TANFIELD GROUP PLC
REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
Registered in England & Wales
Company number 04061965
Tanfield Group PLC
REPORT AND FINANCIAL STATEMENTS 2008
CONTENTS
Page
Directors, Advisers and Officers
Financial and Business Review
Directors’ Report
Corporate Governance
Directors’ Remuneration Report
Statement of Directors Responsibilities
Independent Auditors Report
Consolidated Income Statement
Consolidated Balance Sheet
Company Balance Sheet
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Cash Flow Statement
Company Cash Flow Statement
Accounting Policies
Notes to the Accounts
1
2
6
10
13
17
18
20
21
21
22
22
23
23
24
32
DIRECTORS, ADVISERS AND OFFICERS
Tanfield Group PLC
DIRECTORS
Executive
DS Kell
CD Brooks
BJ Campbell
GE Allison
Non-executive
RRE Stanley
Dr JN Bridge
M Groak
C Billiet
SECRETARY
CD Brooks
REGISTERED OFFICE
Vigo Centre
Birtley Road
Washington
Tyne and Wear, NE38 9DA
AUDITORS
Baker Tilly UK Audit LLP
1 St James’ Gate
Newcastle upon Tyne
NE1 4AD
SOLICITORS
Ward Hadaway
Sandgate House
102 Quayside
Newcastle upon Tyne
NE1 6AE
NOMINATED ADVISOR
Arbuthnot Securities
Arbuthnot House
20 Ropemaker St
London
EC2Y 9AR
NOMINATED BROKERS
Arbuthnot Securities
Arbuthnot House
20 Ropemaker St
London
EC2Y 9AR
REGISTRARS
Capita IRG plc
Bourne House
34 Beckenham
BR3 4TH
Chief Executive
Finance Director
Managing Director Powered Access
Managing Director Zero Emission Vehicles
Chairman
Non executive Director
Non executive Director
Non executive Director
Page 1
Tanfield Group PLC
FINANCIAL AND BUSINESS REVIEW
Financial Highlights
•Turnover: £146m, +18% (2007: £123m)
•Profit before exceptional items: £1.7m (2007: £12.8m)
•Net cash at year end £11.1m
•Impairment of goodwill, intangibles, inventory and receivables of £89.6m
•Loss after impairment £88.5m
Corporate Highlights
•30% cost base reduction in 2008
•Further 27% cost base reduction in 2009
•Strong balance sheet remains after impairments
•US joint venture and customers
Chairman’s Statement
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 some supply chain constraints in 2008, coupled 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.
Despite these challenges, we still succeeded in growing sales during 2008. Turnover in the period was £145.7m, an
increase of 18% on 2007 (£123.3m) partially reflecting a full year of Snorkel. Profit from operations before
restructuring of £1.7m represented a 87% decline, reflecting the more challenging trading conditions of the second
half of 2008.
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 Holdings LLC in 2007. The result was a series of
impairments totalling £89.7m.
The balance sheet after the impairments remains strong with net assets of £85.8m and excess of current assets over
current liabilities of £61.5m. Cash at 31 December 2008 was £11.1m 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.
Page 2
Tanfield Group PLC
Chief Executive’s Review
Trading conditions, particularly in our Powered Access markets, remain challenging with little visibility.
The swift and decisive steps taken to downsize the business have substantially mitigated the risk. This prompt action
means that we can operate the business at a much lower break-even level than previously. Changes in the conditions
of our end markets are constantly monitored, and we will take further actions, if necessary.
During 2008 we reduced our cost base by 30%, including an annualised wage bill reduction of £11m. Since the New
Year, we have implemented shorter working weeks across all business units and geographical territories.
Furthermore, the Executive Directors have volunteered a 20% pay reduction during this period.
The management maintains rigorous control of overheads and continually reviews the Group’s cost base. Given the
restricted nature of the market, 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.
Powered Access
We continue to demonstrate that we can react quickly to the dynamic market conditions experienced in this sector.
While the global outlook remains weak, we are maintaining our presence in all markets through our distributors and
dealers. Across the industry there remains a significant oversupply of powered access platforms and this will take
some time to work through.
We are aggressively targeting the spare parts and refurbishment business, which is growing as owners seek to extend
the working life of their aerial lifts. Our focus on the end user market has proven invaluable during this challenging
period, as has our strategy of developing a dedicated distribution network. We continue to expand this global network
and to support our dealers through targeted marketing initiatives, ensuring that they stay close to customers
throughout the downturn. The relationships with dealers, distributors and customers that we forge during this period
will position us well for when the market recovers. Despite the unique circumstances of the current recession, the
longer term outlook for the powered access sector remains strong.
Zero Emission Vehicles
We continue to expand and strengthen our supply chain and we now have several motor, battery and electronics
suppliers able to meet our stringent quality and availability requirements.
The precipitous fall in demand across the entire commercial vehicle industry has impacted the electric vehicle sector.
In spite of these unprecedented market conditions, our battery electric commercial vehicle offering is steadily gaining
traction.
We have entered into Heads of Terms for a joint venture, Smith Electric Vehicles US Corporation (SEV US Corp) to
assemble our commercial electric vehicles for the North American market. Tanfield will own a 49% equity stake in
SEV US Corp, with the balance in the hands of private US investors. SEV US Corp will produce vehicles from a
facility in Kansas City, Missouri. SEV US Corp will invest $10m to fund its launch and has secured $3m in incentives
from State and local government. The first US production model will be the Smith Newton truck, commencing in the
third quarter of 2009.
We believe that the new US administration’s proactive approach to electric vehicles has unlocked latent demand from
major American corporations for our products. A number of these US corporates have signed letters of intent to
become launch partners for our vehicles. These companies are willing to pay a premium for our electric vans and
trucks, in order to gain early adopter advantage in what they perceive as the mainstream automotive technology of the
near future.
Tanfield has signed a collaboration agreement with Ford Motor Company to assemble the Ford Transit Connect
battery electric vehicle (BEV) in North America. Due for launch in 2010, this light van will be the first BEV to
deliver on Ford’s aggressive new electrification strategy. SEV US Corp will produce the vehicle in the USA on our
behalf. The BEV Connect (Ampere) will also be available in the European market, assembled by Smith in the UK.
Along with owning a 49% stake in SEV US Corp, our JV agreement includes a royalty payment per vehicle sold, £1m
of which will be paid in advance. Given that Newton will not go into production until Q3, we anticipate relatively low
numbers of vehicles for 2009. However, SEV US Corp retains the flexibility to ramp up production for 2010 and
beyond.
Page 3
Tanfield Group PLC
In the UK, we continue to work closely with central Government and our Regional Development Agency, One North
East, to further develop the electric vehicle agenda. Tanfield is a member of the newly-formed London Electric
Vehicle Partnership, created with the desire to maintain London at the global forefront of EV adoption. We are
shortlisted for the Department for Transport’s Low Carbon Vehicle Procurement Programme, with the aim of
commercialising electric and low carbon vans through public sector procurement and expect a final decision on our
inclusion shortly.
With the European side of Ford, we recently unveiled a proof of concept vehicle – the “Tourneo Connect BEV” -
which demonstrates the potential for our technologies to cross over into passenger vehicles. Given the positive
response to this vehicle we are working with Ford to fully assess the market opportunity.
Summary
The management team is clearly focused on the generation of cash through operations and maximising the
effectiveness of the working capital within the Group.
The Group is debt-free, without banking covenants or interest costs and we do not anticipate this changing in the short
to mid-term. We therefore believe we are well positioned to continue to ride out this downturn.
Our experience and first mover advantage in the electric vehicle sector means we can capitalise upon the growing
momentum behind this market, particularly once the trading environment normalises. Any UK-based public
procurement initiatives, such as those we are witnessing in the USA, will help to significantly accelerate the
penetration of electric vehicles into the corporate and SME markets. Similarly the infrastructure stimulus packages in
the North American market, once active, will ultimately have an impact on the construction sector and we will benefit
in turn.
The Board remains confident of its ability to manage the growth of the business when macroeconomic conditions, the
availability of credit, and customer confidence in our end-markets improve.
Finance Director’s report
The Revenue for the year of £145.7m (an 18% increase on 2007’s revenue of £123.3m) reflected the deteriorating
market conditions faced by the company in 2008, given a first half reported revenue of £93m and a full year of
Snorkel. Revenue reduced month on month from June onwards, ending the year at a low of £6.5m in the month of
December.
Significant cost base reductions have been implemented both by reducing headcount and minimising other areas of
spend including property costs by terminating leases. This has reduced the break-even point in response to the lower
revenues. The speed of response to the market changes has allowed the company to report a Profit from Operations
of £1.7m before non-recurring items.
Amortisation of Intangibles
Profit from operations is reported after charging amortisation. Of the £2.0m amortisation charged, £0.9m arose from
the write down of intangibles in the first half of the year that were impaired at the half year (see below). This is not
expected to recur.
Net operating expenses
Operating expenses are stated net of operating income, which includes income from Government Grants and one off
costs of establishing a credit line of £145k and aborted acquisition costs of £250k.
Profit from Operations before Impairments and Restructuring costs
The Profit from Operations before Impairments and Restructuring costs was £1.7m (2007 £12.8m) reflecting the
challenging market conditions in the second half of the year.
Restructuring costs
Restructuring costs of £372k in the year arose from costs related to the headcount reduction implemented. This
amount is relatively small given the size of the headcount reduction reflecting the short service history of many
employees and redundancy regulations in the US.
Impairment of Assets
The huge changes in market prospects for the Powered Access division required a re-assessment of the carrying value
of a number of assets on the balance sheet. This review gave rise to impairments in a number of categories; intangible
Page 4
Tanfield Group PLC
assets and goodwill arising from the acquisitions of Snorkel and UpRight following a reappraisal of those cash
generating units’ value in use calculations, £44.5m; inventory, because of the impact of current trading conditions on
product mix, overall volumes, supplier failure and resourcing decisions, £22.2m; trade receivables, reflecting an
assessment of the impact of customers’ financial viability in current market conditions and our debt collection
strategies on their collectability, £22.9m. These impairments were made at June 2008 and the impairment levels
reflect the asset values at that time. The year-end asset balances reflect the reduction in trading levels experienced
since June. The receivable and inventory impairments have been reviewed since June in response to the further
worsening of the market.
Finance Expenses
Finance Expenses in the year include the costs of marking to market an interest rate collar £516k.
Loss before tax
Given the impairments, the Loss before tax was £88.8m. The Group net assets after charging this loss were £85.8m.
Taxation
The loss before tax creates trading losses that can be carried forward and used against future profits. In recognition of
these losses, a deferred tax asset of £1.8m has been created and added to the balance sheet.
Earnings per share before impairments and restructuring costs
Earnings per share before one off costs was (23.91p) (2007: 3.59p). No dividend has been declared. (2007: nil)
Net Cash
At 31 December 2008, the Group had cash of £11.1m. The cash allows the business to trade without exposure to
financial covenants from banks or other institutions.
Page 5
Tanfield Group PLC
DIRECTORS’ REPORT
The directors submit their report and the financial statements of Tanfield Group PLC for the year ended 31
December 2008.
