TANFIELD GROUP PLC
REPORT AND FINANCIAL
STATEMENTS 2013
Registered in England & Wales
Company number 04061965
TANFIELD GROUP PLC FINANCIAL STATEMENTS
REPORT AND FINANCIAL STATEMENTS 2013
SUMMARY OF CONTENTS
Directors and Advisers
Strategic Report
Directors’ Report
Corporate Governance
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
Report of the Independent Auditor
Statement of Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Cash Flow Statement
Accounting Policies
Notes to the Accounts
2
3
6
8
9
11
12
13
14
15
16
17
20
1
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
D Robinson
REGISTERED OFFICE AND ADVISORS
REGISTERED OFFICE
Sandgate House
102 Quayside
Newcastle upon Tyne
NE1 3DX
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 (resigned 5 November 2013)
Finance Director (resigned 5 November 2013)
Managing Director Powered Access (resigned 5 November 2013)
Chairman
Non executive Director
Non executive Director
Resigned 5 November 2013
Appointed 25 April 2014
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
2
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STRATEGIC REPORT
CHAIRMAN’S STATEMENT
It is with some mixed emotions that I review the past twelve
months but with optimism that I look to the future. Those
twelve months need to be put into the context of the past five
years. The context being that the company went through the
most difficult trading period and the deepest recession ever
experienced in its market for industrial products. It is a credit to
all the people involved that the businesses, in their various
guises, continue to operate and that Tanfield continues to be a
shareholder in these businesses.
Tanfield Group Plc has gone through a radical structural change
from being a strong manufacturing entity to being an
investment company. This process of change is a response to
the circumstances that the company faced during those five
difficult years. We have managed to come through with a
reasonable level of shareholder value intact and I am confident
that our investments have the potential to provide a future
return to shareholders.
NON-EXECUTIVES' REVIEW
Background
The Company is currently defined as an investment company
with two passive investments. This definition resulted from the
disposal of Smith Electric Vehicles in 2009 and the disposal of
Snorkel in October 2013. Tanfield Group plc currently owns
24% of Smith Electric Vehicles Corp. ("Smith") and 49% of
Snorkel International Holdings LLC ("Snorkel"). The Directors
believe that these investments will result in a return of value to
shareholders over time.
The strategy of the Company in relation to these investments is
to return as much of the realised value in these investments to
shareholders as and when they occur. In line with it being
defined as a passive investment company Tanfield does not
hold Board seats in Smith or Snorkel. However the Company
continues to hold the right to two seats on the Board of Smith.
its cost base
The Company has significantly
commensurate with its change to an investment company.
reduced
Snorkel
The Snorkel business continues to progress well over the six
months that it has been in new ownership. The new entity is a
limited liability corporation under the laws of the State of
Nevada, with Tanfield owning 49%. Production is increasing and
the business is taking advantage of the general uplift in the
market for its products. The new partners in the business have
invested a significant level of working capital into the company
currently totalling in excess of $30 million. This has meant that
supplier constraints are being alleviated and that production is
ramping up in line with the increasing demand. The order book
has risen by over 200% in the past six months. The annualised
run rate of sales has now reached over $100 million. A planned
restructuring is taking place to further reduce the breakeven of
the business. All the positives regarding order book, output and
fixed cost reduction mean the business is moving towards
meaningful profitability. The Board are satisfied that significant
progress continues to be made.
Valuation of Snorkel holding
The Board of Tanfield have taken a view of the carrying value of
its 49% holding and its preferred interest holding (Loan note)
that takes account of risks in the industrial global markets and
the normal cycles that operate with these markets. The range of
potential valuation can be broad. The decision has been made to
carry a realistic but prudent valuation. This valuation has been
assessed against a number of criteria using discounted cash flow
in relation to the sale and purchase agreement and its valuation
formula:
Order Book.
Market conditions.
Level of investment in working capital.
Capital investment.
Production capacity.
Historical capability of the business to ramp up output.
OVERVIEW
Taking into consideration these factors the fair value of the
Snorkel holding has been assessed as £36.28 million ($60.06m).
Tanfield Engineering Services Limited
Through a process of administration this loss making business
was disposed of in November 2013. We are pleased to say that
a significant number of jobs were saved. As a result of an
increase in working capital the business is developing, although
Tanfield no longer has an ongoing interest in this business.
3
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STRATEGIC REPORT (Continued)
a business
strategy of
is pursuing
Smith Electric
combined
Smith
manufacturing and licensing of its technology in markets
outside of North America. It has been realigning its business in
this context. We understand that there are a number of
potential licenses currently in negotiation. Smith has downsized
its manufacturing operation and proposes to create smaller
manufacturing units in various locations to accommodate
demand. It is in a position, having raised the appropriate
working capital, to instigate its material and component cost
down plan. This will mean the realisation of a competitive
the aim of achieving sustainable
pricing strategy and
profitability. If Smith can achieve the listing plan, the Smith
Board feel that the potential of the business, in its recapitalised
form, is very strong.
As announced on 12 May 2014, an agreement was reached
between Smith and Sinopoly Battery Limited (‘Sinopoly’) for a
strategic investment in Smith. The investment will come in 3
tranches. The first tranche (which has been completed) was for
$2 million in secured debentures. The second tranche is $10
million in preferred stock, as part of a minimum $20m to
maximum $30m issuance of preferred stock by Smith, subject
to, inter alia, the execution of a battery supply contract and
Component Supply Memorandum of Understanding between
Smith and Sinopoly. The third tranche is to subscribe for $30m
of common stock subject to, inter alia, a US Listing. The
agreement
inter alia, to Sinopoly shareholder
approval.
is subject,
As announced on 20 May 2014, the Tanfield Board signed an
agreement with Smith which conditionally binds it to sign
certain consents to allow Smith to raise funding up to $30
million and to restructure the capital of the company. The Smith
Board plan is to convert all debt into common stock prior to
listing on the Over-the-Counter Bulletin Board ('OTCBB') and
simultaneously raise up to $30 million. It is then proposed that
Smith seeks a full listing on a U.S. National Exchange.
