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TAN Tanfield Group Plc

4.05
0.20 (5.19%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Tanfield Group Plc LSE:TAN London Ordinary Share GB00B4QHFM95 ORD 5P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.20 5.19% 4.05 3.60 4.50 0.00 16:35:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Motor Vehicle Part,accessory 6.9M 4.95M 0.0304 1.27 6.27M

Tanfield Group PLC Final Results & Notice of AGM (5907J)

30/06/2017 7:00am

UK Regulatory


Tanfield (LSE:TAN)
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TIDMTAN

RNS Number : 5907J

Tanfield Group PLC

30 June 2017

The Tanfield Group Plc

("Tanfield" or "the Company")

Final Results for the year ending 31 December 2016 and Notice of AGM

Tanfield Group Plc, a passive investing company as defined by AIM Rules, announces its final results for the year ending 31 December 2016. The audited financial statements are being posted to shareholders today and made available on the Company website at www.tanfieldgroup.com shortly.

Tanfield announces that its Annual General Meeting will be held at 11:30 a.m. (UK time) on 7 August 2017 at Sandgate House, 102 Quayside, Newcastle-upon-Tyne, NE1 3DX. Information on the resolutions can be found in the Notice of Annual General Meeting circular that will be posted to shareholders today and made available on the Company website at www.tanfieldgroup.com shortly.

Daryn Robinson, Chairman of Tanfield, said:

"During the year we have continued to monitor closely the progress of both of the Company's investments. The Board once again feels that some progress has been made towards a realisation of value in the investment in Snorkel following further growth in 2016. The calculation of the Snorkel valuation was made in 2013 and is based on the formula detailed in the circular that was distributed prior to the disposal of the controlling interest in Snorkel, which expires on 30 September 2018. There is no guarantee that the financial targets required to trigger the realisation of this value will be met before the expiry date. The Board is of the opinion that should the financial targets not be met before the deadline, the current valuation could be a fair reflection of the investment value beyond the end of the 5 year period. With respect to Smith, however, the Board continue to hold the view that the value of the investment should be nil. The current combined value per share of investments is 23p per share."

Investment Report

Background

The Company is defined as an investment company with two passive investments. This definition resulted from the disposal of Smith Electric Vehicles in 2009 and the disposal of Snorkel in October 2013. Tanfield Group Plc currently owns 5.76% of Smith Electric Vehicles Corp. ("Smith") and 49% of Snorkel International Holdings LLC ("Snorkel").

Overview

Snorkel

Tanfield continues to own 49% of Snorkel, which it has held since the disposal of the business in October 2013. Sales levels (unaudited) have continued to grow during 2016, increasing by 19% to $130.5m (2015: $109.9m / 2014: $85.3m). Despite market conditions continuing to be challenging, Snorkel has been able to achieve improved market share in targeted regions allowing it to also create a broader and more diverse customer base. This is expected to help underpin further growth expected for 2017, including from large rental companies that have not purchased Snorkel product for a number of years. This is testament to the progress Snorkel has made in recent years and the improvements to the product range, build quality and customer service.

The Snorkel 2016 accounts report an operating loss (unaudited), excluding depreciation, of $2.8m (2015: $10.6m / 2014: $14.9m) with $1.9m of this loss being incurred in the first quarter of the year and the business operationally breaking even during some of the later periods. The significantly reduced operating loss is partially linked to the increased sales levels but is mainly the result of the focused cost-down activity that has taken place during 2015 and 2016 coming to fruition, thereby reducing the bill of material costs and lowering the break-even sales point.

Despite the challenging trading conditions, the Board understand Snorkel is again targeting double-digit growth in 2017 from their UK manufacturing facility which mainly provides product to the European marketplace. Tanfield are, however, unsure how much growth will come from the US manufacturing facility in 2017, given its dependency upon Ahern Rentals as its principal customer. Nevertheless, as a result of the success of the cost down activity and the double digit European growth expectation, the Board believes Snorkel could still achieve combined growth, as evidenced in the March 2017 quarterly accounts, and move into profit for the full 2017 year, in line with their forecast.