PRINCIPAL ACTIVITIES
The company’s principal activity is that of a holding company. Tanfield Group PLC is the parent company of a
group engaged mainly in the powered access, zero emission vehicle industries and engineering.
RESULTS AND DIVIDENDS
The financial result, for the twelve months to 31 December 2008 reflects the impact on the Tanfield Group plc of
the decline in its global markets and its response to that decline.
Turnover for the twelve month period grew to £146m which compares to £123m for the full year to December
2007. Although this is a growth of 18%, this reflects a strong first 5 months and then a decline month on month
since June 2008.
Profit from operations before impairments and restructuring costs and tax for the period of £1.7m shows a
significant reduction from the £12.8m profit in the year to December 2007. The 2007 figure included an amount
of £2m in relation to the recovery of a Snorkel customer debt.
A review was undertaken of the carrying value of assets in the Powered Access division given the significant
changes to market prospects. This review gave rise to impairments of those assets totaling £90m.
After restructuring and impairments, the loss before tax for the period of £88.7m reflects the impact of the
impairments.
The balance sheet remains very robust after impairments, with net assets at the end of December of £86m (£165m:
December 2007). Net Current Assets were £62m (2007: £110m) with cash balances in excess of £11m and no
borrowing. This demonstrates that the company has significant levels of working capital allowing it to work
through the current trading conditions.
No dividend has been paid or proposed for the year (2007: £nil). The loss of £89m (2007: Profit of £10.4m) has
been transferred to reserves.
REVIEW OF THE BUSINESS
The year was dominated by the deterioration in trading conditions in our main markets and the company’s
response to that deterioration.
A detailed review of the business is included in the Business and Financial Review on pages 2 to 5.
FUTURE DEVELOPMENTS
The main focus in the short and medium term is one of managing through the difficult trading conditions, taking
all appropriate steps to minimise costs and preserve cash while retaining skills and resources to respond to any
market improvements when they arise.
Management policies will continue to be reviewed in the light of changing trading conditions.
Page 6
Tanfield Group PLC
DIRECTORS' REPORT (continued)
POLITICAL AND CHARITABLE CONTRIBUTIONS
During the year, the group has made no political or charitable donations (2007 - £nil).
FINANCIAL INSTRUMENTS
The Group’s financial instruments comprise cash, finance leases, unsecured loan notes and short term debtors and
creditors arising from its operations. The principal financial instruments used by the Group are cash balances
raised from share issues by the company and are applied in financing the group’s fixed assets. The Group has not
established a formal policy on the use of financial instruments but assesses the risks faced by the Group as
economic conditions and the Group’s operations develop.
MARKET VALUE OF LAND AND BUILDINGS
The directors are of the opinion that the market value of properties at 31 December 2008 would exceed the net book
values included in the financial statements, but they are unable to quantify this excess in the absence of a professional
valuation, the costs of which are not considered justifiable in view of the group’s intention to retain ownership of its
existing properties for use in its business for the foreseeable future.
RESEARCH AND DEVELOPMENT
The Group maintains a development programme as continuity of investment in this area is essential for the
maintenance of the Group’s market position and for future growth.
EVENTS SINCE THE END OF THE YEAR
There have been no significant events since the end of the year.
DISABLED PERSONS
The group will employ disabled persons when they appear to be suitable for a particular vacancy and every effort is
made to ensure that they are given full and fair consideration when such vacancies arise. Where existing employees
become disabled, it is the Group’s policy wherever practicable to provide continuing employment under normal terms
and conditions and to provide training and career development to disabled employees wherever appropriate.
EMPLOYEE INVOLVEMENT
The Group encourages the involvement of its employees through regular dissemination of information of
particular concerns to employees.
To facilitate this, the company undertakes a Communications Forum where all employees are represented by a
colleague within their department at regular meetings with senior managers.
Page 7
Tanfield Group PLC
DIRECTORS REPORT
DIRECTORS
The present membership of the board is set out on page 1. GE Allison was appointed to the board on 23rd Sept
2008.
Directors shareholding
Beneficial
RRE Stanley
DS Kell
CD Brooks
BJ Campbell
M Groak
G Allison
JN Bridge
C Billiet
Ordinary shares of
£ 0.01each
31/12/2008 31/12/2007
27,769,292
1,700,000
112,463
111,979
-
104,207
47,500
294,000
19,649,292
-
-
6,119
-
-
27,541
-
All directors have the right to acquire shares in the company via the exercise of options granted under the terms of
their service contracts, copies of which may be inspected by shareholders upon written application to the company
secretary. Details of the directors’ options to acquire shares are set out in the Directors’ Remuneration Report on
pages 13 to 16.
POLICY ON PAYMENT OF CREDITORS
It is group policy to agree and clearly communicate the terms of payment as part of the commercial arrangements
negotiated with suppliers and then to pay according to those terms based on the timely receipt of an accurate invoice.
The company supports and the UK based businesses follow the CBI Prompt Payers Code. A copy of the code can be
obtained from the CBI at Centre Point, 103 New Oxford Street, London WC1A 1DU.
Trade creditor days based on creditors at 31 December 2008 were 77 days. (2007 – 64 days)
SUBSTANTIAL SHAREHOLDINGS
On 31 December 2008 the following held substantial shares in the company. No other person has reported an interest
of more than 3% in the ordinary shares.
Nortrust Nominees
Barclayshare Nominees
TD Waterhouse Nominees (Europe)
HSDL Nominees
Productive Nominees
HSBC Global Custody Nominee (UK)
LR Nominees
Prudential Client HSBC GIS Nominee
Hargreaves Lansdown (Nominees)
42,314,575
32,799,010
28,063,410
21,502,543
21,217,112
20,525,985
19,406,957
14,644,718
11,751,518
As disclosed in the Directors report RRE Stanley holds shares of 7.5% which are held through nominee companies.
DIRECTORS’ INTEREST IN CONTRACTS
No director had a material interest at any time during the year in any contract of significance, other than a service
contract, with the company or any of its subsidiary undertakings.
AUDITORS
A resolution to reappoint Baker Tilly UK Audit LLP as auditors will be put to the members at the annual general
meeting. Baker Tilly UK Audit LLP has indicated its willingness to continue in office.
Page 8
Tanfield Group PLC
DIRECTORS' REPORT (continued)
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
The directors in office on the date of approval of the financial statements have confirmed that, as far as they are
aware, there is no relevant audit information of which the auditors are unaware. Each of the directors have confirmed
that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any
relevant audit information and to establish that it has been communicated to the auditor.
DIRECTORS INDEMNITY
Every Director shall be indemnified by the company out of its own funds.
Approved by the Board of Directors
and signed on behalf of the Board
Director
16 April 2009
Page 9
Tanfield Group PLC
CORPORATE GOVERNANCE
Principles of Corporate Governance
The company is committed to high standards of corporate governance. The Board is accountable to the company’s
shareholders for good corporate governance. The company has partially complied throughout the year with the code
of best practice set out in Section 1 of the Combined Code 2006 (effective for periods commencing on or after 1
November 2006) appended to the Listing Rules of the Financial Services Authority.
The role of the Board is to provide entrepreneurial leadership of the company within a framework of prudent and
effective controls, which enables risk to be assessed and managed. The Board sets the company’s strategic aims,
ensures that the necessary financial and human resources are in place for the company to meet its objectives and
reviews management performance. The Board sets the company’s values and standards and ensures that its
obligations to its shareholders and others are understood and met.
Board Structure
During the year the Board comprised the Non-Executive Chairman and Chief Executive, three other Executive
Directors, and three independent Non-Executive Directors. Geoffrey Allison was appointed to the board on 23
September 2008.
Board Role
The Board is responsible to shareholders for the proper management of the Group. The Non-Executive Directors
have a particular responsibility to ensure that the strategies proposed by the Executive Directors are fully
considered. To enable the Board to discharge its duties, all Directors have full and timely access to all relevant
information and there is a procedure for all Directors, in furtherance of their duties, to take independent
professional advice, if necessary, at the expense of the Group. The Board has a formal schedule of matters
reserved to it. It is responsible for overall group strategy, approval of major capital expenditure projects and
consideration of significant financing matters. The Board met on six separate occasions in the year and all
Directors attended.
Appointment and Induction of Directors
The composition of the Board is kept under review with the aim of ensuring that the directors collectively
possess the necessary skills and experience to direct the Group’s business activities.
Board Committees
The Board delegates certain matters to its two principal committees, which deal with remuneration and audit.
Remuneration Committee
The Remuneration Committee comprises John Bridge (Chair) and Martin Groak.
The Remuneration Committee determines and agrees with the Board the framework of remuneration for the
Executive Directors. The Board itself determines the remuneration of the Non-Executive Directors.
There was one remuneration committee meeting in the period which was fully attended.
The report on Directors’ remuneration is set out on pages 13 to 16.
Page 10
Tanfield Group PLC
CORPORATE GOVERNANCE (continued)
Audit Committee
The Audit Committee comprised the Non-Executive Directors Martin Groak (Chair), Colin Billiet and John
Bridge. Meetings are also attended, by invitation, by the Non Executive Chairman, Chief Executive and Group
Finance Director.
The Audit Committee is responsible for:
• Reviewing the scope of external audit, to receive regular reports from Baker Tilly UK Audit LLP.
• Reviewing the half-yearly and annual accounts prior to their recommendation to the Board.
• Reviewing the Group’s internal financial controls and risk management systems and processes.
• Making recommendations on the appointment, re-appointment and removal of external auditors and
approving the terms of engagement.
• Reviewing the nature of the work and level of fees for non-audit services provided by the external
auditors.
• Assessing the independence, objectivity and effectiveness of the external auditor.
The committee met on two occasions during the year and they were fully attended.
Internal Control
The Board has overall responsibility for the Group’s system of internal control and risk management and for
reviewing the effectiveness of this system. Such a system can only be designed to manage, rather than eliminate,
the risk of failure to achieve business objectives and can therefore only provide reasonable and not absolute
assurance against material misstatement or loss.
The Board are of the view that due to the current size and composition of the Group, that it is not necessary to
establish an internal audit function.
Relations with Shareholders
The Company values its dialogue with both institutional and private investors. Effective two-way
communication with fund managers, institutional investors and analysts is actively pursued and this encompasses
issues such as performance, policy and strategy.
Private investors are encouraged to participate in the Annual General Meeting at which the Chairman presents a
review of the results and comments on current business activity. The Chairmen of the Audit and Remuneration
Committees will be available at the Annual General Meeting to answer any shareholder questions.
Notice of Annual General Meeting will be issued in due course.
Page 11
Tanfield Group PLC
CORPORATE GOVERNANCE (continued)
Going Concern
The directors confirm that they are satisfied that the Company and Group have adequate resources to continue in
business for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing
the financial statements.
Statement by the Directors on compliance with the Provisions of the Combined Code
Throughout the year ended 31 December 2008, the Group has complied with the provisions set out in Section 1
of the Combined Code.
Darren Kell
Chief Executive
16 April 2009
Page 12
Tanfield Group PLC
DIRECTORS’ REMUNERATION REPORT
Remuneration Committee
The company has established a Remuneration Committee which is constituted in accordance with the
recommendations of the Combined Code. The members of the committee are JN Bridge and M Groak who are
both non-executive directors and the committee is chaired by JN Bridge.
