The company ended the period with a net cash balance of £2.2m reflecting the adverse trading conditions in the period.

Demand for electric commercial vehicles continued to rise steadily during the period, with new markets outside of the UK accounting for a significant proportion of order intake. However, the ongoing global downturn in the construction sector, exacerbated by the continued absence of credit, denied the Powered Access division any opportunity for recovery.

Discussions with Smith Electric Vehicles US Corporation

As outlined in our announcement of 9^th August, Tanfield has signed non-binding Heads of Terms with Smith Electric Vehicles US Corp (SEV US). The strategy centres on an agreement to consolidate the UK arm of Smith Electric Vehicles and SEV US. SEV US has indicated that it is exploring a possible public offering of its equity securities on the NASDAQ exchange. Because of this development, we are restricted in our ability to comment on SEV US. However, the Board of Directors will update shareholders on these discussions, as soon as it is appropriate.

Powered Access:  Turnover of £18.6m (H1 2009: £21.2m / H2 2009: £20.5m)

We believe that, after an extremely turbulent two years, the market for aerial work platforms is beginning to stabilise.

During the period, the Powered Access division successfully sold significant amounts of excess inventory; going forward, we will maintain strategic stock across the globe.

For the past two years, we have marketed aerial lifts under two brands, UpRight Powered Access and Snorkel. In April 2010 we launched our new global Snorkel branding, which has been positively received by our customer base. On 31^st August 2010, we will cease to market aerial work platforms under the UpRight banner, with all UpRight lifts consolidated into a global Snorkel product range. This consolidated portfolio contains new products in the volume segments of boom lifts and scissor lifts. The first of these new models are now in production and we will launch more next year.

During the first half, Tanfield further expanded and enhanced its global dealer network, with the appointment of new distributors in Latin America and Europe.  However, the major equipment rental companies continued to age their fleets and held off additional capital expenditure. As these companies account for more than 70% of worldwide sales for powered access equipment, their ongoing lack of spending continues to impact the entire aerial lift industry.

In light of this situation, Tanfield continues to explore other opportunities for growth. Our licensing agreement with Pop-Up Products Ltd has allowed Tanfield to quickly generate a world-leading position in the emerging market of low-level access. Pop-Up is the acknowledged market leader in lightweight, compact lifts for interior use, which deliver substantial safety and productivity benefits in areas previously reliant on stepladders or scaffold podium towers. Working with Pop-Up, we have already launched new machines in this segment and are growing sales through our global distribution capabilities.

Zero Emission Vehicles:  Turnover of £8.4m (H1 2009: £8.1m / H2 2009: £7.0m)

Tanfield remains the recognised world leader in commercial electric vehicle technologies and continued to enhance this position during the period.

After the most severely depressed period on record for the whole commercial vehicle sector, with demand in certain vehicle types down by as much as 80%, there are now some signs of market recovery, and it is encouraging that year on year revenues have grown in this division. 

The Zero Emission Vehicles division has commenced delivery of the 47 electric vans through the UK Government's Low Carbon Vehicle Procurement Programme. We are on target to meet our agreed delivery schedule for these vehicles, which are destined for a range of Government bodies and local authorities. Tanfield is the largest supplier of electric vans into Phase One of the programme.

We have also supplied the majority of the 51 Smith Edison electric vehicles for Sainsbury's Online, on target with the customer's delivery schedule. We believe that this is already the largest fleet of electric light commercial vehicles in the world.

During the period, we continued to win new blue chip customers, including outsourcing group Bunzl and utility Western Power Distribution, plus 10 Smith Edison vans for a German Government project in Cologne. Smith Electric Vehicles launched several new products, including a new 17-seat minibus and Smith Telemetry, the world's first telematics software specifically developed for electric vehicles. We commenced trials of a hydrogen fuel cell range-extender and continued to add new export markets, with the appointment of a distributor in France.

Our associate company SEV US has successfully implemented its targeted build and delivery plan for the first half and is winning new business with US blue chip clients. SEV US is in receipt of a grant from the US Government Department of Energy of $32m to accelerate the implementation of these products in the USA. It is very likely that future growth in the US will be significantly more rapid than in the European market, due to number of Federal and state initiatives to drive demand and application.

In the UK, Smith is also leading on two world-first training initiatives; the Smith Electric Vehicles Apprenticeship Programme and an MSc in Low Carbon Vehicle Technologies.

Other:  Turnover of £1.1m (H1 2009: £0.6m / H2 2008: £0.8m)

The core customer base of Tanfield's Engineering operations is mining and off-highway vehicle manufacturers. A small increase in activity from these customers delivered moderate growth in this business unit.

Funding

Despite our focus on cash preservation net cash declined by some £3.2m during the six months to £2.2m at 30 June 2010.  The Directors are conscious that this has subsequently reduced further and, as a priority, they are reviewing alternative ways to fund the continuing cash outflow pending successful completion of the consolidation of the Electric Vehicle business which is expected to lead to a cash inflow for Tanfield.

 

Outlook

Demand for low emission vehicles, especially in the commercial vehicle sector, will remain a major market driver for growth in the Smith Electric Vehicles business, in both the medium and long term. Short term predictions remain modest, with any substantial growth dependent upon the economic recovery in the key end markets of the UK and Western Europe.  However we expect more rapid growth in the US market due to specific market drivers combined with a supportive grant and incentive environment.

While we believe the global market for aerial lifts has bottomed out, the low levels of activity mean there is little potential for growth before 2011. As we previously indicated, it appears that the major rental companies will not be investing in new fleets during 2010.

However, these major buyers of powered access now have fleets of aerial lifts well over their target average age for rental equipment. We therefore expect them to begin re-investing in new equipment at some point in 2011, dependent also on wider economic indicators and the availability of financing.

