23.10.2006

Tanfield raises more capital

The Tanfield Group PLC has called an Extraordinary General Meeting for November 16 to approve the issue of up to 50 million new ordinary shares, worth £20 million through an institutional placing.

The company is also in negotiations with its bank to extend its borrowings by a further £5 million. The company says that it will utilise the proceeds as working capital to fund a growth rate that is currently running at more than twice the rate of its initial plan.

Tanfield says that the order book for Powered Access continues to exceed expectations, with order intake consistently exceeding £1million a week, more than double the projections it gave analysts for 2007.
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Tanfields new plant near Washington, Tyne and Wear

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Inside the new plant four weeks ago, plenty of space for UpRight assembly

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The UpRight TM12 assembly line last month, it is now up and running

The majority of the working capital will be invested in funding the supply chain, allowing Tanfield to benefit from sourcing components from lower cost
countries, as well as expanding the spare parts business, one of the company’s top priorities.

Vertikal Comment

When Tanfield took over CEO Darren Kell said “We don’t know what we don’t know” it therefore began with a conservative forecast for its first full year. Once the UpRight distribution network and brand awareness were combined with a confidence in the future,that forecast was blown out of the water.
A further rights issue, such as this, was therefore predictable, given Tanfield’s aversion to high levels of debt and leverage.

The funds should both avoid any dangers of overtrading and allow the company to fund the purchase of fabrications and similar items from China and other less costly areas.

The problem with sourcing from such areas is that at even if payment terms are available most of it will be taken up by shipping time, and significantly greater levels of inventory are required in order to avoid hiccoughs in production.

The company also needs to keep the pressure on improving its spare parts availability and no matter how you look at this, a larger volume of parts on the shelves is essential.

This latest move suggests that the group is taking a very down to earth and pragmatic approach to its expansion. One thing is for sure - the UpRight acquisition is increasingly looking like it will prove to be the deal of the decade.
There must be one or two other manufacturers out there kicking themselves for letting this one get away.