Tanfield Group Plc
Annual Report 2012

Plain-text annual report

TANFIELD  GROUP  PLC   REPORT  AND  FINANCIAL     STATEMENTS  2012   Registered  in  England  &  Wales   Company  number  04061965   1       TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     REPORT  AND  FINANCIAL  STATEMENTS  2012   SUMMARY  OF  CONTENTS   Directors,  Advisers  and  Officers   Financial  and  Business  Review   Directors’  Report   Corporate  Governance   Directors’  Remuneration  Report   Statement  of  Directors’  Responsibilities   Report  of  the  Independent  Auditor     Consolidated  Statement  of  Comprehensive  Income   Consolidated  &  Company  Balance  Sheets   Consolidated  &  Company  Statements  of  Changes  in  Equity   Consolidated  &  Company  Cash  Flow  Statements   Accounting  Policies   Notes  to  the  Accounts   3   4   6   8   9   11   12   13   15   16   17   18   24   2         TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     DIRECTORS  AND  ADVISERS   DIRECTORS   EXECUTIVE   DS  Kell   CD  Brooks   BJ  Campbell   NON-­‐EXECUTIVE   J  Pither                             RRE  Stanley   M  Groak   SECRETARY   CD  Brooks   REGISTERED  OFFICE  AND  ADVISORS   REGISTERED  OFFICE   Vigo  Centre   Birtley  Road   Washington   Tyne  and  Wear   NE38  9DA   AUDITOR   Baker  Tilly  UK  Audit  LLP   1  St  James’  Gate   Newcastle  upon  Tyne   NE1  4AD   SOLICITOR   Ward  Hadaway   Sandgate  House   102  Quayside   Newcastle  upon  Tyne   NE1  3DX   Chief  Executive   Finance  Director   Managing  Director  Powered  Access   Chairman   Non  executive  Director   Non  executive  Director   NOMINATED  ADVISOR   WH  Ireland   24  Martin  Lane   londno   London   EC4R  0DR   NOMINATED  BROKER   WH  Ireland   24  Martin  Lane   Londno   London   EC4R  0DR   REGISTRAR   Capita  IRG  plc     Bourne  House   34  Beckenham   Beckenham   Kent   BR3  4TH         3                                                                                                                                                                                                                                                                                                                       TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     FINANCIAL  AND  BUSINESS  REVIEW   Financial  highlights   Key  performance  indicators   Continuing  operations   Revenue   Gross  margin  on  materials1   EBITDA(before  impairments,  associates  &  disposals)   Cash   Headcount  (Average  no.)   1  Source:  management  accounts   2012   £000’s   45,072   41%   (13,535)   2,198   506   2011   £000’s   48,305   37%   (13,397)   3,463   469   change   %   (6.7)   4.0   (1.0)   (36.5)   7.9   CHAIRMAN’S  STATEMENT   As  we  predicted,  global  demand  for  aerial  work  platforms  continued   to  grow  significantly  throughout  2012.  We  were  able  to  capitalise  on   this  returning  market  after  successfully  raising  £11m,  net  of  costs,  in   March,   via   a   share   placing.   In   the   ensuing   six   months   we   achieved   monthly   incremental   gains   in   output   and   sales,   leading   to   our   first   break-­‐even  month  since  2008.   However,   the   extended   cash-­‐to-­‐cash   cycle   of   key   markets   in   the   Asia-­‐Pacific   region,   combined   with   supply   chain   constraints   put   additional  strain  on  our  working  capital,  so  we  reined  in  production   during   the   final   quarter   in   order   to   rebalance   inventory   and   maintain  cash.   Global   demand   for   our   Snorkel   range   of   aerial   lifts   remains   strong,   pricing   has   improved   and   margins   increased.   Customers   remain   engaged   in   fleet   replacement   programmes   after   ageing   their   fleets   during   the   economic   downturn.     We   continue   to   increase   our   distribution   channels   in   key   markets,   including   both   Latin   America   and   North   America.   Scandinavia   and   Japan   remained   particularly   buoyant  markets.     the  development  of  two  exciting  new  products  that  we  introduced   in  April  2013.  Tanfield  sells  the  Snorkel  brand  of  aerial  work   platforms  through  a  global  network  of  independent  distributors.  In   2012  we  appointed  new  distributors  in  Germany,  France,  Brazil,   Colombia;  as  well  as  more  re-­‐sellers  in  North  America.   Zero  Emission  Vehicles   Smith  Electric  Vehicles  US  Corp  (“SEVUS”),  in  which  Tanfield  retains   a  24  per  cent  holding,  successfully  raised  $40m  in  February  2012  to   continue  its  development.  However,  the  company  withdrew  its   planned  Initial  Public  Offering  on  Nasdaq  in  September  2012.  SEVUS   continues  to  progress,  winning  new  customers  in  North  America,   Europe  and  Asia.  We  remain  supportive  of  the  SEVUS  management   strategy,  which  we  believe  will  ultimately  deliver  a  significant  return   on  our  investment.   Outlook   We  expect  global  demand  for  aerial  work  platforms  will  continue  to   grow  during  2013  and  beyond,  although  there  remains  some  level  of   economic  uncertainty  in  the  key  markets  of  North  America  and  the   Eurozone.   I  would  like  to  thank  all  of  our  employees  for  their  efforts  this  year,   particularly   in   achieving   our   first   break-­‐even   month   in   October.   I   look  forward  to  working  with  you  all  in  2013.   In  order  to  fully  exploit  the  significant  opportunities  available  in   2013  –  and  to  return  to  profitability  -­‐  Tanfield  requires  additional   working  capital,  beyond  the  £2.1m  placing  in  April  2013.   CHIEF  EXECUTIVE’S  REVIEW   Summary   The  fleet  replacement  initiatives  we  first  saw  in  2011  continued  into   2012,  as  equipment  rental  and  plant  hire  companies  revitalised   ageing  fleets  of  aerial  work  platforms.  We  significantly  strengthened   our  supply  chain  during  2012  and  achieved  our  first  month  of   profitability  since  2008.   However   cash   constraints   in   the   final   quarter   meant   that   we   lost   some  momentum  and  losses  for  the  year  reached  £14.5m.   Powered  Access  &  Engineering:  Turnover  of   £45.1m  (2011:  £48.3m)     Demand  grew  for  powered  access  products  in  2012,  outstripping   our  capability  to  supply.  We  continued  to  plan  for  the  future  with     Tanfield  is  not  proposing  to  pay  a  dividend  for  the  period.   As  outlined  in  our  announcements  of  20  February  2013  and  15  April   2013,  The  Board  has  received  a  substantial  number  of  approaches   from  credible  parties  interested  in  purchasing  our  Powered  Access   division  and  the  Snorkel  brand.   Due  to  the  strength  of  this  interest,  in  April  the  Board  of  Directors   appointed  an  M&A  advisory  firm  to  further  explore  and  manage  this   process  to  optimise  value  for  shareholders.  Further  announcements   will  be  made  in  due  course.   4                                                                                                                   TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     FINANCIAL  AND  BUSINESS  REVIEW   (Continued)   FINANCE  DIRECTOR’S  REPORT   The   Revenue   for   the   year   of   £45.1m   (2011   £48.3m)   reflected   the   difficulty  in  responding  to  the  improved  market  conditions  owing  to   the   constraints   imposed   by   supply   chain   capacity   and   working   capital  constraints  in  2012.   As  in  2011,  the  cost  base  has  been  held  as  low  as  possible  without   damaging  the  overall  group  infrastructure,  and,  in  spite  of  the  lower   turnover  in  the  year,  the  business  reported  a  similar  Loss  before  Tax   investment  and  associate  of  £15.3m  (2011  £15.1m).      Expenses  in  all   categories   were   very   similar   to   2011   and   improved   performance   is   dependent  upon  increased  volumes.   Reassessment  of  the  company’s  holding  in  Smith  Electric  Corp.   During  the  year,  Tanfield’s  holding  in  Smith  Electric  Corp  was  diluted   by  successive  fundraisings.    In  addition,  Tanfield’s  influence  at  board   level   has   reduced,   following   the   appointment   of   further   non-­‐ executive  directors.    As  a  result,  Tanfield’s  holding  can  no  longer  be   considered   that   of   an   associate.     It   is   therefore   now   treated   as   an   investment.      As  such,  it  is  now  being  held  at  the  lower  of  cost  and   realisable  value.    Whilst  the  realisable  value  of  a  private  company  is   difficult   to   estimate,   all   valuation   discussions   in   relation   to   recent   fundraisings  by  Smith  Electric  use  valuation  ranges  well  in  excess  of   £1.3m  which  is  the  recorded  cost  of  the  investment.  The  investment   is  valued  at  cost,  £1.3m.   Loss  from  continuing  operations  after  impairments   The  Loss  from  Operations  in  the  period  was  £15.3m  (2011  £15.2m).     This   was   a   trading   loss   reflecting   low   sales   volumes   given   the   constraints  to  revenue.     Finance  income   The  interest  cost  in  the  period  of  £127k  (2011:  £286k)  was  lower   owing  to  higher  cash  balances  in  the  period  and  interest  income   £146k  (on  deferred  consideration  of  £220k  (2011:  £470k))  was  lower   as  2011  benefited  from  interest  on  deferred  consideration  relating   to  the  Smith  sale.   Taxation   In   spite   of   the   consolidated   losses,   a   tax   charge   of   £79k   arose   in   a   specific  fiscal  jurisdiction  (Japan)  in  the  period  (2011  £186k).    There   is  no  brought  forward  deferred  tax  asset,  and  none  was  recognised   in  the  period  resulting  in  no  adjustment  to  deferred  tax,  consistent   with  2011.   Loss  from  continuing  operations   Given   the   above,   Loss   from   continued   operations   was   £14.5m,   (2011   £16.5),   the   most   significant   differences   between   2012   and   2011   being   the   reassessment   of   the   holding   in   Smith   Electric   Vehicles.   Total  comprehensive  income  for  the  year   The  total  comprehensive  income  for  the  year  was  a  loss  of  £15.5m,   (2011  £15.7m),  after  a  £1.0m  charge  (2011  £0.7m  income)  relating   to  currency  translation  differences.     Earnings  per  share     Loss   per   share   from   continuing   operations   was   12.0   pence   (2011:   Loss  17.5  pence).    No  dividend  has  been  declared.  (2011:  nil)   Cash   At  31  December  2012,  the  Group  had  cash  of  £2.2m  (2011:  £3.5m).     Although  the  business  reported  a  loss  of  14.5m  in  the  period,  the   cash  used  was  £1.3m.    The  difference  was  funded  by  issuing   ordinary  shares,  (£13.4m  net,  of  which  £2m  was  loaned  to  Smith)   and  £1.9m  from  working  capital.   5                                           TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     DIRECTORS’  REPORT   The  directors  submit  their  report  and  the  financial  statements  of  Tanfield   Group  PLC  for  the  year  ended  31  December  2012.   Tanfield   Group   PLC   is   a   public   listed   parent   company   incorporated   and   domiciled  in  England  and  quoted  on  AIM.   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  industry  and  engineering.   RESULTS  AND  DIVIDENDS   The  financial  result,  for  the  twelve  months  to  31  December  2012  reflects   improved   market   conditions   constrained   by   supply   chain   capacity   and   working  capital  limitations.   Turnover   for   the   twelve   month   period   was   £45.1m   compared   with   £48.3m   in   the   full   year   to   December   2011.   This   reflects   the   company’s   inability   to   address   the   demand   for   its   products   because   of   constraints   within  the  supply  chain  and  working  capital  limitations.   The  loss  in  the  period  of  £14.5m  (2011:  £16.4m  loss)  arose  from  trading,   reflecting  the  low  sales  volumes.   As  at  the  end  of  2012,  a  review  was  undertaken  of  the  carrying  value  of   assets   in   the   Powered   Access   division   and   it   was   concluded   no   further   impairment  was  required.       The   balance   sheet   remains   robust,   with   total   assets   at   the   end   of   December  of  £43m  (2011:  £45m).  Net  Current  Assets  were  £20.9m  (2011:   £22.6m)   with   cash   balances   of   £2.2m   and   no   borrowing.     The   company   has  identified  sources  of  capital  and  is  in  the  middle  of  a  process  designed   to   ensure   it   has   sufficient   working   capital   that   should   allow   it   to   work   through  the  current  trading  conditions.   No  dividend  has  been  paid  or  proposed  for  the  year  (2011:  £nil).  The  loss   of  £14.5m  (2011:  £16.4m)  has  been  transferred  to  reserves. REVIEW  OF  THE  BUSINESS   The  year  showed  an  increase  in  demand  for  the  companies  products  and   the   company   examined   ways   in   which   to   respond   cautiously   to   that   demand.    The  company  raised  equity  of  £12m  through  a  private  placing   of   its   shares.     This   additional   cash   was   used   to   assist   the   company’s   efforts  to  respond  to  the  increased  demand.    As  a  result  the  company  was   able  to  grow  the  business  to  respond  to  that  demand,  but  were  then  held   back   by   supply   chain   constraints,   which   increased   the   working   capital   required  to  grow  further.   A  detailed  review  of  the  business  is  included  in  the  financial  and  business   review  on  pages  4  to  5  including  the  KPIs  on  page  4.   FUTURE  DEVELOPMENTS   The  company  entered  into  a  confidential  invoice  discounting  facility  with   Close  Brothers  Invoice  Finance  during  February  2013.       6 POLITICAL  AND  CHARITABLE  CONTRIBUTIONS     During  the  year,  the  group  has  made  no  political  or  charitable   donations  (2011  -­‐  £nil).   FINANCIAL  INSTRUMENTS   The   Group’s   financial   instruments   comprise   cash,   finance   leases   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   property,   plant  and  equipment.  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  2012  would  exceed  the  net  book   values  included  in  the  financial  statements.    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.   