Overall, the Board expects trading conditions in the second half of 2010 will be similar to the first half of the year.

Given the focus on cash preservation, Tanfield is not proposing to pay a dividend for the period.

ENDS

 

 

 

CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDING 30 JUNE 2010
	Six months	Six months	Year to
	to 30 Jun 10	to 30 Jun 09	31 Dec 09
	(unaudited)	(unaudited)	(audited)
	£000's	£000's	£000's
Revenue	28,092	29,928	58,159
Changes in inventories of finished goods and WIP	(2,702)	840	(6,358)
Raw materials and consumables used	(17,875)	(24,103)	(39,945)
Staff costs	(9,896)	(9,501)	(18,645)
Depreciation and amortisation expense	(1,454)	(1,539)	(3,007)
Other operating income	-	-	-
Other operating expenses	(5,984)	(6,672)	(11,648)
Loss from operations before impairments	(9,819)	(11,047)	(21,444)
Share of results of associates	-	-	(51)
Impairment of Receivables	-	-	(600)
Loss from operations after impairments	(9,819)	(11,047)	(22,095)
Finance costs	(188)	(374)	(567)
Interest receivable	36	26	207
Net finance expense	(152)	(348)	(360)
Loss before taxation	(9,971)	(11,395)	(22,455)
Taxation	(34)	838	1,066
Net loss	(10,005)	(10,557)	(21,389)
Attributable to:
Owners of the parent	(9,960)	(10,557)	(21,388)
Non-controlling interest	(45)	-	(1)
Earnings per share
Basic  (pence)	(13.4)	(14.3)	(28.9)
Diluted (pence)	(13.4)	(14.3)	(28.9)

 

 

 

CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2010	30 Jun 10	30 Jun 09	31 Dec 09
	(Unaudited)	(Unaudited)	(Audited)
	£000's	£000's	£000's
Non current assets
Goodwill	356	356	356
Intangible assets	13,066	14,583	13,825
Property, plant and equipment	4,896	5,630	5,200
Deferred tax assets	1,915	1,781	1,915
Associate	-	-	-
Trade and other receivables	900	1,500	900
	21,133	23,850	22,196
Current assets
Inventories	39,720	49,426	44,615
Trade and other receivables	12,528	13,103	11,878
Investments	451	208	275
Current tax assets	72	59	72
Cash and cash equivalents	2,228	10,813	5,414
	54,999	73,609	62,254
Total assets	76,132	97,459	84,450
Current liabilities
Trade and other payables	16,757	15,176	16,178
Provisions	598	-	527
Tax liabilities	79	-	45
Obligations under finance leases	417	547	480
Other creditors	2,534	9,138	2,553
	20,385	24,861	19,783
Non-current liabilities
Other creditors	-	-	-
Obligations under finance leases	-	303	156
Deferred tax liabilities	375	307	375
	375	610	531
Total liabilities	20,760	25,471	20,314
Equity
Share capital	3,704	3,704	3,704
Share premium	-	138,511	-
Share option reserve	1,764	1,653	1,764
Special reserve	66,837	-	66,837
Merger reserve	1,534	1,534	1,534
Capital reduction reserve	-	7,228	-
Translation reserve	10,164	6,054	8,923
Profit and loss account	(28,585)	(86,696)	(18,625)
Total parent shareholders' equity	55,418	71,988	64,137
Minority interests	(46)	-	(1)
Total equity and total liabilities	76,132	97,459	84,450

 

 

CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDING 30 JUNE 2010
	Six months	Six months	Year to
	to 30 Jun 10	to 30 Jun 09	31 Dec 09
	(unaudited)	(unaudited)	(audited)
	£000's	£000's	£000's
Cash flow from operating activities
Loss before interest and taxation	(9,819)	(11,047)	(22,095)
Depreciation and amortisation	1,454	1,539	3,007
(Gain) on deferred consideration reassessment	-	-	(926)
(Gain) Loss on disposal of fixed assets	-	-	55
(Gain) Loss on disposal of Intangible assets	-	-	69
Impairment of receivables	-	-	600
Loss on impairment of investments	-	-	51
Operating cash flows before movements in working capital	(8,365)	(9,508)	(19,239)
(Increase) decrease  in receivables Decrease (increase) in receivables	(358)	7,029	8,668
Increase (decrease) in payables	409	(3,881)	(2,981)
Increase (decrease) in provisions	73	-	(2,840)
Decrease (increase) in inventories	5,676	8,072	14,821
Net cash (used) generated from operating activities	(2,565)	1,712	(1,571)
Interest paid	(188)	(69)	(567)
Income taxes received	-	(374)	241
Net cash (used) generated from operating activities	(2,753)	1,269	(1,897)
Cash flow from Investing Activities Cash flow from Investing Activities
Purchase of investments in Associates	-	-	(51)
Purchase of property, plant and equipment	(59)	(80)	(243)
Payment of deferred consideration	-	(349)	(2,904)
Proceeds from sale of property, plant and equipment	-	-	58
Purchase of investments	(143)	(3)	(51)
Purchase of intangible fixed assets	(136)	(349)	(544)
Interest received	36	26	207
Net cash used in investing activities	(302)	(755)	(3,528)
Cash flow from financing activities Cash flow from financing activities
Repayments of obligations under finance leases	(227)	(278)	(504)
Net cash used in financing activities	(227)	(278)	(504)
Effect of exchange rate changes on cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents	96	(553)	213
Net decrease in cash and cash equivalents	(3,186)	(317)	(5,716)
Cash and cash equivalents at the start of the period	5,414	11,130	11,130
Cash and cash equivalents at the end of the period	2,228	10,813	5,414