Smith will issue Tanfield 5,050,017 warrants at an exercise price
equal to post-money valuation at the closing of the Series E
Preferred stock and 5,050,017 at an exercise price equal to the
post-money valuation at the closing of the post-merger
financing or underwritten public offering. The warrants will be
exercisable within 6 months of issuance and carry a term of 2
years. As a consequence of the agreement and as a current
common stock holder in Smith, Roy Stanley, will receive two
tranches totalling 3,997,600 warrants on the same terms. Mr
Stanley is assigning the rights to these warrants to the Company
for nil consideration for the benefit of the Company and its
shareholders. In aggregate, the total number of warrants to be
issued to Tanfield including those assigned to Tanfield are
expected to amount to just under 2% of the issued share capital
at the time of the OTCBB listing.
Public Company merger
The Board of Smith has executed a Letter of Intent with an
OTCBB company and has conducted due diligence for the
proposed merger of Smith into the company. It is anticipated,
assuming funds are raised, that the listing will take place by the
end of June 2014.
Proposed subsequent flotation on a US Market
Subsequent to the proposed reverse merger it is intended to
apply for a Listing on a US national exchange. The company
intends to complete a minimum of a $40 million underwritten
offering in order to satisfy the waiver of the one year seasoning
requirement relating primarily to applicant companies having
been traded on another exchange and the reporting of
information. Subject to meeting the other requirements of NYSE
or NASDAQ, it is proposed that Smith will apply to list on NYSE or
NASDAQ upon completion of the offering. The Company is in the
process of negotiating with an underwriting Bank.
is
anticipated that this listing will be effective within 90 days to
120 days from the OTCBB listing.
It
View of the Tanfield Board
It is estimated that post-merger (listing on OTCBB) Tanfield will
hold between 4% and 5% of Smith shares, (excluding warrants)
based upon a post money valuation of $275 million. The
ultimate holding post the public listing on a US National
exchange will depend on the price at which any money is raised
at that point.
The shares in the OTCBB entity will not be tradable for 180 days.
Shares in the entity listed on the National exchange will be
tradable on the ending of this 180 day period.
The Tanfield Board takes the view that although there is still a
risk of failure in the plan that this risk has diminished. On
balance it remains positive that supporting this plan represents
the best possible outcome for all stakeholders of Smith,
including Tanfield. The Tanfield Board considers that in entering
this agreement it has sought to fulfil its obligation to its
shareholders in seeking to optimise the value on its investment
in Smith.
Valuation of Smith holding
Currently Tanfield has a carrying value of £1.28m ($2.11m) for
its equity investment in Smith and this has been the carrying
value since its disposal by the Company in 2009. Depending
upon the ongoing viability of Smith the realisation of value may
be higher than its carrying value but because of the risks
attached to the viability of Smith the Board feels that it is
prudent to maintain its current carrying value. The future value
of Smith will depend upon its performance and its reception as a
public listed entity. In addition Tanfield has loans and other
debts outstanding due from Smith totalling £2.86m ($4.70m)
4
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STRATEGIC REPORT (Continued)
Strategy of Tanfield Board of Directors
relation to its current Investment
It is the aim of the Tanfield Board to return any value realisation
from its investments in Smith and Snorkel to shareholders as
soon as these events occur and circumstances allow.
in
Review of Investment Strategy
The Company is currently defined as an investment company
with two passive investments. This definition resulted from the
disposal of Smith Electric Vehicles in 2009 and the disposal of
the Snorkel division in October 2013. Tanfield Group Plc
currently owns (24%) of Smith and (49%) of Snorkel. The
Directors believe that whilst these investments will result in a
return of value to shareholders over time that there is an
opportunity to further enhance the potential value to
shareholders. Accordingly, the Directors believe that it is in the
Company’s interests to adopt an amended strategy for the
development of the Company as a broader investing company
as set out below and for which it will seek shareholder approval
at its forthcoming AGM.
The Board intend to “ring fence” current funds to preserve the
continuity and value in its existing investments. The strategy of
the Company in relation to these investments is to return as
investments to
much as possible of the value in these
shareholders as and when it is realised. The Company would
therefore raise money to acquire and
fund any new
investments. Where appropriate it will use a small proportion of
its shares and cash (excluding existing funds) to acquire or
invest
in the technology sector. Any new
fundraising for such a purpose will be subject to shareholder
approval. The Company intends to issue a circular in the near
future informing shareholders of an open offering to all
shareholders of up to £2m at the same time as giving notice of
its AGM.
in businesses
The Directors believe that this approach is a way of not only
increasing shareholder value but also of spreading risk in
relation to the realisation of current investments.
Existing Investments
The Existing Investments are passive investments. It is the
intention that where distributions are received from or
realisations made of the Existing Investments (or there is a
receipt of marketable securities) that these are distributed to
shareholders, subject to compliance with any legal requirements
associated with such distributions. There is no limit on the
amount of time the Existing Investments are to be held by the
Company.
New Investments
The Directors of the Company intend to identify and, subject to
the availability of financial resources to do so, make New
Investments in any company or asset within the technology
sector offering the potential to deliver a favourable return to
shareholders either through distributions or capital gain. The
Company's equity interest in a New Investment may range from a
minority position to 100% ownership. New Investments may be
either in quoted or unquoted companies and may also include
debt, convertible securities or joint venture structures. New
Investments are not to be subject to limits upon concentration or
diversification, and may be held for any period of time. The
Directors intend to be either active or passive investors in New
Investments as appropriate.
Finance income
The interest cost in the period of £80k (2012 nil) was incurred
from bank borrowings and loan interest charged during the
period and interest income of £48k (2012 £71k) received on
deferred consideration and loans with Smith and bank balances.
