Last checked at 28 Sep 2012 07:00
The Tanfield Group Plc
("Tanfield", "Group", or "the Company")
Interim Results for the six-month period to 30 June 2012
28th September 2012
The Tanfield Group Plc, a leading manufacturer of aerial work platforms, announces its unaudited interim results for the six-month period ended 30 June 2012.
·; Continued recovery of global aerial lift market
·; Significant output progress since injection of £11m of new equity in March 2012
·; Turnover decline reversed at £24.1m (H2 2011: £23.7m)
·; Improved margins and controlled overhead cost base
·; Net losses narrowed to £7.0m (H2 2012: Operating loss: £8.2m)
·; Anticipating first "post-recession" break-even month in October 2012
·; Cash invested in Supply Chain - net cash at 30 June of £2.75m (31 December 2011: £3.5m)
·; Remain on track for full-year profitability in 2013
Darren Kell, CEO of Tanfield, said: "We made steady progress from a low base during the first half of 2012, as global demand for aerial work platforms continued to recover."
"Since the injection of working capital in March, the business has witnessed monthly output improvements, with the major step-change impact from our supply chain investment occurring late in the third quarter after the end of the half year. Margins have improved, losses have narrowed, and the Company predicts having its first post-recession break-even month in October. The outlook for 2013 looks positive, with the company remaining on track for full year profitability."
Further information:
Tanfield Group Plc Darren Kell / Charles Brooks
| 0845 155 7755 |
WH Ireland James Joyce/Nick Field-Corporate Finance Seb Wykeham / Ruari McGirr - Corporate Broking
| 020 7220 1666 |
Buchanan Charles Ryland/ Nicola Cronk /Helen Greenwood | 020 7466 5000 |
Summary
Revenue at £24.1m, (H2 2011: £23.7m), was achieved through growth in the second quarter of the first half of 2012. Until the second quarter, in spite of the strength of demand for our products, revenue was declining owing to lack of component availability, resulting from supply chain issues and working capital constraints.
The sales constraints continued until March 2012 when we successfully raised approximately £11m, net of expenses, by way of a placing of new equity. We invested the net proceeds from this placing in the supply chain, with cognisance of a six-month lead time on many key components. In spite of these lead times we achieved month-on-month output growth during the second quarter from all of our manufacturing sites, particularly our Chinese facility. Since the period end, we have witnessed a significant increase in component availability, resulting in accelerated production growth in the third quarter. We therefore expect to deliver a first post-recession break-even month in October 2012.
£2.75m cash at 30 June reflects the level of investment in the supply chain in advance of the additional receipts from incremental sales. In the second half, as increased revenues flow through, this reduction in cash over the period will stabilise at that level.
Global demand for our Snorkel range of aerial lifts remains strong, pricing has improved and margins have increased. Customers remain engaged in fleet replacement programmes after ageing their fleets during the economic downturn. We continue to increase our distribution channels in key markets, including both Latin America and North America. Scandinavia and Japan remained particularly buoyant markets.
In spite of close management we have encountered some unavoidable supply chain delays, some of which are volume-related and others of which relate to supplied product quality and consistency. This has imbalanced our output, leading to some rescheduling delivery dates on certain machines. We fully expect to resolve these issues by further developing the supply chain. Minimising the impact of supply chain bottlenecks will allow us to balance product availability against customer requirements and improve order take up.
Snorkel - The Powered Access Market
Recovery in our markets continues to be driven by fleet replacement, rather than fleet expansion. We expect true market growth to return only once demand increases within the non-residential construction and facilities maintenance markets. This will drive the utilisation of powered access equipment to the point that rental companies have to invest in additional machines in order to support their end-user customers.
During the period, we appointed a new Snorkel distributor in Brazil, which is experiencing a construction and infrastructure boom and represents a significant opportunity for sales growth. We also enhanced our distribution channels in Germany and strengthened our sales team in North America.
