Tanfield Regulatory News (TAN)

6 Feb 2009 07:00



6 February 2009

Tanfield Group plc 

Trading Update

Tanfield Group plc ("the Group") gives the following update on its trading position.

As previously notified we experienced much poorer market conditions in the second half of 2008. The Group had a number of loss-making months before the impact of cost cutting restored us to a break-even position on a monthly basis, before exceptional restructuring costs. We were however still able to grow the Group year on year, with revenues of £146.5m. With many customers holding onto their own cash, our year end position was £11.1m, with £8.0m being collected in the weeks following the year end. Cash balances at the end of January 2009, traditionally a low point, were £13.1m.

Trading conditions in all of our markets remain challenging, with little visibility and reduced order intake. The swift and decisive steps taken last year to downsize the business have substantially mitigated the risk of overexposure. Because of this prompt action, we can maintain the business at a much lower break-even level than historically was the case.

We continue to maintain tight control on overheads and to review our cost base. Given the restricted horizon of our order book, our visibility for 2009, in line with our peers, is limited, except to indicate that we expect to see a contraction in 2009 compared to 2008.

Adverse trading conditions and the ongoing unavailability of credit for our customers continue to impact all three divisions. The major OEM customers into which our Engineering Division supplies sub-assemblies have either significantly downsized or cancelled their orders. In agreement with our workforce, we have implemented a three-day week at that facility, in order to reduce our cost base, while retaining the core skills within the business unit. 

Market conditions in the USA are particularly challenging. We are instigating temporary production suspensions in North America, on an as-needed basis, to continue to match output to demand. However, as always, customer service remains our number one priority and all customer-facing operations will carry on as normal. 

We have already downsized the European-based Powered Access and Zero Emission Vehicle divisions to accommodate a lower run rate. We will review this closely and regularly, and if necessary, take further steps which may include the implementation of shorter working week practices.

The Group is, however, debt-free without banking covenants or interest costs and we do not anticipate this changing in the short to mid-term. The Group is therefore well positioned to continue to ride out this downturn until eventual market recovery.

ENDS

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