TANFIELD GROUP PLC
REPORT AND FINANCIAL
STATEMENTS 2017
Registered in England & Wales
Company number 04061965
TANFIELD GROUP PLC FINANCIAL STATEMENTS
REPORT AND FINANCIAL STATEMENTS 2017
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
Statement of Financial Position
Statement of Changes in Equity Attributable to Equity Shareholders
Cash Flow Statement
Accounting Policies
Critical Accounting Estimates and Key Judgements
Notes to the Accounts
2
3
5
6
7
9
10
12
13
14
15
16
18
20
1
TANFIELD GROUP PLC FINANCIAL STATEMENTS
DIRECTORS AND ADVISERS
DIRECTORS
NON-EXECUTIVE
J Pither
D Robinson
M Groak
SECRETARY
D Robinson
REGISTERED OFFICE AND ADVISORS
REGISTERED OFFICE
Sandgate House
102 Quayside
Newcastle upon Tyne
NE1 3DX
AUDITOR
RSM UK Audit LLP
1 St James’ Gate
Newcastle upon Tyne
NE1 4AD
SOLICITOR
Ward Hadaway
Sandgate House
102 Quayside
Newcastle upon Tyne
NE1 3DX
Chairman (resigned 31 May 2017)
Non executive Director (appointed Chairman 31 May 2017)
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
Link Market Services Limited (formerly Capita Registrars Limited)
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
2
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STRATEGIC REPORT
CHAIRMAN’S STATEMENT
We have continued to closely monitor the progress of the
Company’s main investment in Snorkel during the year whilst
still maintaining a watchful eye over the investment in Smith
despite the carrying value being nil. The Board is pleased with
the progress made by Snorkel during 2017 and feels that,
should the progress continue, it makes the likelihood of a
realisation of value in the future more probable. The calculation
of the Snorkel valuation was made in 2013 and is based on the
formula for realisation of value, which expires on 30 September
2018, detailed in the circular that was distributed prior to the
joint venture between Tanfield Group Plc and Xtreme
Manufacturing LLC. Whilst progress continues to be made, the
Board is of the view that the financial targets required to trigger
the formula for realisation of value will not be met before this
expiry date. After this date, the calculation of the investment
value becomes uncertain and the return could be less than the
carrying value.
The Board continues to hold the view that the value of the
investment in Smith should be nil.
NON-EXECUTIVES' REVIEW
Background
The Company is defined as an investment company with two
passive investments. This definition resulted from the disposal
of the controlling interest in Smith Electric Vehicles in 2009 and
the formation of a joint venture between Tanfield Group Plc and
Xtreme Manufacturing LLC relating to Snorkel in October 2013.
Tanfield currently owns 5.76% of Smith Electric Vehicles Corp.
("Smith") and 49% of Snorkel
International Holdings LLC
("Snorkel").
OVERVIEW
Snorkel
Tanfield continues to own 49% of Snorkel, which it has held
since the joint venture was established in October 2013. Sales
levels (unaudited) have continued to grow during 2017,
increasing by 27% resulting in sales of $165.8m (2016: $130.5m/
2015: $109.9m / 2014: $85.3m). Snorkel's strategy of creating a
broader and more diverse customer base in targeted areas is
one of the factors that has assisted the continued sales growth.
The Board is not aware of any market factors, nor has it been
made aware of any other specific reason why further growth
could not take place in 2018.
The Snorkel unaudited accounts for 2017 report an operating
profit, excluding depreciation, of $1.6m (2016: $2.8m loss /
2015: $10.6m loss / 2014: $14.9m loss). The Board takes
comfort from a sustained period of operating profitability
experienced in 2017. This is testament to the focused cost-
down activity that has taken place in recent years and that is
expected to continue in future and which, if successful, should
reduce the bill of material costs and improve gross margins
further.
With the continued focus and support received from the
majority owner Don Ahern, the owner of Xtreme, the Board sees
no reason why Snorkel could not once again see growth in 2018,
having achieved sales growth of 29% in 2015, 19% in 2016 and
27% in 2017, and therefore potentially increase the level of
operating profitability. Tanfield is, however, unsure if the
dependency in the US upon Ahern Rentals as its principal
customer may have an impact upon this possible outcome.
Should economic conditions materially change during the
remainder of 2018, this may have an impact on the expected
outcome, but the Board is currently of the opinion that the
investment in Snorkel will result in a return to shareholders in
the future, although it should be noted that this is not expected
to materialise until after 30 September 2018, when the outcome
then becomes uncertain and could be less or could be more
than the calculated realisation value.
