4th Apr 2005 07:01
Tanfield Group PLC04 April 2005 Tanfield Group Plc Preliminary Results for the year ended 31st December 2004 Tanfield Group plc ("Tanfield" or "the Group"), is pleased to announce itspreliminary results for the twelve months ended 31st December 2004. TheDirectors also take this opportunity to highlight recent developments andoutline the continuing strategy of the Group Summary of Key Developments: Introduction The Group has undergone a significant transformation during the period sinceDecember 2003, firstly acquiring the Tanfield engineering businesses and thenSEV Group Limited ("SEV") whilst during this time carrying out a significantrestructuring exercise. The Group is now focused on its specialist engineeringand electric vehicle divisions. The Directors believe that this transition hasgone well and that the Group will deliver significant shareholder value in thefuture. The Group has grown substantially over the past six months, new productlines have come on stream, major orders have been won and deliveries againstthese orders have commenced. Trading in the last quarter of 2004 and the firstquarter of 2005 have been in line with expectations. The strategy outlined in the announcement of the interim results in September2004 of the Group exiting from the supply of automotive components and removingitself from lower margin component supply has been completed. Before itsacquisition by the Group 30% of the Tanfield Holdings group turnover was relatedto the supply of automotive components out of E2A Ltd. This turnover has beenreplaced by sales of higher margin assembly and sub assembly products and byincome arising from the acquisition of SEV Group Ltd. Financial Results The Group reported turnover for the year to December of £11.76m (2003 £2.85m),an increase of 312% principally represented by the acquisition of the TanfieldHoldings group at the end of 2003 and the SEV Group in October 2004. Included indiscontinued operations are the activities of E2A and E Comeleon following thedecisions to withdraw from the automotive sector and to focus solely on thelicensing of E Comeleon's imaging technology. This sector provided turnover preacquisition of £1.84m in the 9 months to December 2003 and thus represented 30%of the business prior to restructuring. The year on year improvement in salesresults from strong turnover growth within HMH Ltd as well as contribution tosales from the SEV Group Ltd acquisition completed in October 2004. The pre tax consolidated loss for the year was £5.97m (2003 £6.99m) afteraccounting for a goodwill amortisation of £235k. This loss includes substantialcosts associated with restructuring the Group's business activities, includingexceptional costs of £2.11m connected to the discontinuance of certain divisionsand restructuring of the operations of the Group. The loss for the year is alsoaffected by significant start up costs associated with the introduction of newcustomers within the Groups new target market. Furthermore the Board has alsotaken the decision to vacate Comeleon House and give up the lease now that thee-comeleon business no longer operates manufacturing facilities there. Costsassociated with this include £253k in respect of the write off of stock. Groupnet assets as at December were £1.03m (2003 £0.18m). The Group has raised newequity funds of £7m during the year. The Group Structure The Group now falls into two main divisions; Tanfield Holdings; this division designs and manufactures added value assemblyand sub assembly products. The Directors of Tanfield have moved this divisionaway from being a sub-contract business with a short horizon order book to beingfocussed on delivered assemblies with longer term visibility of earnings, highermargins and a higher degree of lock in with blue chip customers and partners. Smiths Electric Vehicles (SEV); this division designs and manufactures electricvehicles and, aerial access equipment and also provides servicing andmaintenance of the vehicles and equipment. Since the acquisition in October 2004there has been a focus on rationalising and improving the product range andre-organising, through improved distribution, the sales function of SEV. Growth of the Group; The Group has grown significantly since the third quarter of 2004. This growthis attributable to both organic factors and the acquisition of SEV. The numberof employees has increased from 160 at the end of March 2004 to the currentheadcount of 395. It is anticipated that bringing the two divisions together on one site couldprovide the advantage of several major synergies. Grant assistance is beingsought for this project. The manufacturing expertise within Tanfield Holdingshas been used to improve the costs of production of SEV vehicles. The Order Book The current order book of both divisions is at record levels; in particular,there has been a large increase in the rate of growth in the SEV order book. Tanfield Holdings division has won a number of significant contracts in a rangeof sectors; Defence, Power Generation, Industrial Vehicles and the HealthSector. The annualised order book stands at over £18 million, compared to £7million at the beginning of 2004. The level of