We successfully launched two new mid-range boom lifts, which have been well received and will go into full production at the end of 2012. These machines are part of a new family of products that improve commonality of parts across our volume boom lifts, while still combining Snorkel's intrinsic durability with enhanced machine performance.
Smith Electric Vehicles
As announced on 21 September 2012, Smith Electric Vehicles has decided not to pursue its planned initial public offering. Smith has withdrawn its registration statement on Form S-1 as filed with the Securities and Exchange Commission and has instead initiated a further round of private financing, as it seeks to execute the next phase of its business plan.
Tanfield currently holds 5.2m shares in Smith Electric Vehicles, amounting to 24% of Smith's issued share capital.
The board continue to assess the best way to utilise this asset.
Dividends
Based on our on-going requirements for working capital to fund growth, the Board has not declared a dividend for the period.
Outlook
Trading in the third quarter of 2012 has increased on the second quarter. However, given the length of lead times for many of the key components, we are only now, at the end of the third quarter, seeing a significant increase in deliveries of certain components to our facilities. This will support the planned production ramp going forward. As revenue levels increase we continue to make progress towards break-even and we anticipate our first post-recession break-even month being October 2012.
Given the longer cash-to-cash cycle required to support finished product inventory in Australia (our third largest market after the USA and EMEA), and Japan (our fourth largest market), these inventory levels had been allowed to drop. As these territories are re-stocked, a proportion of the increased output from our production facilities will take longer to convert to revenue. Re-stocking is likely to continue well into the first half of next year, before the products reach their end markets. This, in turn, will help ensure we reach our sales targets for that year.
However, in the short term, the specific supply chain issues we have experienced, combined with the added factors of product stock imbalances, means we feel it is prudent to rein in further expansion plans over the winter to reduce the risk of surplus and imbalanced inventory levels at year end resulting from customers re-scheduling orders into successive periods in response to the less predictable nature of the generally weaker winter months in the Northern hemisphere.
The immediate focus therefore is to allow the business to catch its breath while rebalancing inventory levels globally and concluding the remaining supply chain issues. We will therefore be well placed to benefit from the next industry buying season in spring 2013, meaning that sustained break-even will only be achieved in the second quarter of 2013.
Based on this strategy - and provided the macroeconomic situation does not take a turn for the worse - the outlook for 2013 remains positive, with the business on track for full year profitability that year.
ENDS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | |||
FOR THE SIX MONTHS ENDING 30 JUNE 2012 | |||
Six months | Six months | Year to | |
to 30 Jun 12 | to 30 Jun 11 | 31 Dec 11 | |
(unaudited) | (unaudited) | (audited) | |
£000's | £000's | £000's | |
Continuing operations | |||
Revenue | 24,096 | 24,633 | 48,305 |
Changes in inventories of finished goods and WIP | (330) | (5,610) | (2,848) |
Raw materials and consumables used | (16,450) | (12,464) | (33,250) |
Staff costs | (9,109) | (8,577) | (17,143) |
Depreciation and amortisation expense | (882) | (806) | (1,595) |
Other operating expenses | (4,323) | (4,206) | (8,461) |
Loss from continuing operations before impairments | (6,998) | (7,030) | (14,992) |
