08.04.2009

Tanfield takes massive loss

Tanfield, owner of UpRight and Snorkel has reported full revenues up 18 percent on 2007 to £146 million ($212 million), largely due to the full year contribution of Snorkel, compared to six months in 2007. At the same time pre tax profits – before exceptionals- dropped by almost 87 percent to £1.7 million ($2.5 million).

The company took a number of impairments in its annual accounts writing off almost all goodwill while taking steep write downs in inventory and debtors which resulted in a final pre-tax loss of £88.8 million ($128 million)

At the end of the period the company has no debt, few intangible assets on its books and a cash pile of over £11 million.

Chairman Roy Stanley said: “After a profitable first half of the year, the Group encountered a downturn in its end markets in the second half of 2008. The Powered Access Division was impacted by the swift decline in the economy, which led to a blanket suspension of fleet replacement and expansion programmes by major equipment rental companies along with the almost complete withdrawal of financing globally for new aerial work platforms.”

“The Zero Emission Vehicles Division experienced supply chain constraints in 2008, with several order postponements. Several customers involved in urban delivery operations delayed the step up from trials to volume fleet orders, in response to concerns over the effects of the economic downturn on their own revenues.”

“As discussed in our Interim Results, during 2008 the board undertook a review of Tanfield's goodwill and other assets, particularly those arising from the acquisition of Snorkel in 2007. The result was a series of impairments totaling £89.7 million”

“The balance sheet after the impairments remains strong with net assets of £85.8 million and excess of current assets over current liabilities of £61.5 million. Cash at 31 December 2008 was £11.1 million and this position is being maintained.”

“This has been a challenging year for the Group. However, we are a business that is lean, nimble and focused, with a highly experienced management team, which reacted promptly and decisively to the adverse market conditions. Tanfield is well placed to trade through the downturn and to move rapidly when its end markets improve. I have great faith in the ability of all our people. I would like to thank everyone involved with Tanfield for their dedication and hard work and their continued efforts.”

Vertikal Comment

There are really no surprises here in spite of the big negative number at the bottom of its accounts, the massive goodwill write-offs were already announced and leave the company with one of the cleanest balance sheets in the industry.

When the market comes back as it most certainly will, Tanfield could begin generating substantial profits due to the fact that it will have no interest payments, little depreciation, a low cost base and a large production capability.

The challenge though will be maintain brand image and confidence and maintaining, or rather improving parts and service performance. At the same time it needs to seriously consider its product line and product quality making sure that it is in good shape for the upturn.

On the other issues, the fact that some of the major brands are struggling on how to maintain their brand and exposure could help Tanfield. The current climate has closed the gap between the largest producers and the small to medium companies, providing an opportunity for those that are best able to exploit the situation.

Tanfield – on paper – is in a good place here, but also has more work than most, as the downturn hit before its business had ‘settled’ and found their place after the rapid acquisition and expansion programmes of 2006 and 2007. It might though be helped by the fact that it has a large number of small privately held distributors around the world who are passionate about its two brands.

It is a big jump to say that this will put it in a strong place to exploit and benefit from the downturn. But at least it has enough ingredients to make a decent cake – it just needs to make sure that it has a good recipe

[[Sorry in advance for that last line!]]