Taxation
There is no tax charge for the period under review. There is no
brought forward deferred tax asset, and none was recognised in
the period resulting in no adjustment to deferred tax, consistent
with 2012.
Profit from operations
Profit from operations was £7.4m, (2012 £13.4m loss), the most
significant difference between 2013 and 2012 being the
adjustment to fair value of investments of £27.0m.
Proposed New Investing Policy
Tanfield Group Plc is classified as an Investing Company. The
Company does not have and will not make cross-holding
investments. The Company does not have a policy on gearing.
Earnings per share
Profit per share from continuing operations was 5.4 pence
(2012: Loss 11.0 pence). No dividend has been declared. (2012:
nil)
The Company has a 49% membership interest in Snorkel
International Holdings and a 24% interest in the shares of Smith
Electric
"Existing
Investments"). Under its Investing Policy, the Company holds the
Existing Investments and may seek to make further investments
in the technology sector ("New Investments").
(together
Vehicles
Corp
the
Cash
At 31 December 2013, the Company had cash of £0.4m (2012:
£0.4m).
Approved by the Board of Directors and signed on behalf of the
Board
Roy Stanley
Non-Executive Director
30 May 2014
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 2013.
Tanfield Group Plc is a public listed company incorporated and
domiciled in England and quoted on AIM.
PRINCIPAL ACTIVITIES
The company’s principal activity is that of an investment
company.
RESULTS AND DIVIDENDS
The financial result, for the year to 31 December 2013 reflect
the changes to the principal activity of the company to that of
an investment company.
Turnover for the year was £2.2m compared with £3.3m in 2012.
The operating loss before impairments in the year of £1.1m
(2012: £1.3m loss) arose from operating costs.
The balance sheet strength has increased with total assets at
the end of the year of £41.2m (2012: £31.7m). Net Current
Assets were £1.7m (2012: £17.8m) with cash balances of £0.4m.
The directors believe the Company has sufficient working
capital to allow it to continue through to realising value from
one of its investments.
No dividend has been paid or proposed for the year (2012: £nil).
The profit of £7.4m (2012: £13.4m loss) has been transferred to
reserves.
FINANCIAL INSTRUMENTS
The Company’s financial instruments comprise cash, short term
debtors and creditors arising from its operations. The principal
financial instruments used by the Company are cash balances
raised from share issues by the company. The Company has not
established a formal policy on the use of financial instruments
but assesses the risks faced by the Company as economic
conditions and the Company’s operations develop.
RISKS AND UNCERTAINTIES
The business believes it has sufficient cash funds to continue in
business for the foreseeable future through to the realisation
of value from one of its investments. It recognises that its
investments have a level of risk associated with them and is
reliant on the continued performance within their respective
markets.
DIRECTORS
The present membership of the board is set out on page 2. DS
Kell, CD Brooks and BJ Campbell resigned on 5 November 2013.
All directors have the right to acquire shares in the company via
the exercise of options granted under the terms of their service
contracts, copies of which may be inspected by shareholders
upon written application to the company secretary. Details of
the directors’ options to acquire shares are set out in the
Directors’ Remuneration Report on pages 9 to 10.
POLICY ON PAYMENT OF CREDITORS
It is Company 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 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 2013
were 71 days (2012: 52 days).
SUBSTANTIAL SHAREHOLDINGS
On 31 December 2013 the following held substantial shares in
the company. No other person has reported an interest of more
than 3% in the ordinary shares.
No.
%
HSBC GLOBAL CUSTODY NOMINEE (UK)
26,908,140
19.29%
THE BANK OF NEW YORK (NOMINEES)
24,869,344
17.83%
VIDACOS NOMINEES LIMITED
14,893,223
10.68%
UBS PRIVATE BANKING NOMINEES LTD
9,610,579
6.89%
CHASE NOMINEES LIMITED
9,194,506
6.59%
TD DIRECT INVESTING NOMINEES
4,256,256
3.05%
RRE Stanley holds shares of 9.05% which are held through
nominee companies.
DIRECTORS’ INTEREST IN CONTRACTS
No director had a material interest at any time during the year in
any contract of significance, other than a service contract, with
the company or any of its subsidiary undertakings.
AUDITORS
A resolution to reappoint Baker Tilly UK Audit LLP as auditors will
be put to the members at the annual general meeting. Baker
Tilly UK Audit LLP has indicated its willingness to continue in
office.
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.
6
TANFIELD GROUP PLC FINANCIAL STATEMENTS
DIRECTORS’ REPORT (Continued)
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
Roy Stanley
Non-Executive Director
30 May 2014
7
TANFIELD GROUP PLC FINANCIAL STATEMENTS
CORPORATE GOVERNANCE
Principles of Corporate Governance
The Company is committed to high standards of corporate
is accountable to the Company’s
governance. The board
shareholders for good corporate governance. The Company has
complied substantially throughout the period with the
corporate governance guidelines for smaller quoted companies
issued by the Quoted Company Alliance and details are
provided below.
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 two independent Non-Executive Directors. In
addition, until their resignation on 5 November 2013, the Chief
Executive and two other Executive Directors were members of
the board.
Board Role
The Board is responsible to shareholders for the proper
management of the Company. The Non-Executive Directors
have a particular responsibility to ensure that the strategy is
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 Company. The Board has a formal schedule
of matters reserved to it. 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 Company’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
determined and agreed 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
The report on Directors’
remuneration is set out on pages 9 to 10.
fully attended.
Audit Committee
During the year the Audit Committee comprised of Martin
Groak and John Pither.
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 Company’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 Company’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 Company, that it is not necessary to establish
an internal audit function.
Relations with Shareholders
The Company values its dialogue with both institutional and
private investors. Effective two-way communication with fund
managers, institutional investors and analysts is actively pursued
and this encompasses issues such as performance, policy and
strategy.
Private investors are encouraged to participate in the Annual
General Meeting at which the Chairman presents a review of the
results and comments on current business activity.