Share of results of associates | - | - | - |
Impairment of Receivables | - | - | (250) |
Loss from continuing operations after impairments | (6,998) | (7,030) | (15,242) |
Finance costs | (73) | (565) | (286) |
Interest receivable | 103 | 264 | 470 |
Net finance expense | 30 | (301) | 184 |
Loss from continuing operations before tax and associate | (6,968) | (7,331) | (15,058) |
Reassessment of carrying value of associate | - | - | (1,280) |
Loss before taxation | (6,968) | (7,331) | (16,338) |
Taxation | 9 | (58) | (186) |
Loss for the period from continuing operations | (6,959) | (7,389) | (16,524) |
Discontinued operations | |||
Profit on disposal of discontinued operations | - | 173 | 173 |
Net loss for the period | (6,959) | (7,216) | (16,351) |
Other comprehensive income, net of tax: | |||
Currency translation differences | (237) | 368 | 694 |
Total comprehensive income for the period | (7,196) | (6,848) | (15,657) |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Continued) | |||
FOR THE SIX MONTHS ENDING 30 JUNE 2012 | |||
Six months | Six months | Year to | |
to 30 Jun 12 | to 30 Jun 11 | 31 Dec 11 | |
(unaudited) | (unaudited) | (audited) | |
£000's | £000's | £000's | |
Loss for the period attributable to: | |||
Owners of the parent | |||
From continuing operations | (6,976) | (7,389) | (16,510) |
From discontinuing operations | - | 173 | 173 |
(6,976) | (7,216) | (16,337) | |
Non-controlling interest | |||
From continuing operations | 17 | - | (14) |
Net loss for the period | (6,959) | (7,216) | (16,351) |
Total comprehensive income for the period attributable to: | |||
Owners of the parent | (7,213) | (6,848) | (15,643) |
Non-controlling interest | 17 | - | (14) |
Total comprehensive income for the year | (7,196) | (6,848) | (15,657) |
Earnings per share from continuing operations | |||
Basic (pence) | (6.1) | (7.7) | (17.5) |
Diluted (pence) | (6.1) | (7.7) | (17.5) |
CONSOLIDATED BALANCE SHEET | |||
AS AT 30 JUNE 2012
| 30 Jun 12 | 30 Jun 11 | 31 Dec 11 |
(Unaudited) | (Unaudited) | (Audited) | |
£000's | £000's | £000's | |
Non current assets | |||
Intangible assets | 4,476 | 5,124 | 5,023 |
Property, plant and equipment | 3,048 | 3,531 | 3,324 |
Associate | - | - | - |
Deferred consideration receivable | - | 1,405 | - |
Trade and other receivables | - | 250 | - |
7,524 | 10,310 | 8,347 | |
Current assets | |||
Inventories | 21,921 | 23,458 | 21,495 |
Trade and other receivables | 11,330 | 10,855 | 10,753 |
Investments | 513 | 417 | 498 |
Current tax assets | - | 11 | - |
Deferred consideration receivable | 345 | 3,575 | 341 |
Cash and cash equivalents | 2,754 | 4,682 | 3,463 |
36,863 | 42,998 | 36,550 | |
Total assets | 44,387 | 53,308 | 44,897 |
Current liabilities | |||
Trade and other payables | 8,864 | 13,235 | 13,034 |
Provisions | 714 | 327 | 621 |
Tax liabilities | - | 95 | 189 |
Obligations under finance leases | 65 | 98 | 60 |
9,643 | 13,755 | 13,904 | |
Non-current liabilities | |||
Obligations under finance leases | 173 | - | 208 |
Deferred tax liabilities | 375 | 375 | 375 |
548 | 375 | 583 | |
Total liabilities | 10,191 | 14,130 | 14,487 |
Equity | |||
Share capital | 6,193 | 4,727 | 4,728 |
Share premium | 12,590 | 2,346 | 3,097 |
Share option reserve | 1,809 | 1,764 | 1,785 |
Special reserve | 66,837 | 66,837 | 66,837 |
Merger reserve | 1,534 | 1,534 | 1,534 |
Translation reserve | 11,889 | 11,800 | 12,126 |
Profit and loss account | (66,656) | (49,827) | (59,680) |
Equity attributable to the owners of the parent | 34,196 | 39,181 | 30,427 |
Non controlling interests | - | (3) | (17) |
Total equity | 34,196 | 39,178 | 30,410 |
Total equity and total liabilities | 44,387 | 53,308 | 44,897 |
CONSOLIDATED CASH FLOW STATEMENT | |||
FOR THE SIX MONTHS ENDING 30 JUNE 2012 | |||
Six months | Six months | Year to | |
to 30 Jun 12 | to 30 Jun 11 | 31 Dec 11 | |