enquiries is also currently at arecord level compared to last year. All these orders are now being deliveredagainst and further projects are expected to come on stream over the next threemonths. The directors believe that the rate of growth in the order book willincrease during the remainder of the year particularly going into the lastquarter of 2005. SEV has a record order book of over £9 million, compared to £5 million this timelast year. The growth rate in the order book is accelerating. Since the start ofthe year the company has received over £3.5 million of orders for products to beexported to North America, Eastern Europe and Australia. The company, inFebruary, won its first fleet contract in the airport sector. The order was witha major regional airport for electric baggage handling vehicles. The company hasalso secured an order from a major North American airline for 19 vehicles and inthe view of the Directors these orders indicate the great potential in thismarket sector. Opportunities for the Future New product development across the divisions provides great scope for thefuture. The Group will establish alliances with appropriate partners thatprovide good brand recognition and established routes to market. The focus forSEV is developing export sales through distribution networks and bringingfurther products to the market that address the legislative and environmentalissues that are facing its customers. Conclusion The final results for the twelve months ended 31st December 2004 reflect abusiness which was in transition. This transitional process is complete. TheDirectors have a strategy for growth, which incorporates both the organicdevelopment of the Group and, where appropriate, acquisitions. The successful implementation of the strategy to date is as a result of theefforts of all the people involved within the Group. The business is trading inline with expectations and there are good opportunities for further growth. Chairman's Comment: Commenting on this announcement, Jon Pither, Chairman of Tanfield Group plcsaid: " There are a number of good opportunities being presented to the business. TheDirectors are pleased with the progress the Group has made during 2004. " CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2004 Note Year ended 15 month 31 December period ended 2004 31 December £ 2003 £ TURNOVERExisting operations 8,362,143 -Acquisitions 2,324,846 - Continuing operations 10,686,989 -Discontinued operations 1,077,750 2,854,037 11,764,739 2,854,037Cost of sales --------- -----------Exceptional cost of sales 4 (252,760) --Other cost of sales (8,766,955) (3,855,248) --------- ---------- Total cost of sales (9,019,715) (3,855,248) Gross profit/(loss) 2,745,024 (1,001,211) Administrative expenses --------- -----------Exceptional administrative expenses -goodwill impairment 4 - (672,067)-Exceptional administrative expenses -other 4 (1,859,000) (1,196,934)-Other administrative expenses (6,061,473) (4,008,557) --------- ---------- Total administrative expenses (7,920,473) (5,877,558) OPERATING LOSSExisting operations (2,538,898) -Acquisitions (173,229) - Continuing operations (2,712,127) -Discontinued operations (2,471,722) (6,878,769) (5,175,449) (6,878,769) Interest receivable and similar income 18,916 36,275Interest payable and similar charges (848,117) (145,799) LOSS ON ORDINARY ACTIVITIES BEFORETAXATION (6,004,650) (6,988,293) Tax on loss on ordinary activities 38,446 - LOSS ON ORDINARY ACTIVITIES AFTERTAXATION (5,966,204) (6,988,293) RETAINED LOSS FOR THE FINANCIAL YEARWITHDRAWN FROM RESERVES (5,966,204) (6,988,293) Basic and diluted loss per ordinary share 5 (8.26p) (45.08p) CONSOLIDATED BALANCE SHEET As at 31 December 2004 2004 2003 £ £FIXED ASSETS Intangible assets 5,236,731 4,556,411Tangible assets 2,332,537 2,962,325 7,569,268 7,518,736 CURRENT ASSETS Stocks 2,417,395 779,000Debtors 4,042,035 1,228,057Cash at bank and in hand 8,745,702 3,171,604 15,205,132 5,178,661 CREDITORS: amounts falling due within one year (16,878,345) (8,554,196) NET CURRENT LIABILITIES (1,673,213) (3,375,535) TOTAL ASSETS LESS CURRENT LIABILITIES 5,896,055 4,143,201 CREDITORS: amounts falling due after more than oneyear Convertible debt (1,831,880) (1,783,880)Other creditors (1,547,641) (1,634,015) PROVISION FOR LIABILITIES AND CHARGES (1,487,532) (543,769) 1,029,002 181,537 CAPITAL AND RESERVES Called up share capital 1,327,847 617,347Shares to be issued 298,706 298,706Other reserve 111,150 111,150Share premium account 18,631,774 12,528,605Merger Reserve 1,533,740 1,533,740Profit and loss account (20,874,215) (14,908,011) TOTAL EQUITY SHAREHOLDERS' FUNDS 1,029,002 181,537 CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2004 Note Year ended 15 months ended 31 December 31 December 2004 2003 £ £ Net cash outflow from operatingactivities 6 (2,614,290) (2,009,152) Returns on investments and servicingof finance (601,201) (109,524) Taxation - 24,679 Acquisitions and disposals (2,541,354) (2,328,817) Capital expenditure & financialinvestment 8,910 (155,483) Cash outflow before financing (5,747,935) (4,578,297) Financing 5,956,030 1,309,989 Increase/(decrease) in cash in theperiod 8, 7 208,095 (3,268,308) NOTES 1. Accounting policies These financial statements have been prepared using the accounting policies setout in the Annual Report and Financial Statements for the 15 months ended 31December 2003. The financial statements are prepared in accordance with United Kingdomapplicable accounting standards. 