Tanfield Regulatory News (TAN)

14 March 2014

Tanfield Group Plc

("Tanfield" or the "Company")

Investment Update

The Board of Tanfield Group plc is providing an update to shareholders ahead of the publication of its final results for the year ended 31 December 2013 expected to be released in April.

The Company is currently defined as an investing company with two passive investments. This status resulted from the disposal of the Snorkel business in October 2013. The company's costs and processes have been realigned in the context of this change in the nature of the business. The Board believes that the business has sufficient cash to see it through to the realisation of the value in its investments.

Snorkel

The Board have been informed by the Snorkel management that following the injection of significant working capital the business continues to progress well. Production is increasing and the business is taking advantage of the general uplift in the market for its products. Buyer and supplier relationships have been strengthened. The parts business has been significantly built up. The synergies between the parent and Snorkel mean that improved access to distribution is proving beneficial. There has been a significant increase in output in recent months. The Board are informed that the internal plan is on schedule and that orders and turnover are both rising. More detail regarding the carrying value of Snorkel will be provided in its final year results.

Smith Electric Vehicles

The management of Smith Electric Vehicles Corporation continues to pursue further investment as it follows its ultimate strategy of seeking a listing on a public market. 

The Smith management has informed Tanfield that the ability of the company to achieve its strategy and its survival is dependent upon the continued financial support of its existing investors; which it has and the raising of further investment; for which it is in negotiations. It is the strong view of the Tanfield Board that it is sensible to recognise that there is a risk that Smith will fail to raise the further required investment.

Smith has consolidated various accumulated debt instruments including a further $7.6 million raised since end of June 2013 into a convertible instrument. The full value of this instrument post full conversion is $98 million. It has been indicated by the Smith management that if the full investment is raised to achieve a public listing and ongoing working capital then the terms of the prospective investment and fund raising and the conversion of the debt would be markedly dilutive to Tanfield's current holding of 24% Until there are definitive terms for any future investment and ultimate valuation of Smith is known then it is not possible for Tanfield to determine its resultant shareholding of Smith in the newly listed entity.

In line with it being classified as a passive Investment company Tanfield does not hold board seats in Smith or Snorkel. However Tanfield continues to hold the right to two seats on the board of Smith. 

Tanfield Engineering Services Limited

This loss making business was disposed of in December 2013.

Return to Shareholder Strategy and Review

The strategy of the company in relation to its two interests is to return as much possible of the realised value in these investments to shareholders as and when they occur. The Board is reviewing its investment strategy and will inform shareholders of the outcome of this review in the near future. Any proposed amendment to the investing policy would be subject to shareholder approval.

The Board anticipates that it will announce its final year results and set the date for the meeting of the AGM before the end of April.

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