Tanfield half year results: company may split business.

30 September 2009

Darren Kell, Tanfield Group chief executive.

Darren Kell, Tanfield Group chief executive.

In its half year results report Tanfield Group revealed that the board is considering the de-merging of its two trading divisions to create separate companies focused on powered access and on zero emission vehicles.

Over the first half of 2009 turnover declined 68% to £29.9 million: turnover in the Powered Access division (owner of UpRight Powered Access and Snorkel) fell from £72.9 million in 2008 to £21.2 million in 2009 a fall of 71%; sales at the SEV zero emission vehicles fell 48%.

Over the period Tanfield experienced a £11 million operating loss, but was able to report cash reserves of £10.8 million.

Darren Kell, CEO of Tanfield said, "Sales performance across the group continues to be constrained by the global recessionary environment.

"However, we took appropriate and timely corrective action to reshape the business. Throughout the period we have consciously run the company for cash ahead of profitability; a strategy that has maintained the cash position, with the group still retaining a strong balance sheet.

"We continue to prepare for an eventful upturn in market demand in both our core business sectors, and are already witnessing positive developments in the Zero Vehicles division."

The board of directors is considering how dividing the company into two separate PLCs will improve shareholder value and provide growth opportunities in each of the businesses. More information on this proposal will be available when the board has completed its strategic review of the business.

In the Powered Access division a focus on inventory reductions during the first half year generated cash and harmonised Tanfield's finished goods stock with production target levels.

Across the company Tanfield has taken action to reduce the cost base and improve business efficiency, including shorter working weeks and periods of unpaid leave. This resulted in a reduction of staff costs by 40% whilst retaining the core skills base of the workforce.

During the first half, Tanfield further expanded its powered access global dealer network, with the appointment of new distributors in Latin America, North Africa and Europe. The Company also appointed a national network of sales agents in North America, to target smaller, family-owned equipment rental companies.

The company reported, "The almost blanket cessation of fleet purchases by equipment rental companies seen in the second half of 2008 continued throughout this period. This has fuelled increased competition for the end user market, resulting in heavy discounting from all the company's major competitors. However, while revenues in the period have declined, our performance is in line with, or better than, our sector peers."

Recently due to the unsettled market conditions, companies have been reticent to offer predictions and outlooks for the coming months and years, however Tanfield has ventured a statement.

The board is confident in the future of the Zero Emission Vehicles sector, but with modest short-term expectations.

The company said, "The short term outlook for Powered Access remains challenging. Major rental companies have applied a capital expenditure moratorium on new equipment and are actively reducing inventory. This has resulted in a large number of used machines entering the market, which has in turn impacted on new product sales and pricing. Rental customers, that globally account for over two-thirds of all powered access sales, are indicating that their ‘purchasing holiday' could continue throughout 2010.

"Notwithstanding these market challenges, the Board expects that the strong customer relationships and product support capabilities of Tanfield's distributor network will sustain sales, albeit at the significantly reduced levels and pricing similar to those experienced so far this year.

Overall, the Board expects trading conditions in the second half of 2009 will be similar to the first half of the year."

Tanfield is not proposing to pay a dividend for the period.

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