RISKS  AND  UNCERTAINTIES   The   business   is   reliant   on   continued   sales   within   its   end   markets,  the  pricing  levels  in  those  markets  and  the  continued   performance   of   its   supply   chain.   These   markets   have   been   subject   to   a   sustained   period   of   low   demand   and   future   performance  in  those  markets  is  uncertain.       The   company   needs   to   raise   additional   capital   to   fund   its   return   to   growth.     The   three   options   as   sources   of   working   capital   are:   Realisation   of   the   value   of   its   Smith   investment;   Equity   injection   from   shareholders;   Sale   of   its   Snorkel   Aerial   Work   Platform   business.       The   success   of   any   of   these   is   uncertain.   The  group  buys  the  majority  of  its  powered  access  components   and   sells   the   majority   of   its   powered   access   products   in   US   dollars.    Whilst  that  allows  a  natural  hedge  of  those  products,  it   does   affect   pricing   in   non   US   dollar   markets,   adding   to   the   uncertainty.   EVENTS  SINCE  THE  END  OF  THE  YEAR   The   company   entered   in   to   a   confidential   invoice   discounting   facility   with   Close   Brothers   Invoice   Finance.     The   company   is   carrying   out   a   sales   process   with   a   Mergers   and   Acquisitions   advisor  for  the  disposal  of  the  Snorkel  Powered  Access  division.                                                       TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     DIRECTORS’  REPORT  (Continued)   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.       DIRECTORS   The  present  membership  of  the  board  is  set  out  on  page  3.  Dr  JM  Bridge   and  JN  Wooding  resigned  on  8  March  2012.   All   directors   have   the   right   to   acquire   shares   in   the   company   via   the   exercise   of   options   granted   under   the   terms   of   their   service   contracts,   inspected   by   shareholders   upon   written   copies   of   which   may   be   application  to  the  company  secretary.  Details  of  the  directors’  options  to   acquire   shares   are   set   out   in   the   Directors’   Remuneration   Report   on   pages  9  to  10.   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   2012   were   117   days.  (2011:  100  days)   SUBSTANTIAL  SHAREHOLDINGS   On   31   December   2012   the   following   held   substantial   shares   in   the   company.    No  other  person  has  reported  an  interest  of  more  than  3%  in   the  ordinary  shares.   THE  BANK  OF  NEW  YORK  (NOMINEES)   HSBC  GLOBAL  CUSTODY  NOMINEE  (UK)   VIDACOS  NOMINEES  LIMITED   UBS  PRIVATE  BANKING  NOMINEES  LTD   CHASE  NOMINEES  LIMITED   STATE  STREET  NOMINEES  LIMITED   LYNCHWOOD  NOMINEES  LIMITED   TD  DIRECT  INVESTING  NOMINEES   No.   21,072,650   18,541,854   13,175,899   10,174,079   8,057,664   7,639,944   5,774,455   5,579,301   %   16.34%   14.37%   10.21%   7.89%   6.25%   5.92%   4.48%   4.33%   RRE   Stanley   holds   shares   of   9.8%   which   are   held   through   nominee   companies.    DS  Kell  holds  shares  of  2.7%  which  are  held  through  nominee   companies.   7 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.   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.   INFORMATION   TO   STATEMENT   AS   TO   DISCLOSURE   OF   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   Charles  Brooks   Director   27  June  2013                                                                       TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     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   the   UK   Corporate   Governance  Code  (effective  for  periods  commencing  on  or  after  29  June   2010)  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,   two   other   Executive   Directors,   and   two   independent   Non-­‐Executive   Directors.     In   addition,   until   their   resignation   on   8   March   2012,  two  other  independent  Non-­‐Executive  Directors  were  members  of   the  board.     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.   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   During   the   year   the   Remuneration   Committee   comprised     Roy   Stanley   and  John  Pither.   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  9  to  10.   Audit  Committee   During   the   year   the   Audit   Committee   comprised   the   Non-­‐Executive   Directors  Martin  Groak  and  John  Pither.    Meetings  are  also  attended,  by   invitation,  by  the  Group  Finance  Director.   8 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   effectiveness  of  the  external  auditor.   independence,   objectivity   and   the   • • 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.     institutional   investors   and   analysts   Relations  with  Shareholders   The   Company   values   its   dialogue   with   both   institutional   and   private  investors.    Effective  two-­‐way  communication  with  fund   managers,   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.   Going  Concern   The   directors   confirm   that   they   are   satisfied   that   the   Company   and   Group   have   options   as   sources   of   additional   working   capital,   as   set   out   on   Page   18,   to   provide   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.   Darren  Kell   Chief  Executive  27  June  2013                                           TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     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   during   the   year   were   JN   Bridge   and   M   Groak   and   the   committee   was   chaired   by   JN   Bridge.     After   8   March   2012   the   committee   was   comprised   of   Roy   Stanley   and   John   Pither.   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:   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.   Board  changes   On   8   March   2012   JN   Bridge   and   JM   Wooding   resigned   as   directors.   • • • • Basic  annual  salary  (including  directors’  fees)  and  benefits;   Annual  bonus  payments;   Share  option  incentives;  and   Pension  arrangements.   Directors  interests   The  interests  of  directors  holding  office  at  the  year  end  in  the   company’s   ordinary   5p   shares   at   31   December   2012   and   1   January  2012  are  shown  below:   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.     Performance  bonuses  were  paid  as  set  out  in  the  table  on  page  10.   RRE  Stanley   DS  Kell   CD  Brooks   BJ  Campbell   M  Groak   J  Pither   Total   Number  of  shares   2012   12,617,661   3,447,811   28,563   106,363   -­‐   815,084   17,015,482   2011   12,378,756   3,447,811   28,563   106,363   -­‐   815,084   16,776,577   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.  Share  options  were  awarded  as   set  out  in  the  table  on  page  10.   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.   The   directors,   as   a   group,   beneficially   own   13%   of   the   company’s  shares.   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.     9                                                   TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     DIRECTORS’  REMUNERATION  REPORT  (continued)   Remuneration  review   Directors  emolument  for  the  financial  year  were  as  follows:   RRE  Stanley   DS  Kell   CD  Brooksa   BJ  Campbell   JN  Bridged   M  Groak   JM  Woodingb   J  Pitherc   Total   a   CD  Brooks  received  a  loan  in  a  previous  year  of  £31k  which  was  outstanding  at  31  December  2012. Salary   82   311   230   208   4   28   21   33   917   Benefits   in  kind   18   18   18   18   -­‐   -­‐   -­‐   -­‐   72   b   Mr  Wooding  is  paid  through  Simkat  Consultants.    Mr  Wooding  resigned  8  March  2012. c  J  Pither  is  paid  through  Surrey  management  services. d  JN  Bridge  resigned  8  March  2012.   Directors  share  options  held  at  31  December  2012  were  as  follows:   Bonuses   10   130   80   50   -­‐   10   -­‐   10   290   Total                       2012   110   459   328   276   4   38   21   43   1,279   Pension  Total               Total                       2011   83   406   306   246   26   26   25   30   1,158   2012   15   58   15   35   -­‐   -­‐   -­‐   -­‐   123   Pension   Total               2011   4   26   15   17   -­‐   -­‐   -­‐   -­‐   62   DS  Kell   CD  Brooks   BJ  Campbell   RRE  Stanley   JN  Bridge   M  Groak   J  Pither   31  December   2011f   411,334   860,000   1,800,000   Granted/   Lapsed   -­‐   -­‐   -­‐   Exercised   -­‐   -­‐   -­‐   Option   price  per   sharee,g   1p   1p   27p   Date  from   which   normally   exercisablef   01/03/2009   02/01/2010   21/01/2014   Expiry  Date   01/03/2016   02/01/2017   21/01/2021   1p   1p   27p   5p   1p   1p   27p   1p   1p   1p   27p   14/06/2009   02/01/2010   21/01/2014   14/06/2016   02/01/2017   21/01/2021   14/09/2008   01/03/2009   02/01/2010   21/01/2014   14/09/2015   01/03/2016   02/01/2017   21/01/2021   02/01/2010   01/03/2009   01/03/2009   21/01/2014   02/01/2017   01/03/2016   01/03/2016   21/01/2021   31   December   2012   411,334   860,000   1,800,000   250,000   200,000   1,100,000   140,000   50,000   320,000   900,000   800,000   30,000   30,000   200,000   7,091,334   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   250,000   200,000   1,100,000   140,000   50,000   320,000   900,000   800,000   30,000   30,000   200,000   Total   e  Certain  option  agreements  allow  for  the  option  price  to  reduce  in  the  event  of  a  demerger.       f   7,091,334   Certain  share  option  agreements  have  a  clause  that  allows  the  options  to  be  exercised  early  if  market  capitalisation  exceeds  a  certain  level.   g   On  31  December  2012  the  market  price  of  the  ordinary  shares  was  26.88p.  The  range  during  2012  was  22.50p  to  68.25p   Approval   This  report  was  approved  by  the  board  of  directors  and  authorised  for  issue  on  27  June  2013  and  signed  on  its  behalf  by:   Roy  Stanley   Chairman  of  Remuneration  Committee   10                                                                                                                                                                                                                                                       TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     STATEMENT  OF  DIRECTORS’  RESPONSIBILITIES       The  directors  are  responsible  for  preparing  the  Directors’  Report  and  the   financial  statements  in  accordance  with  applicable  law  and  regulations.   Company   law   requires   the   directors   to   prepare   Group   and   Company   Financial  Statements  for  each  financial  year.    The  directors  are  required   by   the   AIM   rules   of   the   London   Stock   Exchange   to   prepare   Group   financial  statements  in  accordance  with  International  Financial  Reporting   Standards   ("IFRS")    as   adopted   by   the   European   Union   (“EU”)   and   have   elected  under  company  law  to  prepare  the  company  financial  statements   in  accordance  with  IFRS    as  adopted  by  the  EU.   The  financial  statements  are  required  by  law  and  IFRS  adopted  by  the  EU   to  present  fairly  the  financial  position  of  the  group  and  company  and  the   financial  performance  of  the  group.    The  Companies  Act  2006  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  directors  are  responsible  for  keeping  adequate  accounting   records  that  are  sufficient  to  show  and  explain  the  group’s  and   the   company’s   transactions   and   disclose   with   reasonable   accuracy  at  any  time  the  financial  position  of  the  group  and  the   company   and   to   enable   them   to   ensure   that   the   financial   statements   comply   with   the   Companies  Act  2006.     They   are   also   responsible   for   safeguarding   the   assets   of   the   group   and   the   company   and   hence   for   taking   reasonable   steps   for   the   prevention  and  detection  of  fraud  and  other  irregularities.   The  directors  are  responsible  for  the  maintenance  and  integrity   of   the   corporate   and   financial   information   included   on   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.   Under   company   law   the   directors   must   not   approve   the   financial   statements  unless  they  are  satisfied  that  they  give  a  true  and  fair  view  of   the  state  of  affairs  of  the  group  and  the  company  and  of  the  profit  and   loss  of  the  group  for  that  period.   In   preparing   each   of   the   group   and   company   financial   statements,   the   directors  are  required  to:   a. b. c. d. select   suitable   accounting   policies   and   then   apply   them   consistently;   make  judgements  and  estimates  that  are  reasonable  and  prudent;   state  whether  they  have  been  prepared  in  accordance  with  IFRSs   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.   11                                                               TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     REPORT  OF  THE  INDEPENDENT  AUDITOR       Independent auditor’s report to the members of Tanfield Group PLC We   have   audited   the   group   and   parent   company   financial   statements   (“the   financial   statements”)   on   pages   13   to   41.   The   financial   reporting   framework   that   has   been   applied   in   their   preparation   is   applicable   law   and  International  Financial  Reporting  Standards  (IFRSs)  as  adopted  by  the   European   Union   and,   as   regards   the   parent   company   financial   statements,   as   applied   in   accordance   with   the   provisions   of   the   Companies  Act  2006.     This  report  is  made  solely  to  the  company’s  members,  as  a  body,  in   accordance  with  Chapter  3  of  Part  16  of  the  Companies  Act  2006.    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  auditor   As   more   fully   explained   in   the   Directors’   Responsibilities   Statement   set   out  on  page  11,  the  directors  are  responsible  for  the  preparation  of  the   financial  statements  and  for  being  satisfied  that  they  give  a  true  and  fair   view.     