Should economic conditions materially change in the latter stages of 2017, this may have an impact on the expected outcome, but the Tanfield Board is currently of the opinion that the investment in Snorkel will result in a return to shareholders in the future, although it should be noted that this may not materialise until after 30 September 2018 when the outcome then becomes uncertain and could be more or could be less than the calculated realisation value.

Valuation of Snorkel holding

The Board of Tanfield has taken a view of the carrying value of its 49% holding and its preferred interest position that takes account of risks in the industrial global markets and the normal cycles that operate within these markets. The range of potential valuations can be broad, with the added complexity of a time- driven element whereby the agreement for the current valuation formula could only be triggered during a five year period ending in September 2018. The transaction is described below, largely extracted from page 7 of the Circular distributed to Shareholders in 2013 and available from the Company website at http://www.tanfieldgroup.com with current values* inserted where appropriate.

Xtreme, by way of its holding in SKL Holdings, entered in to a staged acquisition of the Snorkel Division, via the creation of Snorkel International Holdings, in which Tanfield retains a holding until the consideration terms are fully met. Xtreme has made significant working capital facilities available to Snorkel International Holdings to deliver its growth forecast (currently believed to be approximately $70m* of working capital) and has delivered certain other strategic benefits and synergies to Snorkel International Holdings. Tanfield retains an initial interest in 49% of Snorkel International Holdings and an adjusted preferred interest position of $22.4m*, in exchange for Xtreme's controlling interest in Snorkel International Holdings. Subject to the Snorkel Division reaching an EBITDA of at least $25m for any prior 12 month period prior to 30 September 2018, Tanfield can demand payment of this preferred interest which would be paid when Snorkel International Holdings is able to fund such payment and its net debt/EBITDA ratio is less than 2, ultimately reducing Tanfield's interest to 30% and Xtreme will hold 70% of Snorkel International Holdings.

Subject to the payment of the preferred interest, and before 30 September 2018, Tanfield has a "put" option on this remaining holding, whereby SKL Holdings will be obliged to purchase the remaining interest held by Tanfield at an agreed multiple of 5.5 times EBITDA earnings, as at the date of the put, again subject to Snorkel International Holdings being able to fund such a payment. SKL Holdings has a call option on the same commercial terms.

At the end of 2016 there were just under two years left to run on the fixed terms of the agreement. If the formula is not triggered within the 5 year time frame Tanfield will retain a 49% interest in Snorkel but the $25m EBITDA trigger compelling payment of the $22.4m adjusted preferred interest position and the Company's put option compelling the purchase of Tanfield's remaining interest in Snorkel will expire.

The Board continues to have discussions with Snorkel and remain of the view that Don Ahern, the owner of Xtreme, would wish to one day own 100% of Snorkel and will therefore seek to buy Tanfield's holding in Snorkel at some point in the future.

The Board has considered a number of scenarios and, based on the range of possible outcomes, feel the valuation of GBP36.3m should be maintained. This valuation has been assessed against various criteria, including past performance, production capacity, market conditions, the capability of the business to increase output and exchange rate fluctuations.

The original valuation was based on the assumption that the $25m EBITDA target would be reached within the 5 year period. Whilst that target now seems increasingly unlikely to be achieved, if the assumption is made that both the progress within Snorkel and the wider global market conditions will continue to improve, then the current GBP36.3m valuation could still be a fair reflection of the investment value beyond the 5 year period; with the caveat that a number of factors could influence the valuation and performance of Snorkel between now and a potential realisation date beyond September 2018, including Xtreme's negotiating stance. Therefore, the actual value that might be realised could be more or less than the current valuation.

The Board would like to draw your attention to note 2 of this announcement and that the auditors have also highlighted this uncertainty.

The Board will continue to monitor the investment and is reviewing the original agreements with its advisers to ensure it has an accurate understanding of the position post September 2018 should the EBITDA target not be achieved beforehand.

Smith

In October 2014 Smith completed a restructuring exercise that saw it convert debt to equity. As a result of this, they informed the Company that its equity shareholding had reduced from 24% to 5.76% (excluding warrants).

