25th Sep 2006 07:02
Tanfield Group PLC25 September 2006 The Tanfield Group Plc Interim Results Six months to 30 June 2006 Tanfield Group is pleased to announce its unaudited interim results for the 6month period to June 2006, and also takes the opportunity to comment on recenttrading performance and future prospects. Highlights: Financial •Turnover increased by almost 60% against H1 2005 •Significant pre-tax profit increase against H1 2005 •Net current assets quadrupled against year end 2005 •High organic growth in both key divisions •Net assets doubled against year end 2005 •Gross profit margin maintained Business •Increase in rate of order intake •Increase in acceptance of new electric vehicles. •Restructuring of business divisions. •Public sector assisted funding programme for fleet demonstration vehicles. •Board changes •New assembly facility Chairman's Statement The financial results for the six months to June 2006 demonstrate how the Groupis building strongly on its improved performance in 2005, with an exceptionallevel of growth and maintained profitability. Turnover for the six months grew by almost 60% to £16.5m from £10.4m in theequivalent period in 2005. This is almost entirely organic growth fromcontinuing operations. The acquisition during this period (see UpRight below)was completed on June 9th 2006 and had limited impact on sales figures. The highest growth area was the Zero Emission Vehicle division, where turnoverfor the six month period was £8.8m, against a full year figure in 2005 of £9.6m. For the Powered Access segment, turnover rose to £3.1m in the 6 months to June,against a full year figure in 2005 of £4.4m. The increase in turnover has been achieved while maintaining gross profit at54%, (55% in the first 6 months of 2005). Profit before tax was £1.94m beforerestructuring costs, after goodwill write-off and depreciation, compared with£0.19m in the first half of 2005 and £1.69m for the full year ending December31st 2005. The balance sheet reflects the full impact of the acquisition of the PoweredAccess Division of Upright International Manufacturing Limited. The acquisitionwas structured as an Asset Purchased Agreement. The assets purchased were current assets such as stock, WIP and debtors. Theincreases in those balances since December 31st 2005 largely result from theacquisition that took place at the end of the period. The net assets at the endof the period were £23.2m (£11.7m as at December 31st 2005). Net Current Assetswere £12.3m (£2.5m at December 31st 2005). At June 30th 2006, the company had £0.6m of cash balances while utilising only£0.7m of the £4m Group Banking facility. This headroom will be required tosupport the growth forecast. The gearing at June 30th was 9.2% (19.7% atDecember 31st 2005). Interest Cover at June 30th was 16 times (1.7 times at June2005). Trading Update: Restructuring To reflect the changes in the operational activities of certain areas of thebusiness and maximise the synergies that exist within these areas, the Group isrestructuring its activities into two specific business divisions, namely ZeroEmission Specialist Vehicles and Powered Access equipment. The Zero Emission Specialist Vehicles division will incorporate all of theGroup's vehicle operations: Smith Electric Vehicles, Norquip, Jumbotugs and theSEV service network. The lead brand in this division will be Smith ElectricVehicles. The Powered Access division will encompass the operations of Aerial Access,along with the newly-acquired UpRight Powered Access. The lead brand will beUpRight. This strategy will allow us to focus on and invest in building on the strongbrand equity that already exists in the customer bases for these lead brands,while also clearly defining the two main operational areas of the Group. The Group's existing Engineering Division will increasingly become the keysupplier to the two divisions and their sub-brands. We are already seeing asignificant increase in the percentage of throughput from engineering destinedfor the group's OEM operations. The acquisition of Upright brought Tanfield access to a supply chain utilisinghigh volume supply from low cost regions. The Group will seek to exploit this inconjunction with the flexibility provided by its Engineering Division. Zero Emission Specialist Vehicles I am pleased to report continued growth in both the order book for this divisionand indeed greater market awareness and demand. The market drivers for theadoption of these products are stronger than ever. This, allied to a further rise in oil pricing and the implementation of