Preliminary Results

RNS Number : 2803E

Tanfield Group PLC

05 April 2011

 



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	[phone]
Arbuthnot Securities Limited (Nominated Adviser & Broker) James Steel / Ed Groome	[phone]

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010 CONSOLIDATED

Attributable to the owners of the parent Share capital Share premium Shares option reserve Merger reserve Capital reduction reserve Special reserve 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 £000's At 1 January 2009 3,704 138,511 1,653 1,534 7,228 - 9,290 (76,139) - 85,781 Comprehensive income Loss for the year - - - - - - - (21,388) (1) (21,389) Other comprehensive income    Currency translation differences - - - - - - (367) - - (367)    Share option provision - - 111 - - - - - - 111    Cancellation of share premium account - (138,511) - - (7,228) 66,837 - 78,902 - - Total other comprehensive income for the year - (138,511) 111 - (7,228) 66,837 (367) 78,902 - (256) Total comprehensive income for the year - (138,511) 111 - (7,228) 66,837 (367) 57,514 (1) (21,645) Transactions with owners in their capacity as owners - - - - - - - - - - Balance at 31 December 2009 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 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

CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2010
			Group
			2010	2009
			£000's	£000's
Continuing operations
Loss before interest and taxation			(16,477)	(16,668)
Depreciation and amortisation			1,745	1,859
Gain on deferred consideration reassessment			-	(926)
Loss on disposal of fixed assets			23	151
Impairment of receivables			650	600
Loss on intercompany loan write off			-	-
Loss on impairment of investments			-	51
Operating cash flows before movements in working capital			(14,059)	(14,933)
Decrease (increase) in receivables			611	9,310
(Decrease) increase in payables			(2,656)	(2,822)
Decrease in provisions			(28)	(3,050)
Decrease in inventories			13,111	12,723
Net cash (used in) operations - continuing operations			(3,021)	1,228
Discontinued operations
(Loss) profit before interest and taxation			(5,369)	(5,427)
Depreciation and amortisation			655	1,148
Loss (gain) on disposal of fixed assets			11	(27)
Operating cash flows before movements in working capital			(4,703)	(4,306)
Decrease (increase) in receivables			1,194	(642)
Decrease in payables			(197)	(159)
Increase in provisions			300	210
Decrease in inventories			3,410	2,098
Net cash from operations - discontinued operations			4	(2,799)
Cash used in operations			(3,017)	(1,571)
Interest paid			(300)	(567)
Income taxes received			80	241
Net cash used in operating activities			(3,237)	(1,897)
Cash flow from Investing Activities
Purchase of investments in Associates			-	(51)
Purchase of property, plant and equipment			(313)	(243)
Payment of deferred consideration			-	(2,904)
Proceeds from sale of property, plant and equipment			-	58
Purchase of investments			(70)	(51)
Purchase of intangible fixed assets			(375)	(544)
Exclusivity agreement cash received			491	-
Interest received			108	207
Net cash (used in) from investing activities			(159)	(3,528)
Cash flow from financing activities
Proceeds from issuance of ordinary shares net of costs			1,827	-
Repayments of obligations under finance leases			(458)	(504)
Net cash from (used in) financing activities			1,369	(504)
Effect of exchange rate changes on cash and cash equivalents			250	213
Net (decrease) increase in cash and cash equivalents			(1,777)	(5,716)
Cash and cash equivalents at the start of year			5,414	11,130
Cash and cash equivalents at the end of the year			3,637	5,414
Note: Cashflows arising from discontinued operations are operating activities £2k outflow (2009: £2,892k outflow), Investing activities £356k outflow (2009: £352k ouflow) and Financing activities £20k outflow (2009: £51k outflow).

1. Basis of preparation

The preliminary announcement has been prepared under the historical cost convention on a going concern basis and in accordance with the recognition and measurement principles of International Financial Reporting Standards and IFRIC interpretations as adopted by the EU ("IFRS").

The preliminary announcement has been prepared on the basis of the same accounting policies as published in the audited financial statements of the Group for the year ended 31 December 2010.

The information in this preliminary statement has been extracted from the accounts for the year ended 31 December 2010 and as such, does not contain all the information required to be disclosed in accordance with the International financing reports standards ("IFRS").

2. Audited Financial Statements

The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 December 2010 or 2009 within the meaning of s435 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for 2009 have been delivered to the registrar of companies, and those for 2010 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2009 or 2010. The results for the year ended 31 December 2010 were approved and authorised for issue by the Board of Directors on 1 April 2011 and are audited.