(unaudited) | (unaudited) | (audited) | |
£000's | £000's | £000's | |
Continuing operations | |||
Loss before interest and taxation | (6,998) | (6,857) | (16,349) |
Depreciation and amortisation | 882 | 806 | 1,595 |
Loss on deferred consideration currency fluctuations | - | - | 337 |
Profit on disposal of operations | - | (173) | (173) |
Loss on disposal of fixed assets | - | - | 128 |
Loss on reassessment of carrying value of associate | - | - | 1,280 |
Impairment of receivables | - | - | 250 |
Operating cash flows before movements in working capital | (6,116) | (6,224) | (12,932) |
(Increase) in receivables | (643) | (441) | (310) |
(Decrease) Increase in payables | (4,096) | 2,563 | 1,537 |
Increase in provisions | 94 | 55 | 349 |
(Increase) decrease in inventories | (594) | 1,561 | 3,910 |
Net cash used in operations | (11,355) | (2,486) | (7,446) |
Interest paid | (73) | (143) | (286) |
Income taxes paid | (170) | (37) | (60) |
Net cash used in operating activities | (11,598) | (2,666) | (7,792) |
Cash flow from Investing Activities | |||
Purchase of property, plant and equipment | (82) | (79) | (390) |
Deferred consideration received | - | 3,774 | 7,756 |
Purchase of investments | (33) | (32) | (76) |
Purchase of intangible fixed assets | (4) | (1) | (232) |
Interest received | 103 | 123 | 453 |
Net cash (used in) from investing activities | (16) | 3,785 | 7,511 |
Cash flow from financing activities | |||
Proceeds from issuance of ordinary shares net of costs | 10,958 | - | - |
New obligations under finance leases in the period | - | - | 274 |
Repayments of obligations under finance leases | (30) | (97) | (202) |
Net cash (used in) from financing activities | 10,928 | (97) | 72 |
Effect of exchange rate changes on cash and cash equivalents | (23) | 23 | 35 |
Net increase (decrease) in cash and cash equivalents | (709) | 1,045 | (174) |
Cash and cash equivalents at the start of year | 3,463 | 3,637 | 3,637 |
Cash and cash equivalents at the end of the year | 2,754 | 4,682 | 3,463 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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| |||||||||
Attributable to the owners of the parent | ||||||||||
Share capital | Share premium | Shares option reserve | Merger 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 | ||
For the six month period ended 30 June 2012 | ||||||||||
Balance at 1 January 2012 | 4,728 | 3,097 | 1,785 | 1,534 | 66,837 | 12,126 | (59,680) | (17) | 30,410 | |
Comprehensive income | ||||||||||
(Loss) profit for the period | - | - | - | - | - | - | (6,976) | 17 | (6,959) | |
Other comprehensive income | ||||||||||
Currency translation differences | - | - | - | - | - | (237) | - | - | (237) | |
Total other comprehensive income for the year | - | - | - | - | - | (237) | - | - | (237) | |
Total comprehensive income for the year | - | - | - | - | - | (237) | (6,976) | 17 | (7,196) | |
Transactions with owners in their capacity as owners:- | ||||||||||
Issue of shares | 1,464 | 9,493 | - | - | - | - | - | - | 10,957 | |
Share based payments | 1 | - | 24 | - | - | - | - | - | 25 | |
At 30 June 2012 | 6,193 | 12,590 | 1,809 | 1,534 | 66,837 | 11,889 | (66,656) | - | 34,196 | |
For the six month period ended 30 June 2011 | ||||||||||
Balance at 1 January 2011 | 4,704 | 827 | 1,764 | 1,534 | 66,837 | 11,432 | (42,611) | (3) | 44,484 | |
Comprehensive income | ||||||||||
Loss for the period | - | - | - | - | - | - | (7,216) | - | (7,216) | |
Other comprehensive income | ||||||||||
Currency translation differences | - | - | - | - | - | 368 | - | - | 368 | |
Total other comprehensive income for the year | - | - | - | - | - | 368 | - | - | 368 | |
Total comprehensive income for the year | - | - | - | - | - | 368 | (7,216) | - | (6,848) | |
Transactions with owners in their capacity as owners:- | ||||||||||