furthercongestion and pollution charging, is creating significant interest in thedivision's product portfolio. Throughout the first six months of the year we have delivered vehicles to theairport, delivery and waste collection sectors, plus the public sector. Thesevehicles are all based on our Faraday platform, which has proved tremendouslysuccessful and has been well received by the end users. Engineering and project work is progressing well on the complimentary productsto Faraday, namely Edison our 3.5t electric van platform and Newton our 7.5telectric truck. These products will utilise the Faraday drive line technology but be packagedinto body shells sourced from the volume commercial vehicle sector. The firstproducts from this new generation of vehicles will be delivered to TNT Expressand TNT Logistics and will be launched in October 2006. The adoption of these "donor" vehicle products, with the efficient integrationmethods we have developed, will allow us to considerably increase the buildrate, in order to satisfy market demand. The natural environment for an electric vehicle is one where the vehicle startsand ends its day at a depot location where it can be re-charged; and where itdoes less than 120 miles per day, often with a multitude of start-stops fordeliveries. Internet shopping and grocery delivery companies; food distribution; parcel,mail and logistics companies; and waste collection and recycling companies alloperate significant fleets that fall within these parameters. We have received orders from or are in negotiations with most of the major fleetoperators such as Sainsbury's, TNT, and Enterprise plc, all of whom recognisethe efficacy and compelling financial case for the use of zero emission vehicleswithin a closed urban environment. The airport sector globally is aware of the impact of its "in-air" activities onthe environment and is therefore highly motivated to minimise emissions onground-based operations. We are experiencing significant order intake andenquiries for the Group's traditional airport product range; plus a high levelof interest in utilising the Smith platform for all manner of aviation groundsupport vehicles Growth in service and maintenance activity continues in line with the increasedoutput in vehicles as well as new projects won to maintain vehicles within thedairy sector. The implementation phase of the Dairy Crest contract is nowcomplete and this has expanded the number of our mobile service engineers toover 130 and the Group's service depot locations to 17. The Directors believe that this increased coverage will be invaluable in ourefforts to win further new fleet sales of electric vehicles, as it givestremendous confidence to existing and future electric vehicle purchasers that asignificant infrastructure is in place to support and maintain their vehicles. Tanfield is experiencing a high degree of interest in its zero emission productsfrom companies and organisations overseas and is therefore considering carefullyits options with regard to the potential for leveraging the Group's productsinto other markets. Fleet Demonstration Funding Programme I am please to advise that we have structured an agreement with Cenex, apublic-private partnership established to develop and encourage the adoption oflow carbon technologies in the automotive sector, for the full funding of ademonstration fleet of 30 zero emission commercial vehicles. These vehicles willbe used to seed the fleets of end users with significant potential volumerequirements, to demonstrate the efficacy of electric commercial vehicles. Thisis a rolling programme that will be transitioned in to new vehicles as and whenend users purchase the demonstration vehicles. This programme will significantlyincrease our demonstration fleet effectiveness and accelerate the sales process. Powered Access I am pleased to report that the acquisition of UpRight was completed on June 9th2006 and has had a twofold positive impact. It has directly impacted on salesfigures while also trebling the number of sales outlets for the Group's existingAerial Access brand. UpRight is the third most recognised brand in powered access equipment globallyand it is this significant brand equity that has allowed us to quickly developthe market for its products. The products are well recognised as market leadersand are complimentary to the existing Aerial Access products currently offeredby the Group. We have strengthened and reinvigorated distribution channels for the productrange. Allied to the growth the Group had already achieved for Aerial