Our   responsibility   is   to   audit   and   express   an   opinion   on   the   financial  statements  in  accordance  with  applicable  law  and  International   Standards   on   Auditing   (UK   and   Ireland).     Those   standards   require   us   to   comply  with  the  Auditing  Practices  Board’s  (APB’s)  Ethical  Standards  for   Auditors.   Scope  of  the  audit  of  the  financial  statements   A  description  of  the  scope  of  an  audit  of  financial  statements  is  provided   on  the  APB’s  website  at  www.frc.org.uk/apb/scope/private.cfm.   Opinion  on  financial  statements   In  our  opinion     • • • • the  financial  statements  give  a  true  and  fair  view  of  the  state  of  the   group’s  and  the  parent’s  affairs  as  at  31  December  2012  and  of  the   group’s  loss  for  the  year  then  ended;   the   group   financial   statements   have   been   properly   prepared   in   accordance  with  IFRSs  as  adopted  by  the  European  Union   the   parent   financial   statements   have   been   properly   prepared   in   accordance   with   IFRSs   as   adopted   by   the   European   Union   and   as   applied  in  accordance  with  the  Companies  Act  2006;  and   the  financial  statements  have  been  prepared  in  accordance  with  the   requirements  of  the  Companies  Act  2006.   Emphasis  of  matter  –  Going  Concern   In  forming  our  opinion  on  the  financial  statements,  which  is  not   modified,   we   have   considered   the   adequacy   of   disclosures   made   in   the   accounting   policies   on   page   18   of   the   financial   statements   concerning   the   Group’s   and   Parent   Company’s   ability  to  continue  as  a  going  concern.  The  group  incurred  a  loss   of   £14,524,000   during   the   year   ended   31   December   2012   and   in  order  to  continue  as  a  going  concern  for  a  period  of  at  least   one   year   from   the   date   of   approval   of   these   financial   statements   needs   to   raise   additional   working   capital   from   the   sources   detailed   on   page   18   of   the   financial   statements.   This   condition,   along   with   the   other   matters   explained   on   page   18   of   the   financial   statements,   indicates   the   existence   of   a   material   uncertainty   which   may   cast   significant   doubt   about   the  Group’s  and  the  Parent  Company’s  ability  to  continue  as  a   going   concern.     The   financial   statements   do   not   include   the   adjustments   that   would   result   if   the   Group   or   the   Parent   Company  were  unable  to  continue  as  a  going  concern.   Opinion   on   other   matter   prescribed   by   the   Companies   Act   2006   In  our  opinion  the  information  given  in  the  Directors’  Report  for   the   financial   year   for   which   the   financial   statements   are   prepared  is  consistent  with  the  financial  statements.   Matters  on  which  we  are  required  to  report  by  exception   We  have  nothing  to  report  in  respect  of  the  following  matters   where  the  Companies  Act  2006  requires  us  to  report  to  you  if,   in  our  opinion:   • adequate   accounting   records   have   not   been   kept   by   the   parent   company,   or   returns   adequate   for   our   audit   have   not  been  received  from  branches  not  visited  by  us;  or   the   parent   company   financial   statements   are   not   in   agreement  with  the  accounting  records  and  returns;  or   certain  disclosures  of  directors’  remuneration  specified  by   law  are  not  made;  or   • • • we  have  not  received  all  the  information  and  explanations   we  require  for  our  audit.     ALAN  AITCHISON  (Senior  Statutory  Auditor)   For   and   on   behalf   of   BAKER   TILLY   UK   AUDIT   LLP,   Statutory   Auditor   Chartered  Accountants   1  St  James’  Gate   Newcastle  upon  Tyne   NE1  4AD   27  June  2013   12                       TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     CONSOLIDATED  STATEMENT  OF  COMPREHENSIVE  INCOME   FOR  THE  YEAR  ENDED  31  DECEMBER  2012   Continuing  operations   Revenue   Changes  in  inventories  of  finished  goods  and  WIP   Raw  materials  and  consumables  used   Staff  costs   Depreciation  and  amortisation  expense   Other  operating  expenses   Loss  from  continuing  operations  before  impairments   Impairment  of  receivables   Loss  from  continuing  operations  after  impairments   Finance  expense   Finance  income   Net  finance  income     Loss  from  continuing  operations  before  tax,  investment  and  associate   Reassessment  of  carrying  value  of  associate   Reassessment  of  carrying  value  of  investment   One  off  costs  directly  associated  with  Smiths  investment   Loss  before  taxation   Taxation   Loss  for  the  year  from  continuing  operations   Discontinued  operations   Profit  on  disposal  of  operations   Loss  for  the  year   Other  comprehensive  income,  net  of  tax:   Currency  translation  differences   Total  comprehensive  income  for  the  year   Notes   1   16   3   4   6   5   5   7   2012   £000's   2011   £000's   45,072   2,889   (34,243)   (18,760)   (1,739)   (8,493)   (15,274)   -­‐   (15,274)   (127)   146   19   (15,255)   -­‐   1,280   (470)   (14,445)   (79)   (14,524)   48,305   (2,848)   (33,250)   (17,143)   (1,595)   (8,461)   (14,992)   (250)   (15,242)   (286)   470   184   (15,058)   (1,280)   -­‐   -­‐   (16,338)   (186)   (16,524)   -­‐   (14,524)   173   (16,351)   (958)   (15,482)   694   (15,657)   13                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     CONSOLIDATED  STATEMENT  OF  COMPREHENSIVE  INCOME  (CONTINUED)   FOR  THE  YEAR  ENDED  31  DECEMBER  2012   Loss  for  the  year  attributable  to:   Owners  of  the  parent   From  continuing  operations   From  discontinued  operations   Non-­‐controlling  interest   From  continuing  operations   Loss  for  the  year   Total  comprehensive  income  for  the  year  attributable  to:   Owners  of  the  parent   Non-­‐controlling  interest   Total  comprehensive  income  for  the  year   Loss  per  share   Loss  per  share  from  continuing  operations   Basic  (p)   Diluted  (p)   Loss  per  share  from  discontinued  operations   Basic  (p)   Diluted  (p)   2012   £000's   2011   £000's   (14,543)   -­‐   (14,543)   (16,510)   173   (16,337)   19   (14)   (14,524)   (16,351)   (15,501)   19   (15,643)   (14)   (15,482)   (15,657)   8   8   8   8   (12.0)   (12.0)   (17.5)   (17.5)   -­‐   -­‐   0.2   0.2   14                                                                                                                                                                                                                                                                                                                                     TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     CONSOLIDATED  AND  COMPANY  BALANCE  SHEETS  (Company  registration  number  04061965)   AS  AT  31  DECEMBER  2012   Group   2012   £000's   2011   £000's   Company   2012   £000's   2011   £000's   Notes   Non  current  assets   Intangible  assets   Property,  plant  and  equipment   Investment  in  Associate   Non  current  Investment   Investments  in  subsidiaries   Current  assets   Inventories   Trade  and  other  receivables   Current  Investments   Current  tax  assets   Deferred  consideration   Cash  and  cash  equivalents   Total  assets   Current  liabilities   Trade  and  other  payables   Provisions   Tax  liabilities   Obligations  under  finance  leases   Non-­‐current  liabilities   Obligations  under  finance  leases   Deferred  tax  liabilities   Total  liabilities   Equity   Share  capital   Share  premium   Share  option  reserve   Special  reserve   Merger  reserve   Translation  reserve   Retained  earnings   Equity  attributable  to  the  owners  of  the  parent   Non  controlling  interests   Total  equity   9   11   15   13   31   16   17   12   10   14   18   24   19   19   20   21   21   23   3,940   2,885   -­‐   1,280   -­‐   8,105   22,869   9,063   474   -­‐   339   2,198   34,943   5,023   3,324   -­‐   -­‐   -­‐   8,347   21,495   10,753   498   -­‐   341   3,463   36,550   -­‐   -­‐   -­‐   1,280   10,685   11,965   -­‐   19,002   -­‐   -­‐   339   402   19,743   -­‐   -­‐   1,280   -­‐   1,008   2,288   -­‐   27,780   -­‐   -­‐   341   1,278   29,399   43,048   44,897   31,708   31,687   13,398   577   15   70   14,060   137   375   512   14,572   6,450   14,823   1,885   66,837   1,534   11,168   (74,223)   28,474   2   28,476   13,034   621   189   60   13,904   208   375   583   14,487   4,728   3,097   1,785   66,837   1,534   12,126   (59,680)   30,427   (17)   30,410   1,915   -­‐   -­‐   -­‐   1,915   -­‐   -­‐   -­‐   1,915   6,450   14,823   1,885   66,837   1,534   -­‐   (61,736)   29,793   -­‐   29,793   2,084   -­‐   -­‐   -­‐   2,084   -­‐   -­‐   -­‐   2,084   4,728   3,097   1,785   66,837   1,534   -­‐   (48,378)   29,603   -­‐   29,603   Total  equity  and  total  liabilities   43,048   44,897   31,708   31,687   The   financial   statements   on   pages   13   to   41   were   approved   by   the   board   of   directors   and   authorised   for   issue   on   27   June   2013   and   are   signed  on  its  behalf  by:   Charles  Brooks     Group  Finance  Director   15                                                                                                                                                                       CONSOLIDATED  AND  COMPANY  STATEMENTS  OF  CHANGES  IN  EQUITY   FOR  THE  YEAR  ENDED  31  DECEMBER  2012   CONSOLIDATED   Balance  at  1  January  2011   Comprehensive  income   Loss  for  the  year   Other  comprehensive  income        Currency  translation  differences   Total  other  comprehensive  income  for  the  year   Total  comprehensive  income  for  the  year   Transactions  with  owners  in  their  capacity  as  owners:-­‐        Issue  of  shares  to  settle  deferred  consideration        Share  based  payments  (note  25)   At  31  December  2011   Comprehensive  income   Loss  for  the  year   Other  comprehensive  income        Currency  translation  differences   Total  other  comprehensive  income  for  the  year   Total  comprehensive  income  for  the  year   Transactions  with  owners  in  their  capacity  as  owners:-­‐        Issuance  of  new  shares  (note  21)        Share  based  payments  (note  25)   At  31  December  2012   COMPANY   Balance  at  1  January  2011   Comprehensive  income   Loss  for  the  year   Total  comprehensive  income  for  the  year   Transactions  with  owners  in  their  capacity  as  owners:-­‐        Issue  of  shares  to  settle  deferred  consideration        Share  based  payments  (note  25)   At  31  December  2011   Comprehensive  income   Loss  for  the  year   Total  comprehensive  income  for  the  year   Transactions  with  owners  in  their  capacity  as  owners:-­‐        Issuance  of  new  shares  (note  21)        Share  based  payments  (note  25)   At  31  December  2012   Share   capital   £000's 4,704   Share   premium   £000's 827   Share   option   reserve   £000's 1,764   Attributable  to  the  owners  of  the  parent   Merger   reserve   Special   reservea   Translation   reserve   £000's 1,534   £000's 66,837   £000's 11,432   Retained   earnings   £000's (42,611)   Non-­‐ controlling   interests   £000's   (3)   Total   £000's 44,484   (16,337)   (14)   (16,351)   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   23   1   4,728   2,270   -­‐   3,097   -­‐   21   1,785   -­‐   -­‐   1,534   -­‐   -­‐   66,837   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   1,721   1   6,450   11,726   -­‐   14,823   -­‐   100   1,885   -­‐   -­‐   1,534   -­‐   -­‐   66,837   (57)   (57)   (57)   751   -­‐   12,126   -­‐   -­‐   (16,337)   (751)   19   (59,680)   -­‐   (14,543)   (958)   (958)   (958)   -­‐   -­‐   11,168   -­‐   -­‐   (14,543)   -­‐   -­‐   (74,223)   Translation   reserve   Retained   earnings   Share   capital   £000's 4,704   -­‐   -­‐   23   1   4,728   -­‐   -­‐   1,721   1   6,450   Share   premium   £000's 827   -­‐   -­‐   2,270   -­‐   3,097   -­‐   -­‐   11,726   -­‐   14,823   Attributable  to  the  owners  of  the  parent   Merger   reserve   Special   reservea   Share   option   reserve   £000's 1,764   £000's 1,534   £000's 66,837   £000's -­‐   -­‐   -­‐   -­‐   21   1,785   -­‐   -­‐   -­‐   100   1,885   -­‐   -­‐   -­‐   -­‐   1,534   -­‐   -­‐   -­‐   -­‐   1,534   -­‐   -­‐   -­‐   -­‐   66,837   -­‐   -­‐   -­‐   -­‐   66,837   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   £000's (33,577)   (14,820)   (14,820)   -­‐   19   (48,378)   (13,358)   (13,358)   -­‐   -­‐   (61,736)   -­‐   -­‐   (14)   -­‐   -­‐   (17)   19   -­‐   -­‐   19   -­‐   -­‐   2   Non-­‐ controlling   interests   £000's   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   (57)   (57)   (16,408)   2,293   41   30,410   (14,524)   (958)   (958)   (15,482)   13,447   101   28,476   Total   £000's 42,089   (14,820)   (14,820)   2,293   41   29,603   (13,358)   (13,358)   13,447   101   29,793   a   The  company’s  special  reserve  relates  to  the  reclassification  of  the  share  premium  account. 