In determining the directors’ remuneration for the year, the committee consulted the Chief Executive DS Kell
and the Finance Director CD Brooks about its proposals.
Remuneration Policy
The policy of the committee is to reward executive directors in order to recruit, motivate and retain high quality
executives within a competitive market place.
There are four main elements of the remuneration packages for executive directors and senior management:
• Basic annual salary (including directors’ fees) and benefits;
• Annual bonus payments;
• Share option incentives; and
• Pension arrangements.
Basic salary
Basic salary is reviewed annually in March with increases taking effect from 1 April. In addition to basic salary, the
executive directors also receive certain benefits in kind, principally private medical insurance.
Annual bonus
The committee establishes the objectives which must be met for each financial year if a cash bonus is to be paid.
The purpose of the bonus is to reward executive directors and other senior employees for achieving above average
performance which also benefits shareholders. Whilst bonuses awarded in prior years relating to prior year
performance were paid in 2008, no bonuses were awarded or paid in relation to 2008 performance.
Share options
The executive and non-executive directors have options granted to them under the terms of the Share Option
Scheme. There are no performance conditions attached to the share options. No share options were awarded in
2008.
Pension arrangements
Executive directors are members of a money purchase pension scheme to which the group contributes. Their
dependants are eligible for dependants’ pension and the payment of a lump sum in the event of death in service.
No other payments to directors are pensionable.
Page 13
Tanfield Group PLC
DIRECTORS’ REMUNERATION REPORT (continued)
Directors’ contracts
It is the company’s policy that executive directors should have contracts with an indefinite term providing for a
maximum of one year’s notice. In the event of early termination, the directors’ contracts provide for compensation
up to a maximum of basic salary for the notice period.
Non-executive directors
The fees of non-executive directors are determined by the board as a whole having regard to the commitment of
time required and the level of fees in similar companies.
Non-executive directors are employed on renewable fixed term contracts not exceeding three years.
Performance graph
The following graph shows the company’s performance, measured by closing share price, compared with the
performance of the FTSE Aim All Share Index which has been selected by the Board as being the most appropriate
measure as no readily identifiable benchmark group of companies exists.
Share price
3000
2500
2000
1500
1000
500
)
0
0
1
o
t
d
e
s
a
b
e
r
(
e
c
i
r
p
e
r
a
h
S
0
Mar-04
Sep-04 Mar-05
Sep-05 Mar-06
Sep-06 Mar-07
Sep-07 Mar-08
Sep-08 Mar-09
Time period -5yrs
TANFIELD GROUP
FTSE AIM ALL-SHARE
Aggregate directors' remuneration
The total amounts for director’s remuneration were as follows:
Emoluments
Gain on exercise of share options
Money purchase pension contributions
Total
2008
£000's
1,379
-
87
1,466
2007
£000's
1,339
10,015
60
11,414
Page 14
Tanfield Group PLC
DIRECTORS’ REMUNERATION REPORT (continued)
Directors emoluments
Salary
£000's
Benefits
in kind Bonuses
£000's
£000's
Total
2008
£000's
Total
2007
£000's
Pension
Total
2008
£000's
Pension
Total
2007
£000's
Executive Directors
RRE Stanley
DS Kell
CD Brooks
BJ Campbell
GE Allison*
Non Executive Directors
JN Bridge
M Groak
C Billiet
119
227
161
161
24
25
25
25
18
18
18
18
-
-
-
-
150
167
92
92
24
5
5
5
287
412
271
271
48
30
30
30
369
438
270
200
-
25
25
12
18
22
15
31
1
-
-
-
19
16
12
13
-
-
-
-
767
72
540
1,379
1,339
87
60
*GE Allison was appointed to the board on 23 Sept 2008.
Directors share options
As at
31/12/2007
Granted/
Lapsed
Exercised
As at
31/12/2008
Market
Price at
date of
exercise
(pence)
Date from
which
normally
exercisable*
Exercise
Price
(pence)
Expiry Date
DS Kell
RRE Stanley
CD Brooks
BJ Campbell
JN Bridge
M Groak
2,056,671
4,300,000
6,356,671
4,000,000
1,250,000
1,000,000
2,250,000
700,000
250,000
1,600,000
2,550,000
150,000
150,000
15,456,671
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,056,671
4,300,000
6,356,671
4,000,000
1,250,000
1,000,000
2,250,000
700,000
250,000
1,600,000
2,550,000
150,000
150,000
15,456,671
20p
20p
20p
23p
20p
1p
20p
20p
20p
20p
01/03/2009
01/03/2016
02/01/2010
02/01/2017
02/01/2010
02/01/2017
14/06/2009
14/06/2016
02/01/2010
02/01/2017
14/09/2008
14/09/2015
01/03/2009
01/03/2016
02/01/2010
02/01/2017
01/03/2009
01/03/2016
01/03/2009
01/03/2016
* Certain share option agreements have a clause that allows the options to be exercised early if market
capitalisation exceeds a certain level.
On 31 December 2008 the market price of the ordinary shares was 5p. The range during 2008 was 3.5p to
124.75p.
Page 15
Tanfield Group PLC
DIRECTORS’ REMUNERATION REPORT (continued)
Approval
This report was approved by the board of directors and authorised for issue on 16 April 2009 and signed on its
behalf by:
John Bridge
Chairman of Remuneration Committee
16 April 2009
Page 16
Tanfield Group PLC
DIRECTORS' RESPONSIBILITIES IN THE PREPARATION OF FINANCIAL STATEMENTS
The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.
UK company law requires the directors to prepare Group and Company Financial Statements for each financial
year. Under that law the directors are required to prepare Group financial statements in accordance with
International Financial Reporting Standards (“IFRS”) as adopted by the EU and have elected to prepare the
company financial statements in accordance with IFRS as adopted by the EU.
The group financial statements are required by law and IFRS adopted by the EU to present fairly the financial
position and performance of the group; the Companies Act 1985 provides in relation to such financial
statements that references in the relevant part of that Act to financial statements giving a true and fair view are
references to their achieving a fair presentation.
The company financial statements are required by law to give a true and fair view of the state of affairs of the
company.
select suitable accounting policies and then apply them consistently;
In preparing each of the group and company financial statements, the directors are required to:
a.
b. make judgements and estimates that are reasonable and prudent;
c.
d.
state whether they have been prepared in accordance with IFRS adopted by the EU;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
group and the company will continue in business.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at
any time the financial position of the company and to enable them to ensure that the financial statements
comply with the requirements of the Companies Act 1985.
They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are also responsible for the maintenance and integrity of the Tanfield Group plc website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Page 17
Tanfield Group PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TANFIELD GROUP
PLC
We have audited the group and parent company financial statements which comprise the Consolidated Income
Statement, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash Flow Statements,
the Consolidated and Company Statements of Changes in Shareholders’ Equity and the related notes.
This report is made solely to the company’s members, as a body, in accordance with section 235 of the Companies
Act 1985. Our audit work has been undertaken so that we might state to the company’s members those matters we
are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company and the company’s members as a body,
for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union (“EU”) are
set out in the Statement of Directors’ Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial
statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether
in our opinion the information given in the Directors’ Report is consistent with the financial statements.
In addition we report to you if the company has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information specified by law regarding directors’
remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited financial
statements. The other information comprises only the Financial and Business Review, the Directors’ Report, Corporate
Governance Report and Directors’ Remuneration Report. We consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend
to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements
made by the directors in the preparation of the financial statements, and of whether the accounting policies are
appropriate to the group’s and company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are
free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we
also evaluated the overall adequacy of the presentation of information in the financial statements.
Page 18
Tanfield Group PLC
Opinion
In our opinion:
•
the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the
European Union of the state of the group’s affairs as at 31 December 2008 and of its loss for the year then
ended;
the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by
the European Union as applied in accordance with the provisions of the Companies Act 1985, of the state of
the parent company’s affairs as at 31 December 2008;
the financial statements have been properly prepared in accordance with the Companies Act 1985; and
the information given in the Directors’ Report is consistent with the financial statements.