Accessdistribution channels, this means there is a ready route to market for thecombined powered access offering. The sales and marketing function has been strengthened and we have commenced thefirst stage in an aggressive sales plan to grow the business. As an example, the UpRight brand was recently re-launched in Spain, with newdistributors and new sales management, and within the first week of operation wereceived orders from Spain in excess of £0.5m. The acquisition and our plans for the business have been very well received bythe market and this has allowed us to tap into significant latent demand forproduct. Additionally, we have been able to cross-sell other Group products intoand through the UpRight distribution base. Order intake has accelerated throughout the first months of ownership to thepoint where we are now experiencing a level four times that of the UpRightbusiness at point of acquisition. Our strategy is to reintroduce several of the historic product models and expandthe range offered to the market - as well as offering derivative products andoffering certain Aerial Access products under the UpRight brand. We have also taken over the production of UpRight equipment at the vendor'sfacility in Ireland. This allows us to manage the transition of the productionlines from Ireland to the North East of England. This process also allows us tomanage and control the production of existing orders. It is testament to thecapability of our operational team that we have been able to more than doublethroughput at this facility within three weeks of gaining control. Tanfield Centre We have signed a lease on a new 250,000 sq foot dedicated assembly facility -"Tanfield Centre" - close to the Group's existing facilities. To offset the costof establishing this factory we have negotiated a rent-free period of 15 monthsand have been offered a £1.95 million grant from the local Regional DevelopmentAgency. The new facility will become the main site for the final assembly of allGroup products, including those manufactured under the UpRight brand. This willprovide scalability of its operations and allow us to deliver further rapidgrowth. Board Changes It is with pleasure that I announce two Board changes. The Board has appointedDarren Kell as Chief Executive of the Group and Brendan Campbell as OperationsDirector of the Group. Over recent months, a number of senior management appointments have been madewithin the Group and its divisions. This means that there is now in place anexperienced and enthusiastic team to manage and lead this dynamic and rapidlygrowing business. There is clear succession planning and strength in depth. Summary Following another period of significant growth and the successful organicprofitable growth of the core businesses, we are now embarking upon a new phasein the Group's development. The sectors in which we operate are exciting and dynamic and offer us tremendouspotential for further profitable growth. The acquisition of the UpRight business puts us firmly in the front ranks of thefast-growing powered access market and widens our opportunities globally throughour operations in Japan and USA. Our new production facility will allow us to fulfil market demand for theGroup's products and operate more efficiently. I would like to take this opportunity to thank all of our people for theirefforts over the past six months and for the continuing support of all ourstakeholders. Roy Stanley,Chairman Tanfield Group PLC Consolidated Income StatementFor six months ending 30th June 2006 Notes Unaudited Unaudited Audited 6 months 6 months Year ended to 30th to 30th 31 June 2006 June 2005 December 2005 £000's £000's £000's Revenue 16,494 10,443 22,431 Other operating income - - 42Changes in inventories offinished goods and WIP 2,593 1,392 1,983Raw materials and consumablesused (10,184) (6,031) (9,111)Reversal of previouslyimpaired assets - - 69Staff costs (5,385) (4,489) (9,049)Depreciation and amortisationexpense 173 (269) 475Other operating expenses (1,622) (574) (4,729)Restructuring costs (211) Profit from operations 1,858 472 2,109 Finance costs (126) (280) (109) Net Profit for Year 1,732 192 2,000 Income tax expense 2 - - (344) Profit for theyear fromcontinuingoperations 1,732 192 1,656 Discontinued operationsLoss forperiod fromdiscontinuedoperations - - 37 Net profit forthe year 1,732 192 1,694 Earnings per shareFrom continuing operationsBasic 4 0.80p 0.13p 1.00pDiluted 0.78p 0.12p 0.97p From continuing anddiscontinued operationsBasic 0.80p 0.13p 1.03pDiluted 0.78p 0.12p 0.99p Tanfield Group PLC Consolidated