16                                                                                                                                                                                                                                                                                                                     CONSOLIDATED  AND  COMPANY  CASH  FLOW  STATEMENTS   FOR  THE  YEAR  ENDED  31  DECEMBER  2012   Continuing  and  discontinuing  operations   Loss  before  interest  and  taxation   Depreciation  and  amortization   Loss  on  deferred  consideration  currency  fluctuations   Loss  on  disposal  of  fixed  assets   Profit  on  disposal  of  operations   Impairment  of  receivables   Gain  on  reassessment  of  carrying  value  of  investment   Loss  on  reassessment  of  carrying  value  of  associate   Loss  on  intercompany  loan  write  off   Loss  on  impairment  of  investments   Operating  cash  flows  before  movements  in  working  capital   Decrease  (increase)  in  receivables   Increase  in  payables   (Decrease)  increase  in  provisions   (Increase)  decrease  in  inventories   Net  cash  (used  in)  operations   Interest  paid   Income  taxes  paid   Net  cash  used  in  operating  activities   Cash  flow  from  Investing  Activities   Purchase  of  property,  plant  and  equipment   Receipt  of  deferred  consideration   Purchase  of  investments   Purchase  of  intangible  fixed  assets   Loan  to  Smith  Electric  Vehicles  US  Corp   Interest  received   Net  cash  (used  in)  from  investing  activities   Cash  flow  from  financing  activities   Proceeds  from  issuance  of  ordinary  shares  net  of  costs   New  obligations  under  finance  leases  in  the  period   Repayments  of  obligations  under  finance  leases   Net  cash  from  financing  activities   Effect  of  exchange  rate  changes  on  cash  and  cash  equivalents   Net  (decrease)  increase  in  cash  and  cash  equivalents   Cash  and  cash  equivalents  at  the  start  of  year   Cash  and  cash  equivalents  at  the  end  of  the  year   Group   2012   £000's   2011   £000's   Company   2012   £000's   2011   £000's   (14,464)   1,739   99   43   -­‐   -­‐   (1,280)   -­‐   -­‐   -­‐   (13,863)   3,239   788   (44)   (2,105)   (11,985)   (127)   (222)   (12,334)   (310)   -­‐   (49)   (57)   (1,935)   131   (2,220)   13,447   -­‐   (61)   13,386   (97)   (1,265)   3,463   2,198   (16,349)   1,595   337   128   (173)   250   -­‐   1,280   -­‐   -­‐   (12,932)   (310)   1,537   349   3,910   (7,446)   (286)   (60)   (7,792)   (390)   7,756   (76)   (232)   -­‐   453   7,511   -­‐   274   (202)   72   35   (174)   3,637   3,463   (13,428)   -­‐   99   -­‐   -­‐   -­‐   -­‐   -­‐   9,787   2,323   (1,219)   944   (169)   -­‐   -­‐   (444)   -­‐   -­‐   (444)   -­‐   -­‐   (12,000)   -­‐   (1,935)   56   (13,879)   13,447   -­‐   -­‐   13,447   -­‐   (876)   1,278   402   (15,074)   -­‐   337   -­‐   (529)   -­‐   -­‐   -­‐   14,666   839   239   (8,479)   519   -­‐   -­‐   (7,721)   (12)   (8)   (7,741)   -­‐   7,756   -­‐   -­‐   -­‐   253   8,009   -­‐   -­‐   -­‐   -­‐   -­‐   268   1,010   1,278   17                                                                                       TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     ACCOUNTING  POLICIES   (i) Basis  of  preparation  of  the  financial  statements   These   consolidated   financial   statements   have   been   prepared   in   accordance  with  International  Financial  Reporting  Standards  as  adopted   by   the   EU   (“IFRS”),   IFRIC   interpretations   and   the   requirements   of   the   Companies   Act   applicable   to   Companies   reporting   under   IFRS.     The   financial   statements   have   been   prepared   under   the   historical   cost   convention,   modified   for   the   revaluation   of   certain   financial   assets   and   liabilities  at  fair  value.            The   preparation   of   financial   statements   in   conformity   with   IFRS   requires   the   use   of   accounting   estimates.     It   also   requires   management   to   exercise   its   judgement   in   the   process   of   applying   the   group’s   accounting  policies.    The  areas  involving  a  higher  degree  of  judgement  or   complexity,  or  areas  where  assumptions  and  estimates  are  significant  to   the   consolidated   financial   statements,   are   disclosed   below   in   “Critical   accounting  estimates  and  key  judgements”.   (ii)  Going  Concern     The  financial  statements  have  been  prepared  on  the  going  concern  basis,   which  assumes  that  the  Group  will  continue  to  be  able  to  meet  its   liabilities  as  they  fall  due  for  the  foreseeable  future.  At  31  December   2012  the  Group  has  cash  balances  of  £2.2m  and  is  debt  free.    A  further   £2.1m  was  raised  by  a  way  of  a  new  share  issue  on  16  April  2013.     The  Group  has  prepared  trading  forecasts  through  to  December  2016   that  include  detailed  cash  flow  calculations.  The  forecasts  are  based  on   detailed  assumptions  as  to  sales  performance  by  month,  product  mix  and   working  capital  assumptions.  The  forecasts  require  the  introduction  of   additional  working  capital,  beyond  the  £2.1m  raised  on  16  April  2013,   during  the  period  to  December  2013  to  support  the  trading  going   forward.    The  Directors  have  identified  three  options  as  sources  of   working  capital.    These  are:  Realisation  of  the  value  of  its  Smith   investment;  Equity  injection  from  shareholders;  Sale  of  its  Snorkel  Aerial   Work  Platform  business.    The  Directors  continue  to  explore  each  of  these   options  and,  given  the  progress  on  each  of  these,  they  are  confident  that   at  least  one  of  these  will  result  in  the  necessary  working  capital  when   required.    Sensitivities  have  been  prepared  to  demonstrate  the  impact  of   timing  for  each  of  the  options.   There  is  inherent  uncertainty  in  any  forecast.  Such  uncertainties  include   the  lack  of  visibility  regarding  the  sustainability  of  current  levels  of  order   intake  in  the  current  economic  and  financial  climate,  however  the  level   of  orders  taken,  accumulated  order  backlog  and  order  prospects  is  more   than  adequate  to  indicate  activity  levels  that  support  the  forecast  sales   for  2013.    Furthermore  the  company  faces  additional  uncertainties:  the   risk  that  the  actions  that  are  planned  and  being  put  into  effect  might   take  more  time  to  complete  than  forecast;  the  movement  in  dollar  and   euro  exchange  rates.  The  Directors  feel  that  a  reasonably  balanced   approach  has  been  taken  to  these  risks  in  the  forecast.       The  Directors  are  confident  that  the  assumptions  underlying  their   forecasts  are  reasonable  and  that  the  Group  will  be  able  to  operate   within  its  cash  balances.  Having  taken  the  uncertainties  into  account  the   Board  believes  that  it  is  appropriate  to  prepare  the  financial  statements   on  the  going  concern  basis.  The  financial  statements  do  not  include  any   adjustment  to  the  value  of  the  balance  sheet  assets  or  provisions  for   further  liabilities,  which  would  result  should  the  going  concern  concept   not  be  valid.   18 (iii)  Basis  of  consolidation   The   group   financial   statements   consolidate   the   financial   statements   of   Tanfield   Group   plc   (‘the   company’)   and   its   subsidiaries,  and  they  incorporate  its  share  of  the  results  of  its   associates  using  the  equity  method  of  accounting  .   • • A  subsidiary  is  an  entity  that  is  controlled  by  another   entity,   known   as   the   parent.     Control   is   power   to   govern   the   financial   and   operating   policies   of   an   entity  so  as  to  obtain  benefits  from  its  activities.   An   associate   is   an   entity   over   which   another   entity   is   neither   a   has   significant   influence   and   that   subsidiary   nor   an   joint   venture.   interest   Significant  influence  is  the  power  to  participate  in  the   financial   and   operating   policy   decisions   of   an   entity   but  is  not  control  or  joint  control  over  those  policies.   in   a   results   of   subsidiaries   acquired   or   disposed   are   The   consolidated  from  and  up  to  the  date  of  change  of  control.            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   initially   measured   at   fair   value   at   the   combination   are   acquisition  date  irrespective  of  any  minority  interest.            Where   necessary,   adjustments   are   made   to   the   financial   statements  of  subsidiaries  to  bring  the  accounting  policies  used   in   intra-­‐group   transactions,  balances,  income  and  expenses  are  eliminated  on   consolidation.            Investments   in   associates   are   initially   recognised   at   cost.     Subsequent   to   acquisition,   the   carrying   value   of   the   group’s   share   of   post   acquisition   reserves,   less   any   impairment   in   the   value   of   individual   assets.     The   income   statement   reflects   the   group’s   share   of   the   results   of   operations   after   tax   of   the   associate.     In   accordance   with   IAS28   the   groups   share   of   post   tax  loss  is  limited  to  its  investment.   line   with   those   used   by   the   group.     All   (iv)  Revenue   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.   (v)  Leases   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                           Manufacturing  schedules  and  other  intangibles   Manufacturing  schedules  and  other  intangible  assets  have  been   brought  in  on  the  acquisition  of  businesses  and  capitalised  at  a   fair   value.   The   intangible   assets   are   carried   at   cost   less   accumulated  amortisation  and  impairment  losses.   Estimated  useful  economic  lives   The   estimated   useful   economic   lives   assigned   to   the   principal   categories  of  intangible  assets  are  as  follows:   • Computer  software                                                              5  years   • Manufacturing  schedules                                        10  years   • Other  intangible  assets                                                2  to  10  years   (viii)  Research  and  development   Research  expenditure  is  recognised  as  an  expense  in  the  period   in  which  it  is  incurred.            Development   expenditure   income   statement   in   the   period   in   which   it   is   incurred   unless   it   is   probable   that   economic   benefits   will   flow   to   the   group   from   the  asset  being  developed,  the  cost  of  the  asset  can  be  reliably   measured  and  technical  feasibility  can  be  demonstrated.            Internally-­‐generated   intangible   assets   are   amortised   on   a   straight-­‐line  basis  over  their  useful  lives  (10  to  15  years).   is   recognised   in   the   (ix)  Plant,  property  and  equipment   Plant,  property  and  equipment  is  included  in  the  balance  sheet   at   historical   cost,   less   accumulated   depreciation   and   any   impairment  losses.   On   disposal   of   property,   plant   and   equipment,   the   difference   between  sales  proceeds  and  the  net  book  value  at  the  date  of   disposal  is  recorded  in  the  income  statement.     Depreciation   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                                                          3-­‐  10  years   Leasehold  Land  &  Buildings   over   the   lifetime  of  the   lease   • Fixtures,  fittings    and  equipment                3-­‐  10  years   • Motor  Vehicles                                                                              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.   TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     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.   (vi)  Foreign  currencies   Transactions   in   currencies   other   than   sterling,   the   presentational   currency   of   the   group,   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.            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.   (vii)  Intangible  assets   Identifiable  intangible  assets  are  recognised  when  the  group  controls  the   asset,   it   is   probable   that   future   economic   benefits   attributable   to   the   asset   will   flow   to   the   group   and   the   cost   of   the   asset   can   be   reliably   measured.    All  intangible  assets,  other  than  Goodwill,  are  amortised  over   their  useful  economic  life.     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  and  is  included  as  a  non  current  asset.              Goodwill  is  tested  annually  for  impairment  and  is  carried  at  cost  less   accumulated   recognised   losses.   Any   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.   impairment   impairment   is   Computer  Software   Computer   software   comprises   computer   software   purchased   from   third   parties  and  is  carried  at  cost  less  accumulated  amortisation.   19                                         TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     (x)  Asset  Impairment  (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   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.   impairment    (xi)  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.   (xii)  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.   (xiii)  Borrowing  costs   All  borrowing  costs  are  expensed  in  the  income  statement  in  the  period   in  which  they  are  incurred.   20 (xiv)  Financial  instruments   Recognition  of  financial  assets  and  financial  liabilities   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.   Financial  assets   Trade  and  other  receivables   Financial  assets  within  trade  and  other  receivables  are  initially   recognised   at   fair   value,   which   is   usually   the   original   invoiced   amount   and   are   subsequently   carried   at   fair   value   less   provisions  made  for  doubtful  receivables.            Trade  receivables  do  not  carry  any  interest  and  are  stated  at   their   nominal   value   as   reduced   by   appropriate   allowances   for   estimated  irrecoverable  amounts.            Provisions  are  made  specifically  where  there  is  evidence  of  a   risk   of   non-­‐payment,   taking   into   account   ageing,   previous   losses  experienced  and  general  economic  conditions.   Cash  and  cash  equivalents   Cash   and   cash   equivalents   comprise   cash   on   hand   less   short   term  bank  overdrafts.   liabilities   and   equity   Financial  liabilities   Financial  liabilities  and  equity   Financial   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.            Ordinary   shares   are   classified   as   equity.   Incremental   costs   directly   attributable   to   the   issue   of   new   shares   are   shown   in   equity  as  a  deduction  from  the  proceeds  received.   Trade  and  other  payables   Financial  liabilities  within  trade  and  other  payables  are  initially   recorded   at   fair   value,   which   is   usually   the   original   invoiced   amount,  and  subsequently  carried  at  historical  cost.   Loans  and  other  borrowings   Loans  and  other  borrowings  are  initially  recognised  at  fair  value   costs   and   are   plus   directly   attributable   subsequently   carried   at   amortised   cost   using   the   effective   interest  method.   