Since then, Smith has sought to raise funds which would allow it to implement its strategic plan. To date, no significant fundraise has been completed and the Board of Tanfield does not foresee this happening in the immediate future.

In May 2015 Smith executed a conditional agreement to form an exclusive joint venture with strategic partner and investor FDG Electric Vehicles Limited ("FDG"). In May 2016, the Board of Tanfield was informed that Smith had filed a complaint against FDG and the New Joint Venture. The Board of Tanfield understands that counter-claims have been made against Smith and that legal procedures are ongoing.

Valuation of Smith holding

In 2015, the Board of Directors carried out a review of the investment in Smith resulting in a decision to impair the investment value to nil. The Board came to this decision due to funding uncertainties as well as the legal proceedings between Smith and FDG.

We understand that legal proceedings are ongoing and that Smith have not been able to raise any meaningful funds since that time and so the Board maintain its opinion that the investment value should be held at nil.

Strategy of Tanfield Board of Directors in relation to its Investments

Although the Board cannot predict the timeframe for a return of value in its investment in Snorkel, the Directors believe that it will result in a return of value to shareholders over time. In contrast, at this stage it does not look likely that its investment in Smith will result in a return of value to shareholders.

The Directors will update shareholders should this view change.

The strategy of the Company in relation to these investments is to return as much as possible of any realised value to shareholders as events occur and circumstances allow, subject to compliance with any legal requirements associated with such distributions.

The Board takes the view that while there has been further progress made by Snorkel, there is still a risk of failure, although based on progress to date and commitments from Don Ahern / Xtreme, this seems unlikely. The Board will continue to fulfill its obligation to its shareholders in seeking to optimise the value of its investments.

The Investments are defined as passive investments and in line with this definition Tanfield does not hold Board seats in either Snorkel or Smith. There is no limit on the amount of time the existing Investments may be held by the Company.

 
 STATEMENT OF COMPREHENSIVE INCOME 
 FOR THE YEARED 31 DECEMBER 2016 
 
                                                                       2016       2015 
                                                                   GBP000's   GBP000's 
===============================================  ====  ====   =============  ========= 
 
 Revenue                                                                  -          - 
 Staff costs                                                           (85)        618 
 Other operating income                                                  30         27 
 Other operating expenses                                             (182)      (268) 
------------------------------------------------------------  -------------  --------- 
 (Loss)/Profit from operations 
  before impairments                                                  (237)        377 
 Impairment of Investments                                                -    (4,770) 
 Loss from operations after 
  impairments                                                         (237)    (4,393) 
 Finance expense                                                       (13)       (54) 
 Finance income                                                           1          1 
------------------------------------------------------------  -------------  --------- 
 Net finance expense                                                   (12)       (53) 
 
 Loss from operations before 
  tax                                                                 (249)    (4,446) 
 Taxation                                                                 -          - 
-----------------------------------------------  ----  ----   -------------  --------- 
 Loss & total comprehensive income for 
  the year attributable to equity shareholders                        (249)    (4,446) 
-----------------------------------------------------------   -------------  --------- 
 
 
 
 Earnings per share 
 Loss per share from operations 
 Basic (p)                                                            (0.2)      (3.1) 
 Diluted (p)                                                          (0.2)      (3.1) 
 
 
 
 BALANCE SHEET (Company registration number 04061965) 
 AS AT 31 DECEMBER 2016 
 
                                                                  2016          2015 
                                                              GBP000's      GBP000's 
==========================================  ====  ====   =============  ============ 
 Non current assets 
 Non current Investments                                        36,283        36,283 
-------------------------------------------------------  -------------  ------------ 
                                                                36,283        36,283 
 ----  ----  ------------------------------------------  -------------  ------------ 
 Current assets 
 Trade and other receivables                                        61            98 
 Cash and cash equivalents                                         269            94 
-------------------------------------------------------  -------------  ------------ 
                                                                   330           192 
 ----  ----  ------------------------------------------  -------------  ------------ 
 
 Total assets                                                   36,613        36,475 
-------------------------------------------------------  -------------  ------------ 
 