Balance SheetAs at 30th June 2006 Unaudited Audited 30th June 2006 2005 £000's £000'sASSETS Non Current AssetsProperty, Plant and Equipment 4,113 4,015Goodwill 5,143 5,143Intangible Assets 4,183 3,213 ------------ -------- 13,440 12,371 ------------ --------Current AssetsInventories 14,307 4,377Trade and Other Receivables 8,191 5,701Cash and Cash Equivalents 595 1,478 ------------ -------- 23,092 11,555 ------------ -------- ------------ --------TOTAL ASSETS 36,532 23,927 ============ ========LIABILITIESCurrent liabilitiesTrade and Other Payables 7,957 5,511Tax Liabilities 299 299Obligations Under Finance Leases 366 631Bank Loans and Overdrafts 695 1,048Other Creditors 1,432 1,583Provisions - - ------------ -------- 10,749 9,072 ------------ --------Non Current LiabilitiesBank Loans 1,022 1,392Other Creditors 198 212Deferred Tax Liability 45 45Obligations Under Finance Leases 653 723Convertible Loan Notes 69 69Provisions 615 661 ------------ -------- 2,602 3,101 ------------ -------- ------------ --------TOTAL LIABILITIES 13,351 12,173 ------------ -------- EquityShare Capital 2,421 1,905Share Premium Account 10,690 1,509Share option reserve 308 308Loan Stock Equity Reserve 6 6Merger Reserve 1,534 1,534Capital Reduction Reserve 7,228 7,228Profit And Loss Account 994 (737) ------------ --------Total Equity 23,181 11,753 ------------ -------- ------------ --------Total Equity & Liabilities 36,532 23,926 ============ ======== Tanfield Group Plc Consolidated Cash Flow Statement For the six months ending 30th June 2006 Unaudited Unaudited Audited 6 months 6 months Year to 30th to 30th Ended 31 June 2006 June 2005 December 2005 Note £000's £000's £000's Operating ActivitiesCash used in operations 6 (2,324) (2,355) (1,990)Interest paid (126) (558) (207)Tax paid - - - Net Cash from Operating activities (2,450) (2,912) (2,197) Investing ActivitiesAcquisitions (6,523) (329) (324)Purchase of property,plant andequipment (548) (1,681) (2,562)Proceeds from sale of property, plant and equipmentPurchase of intangible fixed assets - - (1,488)Interest received - 98 98 Net cash used in investing activities (7,071) (1,912) (4,276) Financing ActivitiesIssue of ordinary share capital 9,696 5,323 6,886Repayment of bank loans (331) 686 742Capital element of finance leases (335) (244) (121) Net cash used in financing 9,030 5,766 7,507 Net Increase/(Decrease) in Cashand Cash Equivalents (491) 941 1,034 Cash and cash Equivalents atbeginning of Year 960 (74) (74) Cash and Cash equivalents at end of the year 469 866 960 Tanfield Group PLC Consolidated Statement of Changes in EquityFor the six month period ended 30th June 2006 Attributable to equity holders of the company Share Share Share Capital Loan Merger Profit Total capital Option Premium Reduction Stock Reserve and Loss Equity Reserve Reserve Reserve Account £000's £000's £000's £000's £000's £000's £000's £000's Balance at 1January 2006 1,905 308 1,509 7,228 6 1,534 (737) 11,753- prior period - -adjustments- as restated 1,905 308 1,509 7,228 6 1,534 (737) 11,753 Exercise ofshare options 15 - 14 - - - 30Net gains/(losses) not recognised -in the income statementIssue of new share capital 500 9,166 - - - 9,666Capital Reduction - - - - -Conversion of convertible loan - - - - - - -notesShares issued for consideration - - - - - -Net profit for the year - - - - 1,732 1,732DividendsBalance at 30 June 2006 2,421 308 10,690 7,228 6 1,534 994 23,181 For the six month period ended 30th June 2005 Attributable to equity holders of the company Share Share Share Capital Loan Merger Profit Total capital Option Premium Reduction Stock Reserve and Loss Equity Reserve Reserve Reserve Account £000's £000's £000's £000's £000's £000's £000's £000's Balance at 1January 2005 1,328 410 18,632 - 170 1,534 (20,717) 1,356 - prior period adjustments 78 78- as restated 1,328 410 18,632 - 170 1,534 (20,639) 1,434 Exercise of share options 7 (136) - - - 248 118Net gains/(losses) not recognised -in the income statementIssue of newshare capital 275 5,089 - - - 5,364Capital Reduction - - - - -Conversion of convertible loan notes 200 1,581 - (163) - - 1,618Shares issued for consideration 9 81 - - - 90Net profit for the year - - - - 192 192DividendsBalance at 30 June 2005 1,819 273 25,383 - 6 1,534 (20,199) 8,816 NOTES 1. Basis of preparation The financial statements for the six months ended 30 June 2006 have been neitheraudited nor reviewed, nor have the financial statements for the six months ended30 June 2005. They have been prepared on a consistent basis using accountingpolicies set out in the Tanfield Group Plc statutory accounts for the periodended 31 December 2005. The figures for the year ended 31 December 2005 do not constitute the company'sstatutory accounts for that period within the meaning of Section 240 of theCompanies Act but have been extracted from the statutory accounts, which havebeen filed with the Registrar of Companies. The auditors have reported on thoseaccounts and that report was unqualified and did not contain a statement underSection 237(2) or Section 237(3) of the Companies Act 1985. 