Valuation of Snorkel holding: unchanged at
£36.3 million
The Board of Tanfield has taken a view of the carrying value of
its 49% holding and its adjusted priority amount that takes
account of risks in the industrial global markets and the normal
cycles that operate within these markets. The range of potential
valuations can be broad, with the added complexity of a time-
driven element whereby the agreement for the current
valuation formula could only be triggered during a five year
period ending in September 2018.
At the end of 2017 there were just 9 months left to run on the
fixed terms of the agreement. If the formula is not triggered
within the 5 year time frame, Tanfield will retain a 49% interest
in Snorkel but the trailing 12 month $25m EBITDA trigger
compelling payment of the $22.4m adjusted priority amount
and the Company's put option compelling the purchase of
Tanfield's remaining interest in Snorkel will expire. The Board
continues to hold the view that Don Ahern, the owner of
Xtreme, would wish to one day own 100% of Snorkel and will
therefore seek to exercise the call option to buy Tanfield’s
holding in Snorkel at some point in the future.
As the Board is of the view that the $25m EBITDA trigger will not
be achieved by the expiry date, the calculation of the investment
value then becomes uncertain. The Board has considered a
number of possible scenarios, which assume that both progress
within Snorkel and the wider global market conditions will
continue to improve and, given the range of possible outcomes,
the actual realisation could be less or more than the current
valuation. A number of factors could influence the valuation and
performance of Snorkel between now and a potential realisation
date beyond September 2018, including Xtreme’s negotiating
stance and the exchange rate at the time of any realisation.
3
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STRATEGIC REPORT (Continued)
Due to the inherent uncertainties, the Board is unable to
determine whether the outcome will be less than the current
investment value so feel the current valuation of £36.3m should
be maintained. This valuation has been assessed against various
criteria,
including past performance, production capacity,
market conditions, the capability of the business to increase
output and exchange rate fluctuations.
The Board would like to draw your attention to the critical
accounting estimates and key judgments on pages 18 and 19
which further explain the uncertainty and to the Auditors’
report on page 10 in which they have also highlighted the
uncertainty.
Smith
In October 2014 Smith completed a restructuring exercise that
saw it convert debt to equity. As a result of this, they informed
the Company that its equity shareholding had reduced from
24% to 5.76% (excluding warrants).
Since then, Smith has sought to raise funds which would allow it
to implement its strategic plan. To date, no significant fundraise
has been completed and the Board of Tanfield does not foresee
this happening in the immediate future.
In May 2015 Smith executed a conditional agreement to form
an exclusive joint venture with strategic partner and investor
FDG Electric Vehicles Limited ("FDG"). In May 2016, the Board of
Tanfield was informed that Smith had filed a complaint against
FDG and the new Joint Venture. The Board of Tanfield
understands that counter-claims have been made against Smith
and that legal proceedings are ongoing.
Valuation of Smith holding
In 2015, the Board of Directors carried out a review of the
investment in Smith resulting in a decision to impair the
investment value to nil. The Board came to this decision due to
the funding uncertainties as well as the legal proceedings
between Smith and FDG.
In the light of the ongoing legal proceedings and Smith’s
inability to raise any meaningful funds since that time, the
Board maintains its opinion that the investment value should be
held at nil.
in
Strategy of Tanfield Board of Directors
relation to its Investments
Although the Board cannot predict the timeframe for a return
of value from its investment in Snorkel, the Directors believe
that it will result in a return of value to shareholders over time.
In contrast, at this stage it does not look likely that its
investment
in a return of value to
shareholders. The Directors will update shareholders should this
view change.
in Smith will result
The strategy of the Company in relation to these investments is
to return as much as possible of any realised value to
shareholders as events occur and circumstances allow, subject
to compliance with any legal requirements associated with such
distributions.
The Board takes the view that while there has been further
progress made by Snorkel, there is still a risk of failure, although
based on progress to date and commitments from Don Ahern /
Xtreme, this seems unlikely. The Board will continue to fulfill its
obligation to its shareholders in seeking to optimise the value of
its investments.
The investments are defined as passive investments and in line
with this definition Tanfield does not hold Board seats in either
Snorkel or Smith. There is no limit on the amount of time the
existing investments may be held by the Company.