The
Chairmen of the Audit and Remuneration Committees will be
available at the Annual General Meeting to answer any
shareholder questions.
Notice of Annual General Meeting will be issued in due course.
Going Concern
The directors confirm that they are satisfied that the Company
has 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.
Roy Stanley
Non-Executive Director 30 May 2014
8
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 RRE Stanley and J Pither and the committee was
chaired by J Pither.
Remuneration policy
The policy of the committee was to reward executive directors
in order to recruit, motivate and retain high quality executives
within a competitive market place.
There were four main elements of the remuneration packages
for executive directors and senior management:
Basic annual salary (including directors’ fees) and
benefits;
Annual bonus payments;
Share option incentives; and
Pension arrangements.
Basic salary
Basic salary was reviewed annually in March with increases
taking effect from 1 April. In addition to basic salary, the
executive directors also received certain benefits in kind,
principally private medical insurance.
Annual bonus
The committee established the objectives which must be met
for each financial year if a cash bonus was to be paid. The
purpose of the bonus was to reward executive directors and
other
for achieving above average
performance which also benefits shareholders.
senior employees
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 were members of a money purchase
pension scheme to which the company contributed. Their
dependants were eligible for dependants’ pension and the
payment of a lump sum in the event of death in service. No
other payments to directors were pensionable.
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 5 November 2013 DS Kell, CD Brooks and BJ Campbell
resigned as directors. These former Directors had in their
contracts exit packages of two years but this was agreed to be
reduced to the equivalent of one year. The Company has
provided for settlement payments to the former directors as at
31 December 2013 of no more than £891k (DS Kell £371k, CD
Brooks £278k, BJ Campbell £242k). It is intended that the
agreements will state that repayments will be the earlier of the
Company having available free cash from its investments in
Snorkel and Smith or October 2018.
Directors interests
The interests of directors holding office at the year end in the
company’s ordinary 5p shares at 31 December 2013 and 1
January 2013 are shown below:
RRE Stanley
M Groak
J Pither
Total
Number of shares
2013
12,617,661
-
815,084
13,432,745
2012
12,617,661
-
815,084
13,432,745
The directors, as a group, beneficially own 9.6% 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 emoluments for the financial year were as follows:
RRE Stanley
DS Kella
CD Brooksb
BJ Campbellc
M Groak
J Pitherd
Total
a
DS Kell resigned on 5 November 2013
Salary
79
324
220
199
28
36
886
Benefits
in kind
18
18
18
18
-
-
72
Total
2013
97
342
238
217
28
36
958
b
c
CD Brooks received a loan in a previous year of £31k which was outstanding at 31 December 2013. CD Brooks resigned 5 November 2013
BJ Campbell resigned on 5 November 2013
d
J Pither is paid through Surrey management services.
Directors share options held at 31 December 2013 were as follows:
Pension Total
Total
2012
110
459
328
276
38
43
1,254
2013
16
61
36
39
-
-
152
Pension
Total
2012
15
58
15
35
-
-
123
DS Kell
CD Brooks
BJ Campbell
RRE Stanley
M Groak
J Pither
31 December
2012f
411,334
860,000
1,800,000
Granted/
Lapsed
-
-
-
Exerci
sed
-
-
-
250,000
200,000
1,100,000
140,000
50,000
320,000
900,000
800,000
30,000
200,000
-
-
-
-
-
-
-
-
-
-
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
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
21/01/2014
02/01/2017
01/03/2016
21/01/2021
31
December
2013
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
200,000
7,091,334
-
-
-
-
-
-
-
-
-
-
-
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 2013 the market price of the ordinary shares was 16.88p. The range during 2013 was 13.88p to 26.75p
Approval
This report was approved by the board of directors and authorised for issue on 30 May 2014 and signed on its behalf by:
Roy Stanley
Non-Executive Director
10
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the Strategic Report
and the Directors’ Report and the financial statements in
accordance with applicable law and regulations.
Company
law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the financial statements of the
company in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union (“EU”).
The financial statements are required by law and IFRS as
adopted by the EU to present fairly the financial position and
performance of the company. 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.
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 company and of
the profit or loss of the company for that period.
In preparing the financial statements, the directors are required
to:
a.
b.
c.
d.
select suitable accounting policies and then apply them
consistently;
make judgements and accounting estimates that are
reasonable and prudent;
state whether they have been prepared in accordance
with IFRS as adopted by the EU;
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the company and enable them to ensure
that
the
statements
Companies Act 2006. They are also responsible for safeguarding
the assets of the company and hence for taking reasonable steps
for the prevention and detection of
fraud and other
irregularities.
comply with
financial
the
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.
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 financial statements on pages 13 to 28.
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.