transaction   Derivative  financial  instruments  and  hedge  accounting   The  Group  transacts  derivative  financial  instruments  to  manage   the  underlying  exposure  to  foreign  exchange  risks  and  interest   rate   risk.     The   Group   does   not   enter   into   derivative   financial   instruments   for   speculative   purposes.     Derivative   financial   assets  are  included  in  the  balance  sheet  at  fair  value.    Changes   in   fair   value   are   recognised   in   the   income   statement   as   they   arise.                                                                         relates  to  items  credited  or  charged  directly  to  equity,  in  which   case  the  deferred  tax  is  also  dealt  with  in  equity.              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. (xiix)  Termination  benefits   Termination   benefits   (leaver   costs)   are   payable   when   employment  is  terminated  before  the  normal  retirement  date,   or   when   an   employee   accepts   voluntary   redundancy   in   exchange  for  these  benefits.    The  group  recognises  termination   benefits   when   it   is   demonstrably   committed   to   the   affected   employees  leaving  the  group.   (xix)  Provisions   Provisions   are   recognised   when   the   group   has   a   present   legal   or   constructive   obligation   as   a   result   of   past   events,   it   is   probable  that  an  outflow  of  resources  will  be  required  to  settle   the  obligation  and  the  amount  can  be  reliably  estimated.   (xx)  Investments   Investments  are  included  at  cost  less  amounts  written  off.   (xxi)  Disposal  groups  held  for  sale   Disposal  groups  held  for  sale  are  measured  at  the  lower  of  their   carrying   amount   and   fair   value   less   cost   to   sell   and   presented   separately  in  the  balance  sheet  from  other  assets  and  liabilities.   Disposal   groups   are   classified   as   held   for   sale   if   their   carrying   amount   will   be   recovered   through   a   sale   transaction   rather   than  through  continuing  use.    This  condition  is  regarded  as  met   only   when   the   sale   is   highly   probable,   the   disposal   group   is   available   its   present   condition,   management   are   committed   to   the   sale   and   expect   the   disposal   group   to   qualify   for   recognition   as   a   completed   sale   within  one  year  from  the  date  of  classification.   immediate   sale   for   in   (xxii)  Functional  and  presentational  currencies   The  consolidated  financial  statements  are  presented  in  sterling   which  is  also  the  functional  currency  of  the  company.   TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     (xv)  Post  retirement  benefits   The  group  operates  a  defined  contribution  scheme  which  is  administered   by   an   independent   trustee.   The   group   contributions   are   charged   to   the   income  statement  as  they  are  incurred.   (xvi)  Segmental  reporting   IFRS   8   provides   segmental   information   for   the   Group   on   the   basis   of   information  reported  to  the  chief  operating  decision-­‐maker  for  decision-­‐ making   purposes.     The   Group   considers   that   the   role   of   chief   operating   decision-­‐maker   is   performed   by   the   Tanfield   Group   PLC’S   board   of   directors.       (xvii)  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   for   taxable   temporary   liabilities   are   recognised   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     21                             Warranty  Provision   The  Group  has  reviewed  the  warranties  that  it  has  offered  with   the  sales  of  its  vehicles,  and  has  established  a  warranty   provision  to  cover  the  estimated  future  warranty  costs  of   products  sold  over  the  remaining  life  of  the  warranty.    The   estimate  of  future  warranty  costs  assumes  that  the  recent   product  developments  continue  to  reduce  the  warranty   support  necessary  from  that  in  previous  periods.   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   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. changes,   Share  based  payments   The  fair  value  of  share  options  granted  are  recognised  as  an   employee  expense  after  taking  into  account  the  group’s  best   estimate  of  the  number  of  awards  expected  to  vest  allowing  for   non  market  and  service  conditions.  Fair  value  is  measured  at   the  date  of  grant  and  is  spread  over  the  vesting  period  of  the   award.  The  fair  value  of  options  and  awards  granted  is   measured  using  the  Black  Scholes  model.  Any  proceeds   received  are  credited  to  share  capital  and  share  premium  when   the  options  are  exercised.  The  group  has  applied  IFRS  2  ‘Share   based  payment’  to  all  options.   TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     Critical  accounting  estimates  and  key  judgements   The  preparation  of  financial  statements  in  conformity  with  IFRS  requires   the  use  of  accounting  estimates  and  assumptions.    It  also  requires   management  to  exercise  judgement  in  the  process  of  applying  the   group’s  accounting  policies.    We  continually  evaluate  our  estimates,   assumptions  and  judgements  based  on  the  most  up  to  date  information   available.            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.   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.              In  assessment  of  the  carrying  value  the  directors  undertook  an   impairment  review.    Given  the  current  situation,  the  Directors  have  not   conducted  an  impairment  review  based  on  discounted  cash  flows,  but   have  considered  the  value  to  the  business  of  the  assets.    Given  the   introduction  of  capital,  these  assets  will  generate  cash  flows,  and  if  the   division  is  sold,  have  a  value  to  a  purchaser  well  in  excess  of  the  carrying   value.   Investments   The  status  of  the  Group’s  holding  in  Smith  Electric  Corp  was  reviewed.     Given  the  successive  fundraisings  by  Smith  Electric  Corp  during  2012,  the   Group’s  holding  in  Smith  Electric  Corp  has  been  diluted.    In  addition  the   Group’s  influence  at  board  level  within  Smith  Electric  Corp  has  reduced,   following  the  resignation  of  Group  directors  from  the  Smith  Electric  Corp   board  and  additional  non-­‐executive  directors  joining  that  board.    Smith   Electric  Corp  continues  to  demonstrate  ability  to  raise  capital  to  fund  its   development,  and  as  a  result  the  Group  considers  its  receivables  from   Smith  Electric  Corp  are  recoverable  in  full.   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. 22                         New  and  amended  standards  and   interpretations  effective  from  1  January  2013   not  yet  adopted  by  the  group   The   group   currently   adopts   all   relevant   accounting   standards   that   have   been   endorsed   by   the   EU.     There   are   various   standards  that  are  expected  to  be  endorsed  in  2013  which  the   group   believes   will   have   no   significant   impact   on   the   group’s   financial   position   or   results   for   the   current   or   prior   years   but   may   future   transactions   or   arrangements.   impact   the   accounting   for   TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     Accounting  standards,  interpretations  and   amendments  to  published  accounts   The  Group  considered  the  implications,  if  any,  of  the  following   amendments  to  IFRSs  during  the  year  ended  31  December  2012.   New  and  amended  standards  and  interpretations   effective  from  1  January  2012  adopted  by  the  group   During  the  year  ended  31  December  2012,  the  Company  has  not     adopted  any  new  IFRS,  IAS  or  amendments  issued  by  the  IASB,     and  interpretations  by  the  IFRS  Interpretations  Committee,  which     have  had  a  material  impact  on  the  Company’s  consolidated     financial  statements.   23                               TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     NOTES  TO  THE  ACCOUNTS   1.    Revenue   An  analysis  of  the  group’s  revenue  is  as  follows:   Continuing  operations   Total     2.    Segmental  analysis   2012   £000’s   45,072   45,072   2011   £000’s   48,305   48,305   Operating  segments For  management  purposes,  the  Group  is  currently  organised  into  two  continuing  operating  divisions  –  Powered  Access  Platforms  and  other   operations.  These  divisions  are  the  basis  on  which  the  Group  reports  its  segment  information.   Principal  activities  are  as  follows:   Powered  Access  Platforms:    design  and  manufacture  of  powered  access  equipment   Other:  design  and  manufacture  of  engineering  parts  and  the  group  holding  company   Intra-­‐group  revenue  generated  from  the  sale  of  products  and  services  is  agreed  between  the  relevant  business.   Operating  results  by  line  of  business Powered  Access  Platforms   Other   Segment  revenue  /  loss   Finance  income   Finance  costs   Loss  from  continuing  operations  before  tax  and  associate   Reassessment  of  carrying  value  of  associate   Reassessment  of  carrying  value  of  investment   One  off  costs  directly  associated  with  Smiths  IPO   Taxation   Loss  for  the  year  from  continuing  operations   Profit  on  disposal  of  operations   Loss  for  the  year  from  continuing  and  discontinued  operations   Note:  The  £32m  loan  forgiveness  in  2012  given  to  Powered  Access  from  Other  is  excluded  from  the  above  summary.   2012   2011   Revenue   £000's   41,026   4,046   45,072   Revenue   £000's   44,247   4,058   48,305   Loss   £000's   (14,583)   (691)   (15,274)   146   (127)   (15,255)   -­‐   1,280   (470)   (79)   (14,524)   -­‐   (14,524)   Loss   £000's   (14,353)   (889)   (15,242)   470   (286)   (15,058)   (1,280)   -­‐   -­‐   (186)   (16,524)   173   (16,351)   24                                                                                                               TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     2.    Segmental  analysis  continued   Assets  and  liabilities  by  operating  segment1   Assets   Powered  Access  Platforms   Investment  in  Smiths  Electric  Vehicles  US  incorporated   Loan  to  Smiths  Electric  Vehicles  US  incorporated   Other   Cash  and  cash  equivalents2   Total  segment  assets   Current  tax  assets   Deferred  consideration   Total  assets   Liabilities   Powered  Access  Platforms   Other   Total  segment  liabilities   Current  tax  liabilities   Deferred  tax  liabilities   Retirement  benefit  obligations   Total  liabilities   1  Intercompany  loans  have  been  omitted  from  the  asset  and  liabilities  by  line  of  business  summary.       2  Cash  and  cash  equivalents  have  been  omitted  from  the  assets  and  liabilities  by  line  of  business  summary   Geographical  information   2012   £000's   35,340   1,280   1,852   2,039   2,198   42,709   -­‐   339   43,048   (11,908)   (2,262)   (14,170)   (15)   (375)   (12)   (14,572)   2011   £000's   39,373   -­‐   -­‐   1,720   3,463   44,556   -­‐   341   44,897   (11,706)   (2,207)   (13,913)   (189)   (375)   (10)   (14,487)   The  Group’s  revenue  from  external  customers  and  information  about  its  segment  assets  (non  current  assets  excluding  investments  in   associated,  deferred  tax  assets  and  other  financial  assets)  by  geographical  location  are  detailed  below:   Continuing  operations   Entity’s  country  of  domicile  –    United  Kingdom   Europe  excluding  UK     Americas   Australasia   Other  (includes  Asia,  Africa  and  rest  of  the  world  not  classified  above)   Total   Other  segment  information   Powered  Access  equipment   Other   Total   Revenue   Non-­‐current  assets   2012   £000's   5,421   7,727   13,146   8,997   9,781   45,072   2011   £000's   6,426   8,240   13,813   11,922   7,904   48,305   2012   £000's   4,325   -­‐   1,978   522   -­‐   6,825   2011   £000's   5,444   -­‐   2,480   420   3   8,347   Amortisation  and   Depreciation   2012   2011   £000's   1,592   147   1,739   £000's   1,444   151   1,595   Additions  to  non-­‐current   assets   2012   £000's   349   18   367   2011   £000's   590   32   622   25                                                                                                                                                           TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     3.    Staff  costs   Continuing  operations   Aggregate  remuneration  comprised   Wages  and  Salaries     Share  scheme  expense   Social  Security  Costs   Other  Pension  Costs   Total  staff  costs   In  2012  a  further  £470k  of  staff  related  expenses  have  been  charged  to  ‘one  off  costs  directly  associated  with  Smiths  investment’  in  the  consolidated   statement  of  comprehensive  income.   2012   £000's   16,745   110   1,639   266   18,760   Average  monthly  number  of  employees   Production   Head  Office,  Administration  and  sales  &  distribution   Total   2012   No.   318   188   506   2011   £000's   15,123   40   1,786   194   17,143   2011   No.   282   187   469   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  9  to  10.   4.  Depreciation  and  amortisation   Continuing  operations   Depreciation  of  property,  plant  &  equipment   Amortisation  of  intangible  fixed  assets   Total  depreciation  and  amortisation  charge   Depreciation  of  property,  plant  &  equipment   -­‐  owned  assets   -­‐  leased  assets   5.  Finance  expense  and  finance  income   Continuing  operations   Finance  expense   Interest  on  bank  overdrafts,  loans  &  financial  instruments   Interest  on  obligations  under  finance  leases   Total  finance  expense   Finance  income   Interest  on  cash  and  cash  equivalents   Interest  on  deferred  consideration  (note  10)   Fair  value  gain  on  Interest  rate  swap  (note  26)   Total  finance  income   26 2012   £000's   684   1,055   1,739   638   46   2012   £000's   83   44   127   2012   £000's   91   14   41   146   2011   £000's   793   802   1,595   753   40   2011   £000's   276   10   286   2011   £000's   85   220   165   470                                                                                                                                                                                                                                                                       TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     6.  