2. Basis of consolidation The group financial statements consolidate the financial statements of thecompany and its subsidiary undertakings drawn up to 31 December each year. Theresults of subsidiaries acquired are consolidated for the periods from the dateon which control passed. Tanfield Group Plc (formerly Comeleon Plc) was incorporated on 30 August 2000and on 28 November 2000 acquired the entire share capital of E Comeleon Limited.In accordance with the principles set out in Financial Reporting Standard (FRS)6 "Acquisitions and Mergers", 93.5% of the shares acquired were accounted forunder merger accounting. The remaining 6.5% have been accounted for underacquisition accounting. Tanfield Group Plc (formerly Comeleon Plc) acquired the entire share capital ofTanfield Holdings Limited on 30 December 2003. The consideration given inexchange for the entire share capital of Tanfield Holdings Limited was45,906,312 ordinary shares in Tanfield Group Plc (formerly Comeleon Plc). Inaccordance with the provisions of section 131 of the Companies Act 1985, thecompany has taken advantage of merger relief accounting. All other acquisitions are accounted for under the acquisition method. 3. Unaudited Financial Statements The financial information set out in the announcement does not constitutestatutory accounts for the periods ending 31 December 2003 or 2004. The results for the 15 months ended 31 December 2003 have been extracted fromthe Annual Report and Financial Statements for that year, which have beendelivered to the Registrar of Companies and on which the auditors have given anunqualified report which did not contain a statement under Section 237(2) or (3)of the Companies Act 1985. The statutory accounts for the year ended 31 December 2004 will be finalised onthe basis of the financial information presented by the directors in thispreliminary announcement and will be delivered to the Registrar of Companiesfollowing the company's annual general meeting. 4. Exceptional Items Year ended 15 months ended 31 December 31 December 2004 2003 £ £ Exceptional cost of salesStock provision 252,760 - Exceptional administrative costsImpairment of goodwill - 672,067Impairment of tangible fixed assets 1,337,000 1,196,934Onerous lease 522,000 - 1,859,000 1,869,001 5. Loss per ordinary share Loss per share has been calculated using the weighted average number of sharesin issue during the relevant financial periods. The weighted average number ofshares in issue is 72,209,946 (2003 - 15,501,846), and the earnings, being losson ordinary activities after taxation and minority interest are £5,966,204 (2003- £6,988,293). No diluted loss per share has been disclosed as the share options areanti-dilutive. Year ended 15 months ended 31 December 31 December 2004 2003 Pence Pence Loss per share (8.26) (45.08) 6. Reconciliation of operating loss to net cash outflow from operatingactivities 2004 2003 £ £ Operating loss (5,175,449) (6,878,768)Depreciation on tangible fixed assets 570,013 753,424Impairment of tangible fixed assets 1,337,000 1,196,934Amortisation of intangible fixed assets 235,548 11,270Impairment of intangible fixed assets - 672,067Loss on disposal on tangible fixed assets - 488,951Increase in provisions 438,763 309,769Decrease in stocks 319,149 326,797(Increase)/decrease in debtors (997,592) 4,606,657Increase/(decrease) in creditors 658,276 (3,496,253) Net cash outflow from operating activities (2,614,290) (2,009,152) 7. Analysis of net debt At On acquisition Other non At 1 January (excluding cash Cash cash 31 December 2004 and overdrafts) Flow changes 2004 £ £ £ £ £ Cash in handand at bank 3,171,604 - 5,574,098 - 8,745,702Overdrafts (3,454,178) - (5,366,003) - (8,820,181) (282,564) - 208,095 - (74,479) Debt duewithin oneyear (850,000) (50,000) 100,000 - (800,000)Debt dueafter one year (1,783,800) (358,856) 10,055 (88,000) (3,020,681) Finance leases (1,836,622) (274,008) 647,584 (11,548) (1,474,594) (4,753,076) (682,864) 965,734 (99,548) (4,569,754) During the period the group entered into finance lease arrangements in respectof assets with a total capital value at inception of £51,548 (2003 - £Nil),released £48,000 (2003 - £Nil) of capitalised finance charges to the profit andloss account, and reclassified £40,000 (2003 - £Nil) to debt from financeleases. 8. Reconciliation of net cash flow to movement in net debt 2004 2004 2003 2003 £ £ £ £ Increase/(decrease) in cash in the year 208,095 (3,268,308)Cash inflow/(outflow)from increase in debt and leasefinancing 757,639 (1,122,477) Change in net debtresulting from cash flows 965,734 (4,390,785) Other non cash changes (99,548) (375,000)Loans and finance leasesacquired with subsidiary (682,864) (1,895,000) Movement in the year 183,322 (6,660,785)Net funds at 1 January 2004 (4,753,076) 1,907,709 Net debt at 31 December 2004 (4,569,754) (4,753,076) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Tanfield