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
in the Directors’ Responsibilities
As more fully explained
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 Financial Reporting Council’s website at
http://www.frc.org.uk/Our-Work/Codes-Standards/Audit-and-
assurance/Standards-and-guidance/Standards-and-guidance-
for-auditors/Scope-of-audit/UK-Private-Sector-Entity-(issued-1-
December-2010).aspx
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the company’s
affairs as at 31 December 2013 and of its profit for the year
then ended;
have been properly prepared in accordance with IFRSs as
adopted by the European Union; and
have been prepared in accordance with the provisions of
the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and
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, or
returns adequate for our audit have not been received
from branches not visited by us; or
the 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
30 May 2014
12
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
Revenue
Staff costs
Depreciation and amortisation expense
Other operating expenses
Loss from operations before impairments
Impairment of Investments
Intercompany loan forgiveness
Adjustment to fair value of investments
Profit/(loss) from operations after impairments
Finance expense
Finance income
Net finance (expense) income
Profit/(loss) from operations before tax
Taxation
Profit/(loss) & total comprehensive income for the year attributable to
equity shareholders
Earnings/(loss) per share
Earnings/(loss) per share from operations
Basic (p)
Diluted (p)
Notes
2013
£000's
2012
£000's
1
2
4
3
3
5
6
6
2,223
(2,606)
-
(679)
(1,062)
(1,357)
(17,141)
26,984
7,424
(80)
48
(32)
7,392
-
7,392
3,250
(2,100)
-
(2,469)
(1,319)
(2,323)
(9,787)
-
(13,429)
-
71
71
(13,358)
-
(13,358)
5.4
5.3
(11.0)
(11.0)
13
TANFIELD GROUP PLC FINANCIAL STATEMENTS
BALANCE SHEET (Company registration number 04061965)
AS AT 31 DECEMBER 2013
Non current assets
Non current Investments
Investments in subsidiaries
Current assets
Trade and other receivables
Deferred consideration
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Non-current liabilities
Deferred tax liabilities
Total liabilities
Equity
Share capital
Share premium
Share option reserve
Special reserve
Merger reserve
Retained earnings
Total equity
Notes
7
19
10
8
9
11
12
13
13
2013
£000's
37,563
-
37,563
2,902
349
375
3,626
2012
£000's
1,280
10,685
11,965
19,002
339
402
19,743
41,189
31,708
1,885
1,885
-
-
1,885
6,975
16,262
1,904
66,837
1,534
(54,208)
39,304
1,915
1,915
-
-
1,915
6,450
14,823
1,885
66,837
1,534
(61,736)
29,793
Total equity and total liabilities
41,189
31,708
The financial statements on pages 13 to 28 were approved by the board of directors and authorised for issue on 30 May 2014 and
are signed on its behalf by:
Roy Stanley
Non-Executive Director
14
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
At 1 January 2012
Comprehensive income
Loss for the year
Total comprehensive income for
the year
Transactions with owners in their
capacity as owners:-
Issuance of new shares
Share based payments
At 31 December 2012
Comprehensive income
Profit for the year
Total comprehensive income for
the year
Transactions with owners in their
capacity as owners:-
Issuance of new shares (note 13)
Share based payments (note 14)
At 31 December 2013
Share
capital
Share
premium
£000's
4,728
£000's
3,097
Share
option
reserve
£000's
1,785
Merger
reserve
Special
reservea
Retained
earnings
Total
£000's
1,534
£000's
66,837
£000's
(48,378)
£000's
29,603
-
-
-
-
-
-
-
-
-
-
(13,358)
(13,358)
(13,358)
(13,358)
1,721
1
6,450
11,726
-
14,823
-
100
1,885
-
-
1,534
-
-
66,837
-
-
(61,736)
13,447
101
29,793
-
-
-
-
-
-
-
-
-
-
7,392
7,392
7,392
7,392
525
-
6,975
1,439
-
16,262
-
19
1,904
-
-
1,534
-
-
66,837
-
136
(54,208)
1,964
155
39,304
a
The company’s special reserve relates to the reclassification of the share premium account.
15
TANFIELD GROUP PLC FINANCIAL STATEMENTS
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
Profit/(loss) before interest and taxation
Loss on deferred consideration currency fluctuations
Adjustment to fair value of investment
Loss on intercompany loan write off
Loss on impairment of investments
Operating cash flows before movements in working capital
(Increase)/decrease in receivables
Increase/(decrease) in payables
Net cash (used in) operations
Interest paid
Net cash used in operating activities
Cash flow from Investing Activities
Purchase of investments
Loan to Smith Electric Vehicles US Corp
Interest received
Net cash from/(used in) investing activities
Cash flow from financing activities
Proceeds from issuance of ordinary shares net of costs
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the start of year
Cash and cash equivalents at the end of the year
2013
£000's
7,424
27
(26,650)
17,141
1,357
(701)
(1,513)
270
(1,944)
(80)
(2,024)
-
-
34
34
1,963
1,963
(27)
402
375
2012
£000's
(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
16
TANFIELD GROUP PLC FINANCIAL STATEMENTS
ACCOUNTING POLICIES
(i) Basis of preparation of
statements
the
financial
These 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 company’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 Company will continue
to be able to meet its liabilities as they fall due for the
foreseeable future. At 31 December 2013 the Company has
cash balances of £0.4m and is debt free.
The Directors are confident that the cash balances will be
sufficient to see the Company continue until it realises the value
of one of its investments and that the assumptions underlying
their opinion are reasonable and that the Company will be able
to operate within its cash balances. As disclosed in note 16, RRE
Stanley and DS Kell have confirmed they will defer repayment of
their loans for 12 months. 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 assumption not be valid.
(iii) Revenue
All revenue relates to management recharges and is recognised
when the recharges are made.
in
than
sterling,
currencies other
(iv) Foreign currencies
the
Transactions
presentational currency of the company, are recorded at the
rates of exchange prevailing on the dates of the transactions. At
each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date.
Non-monetary assets and liabilities carried at fair value that
are denominated in foreign currencies are translated at the
rates prevailing at the date when the fair value was determined.
Gains and losses arising on retranslation are included in the
income statement for the period, except for exchange
differences on non-monetary assets and liabilities, which are
recognised directly in equity.
(v) Share based payments
The Company 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 Company’s estimate of shares that
will eventually vest.
(vi) Borrowing costs
All borrowing costs are expensed in the income statement in the
period in which they are incurred.
(vii) Financial instruments
Recognition of financial assets and financial liabilities
Financial assets and financial liabilities are recognised on the
Company’s balance sheet when the Company has become a
party to the contractual provisions of the instrument.
Financial assets
Investments
Investments are included at either cost less amounts written off
or fair value where applicable.
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
instruments are classified
Financial
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 Company 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.
17
(xi) 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 Company recognises termination
benefits when it is demonstrably committed to the affected
employees leaving the Company.
(x) Provisions
Provisions are recognised when the Company 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.
(xi) 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
ACCOUNTING POLICIES (continued)
(viii) Segmental reporting
IFRS 8 provides segmental information for the Company on the
basis of information reported to the chief operating decision-
maker for decision-making purposes. The Company considers
that the role of chief operating decision-maker is performed by
the Tanfield Group PLC’S board of directors.