•
•
•
BAKER TILLY UK AUDIT LLP
Registered Auditor
Chartered Accountants
1 St James’ Gate
Newcastle upon Tyne
NE1 4AD
16 April 2009
Page 19
TANFIELD GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2008
Note
2008
£000's
2007
£000's
Continuing operations
Revenue
Changes in inventories of finished goods and WIP
Raw materials and consumables used
Staff costs
Depreciation and amortisation expense
Other operating income
Other operating expenses
Restructuring costs
Profit from operations
Impairment of Goodwill
Impairment of Intangible assets
Impairment of Property, plant & equipment
Impairment of Inventories
Impairment of Receivables
(Loss) / profit from continuing operations
Finance income
Finance costs
(Loss) / profit before taxation
Income tax expense
(Loss) / profit for the year from continuing operations
Discontinued operations
Loss for year from discontinued operations
(Loss) / Profit for the year
Earnings per share
From continuing operations
Basic
Diluted
From continuing and discontinued operations
Basic
Diluted
2
4
5
6
31
31
11
31
31
7
7
8
9
10
145,734
4,808
(102,724)
(32,197)
(3,195)
500
(11,221)
(372)
1,333
(31,895)
(12,605)
(83)
(22,185)
(22,894)
(88,329)
457
(913)
(88,785)
239
(88,546)
123,288
8,702
(87,980)
(23,667)
(2,724)
2,769
(7,560)
(1,270)
11,558
-
-
-
-
-
11,558
1,210
(331)
12,437
(560)
11,877
-
(1,484)
(88,546)
10,393
(23.91)p
(23.91)p
(23.91)p
(23.91)p
3.59p
3.41p
3.14p
2.99p
Page 20
BALANCE SHEETS
AS AT 31 DECEMBER 2008
ASSETS
Non current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax assets
Trade and other receivables
Investments
Current assets
Inventories
Trade and other receivables
Investments
Current tax assets
Cash and cash equivalents
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Tax liabilities
Obligations under finance leases
Other creditors
Non-current liabilities
Other creditors
Obligations under finance leases
Deferred tax liabilities
TOTAL LIABILITIES
EQUITY
Share capital
Share premium
Share option reserve
Loan stock equity reserve
Merger reserve
Capital reduction reserve
Translation reserve
Profit and loss account
TOTAL EQUITY
TANFIELD GROUP PLC
Group
2008
£000's
2007
£000's
Company
2008
£000's
2007
£000's
Note
12
13
11
22
16
14
15
16
17
16
18
20
21
21
20
22
24
27
27
27
27
27
25
26
356
15,153
6,346
1,779
1,500
-
25,134
60,560
20,595
251
-
11,130
92,536
32,244
22,685
6,098
785
-
-
61,812
60,352
47,197
120
1,459
27,952
137,080
-
-
-
-
-
15,124
15,124
-
59,732
-
-
5,372
65,104
-
-
-
278
-
50,048
50,326
-
82,133
-
-
24,607
106,740
117,670
198,892
80,228
157,066
19,807
687
565
9,954
31,013
-
569
307
876
26,406
-
684
467
27,557
5,021
1,100
-
6,121
769
-
10
5,720
6,499
-
-
-
-
31,889
33,678
6,499
3,704
138,511
1,653
-
1,534
7,228
9,290
(76,139)
85,781
3,703
138,493
992
-
1,534
7,228
879
12,385
165,214
3,704
138,511
1,653
-
1,534
7,228
-
(78,901)
73,729
327
-
120
-
447
5,021
10
-
5,031
5,478
3,703
138,493
992
-
1,534
7,228
338
(700)
151,588
TOTAL EQUITY AND LIABILITIES
117,670
198,892
80,228
157,066
The financial statements on pages 20 to 55 were approved by the board of directors and authorised for
issue on 16 April 2009 and are signed on its behalf by:
Charles Brooks FD
Page 21
TANFIELD GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2008
Share
capital
£000's
Share
premium
Share
Option
reserve
Loan
Stock
reserve
£000's
£000's
£000's
Balance at 1 January 2007
2,921
29,578
255
Issue of ordinary share capital (net of expenses)
706
107,893
Exercise of convertible loan stock
Share options exercised
Exercise of share options
Share option provision
Foreign exchange differences on retranslation of
net assets of subsidiary undertakings
Net profit for the year
8
68
-
-
-
-
67
955
-
-
-
-
-
-
-
-
737
-
-
Balance at 1 January 2008
3,703
138,493
992
Issue of ordinary share capital (net of expenses)
Exercise of convertible loan stock
Share options exercised
Exercise of share options
Share option provision
Foreign exchange differences on retranslation of
net assets of subsidiary undertakings
Net loss for the year
-
-
1
-
-
-
-
-
-
18
-
-
-
-
-
-
-
-
661
-
-
Balance at 31 December 2008
3,704
138,511
1,653
6
-
(6)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Merger
reserve
£000's
1,534
Capital
Reduction
reserve
£000's
7,228
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Profit
and
loss
account
Total
Equity
Translation
reserve
£000's
£000's
£000's
-
-
-
-
-
-
879
1,896
43,418
-
-
-
96
-
-
108,599
69
1,023
96
737
879
-
10,393
10,393
1,534
7,228
879
12,385
165,214
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,411
-
-
-
-
22
-
-
-
19
-
683
8,411
-
(88,546)
(88,546)
1,534
7,228
9,290
(76,139)
85,781
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2008
Share
capital
£000's
Share
premium
Share
Option
reserve
Loan
Stock
reserve
£000's
£000's
£000's
Balance at 1 January 2007
2,921
29,578
255
Issue of ordinary share capital (net of expenses)
706
107,893
Exercise of convertible loan stock
Share options exercised
Exercise of share options
Share option provision
Foreign exchange differences on retranslation of
net assets of subsidiary undertakings
Net loss for the year
8
68
-
-
-
-
67
955
-
-
-
-
-
-
-
-
737
-
-
Balance at 1 January 2008
3,703
138,493
992
Issue of ordinary share capital (net of expenses)
Exercise of convertible loan stock
Share options exercised
Exercise of share options
Share option provision
Foreign exchange differences on retranslation of
net assets of subsidiary undertakings
Net loss for the year
-
-
1
-
-
-
-
-
-
18
-
-
-
-
-
-
-
-
661
-
-
Balance at 31 December 2008
3,704
138,511
1,653
6
-
(6)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Merger
reserve
£000's
1,534
Capital
Reduction
reserve
£000's
7,228
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,534
7,228
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,534
7,228
Profit
and
loss
account
Total
Equity
Translation
reserve
£000's
£000's
£000's
-
-
-
-
-
-
338
-
338
-
-
-
-
-
(338)
-
-
(505)
43,418
-
-
-
96
-
-
108,599
69
1,023
96
737
338
(291)
(291)
(700)
151,588
-
-
-
-
22
-
-
-
19
-
683
(338)
(78,223)
(78,223)
(78,901)
73,729
Page 22
CASH FLOW STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
Operating Activities
Cash used in operations
Income taxes received (paid)
Interest paid
Net Cash used in Operating activities
Investing Activities
Acquisition of subsidiaries, net of overdraft acquired
Purchase of investments in subsidiary undertakings
Purchase of property, plant and equipment
Payment of deferred consideration
Proceeds from sale of property, plant and equipment
Purchase of investments
Purchase of intangible fixed assets
Interest received
Net cash used in investing activities
Financing Activities
Proceeds from issuance of ordinary shares
Repayment of borrowings
Repayments of obligations under finance leases
Net cash from financing
Net (Decrease) Increase in Cash and Cash
Equivalents
Cash and Cash Equivalents at beginning of Year
Effect of foreign exchange changes
Cash and Cash Equivalents at end of Year
TANFIELD GROUP PLC
Note
29
Group
2008
£000's
2007
£000's
Company
2008
£000's
2007
£000's
(10,935)
510
(913)
(11,338)
(29,041)
(2,943)
(331)
(32,315)
(20,491)
-
(38)
(20,529)
(56,574)
-
(32)
(56,606)
-
-
(1,087)
(252)
623
(45)
(6,431)
457
(6,735)
(44,564)
-
(1,851)
-
758
(23)
(2,949)
1,210
(47,419)
19
-
(693)
(674)
109,622
(14,904)
(621)
94,097
-
(42,591)
-
-
-
-
-
1,089
(41,502)
-
-
-
(252)
-
-
-
785
533
19
-
109,622
-
-
(120)
(101)
109,622
(18,747)
27,952
1,925
11,130
14,363
13,546
43
27,952
(20,097)
24,607
862
5,372
11,514
13,093
-
24,607
Page 23
TANFIELD GROUP PLC
CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with International Financial Reporting Standards as
adopted by the EU (“IFRS”), IFRIC interpretations and the Companies Act 1985 applicable to Companies
reporting under IFRS.
The financial statements have been prepared on the historical cost basis. The principal accounting policies
adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and enterprises
controlled by the Company (its subsidiaries) made up to 31 December each year. The excess of cost of acquisition
over the fair values of the Group’s share of identifiable net assets acquired is recognised as goodwill. Any
deficiency of the cost of acquisition below the fair value of identifiable net assets acquired (i.e. discount on
acquisition) is recognised directly in the income statement.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The costs of
an acquisition are measured as the fair value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the
acquisition date irrespective of the extent of any minority interest.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income
statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies
used into line with those used by other members of the Group.
All intra-group transactions, balances, and unrealised gains on transactions between group companies are
eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of
an impairment of the asset transferred.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the income statement because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or deductible. The Group’s liability for
current tax is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction which affects
neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries
except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or
the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to
items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.
Page 24
TANFIELD GROUP PLC
CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Taxation (cont)
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in
the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the
date of acquisition.
Goodwill on acquisition of subsidiaries is included as a non current asset.
Goodwill is recognised as an asset and reviewed for impairment at least annually. Any impairment is
recognised immediately in the income statement and is not subsequently reversed.
Goodwill is allocated to cash generating units for the purpose of impairment testing.
On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or
loss on disposal.
Revenue recognition
Service revenue is measured at the fair value of the consideration received or receivable and represents
amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT
and other sales related taxes.
Revenue from the sale of goods is recognised when goods are delivered and title has passed.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present
value of the minimum lease payments, each determined at the inception of the lease. The corresponding
liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are
apportioned between finance charges and reduction of lease obligation so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are charged directly against income.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the
relevant lease.
Benefits received and receivable as an incentive to enter an operating lease are also spread on a straight line
basis over the lease term.
Investments
Investments are included at cost less amounts written off.
Page 25
TANFIELD GROUP PLC
CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Borrowing costs
All borrowing costs are recognised in the income statement in the period in which they are incurred.
Pensions
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Share Based Payments
The Group issues equity-settled share based payments to certain employees and has applied the requirements of
IFRS2 “Share-based payments”.
Equity settled share-based payments are measured at fair value at the date of the grant. Fair value is measured
using a Black-Scholes model. The fair value is expensed on a straight line basis over the vesting period, based
on the Group’s estimate of shares that will eventually vest.
Foreign currencies
Transactions in currencies other than sterling, the presentational and functional currency of the Company, are
recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in
foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains
and losses arising on retranslation are included in the income statement for the period, except for exchange
differences on non-monetary assets and liabilities, which are recognised directly in equity, where the changes in
fair value are recognised directly in equity.
In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts (see
below for details of the Group’s accounting policies in respect of such derivative financial instruments).
On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for
the period. Exchange differences arising, if any, are classified as equity and transferred to the Group’s
translation reserve. Such translation differences are recognised as income or as expenses in the period in which
the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate.
Page 26
TANFIELD GROUP PLC
CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative
purposes, are stated in the balance sheet at cost less any subsequent accumulated depreciation.
Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the straight-
line method, on the following bases:
Plant and Machinery over 3-10 years
Short Leasehold Property Alterations over the lifetime of the lease
Fixtures, fittings and equipment over 3-10 years
Motor Vehicles over 3-5 years
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
assets or, where shorter, the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the
sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Internally-generated intangible assets – research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from the Group’s business development is recognised only if
all of the following conditions are met:
•
•
•
an asset is created that can be identified;
it is probable that the asset created will generate future economic benefits; and
the development cost of the asset can be measured reliably
Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an
expense in the period in which it is incurred.
Internally-generated intangible assets are amortised on a straight-line basis over their useful lives. (10 to 15
years)
Other intangible assets
Computer Software is stated at cost less any accumulated amortisation. The software is amortised over a period
of 5 years on a straight line basis.
Other intangible assets have been brought in on the acquisition of businesses and capitalised at a fair value.
The intangible assets are amortised over the relevant period, ranging from 2 to 10 years on a straight line basis.
Manufacturing schedules have been brought in on the acquisition of businesses and capitalised at a fair value.
The intangible assets are amortised over 10 years on a straight line basis.
Page 27
TANFIELD GROUP PLC
CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of property, plant and equipment and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.
Where the asset does not generate cash flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an
indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be
impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the
asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately,
unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated
as a revaluation increase.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where
applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their
present location and condition. Cost is calculated using the weighted average method. Net realisable value
represents the estimated selling price less all estimated costs to completion and costs to be incurred in
marketing, selling and distribution.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group has
become a party to the contractual provisions of the instrument.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate
allowances for estimated irrecoverable amounts.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand less short term bank overdrafts.
Page 28
CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
TANFIELD GROUP PLC
Financial instruments (continued)
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets
of the group after deducting all of its liabilities.
Convertible loan notes
Convertible loan notes are regarded as compound instruments, consisting of a liability component and an
equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing
market interest rate for similar non-convertible debt. The difference between the proceeds of issue of the
convertible loan notes and the fair value assigned to the liability component, representing the embedded
option to convert the liability into equity of the Group, is included in equity.
Issue costs are apportioned between the liability and equity components of the convertible loan notes based on
their relative carrying amounts at the date of issue. The portion relating to the equity component is charged
directly against equity.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.