Other  operating  expenses   Other  operating  expenses   Non  property  related  operating  lease  rentals   Net  loss  (gain)  on  foreign  exchange     Auditors'  remuneration  (see  below)   Other  operating  expenses   Total  operating  expenses   2012   £000's   78   253   199   7,963   8,493   2011   £000's   128   (22)   184   8,171   8,461   Auditors'  remuneration   Amounts  payable  to  Baker  Tilly  UK  Audit  LLP  and  their  associates  in  respect  of  both  audit  and  non  audit  services  are  as  follows:   Audit  Services   • statutory  audit  of  parent  and  consolidated  accounts   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   Comprising   • Audit  services   • Non  audit  services   2012   £000's   2011   £000's   65   65   25   44   199   155   44   65   65   10   44   184   140   44   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,  Tanfield  Group  PLC,  is  exempt  from  disclosing  its  income  statement.    The  loss  for  the  year  is  £13,358k  (2011:  loss  £14,820k).   27                                                                                                                                                                                                                     TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     7.  Taxation   Analysis  of  taxation  charge  for  the  year   United  Kingdom   Corporation  tax  at  24.5%  (2011:  26.5%)   Non  UK  Taxation   Current   Total  current  taxation  charge   Deferred  tax   Origination  and  reversal  of  temporary  differences   Total  deferred  tax  charge   Total  taxation  charge  in  the  income  statement   Factors  affecting  taxation  charge   2012   £000's   2011   £000's   -­‐   79   79   -­‐   -­‐   79   -­‐   186   186   -­‐   -­‐   186   The  taxation  charge  on  the  loss  for  the  year  differs  from  the  amount  computed  by  applying  the  corporation  tax  rate  to  the  loss  before   taxation  as  a  result  of  the  following  factors:   Loss  before  taxation   Notional  taxation  charge  at  UK  rate  of  24.5%  (2011:  26.5%)   Effects  of:   Non  (taxable)  deductable  expenses     Deferred  tax  asset  not  recognised  in  the  period   Total  taxation  charge   2012   £000's   (15,725)   (3,853)   (715)   4,647   79   2011   £000's   (16,165)   (4,284)   (758)   5,228   186   28                                                                                                                                                                                       TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     8.  Loss  per  share   Basic  loss  per  share  is  calculated  by  dividing  the  loss  attributable  to  equity  shareholders  by  the  weighted  average  number  of  shares  in  issue   during  the  period.   In  calculating  the  dilution  per  share,  share  options  outstanding  and  other  potential  ordinary  shares  have  been  taken  into  account  where  the   impact  of  these  is  dilutive.    The  average  share  price  during  the  year  was  44.55p  (2011:  39.66p).   Number  of  shares   Weighted  average  number  of  ordinary  shares  for  the  purposes  of  basic  earnings  per  share   Effect  of  dilutive  potential  ordinary  shares  from  share  options   Weighted  average  number  of  ordinary  shares  for  the  purposes  of  diluted  earnings  per  share   Earnings   From  continuing  and  discontinuing  operations   Earnings  for  the  purposes  of  basic  earning  per  share  being  net  profit  attributable  to  owners  of  the  parent   Potential  dilutive  ordinary  shares  from  share  options   Earnings  for  the  purposes  of  diluted  earnings  per  share   From  continuing  operations   Earnings  for  the  purposes  of  basic  earning  per  share  being  net  profit  attributable  to  owners  of  the  parent   Profit  on  disposal  of  discontinued  operations   Loss  for  the  purposes  of  earnings  per  share  from  continuing  operations   Adjustment  for  one  off  items:   Reassessment  of  carrying  value  of  associate   Reassessment  of  carrying  value  of  investment   One  off  costs  directly  associated  with  Smiths  IPO   Impairment  of  receivables   Loss  for  the  purposes  of  earnings  per  share  before  one  off  items   Loss  per  share  from  continuing  and  discontinued  operations   Basic  (p)   Diluted  (p)a   Loss  per  share  from  continuing  operations   Basic  (p)   Diluted  (p)a   Loss  per  share  from  continuing  operations  before  one  off  items   Basic  (p)   Diluted  (p)a   Loss  per  share  from  discontinued  operations   Basic  (p)   Diluted  (p)a   2012   No.   000’s     121,202   2,736   123,938   2012   £000's   (14,543)   -­‐   (14,543)   2012   £000's   (14,543)   -­‐   (14,543)   -­‐   (1,280)   470   -­‐   (15,353)   2012   (12.0)   (12.0)   (12.0)   (12.0)   (12.7)   (12.7)   -­‐   -­‐   2011   No.   000’s     94,339   140   94,479   2011   £000's   (16,337)   -­‐   (16,337)   2011   £000's   (16,337)   (173)   (16,510)   1,280   -­‐   -­‐   250   (14,980)   2011   (17.3)   (17.3)   (17.5)   (17.5)   (15.9)   (15.9)   0.2   0.2   a IAS33  defines  dilution  as  a  reduction  in  earnings  per  share  or  an  increase  in  loss  per  share  resulting  from  the  assumption  that  options  are  exercised.  As  the  potential  dilutive  ordinary  shares  from  share  options   reduce  the  loss  per  share  these  share  are  omitted  from  the  dilutive  loss  per  share  calculation.       29                                                                                                                                                                                                                                                                     TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     9.  Intangible  assets   Group   Cost   At  1  January  2011   Additions   Exchange  differences   Disposals   At  31  December  2011   Additions   Exchange  differences   At  31  December  2012   Accumulated  depreciation   At  1  January  2011   Charge  for  the  year   Exchange  differences   Disposals   At  31  December  2011   Charge  for  the  year   Exchange  differences   At  31  December  2012   Development   Costs   £000's   Manufacturing   schedules   £000's   Other   Intangible   Assetsa   £000's   Computer   Software   £000's   2,127   224   -­‐   -­‐   2,351   53   -­‐   2,404   548   209   -­‐   -­‐   757   232   -­‐   989   13,962   -­‐   369   -­‐   14,331   -­‐   (663)   13,668   11,724   292   320   -­‐   12,336   296   (578)   12,054   9,486   2   -­‐   (6,458)   3,030   4   -­‐   3,034   7,804   281   -­‐   (6,458)   1,627   508   -­‐   2,135   899   1,403   106   6   -­‐   (7)   105   -­‐   -­‐   105   59   20   -­‐   (5)   74   19   -­‐   93   12   31   Total   £000's   25,681   232   369   (6,465)   19,817   57   (663)   19,211   20,135   802   320   (6,463)   14,794   1,055   (578)   15,271   3,940   5,023   Carrying  amount   At  31  December  2012   1,614   1,995   At  31  December  2011   a  Other  intangible  assets  include  trademarks,  customer  order  book  and  customer  lists  which  arose  on  previous  years  business  combinations   1,415   1,594   10.  Deferred  consideration     The  sale  and  purchase  agreement  of  the  group’s  electric  vehicle  division  on  1  January  2011  allowed  for  USD  14.25m  of  the  total  USD  15.0m   consideration  to  be  deferred  with  interest  payable  to  the  group  at  4%  above  the  base  rate  of  Barclays  Bank  PLC  on  the  outstanding  balance.       A  summary  of  the  movements  in  deferred  consideration  is  shown  below:   Total  consideration  receivable  at  1  Jan   Total  consideration  received   Consideration  received  in  the  form  of  shares  in  SEV  US   Total  interest  receivable  on  outstanding  consideration   Total  interest  received     Effects  of  currency  fluctuations   Deferred  consideration  receivable  net  of  interest   2012   £000’s   341   -­‐   -­‐   14   -­‐   (16)   339   2011   £000’s   9,696   (7,756)   (1,280)   220   (202)   (337)   341   30                                                                                                                                                                                                       TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     11.  Property,  plant  and  equipment   Group   Cost   At  1  January  2011   Additions   Disposals   Exchange  differences   At  31  December  2011   Additions   Disposals   Exchange  differences   At  31  December  2012   Accumulated  depreciation   At  1  January  2011   Charge  for  the  year   Disposals   Exchange  differences   At  31  December  2011   Charge  for  the  year   Disposals   Exchange  differences   At  31  December  2012   Carrying  amount   At  31  December  2012   At  31  December  2011   a Land  and   buildings   £000's   Plant  and   Machinerya   £000's   Fixtures,   Fittings  and   equipment   £000's   Motor   Vehicles   £000's   2,124   12   -­‐   3   2,139   32   -­‐   (10)   2,161   580   140   -­‐   2   722   138   -­‐   (5)   855   1,306   1,417   4,986   111   (122)   -­‐   4,975   68   (95)   (54)   4,894   3,063   419   (11)   8   3,479   365   (52)   (45)   3,747   1,147   1,496   1,036   228   -­‐   6   1,270   63   -­‐   (24)   1,309   746   183   -­‐   11   940   141   -­‐   (20)   1,061   248   330   272   39   (37)   (7)   267   147   -­‐   (10)   404   150   51   (22)   7   186   40   -­‐   (6)   220   184   81   Total   £000's   8,418   390   (159)   2   8,651   310   (95)   (98)   8,768   4,539   793   (33)   28   5,327   684   (52)   (76)   5,883   2,885   3,324    The  carrying  amount  of  the  group  plant  and  machinery  includes  an  amount  of  £130k  (2011:  £176k)  in  respect  of  assets  held  under  finance  leases.    The  depreciation  charge  on  those  assets  for  2012  was  £46k   (2011:  £40k).    Various  finance  leases  were  fully  settled  in  the  year  and  title  of  the  equipment  obtained.   12.  Current  investments   The  Group  also  holds  a  money  market  investment  relating  to  Japanese  employee’s  retirement  benefits.    The  investment  is  denominated  in   Japanese  Yen  (2012:  £474k,  2011:  £498k).   Group   At  1  January     Additions   Exchange  movements   At  31  December   2012   £000’s   498   49   (73)   474   2011   £000’s   395   76   27   498   13.  Non  current  investment   At  31  December  2012,  the  group  held  a  24%  (2011:  27.22%)  share  of  the  issued  share  capital  of  Smith  Electric  Vehicles  US  Corp,  a  company   registered  in  the  US.    Smith  Electric  Vehicles  US  Corp’s  primary  activities  involve  the  manufacture  and  distribution  of  Zero  Emission  Vehicles.        During  the  year,  Tanfield’s  holding  in  Smith  Electric  Corp  was  diluted  by  successive  fundraisings.    In  addition,  Tanfield’s  influence  at  board   level  has  reduced,  following  the  appointment  of  further  non-­‐executive  directors.    As  a  result,  Tanfield’s  holding  can  no  longer  be  considered   that  of  an  associate.    It  is  therefore  now  treated  as  an  investment.      As  such,  it  is  now  being  held  as  a  non  current  investment  at  the  lower  of   cost  and  realisable  value  (2012:  £1,280,  2011:  £nil).   Company   Investment  in  Smith  Electric  Vehicles  US  Corp   2012   £000’s   1,280   2011   £000’s   -­‐   31                                                                                                                                                                                                     TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     14.  Cash  and  cash  equivalents   Cash  and  cash  equivalents  comprise  cash  and  short-­‐term  deposits  held  by  the  group  treasury  function.  The  carrying  amount  of  these  assets   approximates  their  fair  value.   The  group  primarily  holds  Sterling,  US  Dollars,  Euros,  Australian  Dollars  and  New  Zealand  Dollars.    Currency  denominated  balances  are   translated  to  sterling  at  the  balance  sheet  date.     Cash  and  cash  equivalents   Group   2012   £000's   2,198   2011   £000's   3,463   Company   2012   £000's   402   2011   £000's   1,278   15.  Associate   At  31  December  2012,  the  group  held  a  24%  (2011:  27.22%)  share  of  the  issued  share  capital  of  Smith  Electric  Vehicles  US  Corp,  a  company   registered  in  the  US.    Smith  Electric  Vehicles  US  Corp’s  primary  activities  involve  the  manufacture  and  distribution  of  Zero  Emission  Vehicles.   During  the  year,  Tanfield’s  holding  in  Smith  Electric  Corp  was  diluted  by  successive  fundraisings.    In  addition,  Tanfield’s  influence  at  board   level  has  reduced,  following  the  appointment  of  further  non-­‐executive  directors.    As  a  result,  Tanfield’s  holding  can  no  longer  be  considered   that  of  an  associate.      As  such,  it  is  now  being  held  as  a  non  current  investment  at  the  lower  of  cost  and  net  realisable  value  (Note  13).       GROUP   Aggregate  amounts  relating  to  associates   Total  assets   Total  liabilities   Net  assets  /  (liabilities)   Group’s  share  of  net  assets  /  (liabilities)  of  associate   Total  revenue   Profit  /  (loss)   Group’s  share  of  profit  /  (loss)  of  associate   Reassessment  of  carrying  value  of  associate  -­‐  preferred  equity  securities   Reassessment  of  carrying  value  of  associate-­‐  othera   Share  of  post  tax  loss  of  associate   COMPANY   Associate   2011   £000's   23,369   (87,900)   (64,531)   (17,565)   31,912   (33,579)   (9,140)   1,280   7,860   -­‐   2011   £000's   1,280   2012   £000's   -­‐   16.  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   directors  consider  that  the  carrying  amounts  of  inventories  approximates  to  their  fair  value.         