(ix) 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 Company’s liability for current tax is calculated
by using tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is
accounted for using the balance sheet
liability method.
Deferred tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition
(other than in a business combination) of other assets and
liabilities in a transaction which affects neither the tax profit nor
the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries except where
the Company is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected
to apply to the period when the asset is realised or the liability
is settled. Deferred tax is charged or credited in the income
statement, except when it relates to items credited or charged
directly to equity, in which case the deferred tax is also dealt
with in equity.
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.
18
and
amended
New
and
interpretations effective from 1 January 2014
not yet adopted by the Company
standards
The Company 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 Company believes will have no significant impact on
the Company’s financial position or results for the current or
prior years but may
impact the accounting for future
transactions or arrangements.
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 Company’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.
Investments
The status of the Company’s holding in Smith Electric Corp was
reviewed. Smith Electric Corp continues to demonstrate ability
to raise capital to fund its development, and as a result the
Company considers its receivables from Smith Electric Corp are
recoverable in full.
The status of the Company’s holding in Snorkel International
Holdings was reviewed. Since the injection of working capital
Snorkel International Holdings continues to progress well with
production increasing. The company has reviewed the financial
projections prepared by Snorkel and taking in to account
improving global market conditions, the injection of working
capital and applying its own sensitivity to the time taken to
achieve EBITDA growth to $25m, considers its investment in
Snorkel International Holdings to be at fair market value after
calculating the present day value of the investment. The
investment value in the financial statements assumes that an
EBITDA of $25m will be achieved in November 2016.
Accounting standards,
amendments to published accounts
interpretations and
The Company considered the implications, if any, of the
following amendments to IFRSs during the year ended 31
December 2013.
and
amended
and
New
interpretations effective from 1 January 2013
adopted by the Company
standards
During the year ended 31 December 2013, 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
financial statements.
19
TANFIELD GROUP PLC FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS
1. Revenue
An analysis of the group’s revenue is as follows:
Management recharges
Total
2. Staff costs
Aggregate remuneration comprised
Wages and Salaries
Share scheme expense
Social Security Costs
Other Pension Costs
Total staff costs
Average monthly number of employees
Head Office and Administration
Total
2013
£000’s
2,223
2,223
2013
£000's
2,155
155
143
153
2,606
2013
No.
17
17
2012
£000’s
3,250
3,250
2012
£000's
1,680
100
193
127
2,100
2012
No.
21
21
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.
3. Finance expense and finance
income
Finance expense
Interest on bank overdrafts, loans & financial
instruments
Interest on director loans (note 16)
Total finance expense
Finance income
Interest on cash and cash equivalents
Interest on deferred consideration (note 8)
Interest on Intercompany loans
Total finance income
4. Other operating expenses
Other operating expenses
Property related expenses
Net loss (gain) on foreign exchange
Auditor's remuneration (see below)
Other operating expenses
Total operating expenses
20
2013
£000's
21
59
80
2013
£000's
3
14
31
48
2013
£000's
153
112
54
360
679
2012
£000's
-
-
-
2012
£000's
10
14
47
71
2012
£000's
191
1,663
69
546
2,469
TANFIELD GROUP PLC FINANCIAL STATEMENTS
Auditor's 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 accounts
Other services relating to taxation
compliance services
Comprising
Audit services
Non audit services
5. Taxation
Analysis of taxation charge for the year
United Kingdom
Corporation tax at 23.25% (2012: 24.5%)
Total current taxation charge
Deferred tax
Origination and reversal of temporary differences
Total deferred tax charge
Total taxation charge in the income statement
2013
£000's
2012
£000's
38
16
54
38
16
53
16
69
53
16
2013
£000's
2012
£000's
-
-
-
-
-
-
-
-
-
-
Factors affecting taxation charge
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:
Profit/(loss) before taxation
Notional taxation charge at UK rate of 23.25% (2012: 24.5%)
Effects of:
Non (taxable) income/deductable expenses
Deferred tax asset not recognised in the period
Total taxation charge
2013
£000's
7,392
1,719
(2,082)
363
-
2012
£000's
(13,358)
(3,239)
567
2,672
-
The Company has tax losses of approximately £2,283k (2012: £720k) available to carry forward against future profits of the same
trade.
21
TANFIELD GROUP PLC FINANCIAL STATEMENTS
6. Earnings/(loss) per share
Basic earnings/(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 20.25p (2012: 44.55p).
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 operations
Earnings/(loss) for the purposes of basic earnings per share being net profit attributable to
owners of the parent
Potential dilutive ordinary shares from share options
Earnings/(loss) for the purposes of diluted earnings per share
Earnings/(loss) per share from operations
Basic (p)
Diluted (p)a
2013
No.
000’s
136,879
2,883
139,762
2013
£000's
7,392
-
7,392
2012
No.
000’s
121,202
2,736
123,938
2012
£000's
(13,358)
-
(13,358)
5.4
5.3
(11.0)
(11.0)
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 in 2012.
7. Non current investments
A summary of the Non current investments is shown below:
Investment in Smith Electric Vehicles US Corp
Investment in Snorkel International Holdings LLC
Total Non current Investments
2013
£000’s
1,280
36,283
37,563
2012
£000’s
1,280
-
1,280
Smith Electric Vehicles US Corp
At 31 December 2013, the Company held a 24% (2012: 24%) share of the issued share capital of Smith Electric Vehicles US Corp, a
company registered in the US. This Share holding is being held as a non current investment at the lower of cost and realisable
value (2013: £1,280k, 2012 £1,280k).