Derivative financial instruments and hedge accounting
The Group transacts derivative financial instruments to manage the underlying exposure to foreign exchange
risks. The Group does not transact derivative financial instruments for speculative purposes. Derivative
financial assets are included in the balance sheet at fair value. Changes in fair value are recognised directly in
equity where they qualify for hedge accounting because they have been designated as hedges of future cash
flows, otherwise they are recognised in the income statement as they arise.
Government grants
Government grants towards staff re-training costs are recognised as income over the periods necessary to
match them with the related costs and are deducted in reporting the related expense.
Government grants relating to property, plant and equipment are treated as deferred income and released
to profit and loss over the expected useful lives of the assets concerned.
Segmental reporting
A business segment is a group of assets and operations that provide a product or service and that is
subject to risks and returns that are different from other business segments. A geographic segment is a
group of assets and operations that provide a product or service within a particular economic environment
and that is subject to risks and returns that are different from segments operating in different economic
environments.
Page 29
TANFIELD GROUP PLC
CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the
circumstances. The resulting accounting estimates and assumptions will, by definition, seldom equal the
related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Goodwill
The recoverable amount of cash generating units are determined on value in use calculations. These
calculations require the use of estimates, including management’s expectations of future revenue growth,
operating costs and profit margins for each cash generating unit and a discount rate in order to calculate present
value.
Intangible assets
Amortisation of intangible assets is charged to the income statement on a straight line basis over the useful
economic lives of each intangible asset. The Directors review the assumptions made at the time of acquisitions
in the light of current evidence in the market, and estimated useful economic lives and revisited the carrying
value of each intangible asset. Significant changes in the carrying values assessed are charged through the
income statement as an impairment.
Trade receivables
The Group regularly assesses the recoverability of its trade receivables based on a range of factors including
the age of the receivable, creditworthiness of the customer, any credits required to release payments, and
changes in that customer’s access to credit to fund their purchases. When determining the recoverability of an
account the Group makes estimations as to the financial condition of each customer, their importance in
providing a route to market, any debt collection strategy in place and their ability to subsequently make
payment or provide other future revenue benefits.
Inventories
In accordance with IAS2 the group regularly reviews its inventory to ensure it is carried at the lower of cost or
net realisable value. The management constantly reviews slow moving and obsolete items arising from
changes in the product mix demanded by customers, reductions in overall volumes, supplier failures and
strategic resourcing decisions. Obsolescence provisions are calculated based on current market values and
future sales of inventories. In situations where market demand changes, significantly altering production
volumes, inventories are reviewed to ensure that components have a realistic likelihood of being used in
current models in a reasonable timeframe. If this review identifies significant levels of obsolete inventory, this
obsolescence is charged to the income statement as an impairment.
Adoption of International accounting standards
IFRS 2 (Amendment) "Share-based payment" (effective for periods commencing on or after 1 January
2009). This amendment clarifies that vesting conditions are service conditions and performance conditions
only and that all cancellations, whether by the entity or by other parties, should receive the same accounting
treatment. Management do not believe that the impact of the change in disclosure will be significant
IFRS 3 (Revised) "Business combinations" (effective for business combinations occurring in accounting
periods beginning on or after 1 July 2009). This standard continues to apply the acquisition method to
business combinations. However, it introduces a number of changes that will impact the amount of goodwill
recognised, the reported results in the period that an acquisition occurs, and future reported results. The Group
will apply this standard from 1 Jan 2010 as applicable.
IFRS 8 ‘Operating Segments’ (effective for periods commencing on or after 1 January 2009).
IFRS 8 introduces new disclosure requirements for segmental information and supersedes IAS 14 “Segmental
Reporting”. Management do not believe that the impact of the change in disclosure will be significant.
Page 30
TANFIELD GROUP PLC
CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
IAS 1 (Revised) "Presentation of financial statements" (effective for annual periods beginning on or
after 1 January 2009). The new standard separates owner and non-owner changes in equity. The statement of
changes in equity will include only details of transactions with owners, with non-owner changes in equity
presented as a single line. In addition, the Standard introduces the statement of comprehensive income which
presents all items of recognised income and expense, either in one single statement, or in two linked
statements. The Group will apply this revision to IAS 1 from 1 January 2009 and is currently evaluating
whether it will present one or two statements.
IAS 23 (Amendment) "Borrowing costs" (effective for annual periods beginning on or after 1 January
2009). This amendment requires an entity to capitalise borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset as part of the cost of that asset, removing the option to
immediately expense those borrowing costs. The group currently has no borrowing costs.
IFRS 1 (Amendment) "First-time adoption of IFRSs" and IAS 27 (Amendment) "Consolidated and
Separate Financial Statements" (effective for annual periods beginning on or after 1 January 2009). The
amendments to IFRS 1 allows an entity to determine the cost of investments in subsidiaries, jointly controlled
entities or associates in its opening IFRS financial statements in accordance with IAS 27 or using a deemed
cost. The amendment to IAS 27 requires all dividends from a subsidiary, jointly controlled entity or associate
to be recognised in the income statement in the separate financial statements. The Group will apply these
amendments from 1 January 2009. This will have no impact on the Company as the financial statements are
already prepared under IFRS.
Page 31
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
1
Presentation of Financial Statements
The financial statements have been prepared in accordance with International Financial Reporting
Standards as endorsed by the EU (“IFRS”).
These financial statements are presented in Sterling.
2
Revenue (Group)
An analysis of the Group's Revenue is as follows:
Continuing Operations
Powered Access Platforms
Zero Emission Vehicles
Other
3
Business and Geographical segments (Group)
Business segments (Continuing operations)
2008
£000's
2007
£000's
114,388
25,087
6,259
90,064
26,109
7,115
145,734
123,288
For management purposes, the Group is currently organised into three operating divisions – Powered
Access Platforms, Zero Emission Vehicles and other operations. These divisions are the basis on which
the Group reports its primary segment information.
Principal activities are as follows:
Powered Access Platforms: design and manufacture of powered access equipment
Zero Emission Vehicles: design, manufacture, service and maintenance of electric vehicles
Other: design and manufacture of engineering parts.
Segment information about these businesses is presented on the next page.
Page 32
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
3
Business and Geographical Segments
For the twelve months ending 31st December 2008
Revenue
External Sales
Inter-segment sales
Total revenue
Result
Segment Result before restructuring
Restructuring Costs
Segment Result
Unallocated corporate expenses
Loss from operations
Finance costs
Loss before tax
Income tax expense
Loss after tax
Other information
Capital additions
Depreciation and amortisation
Impairments
Balance Sheet
Assets:
Segment assets
Consolidated total assets
Liabilities:
Segment Liabilities
Consolidated total liabilities
Powered Access
Platforms
£000's
Zero Emission
Vehicles
£000's
Other
Segments
£000's
Consolidated
£000's
114,388
25,087
6,259
145,734
114,388
25,087
6,259
145,734
(82,689)
(263)
(82,952)
(1,389)
(38)
(1,427)
(3,879)
(71)
(3,950)
2,179
2,025
88,385
38,557
38,557
19,133
19,133
5,317
904
1,097
21,388
21,388
3,677
3,677
22
265
180
57,725
57,725
9,079
9,079
(87,957)
(372)
(88,329)
-
(88,329)
(456)
(88,785)
239
(88,546)
7,518
3,195
89,662
117,670
117,670
31,889
31,889
Page 33
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
3
Business and Geographical Segments
For the twelve months ending 31st December 2007
Revenue
External Sales
Inter-segment sales
Total revenue
Result
Segment Result before restructuring
Restructuring Costs
Segment Result
Unallocated corporate expenses
Profit from operations
Finance costs
Profit before tax
Income tax expense
Profit after tax
Other information
Capital additions
Depreciation and amortisation
Balance Sheet
Assets:
Segment assets
Consolidated total assets
Liabilities:
Segment Liabilities
Consolidated total liabilities
Powered
Access
Platforms
£000's
Zero Emission
Vehicles
£000's
Other
Segments
£000's
Consolidated
£000's
90,064
26,109
7,115
123,288
90,064
26,109
7,115
123,288
9,486
(1,270)
8,216
2,848
-
2,848
177
-
177
2,825
1,484
3,025
933
122
307
164,412
164,412
26,225
26,225
25,762
25,762
4,150
4,150
8,718
8,718
3,303
3,303
12,511
(1,270)
11,241
317
11,558
879
12,437
(560)
11,877
5,972
2,724
198,892
198,892
33,678
33,678
Page 34
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
3
Business and Geographical segments (continued)
Geographical segments
The Group’s operations are located in the UK, US, Australasia and Japan.
The following table provides an analysis of the Group’s sales by geographic market, irrespective of the
origin of the goods/services.
UK
Europe
USA
Other
2008
£000's
28,721
25,983
58,349
32,681
145,734
2007
£000's
43,982
29,249
35,597
14,460
123,288
In 2007, revenue from discontinued operations totalled £219k.
The following is an analysis of the carrying amount of segment assets, and additions to property, plant
and equipment and intangible assets analysed by the geographical area in which the assets are located:
Carrying amount of segment
Assets
Additions to property, plant,
equipment and intangible assets
2008
£000’s
63,313
37,179
3,965
13,213
117,670
2007
£000’s
122,007
64,172
3,133
9,580
198,892
UK
USA
Japan
Australasia
4
Staff Costs
Group
Average monthly number of employees
Production
Head Office and Administration
Total
Aggregate remuneration comprised
Continuing
Wages and Salaries
Share scheme expense
Social Security Costs
Other Pension Costs
Total staff costs from continuing operations
Discontinuing
Wages and Salaries
Social Security Costs
Other Pension Costs
Total staff costs
2008
£000’s
6,989
442
24
62
7,517
2008
No.
834
316
1,150
2008
£000’s
28,756
683
2,431
327
32,197
-
-
-
32,197
2007
£000’s
5,888
64
-
20
5,972
2007
No.
812
323
1,135
2007
£000’s
20,313
833
2,008
513
23,667
138
13
2
23,820
Page 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
TANFIELD GROUP PLC
Staff costs (continued)
Details of Directors’ fees and salaries, bonuses, pensions, benefits in kind and other benefit schemes
together with details in respect of Directors’ share option plans are given in the Directors Remuneration
Report on pages 13 to 16.
5
Depreciation and Amortisation
Continuing
Depreciation of property, plant & equipment
Amortisation of intangible fixed assets
Total depreciation and amortisation from continuing operations
Discontinuing
Depreciation of property, plant & equipment
Amortisation of intangible fixed assets
Total depreciation and amortisation charge
6
Profit from continuing operations (Group)
Operating lease rentals
Depreciation of property, plant & equipment
- owned assets
- leased assets
Amortisation of intangible fixed assets
(Profit)/Loss on sale of property, plant & equipment
Grants received
One off bank charges relating to interest rate swap
Staff costs (see Note 4)
Income from Snorkel bad debt previously written off
Share options granted (see Note 4)
Restructuring costs
Net (profit) on foreign exchange
Auditors' remuneration (see below)
Research and development costs
Impairment of Goodwill
Impairment of Intangible assets
Impairment of property, plant & equipment
Impairment of Inventories
Impairment of Receivables
2008
£000’s
1,165
2,030
3,195
-
-
3,195
2008
£000’s
939
894
271
2,030
(587)
(500)
145
31,514
-
683
372
(2,433)
228
308
31,895
12,605
83
22,185
22,894
2007
£000’s
974
1,750
2,724
17
2
2,743
2007
£000’s
1,417
581
410
1,752
57
(750)
-
22,987
(2,019)
833
1,270
(2,186)
195
-
-
-
-
-
-
Restructuring costs of £372k relate to employee costs and expenses incurred while resizing the
Group in line with current market conditions and future expectations.