The  group’s  inventories  comprised:   Raw  materials  and  consumables   Work-­‐in-­‐progress   Finished  Goods  and  goods  for  resale   Inventories  relating  to  continuing  operations   Cost   £000’s 13,859   1,791   10,680   26,330   2012   Provision   £000’s (3,019)   -­‐   (442)   (3,461)   Carrying   value   £000’s 10,840   1,791   10,238   22,869   Cost   £000’s 16,492   1,679   8,097   26,268   Changes  in  inventories  of  finished  goods  and  WIP  can  be  calculated  as:   Total  finished  goods  and  WIP  at    1  January   Changes  in  inventories  of  finished  goods  and  WIP   Total  finished  goods  and  WIP  at    31  December     2011   Provision   £000’s (4,137)   -­‐   (636)   (4,773)   2012   £000’s   9,140   2,889   12,029   Carrying   value   £000’s 12,355   1,679   7,461   21,495   2011   £000’s   11,988   (2,848)   9,140   32                                                                                                                                                                                                                                                                                           TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     17.  Trade  and  other  receivables   Current   Trade  amounts  receivable   Allowance  for  estimated  irrecoverable  amounts   Amounts  due  from  subsidiary  undertakings   Other  Taxes   Loan  to  Smith  Electric  Vehicles  US  Corp     Other  debtors  and  prepayments   Group   2012   £000's   4,718   (265)   -­‐   41   1,852   2,717   9,063   2011   £000's   9,658   (587)   -­‐   226   -­‐   1,456   10,753   The  directors  consider  that  the  carrying  amounts  of  Trade  and  other  receivables  approximates  to  their  fair  value.   The  movements  in  allowances  for  estimated  irrecoverable  amounts  are  as  follows:   At  1  January   Amounts  charged  to  the  income  statement   Utilised  in  the  year   Exchange  differences   At  31  December   Average  credit  period  taken  on  goods  (Days)a   Company 2012   £000's   -­‐   -­‐   16,378   -­‐   1,852   772   19,002   Group   2012   £000's   587   48   (364)   (6)   265   36   2011   £000's   -­‐   -­‐   27,713   -­‐   -­‐   67   27,780   2011   £000's   492   208   (100)   (13)   587   69   a   Debtor  days  are  calculated  as  Trade  amounts  receivable  net  of  allowance  for    estimated  irrecoverable  amounts  over  total  sales  in  the  period  from  continuing  operations  only  multiplied  by  365  days.   Trade  and  other  receivables  are  continually  monitored  and  allowances  provided  against  trade  receivables  consist  of  both  specific   impairments  and  collective  impairments  based  on  the  group’s  historical  loss  experiences,  debt  aging  and  general  economic  conditions.   Trade  receivables  including  allowance  for  estimated  irrecoverable  amounts  are  due  as  follows:   Between  0   and  3   months   £000's Not  past  due   £000's Past  due  but  not  impaired   Between  6   and  12   months   £000's Between  3   and  6   months   £000's Over  12   months   £000's 2012   2011   3,598   7,572   834   1,365   13   80   8   54   -­‐   -­‐   Total   £000's 4,453   9,071   Amounts  past  due  but  not  impaired  have  not  been  provided  against  if  cash  has  been  received  after  the  balance  sheet  date,  balances  can  be   offset  against  supplier  accounts  or  where  the  management  believes  cash  will  be  collected  due  to  continuing  relationships.   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.   At  31  December  2012  £345k  (2011:  £1,601k)  of  trade  receivables  net  of  allowance  for  estimated  irrecoverable  amounts  were  denominated   in  Sterling,  £2,272k  (2011:  £3,271k)  in  US  Dollars,  £518k  (2011:  £1,984k)  in  Australian  Dollars,  £416k  (2011:  £1,137k)  in  Japanese  Yen  and   £1,420k  (2011:  £1,078k)  in  other  currencies  including  Euros  and  NZ  Dollars.   33                                                                                                                                                                                   TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     18.  Trade  and  other  payables   The  directors  consider  that  the  carrying  amounts  of  trade  and  other  payables  approximates  to  their  fair  value.   Group     Company 2012   £000's   2011   £000's   2012   £000's   Current   Trade  payables   Social  security  and  other  taxes   Accrued  expenses   Fair  value  of  Interest  rate  collar     Amounts  due  to  subsidiary  undertakings   10,109   671   2,618   -­‐   -­‐   13,398   117   7,497   607   4,735   195   -­‐   13,034   100   137   151   212   -­‐   1,415   1,915   2011   £000's   220   205   197   -­‐   1,462   2,084   Average  credit  period  taken  on  trade  purchases  (days)a   a   Creditor  days  have  been  calculated  as  trade  payables  and  accrued  expenses  over    changes  in  inventories  of  finished  goods  and  WIP,  raw  materials  and  consumables  used  and  other  operating  expenses   multiplied  by  365  days.    The  calculation  includes  only  continuing  operations. 19.  Obligations  under  finance  leases   Assets  held  under  finance  lease  mainly  relate  to  plant  and  machinery  assets  and  are  secured  on  those  assets.    During  the  year  the  group   entered  into  new  lease  agreements  with  a  capital  value  of  Nil  (2011:  £275k).     The  average  lease  term  is  3  years  (2011:  3  years).  For  the  year  ended  31  December  2012,  the  average  effective  borrowing  rate  was  18%   (2011:  18%).  Interest  rates  are  fixed  at  the  contract  date.     The  directors  consider  that  the  carrying  amounts  of  obligations  under  finance  leases  approximates  to  their  fair  value.    All  leases  are  on  a   fixed  repayment  basis  and  no  arrangements  have  been  entered  into  for  contingent  rental  payments.    A  summary  of  the  outstanding  leases  is  shown  below:   Group   Amounts  payable  under  finance  leases   Within  one  year   In  the  second  to  fifth  years  (inclusive)   Less:  future  finance  charges   Total  finance  lease  obligations   20.  Deferred  taxation Minimum  leases   payments   2011   £000's   2012   £000's   Present  value  of  minimum   leases  payments   2011   £000's   2012   £000's   102   162   264   (57)   207   103   266   369   (101)   268   70   137   207   -­‐   207   60   208   268   -­‐   268   Tax  losses   £000's Other   £000's Total   £000's Group (375)   At  1  January  2011   -­‐)   Charge  to  the  income  statement   (375)   At  1  January  2012   -­‐   Deferred  tax  asset   (375)   Deferred  tax  liability   (375)   At  1  January  2012   -­‐   Charge  to  the  income  statement   (375)   At  December  2012   -­‐   Deferred  tax  asset   (375)   Deferred  tax  liability   At  December  2012   (375)   At  31  December  2012,  the  group  had  unused  tax  losses  of  £132m  (2011:  £113m).    The  losses  have  arisen  in  various  jurisdictions  and  various   locations  and  will  be  relived  against  future  profits  from  these  locations.    No  deferred  tax  asset  has  been  recognised  in  respect  of  the  £132m   (2011:  £113m)  due  to  the  unpredictability  of  profit  streams  which  results  in  an  unrecognised  deferred  tax  asset  of  £36,292k  (2011:   £31,325k).   (375)   -­‐   (375)   -­‐   (375)   (375)   -­‐   (375)   -­‐   (375)   (375)   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   Company   There  is  no  movement  in  deferred  taxation  in  the  current  or  proceeding  years.   34                                                                                                                                                                   TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     21.  Share  capital  and  share  premium   The  Company  has  one  class  of  ordinary  shares  which  carry  no  right  to  fixed  income.  All  shares  are  fully  paid  up.   At  1  January  2011   Shares  issued  to  settle  outstanding  deferred   consideration  payable   Share  options  exercised   At  31  December  2011   New  share  issue  13  Feb  2012a   New  share  issue  23  July  2012b   Share  options  exercised   At  31  December  2012   a Nominal   share   value   5p   5p   5p   5p   5p   5p   5p   5p   Number  of  shares   94,077,218   470,000   20,000   94,567,218   29,268,293   5,135,714   20,000   128,991,225   Share   capitalc   £000’s   4,704   23   1   4,728   1,464   257   1   6,450   Share   premium   £000’s   827   2,270   -­‐   3,097   9,930   1,796   -­‐   14,823      On    13  Feb  2012  the  group  announced  it  would  issue  29,268,293  new  shares  at  41p  each.    The  successful  fundraising  was  completed  in  two  tranches  on  17  Feb  2012  and  9  March  2012  for  9,407,720    shares   and  19,860,573  shares  respectively.  The  associated  costs  of  £607k  have  been  allocated  to  the  share  premium  account.   b    On    23  July  2012  the  group  issued  5,135,714  new  shares  at  42p  each.    The  associated  costs  of  £104k  have  been  allocated  to  the  share  premium  account.   C   The  authorised  share  capital  of  the  company  throughout  2011  and  Until  8  March  2012  was  £5,000,000,  representing  100,000,000  ordinary  shares.  After    8  March    2012  this  increased  to  £6,463,415,   representing  129,268,293  ordinary  shares.   22.  Operating  lease  arrangements   At  the  balance  sheet  date,  the  Group  as  a  lessee  had  future  aggregate  minimum  lease  payments  under  non-­‐cancellable  operating  leases,   which  fall  due  as  follows:   2012   Within  one  year   In  the  second  to  fifth  years  inclusive   Greater  than  five  years   2011   Within  one  year   In  the  second  to  fifth  years  inclusive   Greater  than  five  years   Leasehold  Property   £000’s Other   £000’s 2,057   6,650   13,886   22,593   1,366   5,938   15,173   22,477   78   119   -­‐   197   84   57   -­‐   141   Total   £000’s 2,135   6,769   13,886   22,790   1,450   5,995   15,173   22,618   23.  Non  controlling  interests   The  group  owns  95%  of  Tanfield  Union  Limited,  a  subsidiary  in  conjunction  with  Union  Engineering  Machinery  Systems.    The  minority   interest  of  5%  relating  to  Union  Engineering  Machinery  Systems  is  shown  below:   Balance  at  1  January   Share  of  profits  (losses)   Balance  at  31  December   2012   £000’s   (17)   19   2   2011   £000’s   (3)   (14)   (17)   35                                                                                                                                                                               TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     24.  Provisions   The  provisions  represent  the  Group’s  liability  in  respect  of  12  month  warranties  granted  on  Powered  Access  Platforms.    The  amount   provided  represent’s  management’s  best  estimate  of  the  future  cash  outflows  in  respect  of  those  products  still  within  warranty  at  the   balance  sheet  date.       At  1  January   Net  movement  in  provision   At  31  December   Warranty   provision   2012   £000’s   621   (44)   577   Warranty   provision   2011   £000’s   272   349   621   25.  Share  based  payments   IFRS2  requires  share  based  payments  to  be  recognised  at  fair  value.    The  group  measures  the  fair  value  of  its  share  based  payments  to   employees,  “share  options”,  using  the  Black-­‐Scholes  valuation  method.       All  share  based  payments  are  equity  settled  and  details  of  the  share  option  activity  during  2012  and  2011  are  shown  below.   Outstanding  at  the  beginning  of  the  year   Granted   Forfeited   Exercised   Expired   Outstanding  at  the  end  of  the  year   Exercisable   2012   2011   Number  of   share   options   9,606,334   -­‐   (840,000)   (20,000)   -­‐   8,746,334   3,196,334   Weighted   average   exercise   price   (pence)   Number  of   share   options   (Restated)   113   -­‐   (135)   (5)   -­‐   21   10   3,826,334   5,800,000   -­‐   (20,000)   -­‐   9,606,334   3,806,334   Weighted   average   exercise   price   (pence)   Restated   113   27   -­‐   (5)   -­‐   61   113   The  outstanding  options  at  31  December  2012  had  a  weighted  average  remaining  contractual  life  of  6.49  years  (2011:  7.38  years)   The  following  table  relates  to  share  options  outstanding  and  exercisable  at  31  December  2012   Exercise  price  (pence)   No  of  share  options   No  of  exercisable  options   Option  exercise  prices   5p   140,000   140,000   1p   2,921,334   2,921,334   27p   5,550,000   -­‐   200p   135,000   135,000   Total   8,746,334   3,196,334   Income  statement  charge   In  accordance  with  IFRS2  the  group  determined  the  fair  value  of  its  options  at  ‘grant  date’.    The  group  accrues  this  fair  value  charge  over  the   share  option  vesting  period.    Share  options  that  are  forfeited  during  the  year  are  credited  directly  to  the  share  option  reserve  account.   A  charge  to  the  income  statement  of  £100k  (2011:  £40k)  and  a  credit  directly  to  equity  of  £Nil  (2011:  £19k)  have  been  made  during  the  year   in  accordance  with  IFRS2  ‘Share-­‐based  payments’.   The  group  uses  the  Black-­‐Scholes  model  to  value  its  share  options  and  the  following  table  summaries  the  fair  values  and  key  assumptions   used  in  the  models  inputs.   Weighted  average  exercise  price   Expected  volatilitya   Expected  lifeb   Risk  free  rate   Expected  dividends     Grant  date   27   109%   6.2  years   2.5%   0.0%   a  Expected  volatility  was  determined  by  calculating  the  historical  volatility  of  the  Group’s  share  price  over  the  previous  3  years.       b  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.   36                                                                                                                                                                       TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     26.  Financial  risk  management   The  group’s  operations  are  exposed  to  various  financial  risks  which  are  managed  by  various  policies  and  procedures.  The  main  risk  and  their   related  management  are  discussed  below:   Credit  risk  management   The  group’s  exposure  to  credit  risk  arises  from  its  trading  related  receivables  and  cash  deposits  with  financial  institutions.     The   group’s   credit   policy   for   trading   related   receivables   is   applied   and   managed   by   each   local   operation   to   ensure   compliance.     