Finance expense and income
The interest cost in the period of £nil (2016: £13k) was incurred
from loan interest charged during the period and interest
income of £nil (2016: £1k) received on bank balances.
Loss from operations
Loss from operations was £148k (2016: £237k).
Loss per share
Loss per share from continuing operations was 0.1 pence (2016:
0.2 pence). No dividend has been declared. (2016: £nil)
Cash
At 31 December 2017, the Company had cash of £0.1m (2016:
£0.3m) and approximately £0.3m as at the date of this report.
Risks and uncertainties
Following the successful placing of shares on 22 February 2018
raising £0.25m, the Board believes the business has sufficient
cash funds to continue in business for the foreseeable future,
beyond a period of 12 months from the date of this report.
However, there is no guarantee if and when a realisation of
value from one of its investments will happen and the Board will
closely monitor progress. It recognises that its investments have
a level of risk associated with them and is reliant on the
continued performance within their respective markets.
KPI's
The Board do not use any KPI's to monitor the performance of
the business.
Approved by the Board of Directors and signed on behalf of the
Board
Daryn Robinson
Chairman
23 April 2018
4
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 2017.
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.
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.
investments. It
INVESTING POLICY
The holdings in Snorkel International Holdings LLC and Smith
Electric Vehicles Corp. are passive
is the
intention that where distributions or realisations of such
holdings are made (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 presently no anticipated limit on the
amount of time the holdings are to be held by the Company.
The Company does not have and will not make any cross
holdings and does not have a policy on gearing.
RESULTS AND DIVIDENDS
The financial result, for the year to 31 December 2017 reflects
the principal activity of the company being that of an
investment company.
Turnover for the year was £nil (2016: £nil). The operating loss in
the year of £148k (2016: £237k) arose from operating costs.
The statement of financial position remains consistent with
total assets at the end of the year of £36.4m (2016: £36.6m).
Net Current Assets were £0.1m (2016: £0.2m) with cash
balances of £0.1m (2016: £0.3m). The directors believe the
Company has sufficient working capital to allow it to continue
for the foreseeable future, beyond a period of 12 months from
the date of this report
No dividend has been paid or proposed for the year (2016: £nil).
The loss of £148k (2016: £249k) has been transferred to
reserves.
FINANCIAL INSTRUMENTS
The Company’s financial instruments comprise cash, current
debtors and current and non current 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.
DIRECTORS
The present membership of the Board is set out on page 2.
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 7 to 8.
Trade creditor days based on creditors at 31 December 2017
were 65 days (2016: 48 days).
SUBSTANTIAL SHAREHOLDINGS
On 31 December 2017 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
49,506,267
31.67%
CHASE NOMINEES LIMITED
29,773,712
19.05%
VIDACOS NOMINEES LIMITED
15,873,967
10.15%
AURORA NOMINEES LIMITED
14,566,045
9.32%
THE BANK OF NEW YORK (NOMINEES)
11,142,907
7.13%
LYNCHWOOD NOMINEES LIMITED
7,455,780
4.77%
INTERACTIVE INVESTOR SERVICES
4,746.186
3.04%
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.
AUDITOR
A resolution to reappoint RSM UK Audit LLP as auditor will be
put to the members at the annual general meeting. RSM UK
Audit LLP has indicated its willingness to continue in office.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE
AUDITOR
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 auditor is unaware.
Each of the directors has 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
Daryn Robinson
Chairman
23 April 2018
5
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
complied substantially
the
throughout
corporate governance guidelines for smaller quoted companies
issued by the Quoted Company Alliance and details are
provided below.
the period with
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
At the start of the year the Board comprised of Jon Pither,
Chairman, Daryn Robinson and Martin Groak, independent Non
Executive Directors. Following Jon Pither's resignation on 31
May 2017, the Board comprised of Daryn Robinson, Chairman
and Martin Groak, Independent Non-Executive Director.
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 of Jon
Pither (resigned 31 May 2017 and Martin Groak appointed) and
Daryn Robinson. The Remuneration Committee determined and
agreed with the Board the framework of remuneration for 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 7 to 8.
Audit Committee
During the year the Audit Committee comprised of Martin
Groak and Jon Pither (resigned 31 May 2017 and Daryn
Robinson appointed).
The Audit Committee is responsible for:
Reviewing the scope of external audit, to receive
reports from RSM 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
the
and
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 is 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 the 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.