Snorkel International Holdings LLC
On 15 October 2013 the Company disposed of its Powered Access division Snorkel Europe Ltd in exchange for a 49% share of the
issued share capital of Snorkel International Holdings LLC. At 31 December 2013, the Company held a 49% (2012: Nil) share of the
issued share capital of Snorkel International Holdings LLC, a company registered in the US. This share holding is being held as a
non current investment at fair value (2013: £36,283k, 2012: £Nil) having been held as an investment in subsidiaries in 2012
(£9,677k).
22
TANFIELD GROUP PLC FINANCIAL STATEMENTS
8. Deferred consideration
A summary of the deferred consideration receivable is shown below:
Due from Smith Electric Vehicles US Corp
Total Deferred consideration receivable
2013
£000’s
349
349
2012
£000’s
339
339
Smith Electric Vehicles US Corp
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 interest receivable on outstanding consideration
Effects of currency fluctuations
Deferred consideration receivable net of interest
2013
£000’s
341
14
(6)
349
2012
£000’s
341
14
(16)
339
9. Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term deposits held by the Company treasury function. The carrying amount of
these assets approximates their fair value.
The Company primarily holds Sterling. Currency denominated balances are translated to sterling at the balance sheet date.
Cash and cash equivalents
10. Trade and other receivables
Current
Amounts due from subsidiary undertakings
Amounts due from Snorkel International Holdings LLC
Amounts due from Smith Electric Vehicles US Corp and its subsidiary
Other debtors and prepayments
2013
£000's
375
2013
£000's
-
223
2,511
168
2,902
2012
£000's
402
2012
£000's
16,378
-
1,852
772
19,002
The directors consider that the carrying amounts of Trade and other receivables approximates to their fair value.
11. Trade and other payables
The directors consider that the carrying amounts of trade and other payables approximates to their fair value.
Current
Trade payables
Social security and other taxes
Accrued expenses
Loans
Amounts due to subsidiary undertakings
2013
£000's
114
77
970
724
-
1,885
Average credit period taken on trade purchases (days)a
a
Creditor days have been calculated as trade payables and accrued expenses over other operating expenses multiplied by 365 days. The calculation includes only continuing operations.
71
23
2012
£000's
137
151
212
-
1,415
1,915
52
TANFIELD GROUP PLC FINANCIAL STATEMENTS
12. Deferred taxation
Company
There is no movement in deferred taxation in the current or proceeding years.
13. 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.
Share capitalb
Nominal share
£000’s
value
4,728
5p
1,464
5p
257
5p
5p
1
6,450
5p
5p
362
5p
163
6,975
5p
At 31 December 2011
New share issue 13 Feb 2012
New share issue 23 July 2012
Share options exercised
At 31 December 2012
New share issue 25 March 2013a
New share issue 16 April 2013 a
At 31 December 2013
a
Number of shares
94,567,218
29,268,293
5,135,714
20,000
128,991,225
7,247,826
3,252,174
139,491,225
Share premium
£000’s
3,097
9,930
1,796
-
14,823
993
446
16,262
On 20 March 2013 the Company announced that it had conditionally raised gross proceeds of GBP2.1m. These funds were raised by way of a placing of 10,500,000 new Ordinary Shares of 5
pence ("Shares") with institutional investors at a price of 20 pence per Share. 7,247,826 shares were issued onto the AIM market on 25 March 2013 under existing authorities, a further 3,252,174
shares were issued on 16 April 2013 after the resolution allowing their issue was passed.
14. 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 2013 and 2012 are shown below.
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Expired
Outstanding at the end of the year
Exercisable
Number of
share options
8,746,334
-
(1,685,000)
-
-
7,061,334
3,061,334
2013
Weighted average
exercise price
(pence)
21
-
(41)
-
-
16
1
2012
Number of
share options
(Restated)
9,606,334
-
(840,000)
(20,000)
-
8,746,334
3,196,334
Weighted
average exercise
price (pence)
113
-
(135)
(5)
-
21
10
The outstanding options at 31 December 2013 had a weighted average remaining contractual life of 5.20 years (2012: 6.49 years)
The following table relates to share options outstanding and exercisable at 31 December 2013
Exercise price (pence)
No of share options
No of exercisable options
1p
2,921,334
2,921,334
Option exercise prices
27p
5p
4,000,000
140,000
-
140,000
Total
7,061,334
3,061,334
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 £155k (2012: £100k) and a credit directly to equity of £136k (2012: £Nil) 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.
24
TANFIELD GROUP PLC FINANCIAL STATEMENTS
15. Financial risk management
The Company’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 Company’s exposure to credit risk arises from its Trade and other receivables and cash deposits with financial institutions.
The Company’s maximum exposure to credit risk is summarised below:
Trade and other receivables
Cash and cash equivalents
2013
£’000
2,902
375
3,277
2012
£’000
19,002
402
19,404
The Company 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 Company is exposed to liquidity risk arising from having insufficient funds to meet the Company’s future financing needs.
The Company’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.
Maturity analysis
The table below analyses the Company’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.
2013
Trade and other payables
2012
Trade and other payables
Within 1 year
£’000
1 to 5 years
£’000
Over 5 years
£’000
1,885
1,885
1,915
1,915
-
-
-
-
-
-
-
-
Total
£’000
1,885
1,885
1,915
1,915
Foreign exchange risk management
The Company is exposed to movements in foreign exchange rates due to the net assets of its foreign investments being
denominated in foreign currencies. If appropriate the Company can use currency derivative financial instruments such as foreign
exchange contracts to reduce exposure. These were not used in the period.
Capital management
The Company’s main objective when managing capital is to protect returns to shareholders. The Company also aims to maximise
its capital structure of debt and equity so as to minimise its cost of capital.
The Company 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 Company considers its capital to include share capital, share premium, special reserve, translation reserve and retained
earnings.
No gearing is currently calculated as the Company currently has no borrowings.
25
TANFIELD GROUP PLC FINANCIAL STATEMENTS
16. Related party transactions
Company
The Company entered into transactions with its subsidiaries, until disposal, as disclosed below.