 Current liabilities 
 Trade and other payables                                           91           110 
-------------------------------------------------------  -------------  ------------ 
                                                                    91           110 
 ----  ----  ------------------------------------------  -------------  ------------ 
 Non-current liabilities 
 Other payables                                                      -           254 
                                                                     -           254 
 ----  ----  ------------------------------------------  -------------  ------------ 
 
 Total liabilities                                                  91           364 
-------------------------------------------------------  -------------  ------------ 
 
 Equity 
 Share capital                                                   7,816         7,546 
 Share premium                                                  17,190        16,800 
 Share option reserve                                              459           461 
 Special reserve                                                66,837        66,837 
 Merger reserve                                                  1,534         1,534 
 Retained earnings                                            (57,314)      (57,067) 
-------------------------------------------------------  -------------  ------------ 
 Total equity attributable 
  to equity shareholders                                        36,522        36,111 
-------------------------------------------------------  -------------  ------------ 
 
 Total equity and liabilities                                   36,613        36,475 
-------------------------------------------------------  -------------  ------------ 
 
 
 
 STATEMENT OF CHANGES IN EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS 
 FOR THE YEARED 31 DECEMBER 2016 
 
                                           Share      Share      Share       Merger      Special   Retained      Total 
                                         capital    premium     option      reserve     reservea   earnings 
                                                               reserve 
                                        GBP000's   GBP000's   GBP000's     GBP000's     GBP000's   GBP000's   GBP000's 
    At 1 January 2015                      7,187     16,455        845        1,534       66,837   (53,005)     39,853 
   ------------------------------      ---------  ---------  ---------  -----------  -----------  ---------  --------- 
    Comprehensive income 
    Loss for the year                          -          -          -            -            -    (4,446)    (4,446) 
   ------------------------------      ---------  ---------  ---------  -----------  -----------  ---------  --------- 
    Total comprehensive 
     income for the year                       -          -          -            -            -    (4,446)    (4,446) 
    Transactions with 
     owners in their capacity 
     as owners:- 
    Issuance of new 
     shares                                  359        345          -            -            -          -        704 
    Share based payments                       -          -      (384)            -            -        384          - 
   ------------------------------      ---------  ---------  ---------  -----------  -----------  ---------  --------- 
    At 31 December 2015                    7,546     16,800        461        1,534       66,837   (57,067)     36,111 
   ------------------------------      ---------  ---------  ---------  -----------  -----------  ---------  --------- 
    Comprehensive income 
    Loss for the year                          -          -          -            -            -      (249)      (249) 
   ------------------------------      ---------  ---------  ---------  -----------  -----------  ---------  --------- 
    Total comprehensive 
     income for the year                       -          -          -            -            -      (249)      (249) 
    Transactions with 
     owners in their capacity 
     as owners:- 
    Issuance of new 
     shares                                  270        390          -            -            -          -        660 
    Share based payments                       -          -        (2)            -            -          2          - 
   ------------------------------      ---------  ---------  ---------  -----------  -----------  ---------  --------- 
    At 31 December 2016                    7,816     17,190        459        1,534       66,837   (57,314)     36,522 
   ------------------------------      ---------  ---------  ---------  -----------  -----------  ---------  --------- 
 

a The company's special reserve relates to a previous reclassification of the share premium account.

 
 CASH FLOW STATEMENT 
 FOR THE YEAR ENDED 31 DECEMBER 2016 
                                                             2016       2015 
                                                         GBP000's   GBP000's 
===========================================  ====   =============  ========= 
 
 Loss before interest and taxation                          (237)    (4,393) 
 Loss on impairment of investments                              -      4,770 
--------------------------------------------------  -------------  --------- 
 Operating cash flows before movements 
  in working capital                                        (237)        377 
 Decrease/(increase) in receivables                            25       (25) 
 Decrease in payables                                       (273)    (1,331) 
--------------------------------------------------  -------------  --------- 
 Net cash from/(used in) operations                         (485)      (979) 
 
 
 