Prior year costs of £1,157k relate to employee costs and expenses incurred during the alignment of
the businesses after the Snorkel acquisition.
Also in the prior year, other restructuring costs of £113k are from the acquisition of the Upright
business.
Page 36
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
6
Profit from Operations (Group) continued
Amounts payable to Baker Tilly UK Audit LLP and their associates
in respect of both audit and non audit services
Audit Services
- statutory audit of parent and consolidated accounts
148
155
2008
£000’s
2007
£000’s
Other Services
-
audit of subsidiaries pursuant to legislation, where such
services are provided by Baker Tilly UK Audit LLP
- work provided by associates of Baker Tilly UK Audit LLP
in respect of consolidation returns or local legislative
requirements
Other services relating to taxation
- compliance services
Services relating to Corporate finance
Comprising:
-
-
audit services
non audit services
-
30
40
10
228
178
50
228
-
-
40
191
386
155
231
386
The figures presented are for Tanfield Group plc and subsidiaries as if they were a single entity.
Tanfield Group plc has taken the exemption permitted by SI 2005 2417 Reg 5 to omit information
about its individual accounts.
The parent of Tanfield Group PLC is exempt from disclosing its income statement. The loss for the
year is £78,223k (2007: £291k loss).
7
Finance costs and interest receivable (Group)
Continuing operations
Interest on bank overdrafts and loans
Interest on Invoice Discounting
Interest on obligations under finance leases
Total borrowing costs
Less Interest Receivable
2008
£000's
650
146
117
913
(457)
456
2007
£000's
142
40
149
331
(1,210)
(879)
The Invoice Discounting interest relates solely to Snorkel Elevating Work Platforms PTY Limited.
Page 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
8
Income Tax Expense (Group)
Current Tax
Domestic – current year
Domestic – prior year
Foreign
Deferred Tax
Current year
Prior Year
(Loss) / Profit before tax
Tax at the domestic income tax rate 28% (2007: 30%)
Tax effect of expenses that are not deductible
in determining taxable profit
Capital allowances in excess of depreciation
Short term timing differences
Tax losses for which no relief available
Tax adjustments and relief
Accounting adjustments
Prior Year Tax adjustments
Deferred tax asset recognised in the period
Effect of different tax rates of subsidiaries operating in other
jurisdictions
Tax expense
9
Discontinued Operations
Group
Revenue
Operating costs
Goodwill Impairment
Profit/(loss) before tax
Income tax expense
Profit/(Loss) on ordinary activities after tax
TANFIELD GROUP PLC
2008
£000’s
(278)
-
727
449
(688)
-
(688)
(239)
2008
£000’s
(88,546)
2007
£000’s
1,201
(1,038)
176
339
200
21
221
560
2007
£000’s
10,953
(24,793)
3,286
(3,356)
(286)
-
-
29,362
-
-
(688)
-
(239)
2008
£000’s
-
-
-
-
-
-
(2,917)
(359)
-
-
1,099
(229)
(988)
-
668
560
2007
£000’s
219
(1,301)
(402)
(1,484)
-
(1,484)
Discontinued operations in 2007 relate to the Saxon Specialist Vehicles trade within Tanfield
Engineering Systems Ltd, E-Comeleon Ltd, JoeKnowsIt? Ltd and ClickHere Ltd which have been
discontinued. Also included are costs relating to a non trading company, Express 2 Automotive Ltd,
in respect of leasing costs.
Page 38
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
10 Earnings per Share
Including discontinued operations
The calculation of the basic and diluted earnings per share is based on the following data:
Continuing and discontinuing operations
2008
£000’s
2007
£000’s
Earnings
Earnings for the purposes of earnings per share
(88,546)
10,393
Number of shares
Weighted average number of ordinary shares for the purposes of basic
earnings per share
Effect of dilutive potential ordinary shares
Share Options
Weighted average number of ordinary shares for the purposes of diluted
earnings per share
Basic earnings per share
Diluted earnings per share
From continuing operations
Earnings
Number
Number
370,361,089
331,253,401
9,298,615
16,584,411
379,659,704
347,837,812
(23.91)p
(23.91)p
3.14p
2.99p
2008
£000’s
2007
£000’s
Earnings for the purposes of diluted earnings per share
(88,546)
11,877
Basic earnings per share
Diluted earnings per share
From discontinued
Basic and diluted loss per share
From continuing operations before exceptional items
Earnings
Earnings for the purposes of earnings per share
Impairments
Restructuring
Earnings for the purposes of earnings per share before exceptional items
Basic earnings per share
Diluted earnings per share
(23.91)p
(23.91)p
3.59p
3.41p
2008
-
2007
(0.45)p
2008
£000’s
2007
£000’s
(88,546)
89,662
372
1,488
0.40p
0.39p
11,877
-
1,270
13,147
3.97p
3.78p
Page 39
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
11 Property, Plant and Equipment
Group
Leasehold
property
&
alterations
£000's
2,181
822
-
15
(645)
2,373
90
(167)
33
44
2,373
Plant &
Machinery
£000's
4,258
1,706
708
9
(203)
6,478
664
(2,292)
127
378
5,355
Fixtures,
Fittings &
equipment
£000's
972
394
337
8
-
1,711
258
(1,031)
(83)
114
969
Motor
Vehicles
£000's
917
101
113
4
(229)
906
75
(212)
(77)
16
708
357
161
-
21
(87)
452
131
2
-
(167)
-
418
3,276
399
1
17
-
3,693
562
75
-
(2,292)
-
2,038
875
129
-
9
-
1,013
248
23
83
(1,029)
(9)
329
86
302
-
-
(176)
212
224
5
-
(176)
9
274
Total
£000's
8,328
3,023
1,158
36
(1,077)
11,468
1,087
(3,702)
-
552
9,405
4,594
991
1
47
(263)
5,370
1,165
105
83
(3,664)
-
3,059
1,955
1,921
3,317
2,785
640
698
434
694
6,346
6,098
At 1 January 2007
Additions
Acquisitions of subsidiary undertakings
Exchange Differences
Disposals
At 1 January 2008
Additions
Disposals
Reclassification
Exchange Differences
At 31 December 2008
Depreciation:
At 1 January 2007
Charge for the year
Exchange differences
Impairment of assets
Eliminated on disposals
At 1 January 2008
Charge for the year
Exchange differences
Impairment of assets
Eliminated on disposals
Reclassification
At 31 December 2008
Carrying amount:
At 31 December 2008
At 31 December 2007
The net book value of assets held under finance leases and hire purchase agreements is £1,321k
(2007:£1,647k). The balances relate solely to plant and machinery.
The impairment of £83k relates to legacy I.T system costs.
Page 40
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
12 Goodwill
Group
Cost
1 January
Recognised on acquisition of subsidiary undertakings
Exchange differences
31 December
Accumulated impairment losses
1 January
Impairment losses (see Note 31)
Exchange differences
31 December
Carrying Amount
2008
£000's
2007
£000's
33,147
-
7
33,154
903
31,895
-
32,798
5,644
27,323
180
33,147
501
402
-
903
356
32,244
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units
(CGUs) that are expected to benefit from that business combination.
A segment level summary of the goodwill allocated is presented below;
Powered Access
Zero emission vehicles
Carrying values
2008
£000's
-
356
356
2007
£000's
31,888
356
32,244
The group tests goodwill annually for impairment, or more frequently if there are indications that
goodwill might be impaired (see note 31).
Page 41
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
13
Intangible Assets
Group
Development
Costs
£000's
Manufacturing
schedules
£000's
Other
Intangible
Assets
£000's
Computer
Software
£000's
Cost:
At 1 January 2007
Additions
Acquisitions of subsidiary
undertakings
Exchange differences
At 1 January 2008
Additions
Disposals
Exchange differences
At 31 December 2008
Amortisation:
At 1 January 2007
Charge for the year
Impairment
At 1 January 2008
Charge for the year
Disposals
Impairment
Exchange differences
At 31 December 2008
Carrying amount:
At 31 December 2008
At 31 December 2007
1,709
2,799
-
-
4,508
6,396
-
-
10,904
146
171
-
317
451
-
-
-
768
10,136
4,191
-
10,938
148
11,086
-
-
4,206
15,292
-
456
-
456
456
-
8,303
3,536
12,751
2,541
10,630
4,621
-
4,619
62
9,302
-
(112)
1,776
10,966
475
1,089
71
1,635
1,065
(112)
4,302
1,776
8,666
2,300
7,667
Total
£000's
6,567
2,949
15,557
210
25,283
6,431
(247)
5,985
37,452
775
1,752
71
2,598
2,030
(247)
12,605
5,313
22,299
237
150
-
-
387
35
(135)
3
290
154
36
-
190
58
(135)
-
1
114
176
197
15,153
22,685
The development costs in the year are in relation to the new product developments carried out in the year
which includes the Ampere and other Zero Emission vehicles.
Other intangible assets include trademarks, manufacturing schedules, customer order book and customer lists
which arose on acquisition of the Snorkel International in 2007. The brought forward values of other intangible
assets arose on the acquisition of the Norquip, SEV and Upright businesses.
The impairment balance of £12,605k is made up of £12,094k provided against the intangible asset created on
the acquisition of Snorkel International Inc (see Note 31) and £511k relating to the discontinued Norquip
product line.
Page 42
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
14
Subsidiaries (Group)
Details of the Company’s subsidiaries at 31 December 2008 are as follows:
Name of subsidiary
Place of
incorporation
(or
registration)
and operation
Proportion of
ownership
interest
%
Proportion of
voting power
held
%
Principal activity
Aggregate
capital
reserves
£000
Profit /
(loss) after
Taxation
£000
Tanfield Engineering Systems
Ltd
Tanfield Engineering Systems US
(Inc)
HBWP Inc
Snorkel Holdings LLC
Snorkel International Inc
Snorkel Elevating Work
Platforms PTY Limited
Snorkel Elevating Work
Platforms Limited
Snorkel Europe BV
SEV Group Ltd
E-Comeleon Ltd
JoeKnowsIt? Ltd
ClickHere Ltd
Express 2 Automotive Ltd
Sandco 854 Ltd
Saxon Specialist Vehicles Ltd
HMH Sheet Metal Fabrications
Ltd
Norquip Ltd
YEV Ltd
Tanfield Powered Access Ltd
Tanfield Asia Pacific PTE. Ltd
UK
US
US
US
US
AUS
NZ
Netherlands
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Singapore
100
100
100
100
100
100
100
100
100
100
74
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
74
100
100
100
100
100
100
100
100
100
Engineering
(30,746)
(37,476)
Powered Access
Dormant
Holding Company
Powered Access
Powered Access
Powered Access
Powered Access
Vehicle Service, Hire
& Maintenance
Non Trading
Non Trading
Non Trading
Non Trading
Holding Company
Dormant
Dormant
Dormant
Dormant
Non Trading
Powered Access
(778)
-
-
7,045
(444)
522
-
(422)
-
-
(5,808)
(2,518)
209
-
(2,670)
(1,259)
-
-
-
-
-
-
-
-
-
-
632
-
-
-
-
-
-
-
-
-
-
(11)
The minority interest in JoeKnowsIt? Limited has not been recognised as JoeKnowsIt? Limited has net
liabilities which are unlikely to be recoverable from the third party.