Issue of shares | 23 | 1,519 | - | - | - | - | - | - | 1,542 | |
At 30 June 2011 | 4,727 | 2,346 | 1,764 | 1,534 | 66,837 | 11,800 | (49,827) | (3) | 39,178 | |
For the twelve month period ended 31 December 2011 | ||||||||||
Balance at 1 January 2011 | 4,704 | 827 | 1,764 | 1,534 | 66,837 | 11,432 | (42,611) | (3) | 44,484 | |
Comprehensive income | ||||||||||
Loss for the year | - | - | - | - | - | (16,337) | (14) | (16,351) | ||
Other comprehensive income | ||||||||||
Currency translation differences | - | - | - | - | - | (57) | - | - | (57) | |
Total other comprehensive income for the year | - | - | - | - | - | (57) | - | - | (57) | |
Total comprehensive income for the year | - | - | - | - | - | (57) | (16,337) | (14) | (16,408) | |
Transactions with owners in their capacity as owners:- | ||||||||||
Issue of shares to settle deferred consideration | 23 | 2,270 | - | - | - | 751 | (751) | - | 2,293 | |
Share based payments | 1 | - | 21 | - | - | - | 19 | 41 | ||
At 31 December 2011 | 4,728 | 3,097 | 1,785 | 1,534 | 66,837 | 12,126 | (59,680) | (17) | 30,410 | |
1 Basis of preparation The consolidated Interim Report of the Group for the six months ended 30 June 2012 has been prepared in accordance with AIM Rule 18 and not in accordance with IAS 34 "Interim Financial Reporting" therefore it is not fully in compliance with IFRS.
The half year report does not constitute financial statements as defined in Section 434 of the Companies Act 2006 and does not include all of the information and disclosures required for full annual statements. It should be read in conjunction with the annual report and financial statements for the year ended 31 December 2011 which is available on request from the Group's registered office, Vigo Centre, Birtley Road, Washington, Tyne and Wear NE38 9DA or can be downloaded from the corporate website www.tanfieldgroup.com.
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2 Accounting policies The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2011, as described in those financial statements.
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LOSS PER SHARE | ||||
The calculation of the basic and diluted loss per share is based on the following data:
Number of shares | ||||
Six months | Six months | Year to | ||
To 30 Jun 12 | to 30 Jun 11 | 31 Dec 11 | ||
Weighted average number of shares in thousands | ||||
Basic | 113,829 | 94,234 | 94,339 | |
Potential dilutive ordinary shares from share options | 3,042 | 1,792 | 140 | |
Total diluted | 116,871 | 96,026 | 94,479 | |
Earnings | ||||
From continuing and discontinuing operations | ||||
Earnings for the purposes of basic earning per share | (6,976) | (7,216) | (16,337) | |
Potential dilutive ordinary shares from share options | - | - | - | |
Earnings for the purposes of diluted earnings per share | (6,976) | (7,216) | (16,337) | |
From continuing operations | ||||
Earnings for the purposes of basic earning per share | (6,976) | (7,216) | (16,337) | |
Profit on disposal of discontinued operations | - | (173) | (173) | |
Earnings for the purposes of earnings per share from continuing operations | (6,976) | (7,389) | (16,510) | |
Adjustment for one off items: | ||||
Reassessment of carrying value of associate | - | - | 1,280 | |
Impairments | - | - | 250 | |
Loss for the purposes of loss per share before one off items | (6,976) | (7,389) | (14,980) | |
Loss per share from continuing operations | ||||
Basic loss per share (pence) | (6.1) | (7.8) | (17.5) | |
Diluted loss per share (pence) | (6.1) | (7.8) | (17.5) | |
Loss per share from continuing operations before one off items | ||||
Basic loss per share before one off items (pence) | (6.1) | (7.8) | (15.9) | |
Diluted loss per share before one off items (pence) | (6.1) | (7.8) | (15.9) | |
IAS33 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. | ||||