2. Taxation The tax charge in the period is based on the anticipated effective rate of taxfor the period to 30thJune 2006. 3. Business and Geographical Segment Information Powered Zero Access Emission Platforms Vehicles Engineering Consolidated £000's £000's £000's £000'sRevenueExternal Sales 3,128 8,883 4,483 16,494Inter-segment salesTotal revenue 3,128 8,883 4,483 16,494ResultSegment Resultbefore restructuring 367 1,279 423 2,068Restructuring Costs 211 - - 211Segment Result 156 1,279 423 1,858Unallocated corporate - - - -expensesProfit from operations 156 1,279 423 1,858Finance costs 24 68 34 126Profit before tax 132 1,211 388 1,732 Income tax expense 0 - 0 0Profit after tax 132 1,211 388 1,732Other informationCapital additions 1,243 415 68 1,726Depreciation and amortisation (355) 433 94 173Impairment losses recognised in income 0 0 0 0Balance SheetAssets:Segment assets 16,062 10,558 9,587 36,207Consolidated total assets 16,062 10,558 9,587 36,207Liabilities:Segment Liabilities 3,542 5,610 3,874 13,026Consolidated totalliabilities 3,542 5,610 3,874 13,026 4. Earnings per share Including discontinuing operations The calculation of the basic and diluted earnings per share isbased on the following data: Earnings 6 months ended 6 months ended Year Ended 30/06/2006 30/06/2005 31/12/2005 Earnings for the purposesof basic earnings per share 1,732 192 1,694Effect of dilutive potentialordinary shares: 14 14 14- interest on convertible loannotesEarnings for the purposesof diluted earnings per share 1,718 179 1,680 Number of shares Weighted average number of ordinaryshares for the purposes ofbasic earnings per share 216,053,300 146,563,869 165,038,027 Convertible Loan Notes 789,474 789,474 789,474Share Options 2,928,671 3,057,342 4,057,342 Weighted average numberof ordinary shares for thepurposes of diluted earnings per share 219,771,444 150,410,684 168,884,843 From continuing operationsThe calculation of the basic and diluted earnings per share isbased on the following data: Earnings Year Ended Year Ended Year Ended 31/12/2006 31/12/2006 31/12/2005 Earnings for the purposesof basic earnings per share 1,732 192 1,656 Effect of dilutive potentialordinary shares: 14 14 14- interest on convertible loannotes Earnings for the purposes of dilutedearnings per share 1,718 179 1,642 Earnings per share from continuing operationsBasic 0.80p 0.13p 1.00pDiluted 0.78p 0.12p 0.97p 5. Acquisition. On 8th June 2006, the Group acquired the PartsRight business and the UpRightbrand of powered access equipment from Upright International Manufacturing aconsideration of £6.8m. This has been accounted for by the purchase method ofaccounting. Fair Value 2006Net Assets Acquired £'000s Inventories 5,497Debtor Book 1,004Order Book 327Other Intangible Assets 533IPR 347 -------- 7,708Goodwill (860) --------Total Consideration 6,848Satisfied by :Cash 6,848 -------- --------Net cash outflow arising on acquisition 6,848 ======== 6. Reconciliation of profit from operations to net cash used in operatingactivities 6 months 6 months Year to 30th to 30th Ended 31 June June December 2006 2005 2005 £000's £000's £000'sOperating ActivitiesProfit before tax andinterest expense 1,858 472 2,147Depreciation of property,plant and equipment 450 374 742Write off of negativegoodwill (860) - (1,356)Impairment of property, plant - - -and equipmentAmortisation of intangiblefixed assets 238 - 159(Profit)/Loss on disposal offixed assets - (105) 102(Increase)/decrease in debtors (1,487) (1,251) (1,622)(Decrease)/Increase increditors 1,957 134 205(Decrease)/Increase inprovisions (46) (475) (787)(Increase)/decrease ininventories (4,434) (1,504) (1,579) Net Cash from Operatingactivities (2,324) (2,355) (1,990) Copies of this report are being forwarded to all shareholders and holders of the2009 8.5% Convertible Loan Stock and further copies are available from theCompany's Registered Office at Comeleon House, North Tanfield Industrial Estate,Tanfield Lea, Co Durham. DH9 9NX. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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