2013
£000’s
14,963
2,221
(17,141)
(43)
-
2012
£000’s
26,251
3,250
(9,787)
(4,751)
14,963
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 2013 the company formally forgave £17,141k of its intercompany receivables, of this balance £10,566k (2012: £9,787k) related to Snorkel Europe Limited (formerly Tanfield Powered
Access Limited), £3,810k (2012: Nil) to Snorkel International Inc, £1,283k (2012: Nil) to Tanfield Engineering System (US) Inc and £1,510k to Snorkel Australia PTY Ltd. In 2013 the company also
wrote off a loan due to Tanfield Union of £28k (2012: Nil).
Transactions with its Smith Electric Vehicles US Corp and it’s subsidiary
During the year the group recharged £513k (2012: £800k) 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 13
there was an outstanding balance due from Smiths Electric Vehicles Europe Ltd of £682k (2012: £739k) 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
2013
£000’s
1,995
152
2012
£000’s
1,433
123
2,147 1,556
Loans
During the year RRE Stanley and DS Kell loaned the Company £400k and £100k respectively. The terms of the loan agreements
allowed for a 5% ‘borrowing charge’ payable upon initial drawdown of the funds along with a 9.5% interest rate attached to the
loan capital from the drawdown date (30 Aug 13 and 17 Sept 13 respectively) until the date of the sale of the Company’s Powered
Access division on 15 October 2013, notwithstanding the period. From the date of sale the loans have attracted an annual interest
rate of 10% and the total interest for RRE Stanley and DS Kell during the year amounted to £47k and £12k respectively. In return
for a fee of £132k and £33k, RRE Stanley and DS Kell have agreed to defer the repayment by up to 12 months, or when cash is
available whichever is the earlier. Each of the loan agreements are secured by a Debenture. The Debentures are in a form which is
relatively standard and constitute fixed and floating charges over the Company's assets. As of 31 December 2013 the borrowing
charges had been repaid leaving an aggregate outstanding balance due of £724k which has been classified under trade and other
payables within the balance sheet.
Settlement agreements
On 5 November 2013 DS Kell, CD Brooks and BJ Campbell resigned as directors. These former Directors had in their contracts exit
packages of two years but this was agreed to be reduced to the equivalent of one year. The Company has provided for settlement
payments to the former directors as at 31 December 2013 of no more than £891k (DS Kell £371k, CD Brooks £278k, BJ Campbell
£242k). It is intended that the agreements will state that repayments will be the earlier of the Company having available free cash
from its investments in Snorkel and Smith or October 2018.
26
TANFIELD GROUP PLC FINANCIAL STATEMENTS
17. Retirement benefits
The Company operates defined contribution retirement benefit plans for all qualifying employees. The assets of the schemes are
held separately from those of the Company 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 Company are reduced by the amount of
forfeited contributions.
The total cost charged to income of £153k (2012:£194k) represents contributions payable to these schemes by the Company at
rates specified in the rules of the schemes. As at 31 December 2013, contributions of £5k (2012: £Nil) due in respect of the current
reporting period had not been paid over to the schemes.
18. Financial instruments recognised in the balance sheet
Assets
Current financial assets
Trade and other receivables
Investments
Cash and cash equivalents
Total
Liabilities
Current liabilities
Trade and other payables
Total
a
Assets and liabilities at fair value through profit and loss.
2013
Assets
Held to
maturitya
£000’s
-
37,563
-
37,563
Held for
tradinga
Total
£000’s
2,902
37,563
375
40,840
Total
£000’s
£000’s
-
-
1,808
1,808
2012
Assets
Held to
maturitya
£000’s
-
11,965
-
11,965
Held for
tradinga
Total
£000’s
19,002
11,965
402
31,369
Total
£000’s
£000’s
-
-
1,764
1,764
Loans and
receivables
£000’s
19,002
-
402
19,404
Other
financial
liabilities
£000’s
1,764
1,764
Loans and
receivables
£000’s
2,902
-
375
3,277
Other
financial
liabilities
£000’s
1,808
1,808
19. Investments
The tables below give brief details of the Company’s investments at 31 December 2013. The Company had no operating subsidiaries
as of 31 December 2013.
Investments
Smith Electric Vehicles US Corp
Smith Electric Vehicles Europe Ltda
Snorkel International Holdings LLC
Tanfield Engineering Systems US (Inc)b
Snorkel Europe Ltd b
Snorkel International Inc b
Snorkel Australia Limited b
Snorkel New Zealand Limited b
a
Principal activity
Electric vehicle manufacture
Electric vehicle manufacture
Holding Company
Powered Access
Powered Access
Powered Access
Powered Access
Powered Access
Group Interest in
allotted capital &
voting rights
24.00%
24.00%
49.00%
49.00%
49.00%
49.00%
49.00%
49.00%
Country of
incorporation
US
UK
US
US
UK
US
AUS
NZ
Smith Electric Vehicle Europe Ltd is a 100% owned subsidiary of Smith Electric Vehicles US Corp . The Company’s interest in Smith Electric Vehicles Europe Ltd is held indirectly through its
investment in Smith Electric Vehicles US Corp.
b
The Company’s interest is held indirectly through its investment in Snorkel International Holdings LLC.
27
TANFIELD GROUP PLC FINANCIAL STATEMENTS
Details of the investments held in the Subsidiaries are as follows:
Tanfield Engineering Systems Ltd
Snorkel Europe Ltd (formerly Tanfield Powered Access Ltd)
2013
£000’s
-
-
-
2012
£000’s
1,008
9,677
10,685
Tanfield Engineering Systems Ltd
Through a process of administration Tanfield Engineering Systems Ltd was disposed of in November 2013.
Snorkel Europe Ltd (formerly Tanfield Powered Access Ltd)
On 15 October 2013 the Company disposed of its Powered Access division Snorkel Europe Ltd in exchange for a 49% share of the
issued share capital of Snorkel International Holdings LLC. This investment is being held as a non current investment (Note 7).
28