Details of the investments held in the Company accounts are as follows:
Snorkel International
Tanfield Engineering Systems Limited
E-Comeleon Limited
2008
£000’s
13,013
2,111
-
15,124
2007
£000’s
47,937
2,111
-
50,048
During the year an impairment of £34,535k was made against the investment in Snorkel International
Inc.
During the prior year the investment of £175k in E-Comeleon Limited was impaired to £nil value due to
the company ceasing to trade.
Page 43
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
15
Inventories
Group
Raw materials and consumables
Work-in-progress
Finished Goods and goods for resale
2008
£000’s
33,665
2,087
24,808
60,560
2007
£000’s
38,221
5,731
16,400
60,352
During the year an impairment of £22.2m was made against obsolete and slow moving stock (Note 31).
16
Financial assets
Trade and other receivables
Group
Current
Trade amounts receivable
Allowance for estimated irrecoverable
amounts
Amounts due from subsidiary undertakings
Other Taxes
Other debtors and prepayments
Non-current
Trade amounts receivable
Average credit period taken on goods
2008
£000's
21,243
(1,483)
-
203
632
20,595
1,500
2008
51
2007
£000's
44,146
(112)
-
954
2,209
47,197
-
2007
142
Company
2008
£000's
-
-
59,688
-
44
59,732
2007
£000's
-
-
81,772
305
56
82,133
-
-
The following table provides analysis of trade and other receivables that were past due at 31 December,
but not impaired. The Group believes that the balances are ultimately recoverable based on a review of
past payment history and the current financial status of the customers.
Up to three months
Up to six months
2008
£’000
2,915
825
2007
£’000
2,701
757
During the year an impairment of £22.9m (2007: £Nil) was made against potentially bad and
irrecoverable debts (Note 31) from whom payment was over due by more than three months.
The directors consider that the carrying amount of trade and other receivables approximates their fair
value.
Bank balances and cash comprise cash and short-term deposits held by the group treasury function.
The carrying amount of these assets approximates their fair value.
Credit risk – The Group’s principal financial assets are bank balances and cash and trade and other
receivables, which represent the Group’s maximum exposure to credit risk in relation to financial assets.
The Group’s credit risk is primarily attributable to its trade receivables. The Group has no significant
concentration of credit risk, with exposure spread over a large number of counterparts and customers.
Page 44
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
17
Investments
Group
At 1 January
Additions
Exchange movements
At 31 December
The investment relates to the current value of a money market investment.
18
Trade and other payables
Trade payables
Social security and other Taxes
Accruals and deferred Income
Average credit period taken on trade purchases
Group
2008
£000's
9,314
1,085
9,408
19,807
2007
£000's
15,692
1,004
9,710
26,406
2008
77
2007
64
2008
£000’s
120
45
86
251
2007
£000’s
94
24
2
120
Company
2008
£000's
465
219
85
769
2007
£000's
179
-
148
327
The directors consider that the carrying amount of trade payables approximates to their fair value.
19
Financial instruments recognised in the balance sheet (Group)
ASSETS
Non current assets
Trade and other receivables
Current assets
Trade amounts receivable
Investments
Cash and cash equivalents
£000's
Held for
trading
2008
£000's
Held to
maturity
£000's
Total
£000's
Held for
trading
2007
£000's
Held to
maturity
1,500
1,500
19,760
-
11,130
30,890
-
-
1,500
1,500
-
251
-
251
19,760
251
11,130
31,141
-
-
44,034
-
27,952
71,986
-
-
-
120
-
120
£000's
Total
-
-
44,034
120
27,952
72,106
Total
32,390
251
32,641
71,986
120
72,106
LIABILITIES
Current liabilities
Trade and other payables
Finance leases
Other creditors
Non current liabilities
Finance leases
Other creditors
Total
19,807
565
9,954
30,326
569
-
569
30,895
-
-
-
-
-
-
-
-
19,807
565
9,954
30,326
569
-
569
26,406
684
467
27,557
1,100
5,021
6,121
30,895
33,678
-
-
-
-
-
-
-
-
26,406
684
467
27,557
1,100
5,021
6,121
33,678
Page 45
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
20
Obligations Under Finance Leases
Group
Amounts payable under finance leases
Within one year
In the second to fifth years (inclusive)
Less future finance charges
Present value of lease obligations
Less: Amount due for settlement within 12 months
(shown under current liabilities)
Amount due for settlement after 12 months
Company
Amounts payable under finance leases
Within one year
In the second to fifth years (inclusive)
Less future finance charges
Present value of lease obligations
Less: Amount due for settlement within 12 months
(shown under current liabilities)
Amount due for settlement after 12 months
Minimum lease
Payments
2008
£000's
2007
£000's
640
626
1,266
(132)
1,134
829
1,232
2,061
(277)
1,784
Minimum lease
Payments
2008
2007
£000's
£000's
10
-
10
-
10
127
10
137
(7)
130
Present value of
minimum
lease payments
2008
£000's
2007
£000's
565
569
1,134
684
1,100
1,784
1,134
1,784
(565)
569
(684)
1,100
Present value of
minimum
lease payments
2008
2007
£000's
£000's
10
-
10
10
120
10
130
130
(10)
(120)
-
10
It is the Group’s policy to lease certain of its fixtures and equipment under finance leases. The
average lease term is 5 years. For the year ended 31 December 2008, the average effective borrowing
rate was 10% (2007: 10%). Interest rates are fixed at the contract date.
Obligations under finance leases are secured on the assets to which they relate.
The fair value of the Group’s lease obligations approximate to their carrying amount.
Page 46
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
21
Other Creditors
Buyback Lease Liability
Invoice Discounting
Deferred consideration
Other creditors payable within one year
Deferred consideration
Other Creditors
Other creditors payable after one year
Group
Company
2008
£000's
2007
£000's
342
2,909
6,703
9,954
-
-
-
386
81
-
467
5,021
-
5,021
2008
£000's
-
-
5,720
5,720
2007
£000's
-
-
-
-
-
-
-
5,021
-
5,021
The directors consider that the carrying amount of other creditors approximates to their fair value
22
Deferred Tax
Group
Group
Company
2008
£000's
2007
£000's
2008
£000's
2007
£000's
Analysis for financial reporting purposes:
Deferred tax (liabilities)
Deferred tax assets
Net asset / (liability) position at 31 December
(307)
1,779
1,472
-
785
785
The movement in the year in the Group’s net deferred tax position was as follows:
At 1 January
Recognised on acquisition of subsidiary
undertakings
Credit / (charge) to income for the year
Release to income for the prior year
At 31 December
785
-
687
-
1,472
(19)
1,025
(200)
(21)
785
-
-
-
278
-
(278)
-
-
-
278
278
-
-
278
-
278
The following are the major deferred tax components recognised by the Group and the movements thereon
during the period:
Deferred tax assets / (liabilities)
At 1 January 2008
Credit / (charge) to income for the year
Release to income for the prior year
At 31 December 2008
Group
Group
Company
Tax losses
£000’s
785
994
-
1,779
Other
£000’s
-
(307)
-
(307)
Other
£000’s
278
(278)
-
-
At the balance sheet date, the group has unused tax losses of £49,237k (2007: £3,973k) available for
offset against future profits of the same trade. A deferred tax asset has been recognised in respect of
£1,779k (2007: £785k) of such losses. No deferred tax asset has been recognised in respect of the
remaining £42,884k (2007: £1,356k) due to the unpredictability of future profit streams.
Page 47
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
23
Provisions (Group)
At 1 January 2007
Utilisation of provision
At 1 January 2008
Utilisation of provision
At 31 December 2008
24
Share Capital
Group and Company
Authorised:
500,000,000 (2007 – 500,000,000) Ordinary Shares of 1p each
Issued and Fully Paid:
370,386,089 (2007 – 370,286,089) Ordinary shares of 1p each
Legal
Reserve
£000's
262
(262)
-
-
-
Total
£000's
262
(262)
-
-
-
2008
£000’s
2007
£000’s
5,000
5,000
3,704
3,703
The Company has one class of ordinary shares which carry no right to fixed income.
On 14 April 2008, 100,000 share options were exercised at a price of £1 per share for a total
consideration of £100,000.
The premium net of related charges on the issue of these shares has been credited to the share premium
account.
25
Translation reserve
Balance at 1 January 2007
Foreign exchange differences on retranslation of net assets of subsidiary
undertakings
Foreign exchange differences on retranslation of Investments in subsidiary
undertakings
Balance at 1 January 2008
Foreign exchange differences on retranslation of net assets of subsidiary
undertakings
Foreign exchange differences on retranslation of Investments in subsidiary
undertakings
Balance at 31 December 2008
26
Retained Earnings
At 1 January 2007
Profit / (loss) for the year
Share options charged directly to equity
At 1 January 2008
Profit / (loss) for the year
Share options exercised charged directly to equity
Balance at 31 December 2008
Group
£000's
Company
£000's
-
-
879
-
879
8,411
-
9,290
-
338
338
-
(338)
-
Group
£000's
1,896
10,393
96
12,385
(88,546)
22
(76,139)
Company
£000's
(505)
(291)
96
(700)
(78,223)
22
(78,901)
Page 48
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
27 Capital reserves
Group
Share
capital
Share
premium
Share
Option
reserve
Loan
Stock
reserve
Merger
reserve
Capital
Reduction
reserve
Translation
reserve
Total
£000's
£000's
£000's
£000's
£000's
Balance at 1 January 2008
Issue of Ordinary share capital (net of
expenses)
Exercise of convertible loan stock
Share options exercised
Share option provision
Foreign exchange differences on retranslation
of net assets of subsidiary undertakings
3,703
138,493
992
-
-
1
-
-
-
-
-
661
-
-
18
-
-
Balance at 31 December 2008
3,704
138,511
1,653
-
-
-
-
-
-
-
Company
£000's
7,228
£000's
£000's
879
152,829
-
-
-
-
-
-
-
-
-
-
-
19
661
8,411
8,411
1,534
7,228
9,290
161,920
Share
capital
Share
premium
Share
Option
reserve
Loan
Stock
reserve
Merger
reserve
Capital
Reduction
reserve
Translation
reserve
Total
£000's
£000's
£000's
£000's
£000's
Balance at 1 January 2008
Issue of Ordinary share capital (net of
expenses)
Exercise of convertible loan stock
Share options exercised
Share option provision
Foreign exchange differences on retranslation
of Investments in subsidiary undertakings
3,703
138,493
992
-
-
1
-
-
-
-
18
-
-
-
-
-
661
-
Balance at 31 December 2008
3,704
138,511
1,653
-
-
-
-
-
-
-
£000's
7,228
£000's
£000's
338
152,288
-
-
-
-
-
-
-
-
-
-
-
19
661
(338)
(338)
1,534
7,228
-
152,630
1,534
-
-
-
-
-
1,534
-
-
-
-
-
28 Retirement benefits
Defined contribution plans
The Group operates defined contribution retirement benefit plans for all qualifying employees of its construction
and leasing divisions in the UK. The assets of the schemes are held separately from those of the Group in funds
under the control of trustees. Where there are employees who leave the scheme prior to vesting fully in the
contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions.