The information contained in this preliminary announcement has been approved by the Board of Directors

3.   Loss per ordinary share
Basic loss per share is calculated by dividing the loss attributable to equity shareholders by the weighted average number of shares in issue during the period. In calculating the dilution per share, share options outstanding and other potential ordinary shares have been taken into account where the impact of these is dilutive.  The average share price during the year was 24.95p (2009: 49.95p).
Number of shares			2010	2009
			No	No
Weighted average number of ordinary shares for the purposes of basic earnings per sharea			80,183	75,552
Effect of dilutive potential ordinary shares from share options			143	164
Weighted average number of ordinary shares for the purposes of diluted earnings per share			80,326	75,716
a The weighted average number of shares has been calculated in accordance with IAS 33 using a correction adjustment  factor  to adjust for the rights issue completed on 1 Oct 2010.  The correction factor is calculated as the market value of one share immediately prior to the rights issue (11.011p) over the theoretical ex-rights value per share (10.7961p).  2009 has therefore been restated as 74,077,218 shares multiplied by the correction factor of 1.0199.   The 2010 weighted average number of shares is calculated as 74,077,218 multiplied by the correction factor for  9 / 12 of the year plus 94,077,218 share for 3 / 12 of the year.
Earnings
			2010	2009
From continuing and discontinuing operations			£000's	£000's
Earnings for the purposes of basic earning per share being net profit attributable to owners of the parent			(23,986)	(21,388)
Potential dilutive ordinary shares from share options			-	-
Earnings for the purposes of diluted earnings per share			(23,986)	(21,388)
			2010	2009
From continuing operations			£000's	£000's
Earnings for the purposes of basic earning per share being net profit attributable to owners of the parent			(23,986)	(21,388)
Adjustment to exclude the loss for the period from discontinued operations			5,375	5,520
Potential dilutive ordinary shares from share options			-	-
Earnings for the purposes of diluted earnings per share			(18,611)	(15,868)
Adjustment for one off items:
Impairments			650	600
Gain on deferred consideration reassessment			-	(926)
Loss for the purposes of earnings per share before one off items			(17,961)	(16,194)
			2010	2009
Loss per share from continuing and discontinuing operations
Basic (p)			(29.9)	(28.3)
Diluted (p)b			(29.9)	(28.3)
Loss per share from continuing operations
Basic (p)			(23.2)	(21.0)
Diluted (p)b			(23.2)	(21.0)
Loss per share from continuing operations before one off items
Basic (p)			(22.4)	(21.4)
Diluted (p)b			(22.4)	(21.4)
Loss per share from discontinuing operations
Basic (p)			(6.7)	(7.3)
Diluted (p)b			(6.7)	(7.3)
bIAS33 defines dilution as a reduction in earnings per share or an increase in loss per share resulting from the assumption that options are exercised. As the potential dilutive ordinary shares from share options reduce the loss per share these share are omitted from the dilutive loss per share calculation.

4. BUSINESS SEGMENTS

Operating results by line of business
											2010				2009
											Revenue		Loss		Revenue	Loss
											£000's		£000's		£000's	£000's
Powered Access Platforms											41,033		(14,962)		41,708	(15,457)
Other											2,467		(1,515)		1,394	(1,160)
Segment revenue / loss											43,500		(16,477)		43,102	(16,617)
Share of post tax loss of associate													-			(51)
Restructuring costs													-			-
Finance income													108			207
Finance costs													(294)			(474)
Taxation													(1,950)			1,066
Loss for the year from continuing operations													(18,613)			(15,869)
Net loss from discontinued operations													(5,375)			(5,520)
Loss for the year from continuing and discontinued operations													(23,988)			(21,389)
Assets and liabilities by operating segment1
															2010	2009
															£000's	£000's
Assets
Powered Access Platforms															42,828	55,700
Discontinued operations retained assets															1,262	2,031
Discontinued operations held for sale															13,194	17,278
Other															1,898	2,051
Cash and cash equivalents2															3,637	5,414
Total segment assets															62,819	82,474
Current tax assets															11	61
Deferred tax assets															-	1,915
Total assets															62,830	84,450
Liabilities
Powered Access Platforms															(9,418)	(11,522)
Discontinued operations held for sale															(3,832)	(3,688)
Other															(2,334)	(2,445)
Total segment liabilities															(15,584)	(17,655)
Current tax liabilities															(83)	(45)
Deferred tax liabilities															(375)	(375)
Retirement benefit obligations															(10)	(11)
Deferred consideration															(2,294)	(2,228)
Total liabilities															(18,346)	(20,314)
1 Intercompany loans have been omitted from the asset and liabilities by line of business summary.  2 Cash and cash equivalents have been omitted from the assets and liabilities by line of business summary

5. Post balance sheet events

Tanfield successfully completed the Trade and Assets sale of the Smith Electric Vehicles division to Smith Electric Vehicles US Corp ("SEVUS") on 1 January 2011. For accounting purposes, this is reported as a discontinued operation.  The total consideration receivable amounted to $15m.

 

END

 

 

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