The   policy  requires  that  the  creditworthiness  and  financial  strength  of  customers  is  assessed  at  inception  and  on  an  on  going  basis.    The  group   uses  external  credit  checking  agencies  as  well  as  undertaking  its  own  internal  reviews  of  customer  finances.     The  group’s  maximum  exposure  to  credit  risk  is  summarised  below:   Trade  and  other  receivables   Cash  and  cash  equivalents   2012   £’000   6,305   2,198   8,503   2011   £’000   9,071   3,463   12,534   The  group  did  not  have  any  financial  instruments  that  would  mitigate  the  credit  exposure  arising  from  the  financial  assets  designated  at  fair   value  through  profit  and  loss  in  either  the  current  or  proceeding  year.   Liquidity  risk  management   The  group  is  exposed  to  liquidity  risk  arising  from  having  insufficient  funds  to  meet  the  financing  needs  of  the  group.   The  group’s  liquidity  management  process  includes  projecting  cash  flows  and  considering  the  level  of  liquid  assets  available  to  meet   future  cash  requirements  along  with  monitoring  balance  sheet  liquidity.    The  Board  reviews  forecasts,  including  cash  flow  forecasts  on  a   quarterly  basis.    The  group’s  subsidiaries  review  their  cash  on  a  daily  basis  to  assess  short  and  medium  term  requirement,  these   assessments  ensure  the  group  responds  to  possible  cash  constraints  in  a  timely  manner.    Requests  from  group  companies  for  operating   finance  are  met  whenever  possible  from  central  resources.   Maturity  analysis   The  table  below  analyses  the  Group’s  financial  liabilities  on  a  contractual  gross  undiscounted  cash  flow  basis  into  maturity  groupings  based   on  amounts  outstanding  at  the  balance  sheet  date  up  to  the  contractual  maturity  date.   2012   Finance  leases   Trade  and  other  payables   2011   Finance  leases   Trade  and  other  payables   Within  1   year   £’000   1  to  5   years   £’000   Over  5   years   £’000   70   13,398   13,468   60   12,839   12,899   137   -­‐   137   208   -­‐   208   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   Total   £’000   207   13,398   13,605   268   12,839   13,107   Foreign  exchange  risk  management   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.  If  appropriate  the   group  can  use  currency  derivative  financial  instruments  such  as  foreign  exchange  contracts  to  reduce  exposure.    These  were  not  used  in  the   period.   The  material  foreign  currency  denominated  costs,  include  the  purchase  of  components  from  low  cost  based  countries,  principally  in  US   dollars.   37                                                                                                                                                                                                                     TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     A  summary  of  the  sensitivity  to  foreign  exchange  movements  that  the  group’s  equity  pre  tax  is  currently  exposed  to  is  detailed  below:   Currency   US  Dollar   Euro   Australian  dollar   New  Zealand  dollar   Japanese  Yen   Balance   sheet  rate   to  GBP   1.62   1.22   1.56   1.97   138.7   Effect  on  equity  if   Sterling  strengthens  by   10%     increase  (decrease)   £000’s   Effect  on  equity  if   Sterling  weakens  by   10%     Increase  (decrease)   £000’s   (809)   (28)   (495)   (79)   (288)   890   34   606   97   353   Interest  rate  risk  management   The  Group  is  exposed  to  interest  rate  risk  due  to  its  cash  deposits,  invoice  discounting  facilities  and  interest  rate  collar.    Cash  and  cash   equivalents  are  the  only  interest  bearing  financial  assets  held  by  the  Group.    The  group  regularly  reviews  the  short  term  cash  requirements   against  the  benefit  of  placing  funds  on  term  deposit  to  ensure  the  best  available  rates  of  interest  are  obtained.       At  31  December  2012  the  group  had  no  borrowings.    Future  risk  is  limited  to  new  borrowings  if  the  group  were  to  enter  into  any  borrowing   agreements.   The  group  manages  its  exposure  to  interest  rate  risk  against  its  obligations  under  finance  leases  by  fixing  the  rate  of  interest  over  the   term  of  the  lease.   The  interest  rate  collar  was  settled  on  2  March  2012  but  was  initially  taken  out  when  the  group  had  a  borrowing  facility  to  protect  the  group   from  increases  in  interest  rates.  The  risk  was  limited  to  the  event  that  rates  fall  below  that  at  the  balance  sheet  date.    In  accordance  with   IAS39  the  interest  rate  collar  is  not  classified  as  a  hedging  instrument.       Details  of  the  collar  is  summarised  below:   Instrument   US  Dollar  interest  rate  collar   Notional   principal     $10m   Cap   5.00%   Floor   3.65%   Maturity   date   31  Oct  2012   Derivative   Liability   2012    £000’s   -­‐   Derivative   Liability   2011   £000’s   301   The  interest  payable  under  the  collar  is  recognised  through  the  statement  of  comprehensive  income  £36k  (2011:  £216k)  within  Interest   on  bank  overdrafts,  loans  and  financial  instruments  (Note  5).  The  volatility  arising  on  the  collar  is  also  recognised  in  the  statement  of   comprehensive  income  £41k  gain  (2011:  £165k  gain)  and  disclosed  separately  within  finance  expenses  and  finance  income  (Note  5).       The  liability  is  denominated  in  US  Dollars  and  a  currency  exchange  loss  of  £1k  (2011:  £6k  loss)  has  also  been  recognised  in  the  statement   of  comprehensive  income  within  other  operating  expenses.   Capital  management   The  Group’s  main  objective  when  managing  capital  is  to  protect  returns  to  shareholders  by  ensuring  the  Group  trades  profitably  in  the   future.    The  Group  also  aims  to  maximise  its  capital  structure  of  debt  and  equity  so  as  to  minimise  its  cost  of  capital.   The  Group  manages  its  capital  with  regard  to  risks  inherent  in  the  business  and  the  sector  in  which  it  operates  by  monitoring  its  gearing   ratio  on  a  regular  basis.   The  Group  considers  its  capital  to  include  share  capital,  share  premium,  special  reserve,  translation  reserve  and  retained  earnings.       No  gearing  is  currently  calculated  as  the  Group  currently  has  no  borrowings.   38                                                                                                               TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     27.  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  its  subsidiaries.    The  bank  hold  a  cross  guarantee  in   relation  to  all  the  Group  Company  bank  accounts.   Company   The  Company  entered  into  transactions  with  its  subsidiaries  as  disclosed  below.   2012   £000’s   26,251   3,250   (9,787)   (4,751)   14,963   2011   £000’s   42,908   2,535   (14,666)   (4,526)   26,251   Net  position  at  1  January   Management  charges   Impairments  net  of  intercompany  loan  forgivenessa   Other  transactions  including  new  loans  issued  and  cash  balances  received   Net  position  at  31  December   a  During  2012  the  company  formally  forgave  £32m  of  its  intercompany  receivable  from  Tanfield  Powered  Access  Limited,  £21,831k  of  the  £32m  had  previously  been  impaired  resulting  in  a  net  charge  in  the  year   of    £10,169k  (2011:  £6,677k).    During  2012  the  company  also  wrote  back  previously  impaired  balances  against  Tanfield  Asia  Pacific  PTE.Ltd  £69k  and  Tanfield  Union  £313k.   Transactions  with  its  associate   During  the  year  the  company  loaned  £1,935k  of  cash  to  the  Smith  Electric  Vehicles  US  Corp.   During  the  year  the  group  bought  goods  of  £34k  (2011:  £Nil)  from  its  associate,  Smith  Electric  Vehicles  US  Corp.     During  the  year  the  group  recharged  £800k  (2011:  £860k)  to  Smith  Electric  Vehicles  Europe  Ltd  for  property  related  costs.    These   transactions  have  been  deducted  from  other  operating  expense  in  the  statement  of  comprehensive  income.  At  31  December  12  there  was   an  outstanding  balance  due  from  Smiths  Electric  Vehicles  Europe  Ltd  of  £739k  (2011:  £201k)  and  an  outstanding  balance  due  to  Smiths   Electric  Vehicles  Europe  Ltd  of  £34k  (2011:  Nil)  relating  to  the  these  transactions.   Remuneration  of  key  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  9  to  10.   Directors  emoluments  are  shown  in  the  table  below:   Salaries  and  short  term  benefits  including  NI   Post  employment  benefits   Transactions  with  directors   There  were  no  other  transactions  with  Directors  during  the  year.     28.    Retirement  benefits   2012   £000’s   1,433   123   2011   £000’s   1,289   62   1,556                                              1,351   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  £266k  (2011:£194k)  represents  contributions  payable  to  these  schemes  by  the  Group  at  rates  specified   in  the  rules  of  the  schemes.  As  at  31  December  2012,  contributions  of  £12k  (2011:  £10k)  due  in  respect  of  the  current  reporting  period  had   not  been  paid  over  to  the  schemes.   39                                                                                                                                                                 TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     29.    Financial  instruments  recognised  in  the  balance  sheet   2012   Assets     Held  to   maturitya   £000’s   -­‐   1,754   -­‐   1,754   Held  for   tradinga   Total   £000’s   6,305   1,754   2,198   10,257   Total   £000’s   £000’s   -­‐   -­‐   -­‐   -­‐   -­‐   -­‐   12,725   70   12,795   137   137   12,932   Loans  and   receivables   £000’s   9,071   -­‐   3,463   12,534   Other   financial   liabilities   £000’s   12,232   60   12,292   208   208   12,500   2011   Assets     Held  to   maturitya   £000’s   -­‐   498   -­‐   498   Held  for   tradinga   Total   £000’s   9,071   498   3,463   13,032   Total   £000’s   £000’s   195   -­‐   195   -­‐   -­‐   195   12,427   60   12,487   208   208   12,695   Loans  and   receivables   £000’s   6,305   -­‐   2,198   8,803   Other   financial   liabilities   £000’s   12,725   70   12,795   137   137   12,932   Assets   Current  financial  assets   Trade  and  other  receivables   Investments   Cash  and  cash  equivalents   Total   Liabilities   Current  liabilities   Trade  and  other  payables   Finance  leases   Non  current  liabilities   Finance  leases   Total   a  Assets  and  liabilities  at  fair  value  through  profit  and  loss.   30.  Post  balance  sheet  events   New  share  issue   On  20  March  2013,  the  Board  of  Tanfield  announced  details  of  a  £2.1m    new  share  placing,  advising  that  it  had  successfully  raised  gross   proceeds  of  approximately  £2.1  million  by  way  of  a  placing  of  10,500,000  new  ordinary  shares  of  5p  each  at  a  price  of  20p  per  share  to   institutional  investors     Debt  facility   On  20  February  2013,  the  Group  entered  into  an  asset  backed  debt  facility.    The  debt  facility  is  secured  under    separate  deeds  of  guarantee   and  Indemnity  given  by  Tanfield  Group  PLC,  Snorkel  Holdings  LLC,  Snorkel  International  Inc    and  Tanfield  Powered  Access  Ltd  along  with  an   all  asset  debenture  covering  both  Tanfield  Powered  Access  Ltd  and  Snorkel  International  Inc.   40                                                                                                                                                   TANFIELD  GROUP  PLC  FINANCIAL  STATEMENTS     31.  Subsidiary  undertakings  and  Investments   The  tables  below  give  brief  details  of  the  group’s  operating  subsidiaries  and  investments  at  31  December  2012.    All  subsidiaries  are  unlisted.     No  subsidiaries  are  excluded  from  the  group  consolidation.   Subsidiary  undertakings   Tanfield  Engineering  Systems  US  (Inc)   Tanfield  Powered  Access  Ltd   Snorkel  International  Inc   Snorkel  Australia  Limited   Snorkel  New  Zealand  Limited   Tanfield  Union  Limited   Tanfield  Engineering  Systems  Ltd   Snorkel  Holdings  LLCa   Tanfield  Asia  Pacific  PTE.  Ltd   SEV  Group  Ltda   E-­‐Comeleon  Ltda   Express  2  Automotive  Ltda   HMH  Sheet  Metal  Fabrications  Ltda   Norquip  Ltda   HBWP  Inca   a   Certain  entities  are  not  audited  as  they  are  either  non  trading    or  are  not  required  under  local  laws. Principal  activity   Powered  Access   Powered  Access   Powered  Access   Powered  Access   Powered  Access   Powered  Access   Engineering   Holding  Company   Non  Trading   Non  Trading   Non  Trading   Non  Trading   Dormant   Dormant   Dormant   Group  Interest   in  allotted   capital  &   voting  rights   100% 100% 100% 100% 100% 95%   100%   100% 100% 100% 100% 100% 100% 100% 100% Country  of   incorporation   US   UK   US   AUS   NZ   Hong  Kong   UK   US   Singapore   UK   UK   UK   UK   UK   US   Group  Interest   in  allotted   capital  &   voting  rights   24.00%   24.00%   Country  of   incorporation   US   UK   Investments   Smith  Electric  Vehicles  US  Corp   Smith  Electric  Vehicles  Europe  Ltdb   b  Smith  Electric  Vehicle  Europe  Ltd  is  a  100%  owned  subsidiary  of    Smith  Electric  Vehicles  US  Corp  .  The  groups  interest  in  Smith  Electric  Vehicles  Europe  Ltd  is  held  indirectly  through  its  investment  in  Smith   Principal  activity   Electric  vehicle  manufacture   Electric  vehicle  manufacture   Electric  Vehicles  US  Corp.   Details  of  the  investments  held  in  the  Company  accounts  are  as  follows:   Tanfield  Engineering  Systems  Ltd   Tanfield  Powered  Access  Ltdc   2012   £000’s   1,008   9,677   10,685   2011   £000’s   1,008   -­‐   1,008   c   On  20  Dec  2012  the  Company  acquired  12,000  new  shares  in  Tanfield  Powered  Access  Ltd  for  a  consideration  of  £12,000k.    This  investment  has  been  impaired  by  £2,323k  during  the  year.   41                                                                   

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