 Cash flow from financing activities 
 Proceeds from issuance of ordinary 
  shares net of costs                                         660        704 
--------------------------------------------------  -------------  --------- 
 Net cash from financing activities                           660        704 
--------------------------------------------------  -------------  --------- 
 Net decrease in cash and cash equivalents                    175      (275) 
 Cash and cash equivalents at the start 
  of year                                                      94        369 
--------------------------------------------------  -------------  --------- 
 Cash and cash equivalents at the end 
  of the year                                                 269         94 
--------------------------------------------------  -------------  --------- 
 
 

1. Basis of preparation

The results announcement has been prepared under the historical cost convention on a going concern basis and in accordance with the recognition and measurement principles of International Financial Reporting Standards and IFRIC interpretations as adopted by the EU ("IFRS").

The announcement has been prepared on the basis of the same accounting policies as published in the audited financial statements of the Company for the year ended 31 December 2016.

The information in this statement has been extracted from the accounts for the year ended 31 December 2016 and as such, does not contain all the information required to be disclosed in accordance with the International financing reports standards ("IFRS").

2. Audited Financial Statements

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015 within the meaning of s435 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for 2015 have been delivered to the registrar of companies, and those for 2016 will be delivered in due course.

The auditors have reported on those accounts; their reports were (i) unqualified and (ii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2015 or 2016. However, (iii) in their audit report for the year ended 31 December 2016 the auditors did draw attention by way of an emphasis of matter to a material uncertainty that could impact the carrying value of Non Current Asset Investments (no emphasis was referenced in 2015). Further details can be found in the auditors report on page 11 of the Company's statutory accounts for the year ended 31 December 2016. The results for the year ended 31 December 2016 were approved and authorised for issue by the Board of Directors on 29 June 2017 and are audited.

The information contained in this preliminary announcement was authorised and approved by the Board of Directors on 29 June 2017.

3. Loss per share

 
 Basic loss per share is calculated by dividing the loss attributable 
  to equity shareholders by the weighted average number of shares 
  in issue during the period. In calculating the dilution per share, 
  share options outstanding and other potential ordinary shares have 
  been taken into account where the impact of these is dilutive. As 
  the potential dilutive ordinary shares from share options reduce 
  the loss per share these shares are omitted from the dilutive loss 
  per share calculation. The average share price during the year was 
  12.88p (2015: 19.58p). 
 
 Number of shares                                                                        2016       2015 
                                                                                          No.        No. 
                                                                                        000's      000's 
----------------------------------------------------------------  --------  ------  ---------  --------- 
 Weighted average number of ordinary shares for 
  the purposes of basic earnings per share                                            153,677    144,823 
 Effect of dilutive potential ordinary 
  shares from share options                                                               122        171 
----------------------------------------------------------------  --------  ------  ---------  --------- 
 Weighted average number of ordinary shares for 
  the purposes of diluted earnings per share                                          153,799    144,994 
----------------------------------------------------------------------------------  ---------  --------- 
 
 Loss 
                                                                                         2016       2015 
 From operations                                                                     GBP000's   GBP000's 
----------------------------------------------------------------  --------  ------  ---------  --------- 
 Loss for the purposes of basic earnings per share 
  being net profit attributable to owners of the 
  parent                                                                                (249)    (4,446) 
 Potential dilutive ordinary shares from share                                              -          - 
  options 
----------------------------------------------------------------------------    -------------  --------- 
 Loss for the purposes of diluted earnings 
  per share                                                                             (249)    (4,446) 
----------------------------------------------------------------------------    -------------  --------- 
 
 Loss per share from operations 
 Basic (p)                                                                              (0.2)      (3.1) 
 Diluted (p)                                                                            (0.2)      (3.1) 
 
 

For further information:

Tanfield Group Plc

Daryn Robinson 0700 349 7489

WH Ireland Limited - Nominated Advisor

James Joyce / Alex Bond 020 7220 1666

Peterhouse Corporate Finance - Broker

Peter Greensmith / Duncan Vasey 020 7220 9797

This information is provided by RNS

The company news service from the London Stock Exchange

END

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June 30, 2017 02:00 ET (06:00 GMT)

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