The employees of the Group’s subsidiary in Australia are members of a state-managed retirement benefit scheme
operated by the government of Australia. The subsidiary is required to contribute a specified percentage of their
payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect
to the retirement benefit scheme is to make the specified contributions.
The total cost charged to income of £327k (2007:£515k) represents contributions payable to these schemes by the
Group at rates specified in the rules of the schemes. As at 31 December 2008, contributions of £27k (2007: £51k)
due in respect of the current reporting period had not been paid over to the schemes.
Page 49
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
29
(a) Reconciliation of profit from operations to net cash used in operating activities
Operating Activities (continuing and discontinuing)
Profit (loss) from operations
Adjustments for:
Depreciation of property, plant and equipment
Negative goodwill
Amortisation of intangible fixed assets
(Gain) Loss on disposal of fixed assets
Impairment of Goodwill
Impairment of Intangible assets
Impairment of property, plant and equipment
Impairment of Inventories
Impairment of Receivables
Loss on intercompany loan write off
Loss on impairment of investments
Operating cash flows before movements in working
capital
Decrease (Increase) in receivables
Increase (decrease) in payables
(Decrease) in provisions
(Increase) in inventories
Net Cash used in Operating activities
Group
2008
£000's
2007
£000's
Company
2008
£000's
2007
£000's
(88,329)
10,074
(78,570)
(1,853)
1,165
-
2,030
(587)
31,895
12,605
83
22,185
22,894
-
-
991
-
1,752
57
402
71
47
-
-
-
-
-
-
-
-
-
-
-
51,618
34,535
-
-
-
-
-
-
-
-
-
1,400
175
3,941
4,585
(8,140)
2,612
(13,933)
(10,935)
13,394
(19,049)
9,779
(4,416)
(28,749)
(29,041)
7,583
(29,199)
1,125
-
-
(20,491)
(278)
(57,290)
994
-
-
(56,574)
30 Operating Lease Arrangements
The Group as a lessee:
At the balance sheet date, the Group had total commitments under non-cancellable
operating leases, which fall due as follows:
Within one year
In the second to fifth years inclusive
Greater than five years
2008
£000’s
2,422
5,912
16,710
25,044
2007
£000’s
1,888
4,767
19,093
25,748
Page 50
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
31
Impairments
The impairment losses recognised in the Consolidated Income Statement result from impairment
reviews triggered by the significant changes in the market outlook for the Powered Access division,
experienced during June 2008.
In particular, the company addressed the valuation of the Intangible Assets and Goodwill arising from
the acquisition of Snorkel International Inc and its subsidiaries in August 2007.
In accordance with IAS 36 the Group values Goodwill at the lower of its carrying value or its
recoverable amount, where the recoverable amount is the higher of the value if sold and its value in use.
In addition IAS38 requires intangible assets with finite useful lives to follow the same impairment
testing as Goodwill including the use of value in use calculations.
The impact of market changes in June and the uncertainty within this market going forward, described
elsewhere in this statement, have meant that the assumptions in the value in use calculations, prepared
to support previous valuations, are significantly altered.
The Group identified individual cash generating units for the purposes of IAS 36 within the group.
Value in use calculations were prepared for Snorkel and its subsidiaries, UpRight and Smith Electric
Vehicles. These have been compared with the assets for that unit and the impairments calculated
accordingly.
The value in use calculations were prepared using amended pre-tax cash flow projections based on
financial budgets for the period to December 2011 based on management experience and current
trading expectations, extrapolated to a ten year period using conservative growth assumptions, given
current uncertainty.
The key assumptions applied to the Snorkel calculations after 2011 on Gross Margin are 25%-30% and
Growth Rate are in the range 2 -3%. The discount rate is set at 9.3% (2007 5%) to reflect the current
market assessment of the time value of money and the specific risks of the cash generating unit.
The key assumptions applied to the UpRight calculations after 2011 on Gross Margin are 30% and on
Growth Rate is in the range 0% - 3%. The discount rate is set at 9.3% (2007 5%) to reflect the current
market assessment of the time value of money and the specific risks of the cash generating unit.
The key assumptions applied to the Smith Electric Vehicles calculations after 2011 on Gross Margin
are 35% and Growth Rate are in the range 2% - 3%. The discount rate is set at 9.3% (2007 5%) to
reflect the current market assessment of the time value of money and the specific risks of the cash
generating unit. No impairment was made in Smith Electric Vehicles.
Based on the value in use calculations, the Group has determined that the value of the Goodwill has
been impaired and as such an impairment charge of £31.9m (Snorkel £27.5m, UpRight £4.4m) (2007:
nil) has been made to write down the carrying value of the asset.
Based on the value in use calculations the Group has determined that the value of the intangible assets
has been impaired and as such an impairment charge of £12.6m (Snorkel £12.6) (2007: nil) has been
made.
Allowance for doubtful receivables
A provision has been made against accounts that in the estimation of management may be impaired.
Within each of the business segments an assessment has been made as to the impact of the dramatic
reduction in volumes caused by the changes in market conditions and the reduction in availability of
credit on the financial viability of customers, together with the importance of those customers in
providing a route to market, and their effect on the recoverability of accounts receivable. The
impairment was calculated, with reference to debt collection strategies in place, as the amount
identified as problematic at specific customers less an estimate of the amount that may be collected
when the market recovers discounted (9.3%) to reflect time to and probability of collection, that amount
collected not limited to repayment of the principal but other revenue benefits.
Page 51
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
During the year the Group charged £22.9m (2007: £Nil) to the income statement against trade
receivables.
The Group holds a provision for impairment of receivables at 31 Dec 2008 amounting to £1.4 million
(2007: £nil)
Inventories
In accordance with IAS2 the group regularly reviews its inventory to ensure it is carried at the lower of
cost or net realisable value. At 31 December 2008 the management believes the carrying value of
inventories to be impaired by £22.2m due to slow moving and obsolete items arising from changes in
the product mix demanded by customers, reductions in overall volumes, supplier failures and strategic
resourcing decisions. Obsolescence provisions have been calculated based on current market values and
future sales of inventories.
Page 52
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
32
Share Based Payments (Group)
Equity settled share based payment transactions
Details of the Company’s and group share option scheme are given in the Directors Remuneration
Report on pages 13 to 16.
Movement in outstanding options
2008
Options
(Number)
Weighted
average exercise
price (£)
2007
Options
(Number)
Outstanding at 1 January
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 31 December
Exercisable at 31 December
19,665,004
-
-
(100,000)
(83,333)
19,481,671
8,231,671
0.228
-
0.01
-
0.228
14,453,671
12,083,333
-
(6,872,000)
-
19,665,004
8,415,004
Weighted
average
exercise price
(£)
0.188
0.22
0.107
0.228
The weighted average share price at the date of exercise for share options exercised during the year was
£1.00. The options outstanding at 31 December 2008 had a weighted average exercise price of £0.228,
and a weighted average remaining contractual life of 8.1 years. The range of exercise price is 1p to 40p.
On 31 December 2008 the market price of the ordinary shares was 5p. The range during 2008 was 3.5p
to 124.75p.
Income statement charge
A charge to the income statement of £684k has been made for options issued on or after 7 November
2002 that had not vested as at 1 January 2005 in accordance with IFRS2 ‘Share Based Payments’.
The inputs into the Black-Scholes model are as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk free rate
Expected dividends
2008
22.01p
42.58p
43.2%
3 years
4.6%
-
Expected volatility was determined by calculating the historical volatility of the Group’s share price
over the previous 3 years. The expected life used in the model has been adjusted, based on
management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations.
Page 53
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
33 Financial risk management
Credit Risk
The group is exposed to credit risk due to its trade receivables due from customers and cash deposits
with financial institutions
The Group has no concentration of customer credit risk, with exposure spread over a large number of
counterparties and customers. Although the Group has implemented policies and uses procedures to
ensure that sales are made only to customers with appropriate credit history, the group has seen many
previously creditworthy customers default due to the underlying market conditions. During the year the
Group has also seen credit insurance removed against many of its customers leaving the Group with a
much greater exposure which is reflected in the group’s trade receivables impairment.
Liquidity Risk
The Group is exposed to liquidity risk arising from having insufficient funds to meet the financing needs
of the Group.
The Group holds funds on deposit and has short term committed facilities that are designed to ensure
that the Group has sufficient funds available for the forecast requirements of the Group. As well as
forecasting the Group’s core liquidity needs, the Group Financial Management ensure subsidiary
companies’ liquidity needs are met.
Foreign Exchange Risk
The Group is exposed to movements in foreign exchange rates due to its commercial trading
denominated in foreign currencies, the net assets of its foreign operations into the consolidated
statements and foreign currency denominated costs.
Where possible the Group uses natural hedging of currencies where customer and purchase currencies
are matched, otherwise the Group uses currency derivative financial instruments such as foreign
exchange contracts to reduce exposure.
The material foreign currency denominated costs include the purchase of components from low cost
based countries, principally in US dollars.
Interest rate risk
The Group is exposed to interest rate risk due to its cash deposits. Cash and cash equivalents are the
only interest bearing financial assets held by the Group.
34 Non-cash transactions
Additions to fixtures and equipment during the year amounting to £Nil (2007: £1,172k) were financed
by new finance leases.
35 Contingent Liabilities
There are no contingent liabilities of which the Directors are aware.
Page 54
TANFIELD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008
36 Related Party Transactions
Group
Transactions between the Company and its subsidiaries and between subsidiaries, which are related
parties, have been eliminated on consolidation. These transactions are a management charge from
Tanfield Group PLC to is subsidiaries. The bank hold a cross guarantee in relation to all the Group
Company bank accounts. There are no other related party transactions.
Company
Details of the Company’s share in Group undertakings are given in note 14.
The Company entered into transactions with its subsidiaries as disclosed below.
Management charge for provision of
services
Amounts owed by related parties at year
end
Subsidiaries
2008
£000’s
5,567
2007
£000’s
3,425
59,688
81,772
During the year the company impaired £7,944k against Snorkel International Inc outstanding loans and
also forgave £43,645k in loans to Tanfield Engineering Systems Ltd.
Remuneration of key management personnel
The remuneration of the key management personnel, which includes Directors, is set out below in
aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information
about the remuneration of individual directors is provided in the Directors’ Remuneration Report on
pages 13 to 16.
Directors Emoluments
Short-term employee benefits
Post employment benefits
Gain on exercise of share options
Total
Directors’ transactions
2008
£000's
1,379
87
-
1,466
2007
£000's
1,339
60
10,015
11,414
There were no other transactions with Directors during the year. There have been no related party
transactions with any Director.
Page 55