Daryn Robinson
Chairman
23 April 2018
6
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 J Pither (resigned 31 May 2017 and M Groak
appointed) and D Robinson and the committee was chaired by J
Pither (D Robinson from 31 May 2017).
Remuneration policy
There were four main elements of the remuneration packages
for directors:
Basic annual salary (including directors’ fees) and
benefits;
Annual bonus payments;
Share option incentives; and
Pension arrangements.
Basic salary
The basic salary of the directors is reviewed annually 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.
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 directors for achieving
above average performance which also benefits shareholders.
Share options
The 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 8.
Pension arrangements
Some directors were members of a money purchase pension
scheme to which the company contributed.
Directors interests
The interests of directors holding office at the year end in the
company’s ordinary 5p shares at 31 December 2017 and 1
January 2017 are shown below:
M Groak
J Pither (resigned 31 May 2017)
D Robinson
Total
Number of shares
2017
-
-
942,785
942,785
2016
-
1,542,553
942,785
2,485,338
The directors, as a group, beneficially own 0.6% 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.
7
TANFIELD GROUP PLC FINANCIAL STATEMENTS
DIRECTORS’ REMUNERATION REPORT (continued)
Remuneration review
Directors emoluments for the financial year were as follows:
M Groak
J Pithera
D Robinson
Total
a
J Pither resigned on 31 May 2017
Salary
2017
£000's
25
14
42
81
Pension
2017
£000's
-
-
2
2
Total
2017
£000's
25
14
44
83
Salary
2016
£000's
20
24
41
85
Pension
2016
£000's
-
-
-
-
Total
2016
£000's
20
24
41
85
Directors share options held at 31 December 2017 were as follows:
M Groak b
M Groak
J Pither
D Robinson
Total
31 December
2016
200,000
100,000
100,000
100,000
500,000
Granted/
(Lapsed)
(200,000)
-
-
-
(200,000)
Exercised
-
-
-
-
-
31 December
2017
-
100,000
100,000
100,000
300,000
Option
price per
sharea
5p
27p
27p
27p
Date from
which normally
exercisable
02/01/2010
02/02/2015
02/02/2015
02/02/2015
Expiry Date
02/01/2017
02/02/2020
02/02/2020
02/02/2020
a
On 31 December 2017 the market price of the ordinary shares was 13.25p. The range during 2017 was 11.88p to 16.38p
b
On 2 January 2017 the option lapsed
Approval
This report was approved by the board of directors and authorised for issue on 23 April 2018 and signed on its behalf by:
Daryn Robinson
Chairman
8
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the Strategic
Report, Directors’ Report and the financial statements in
accordance with applicable law and regulations.
law requires the directors to prepare financial
Company
statements for each financial year. Under that
law the
directors have elected to prepare the financial statements of
the company
International Financial
Reporting Standards ("IFRS") as adopted by the European Union
(“EU”).
in accordance with
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.
9
TANFIELD GROUP PLC FINANCIAL STATEMENTS
REPORT OF THE INDEPENDENT AUDITOR
Independent auditor's report to the members of Tanfield Group Plc
Opinion
We have audited the financial statements of Tanfield Group
PLC (the ‘company’) for the year ended 31 December 2017
which comprise the Statement of Comprehensive Income, the
Statement of Financial Position, the Statement of Changes in
Equity and the Cash Flow Statement and notes to the financial
statements, including a summary of significant accounting
policies. 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.
In our opinion, the financial statements:
give a true and fair view of the state of the company’s
affairs as at 31 December 2017 and of its loss for the
year then ended;
have been properly prepared in accordance with
IFRSs as adopted by the European Union; and
have been prepared
requirements of the Companies Act 2006.
in accordance with
the
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in
the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the
company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to SME listed
entities and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters
in relation to which the ISAs (UK) require
us to report to you where:
the directors’ use of the going concern basis of
accounting
in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial
statements any identified material uncertainties that
may cast significant doubt about the company’s
ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months
from the date when the financial statements are
authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and
include the most
significant assessed risks of material misstatement (whether or
not due to fraud) we identified, including those which had the
greatest effect on the overall audit strategy, the allocation of
in the audit and directing the efforts of the
resources
engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Carrying value of non current investments
Included in the Statement of Financial Position are non current
investments with a carrying value of £36.3m. This represents
holdings of 5% and 49% respectively in Smith Electric Vehicles
US Corp and Snorkel International Holdings LLC. Note 6 and the
Critical Accounting Estimates and Key Judgements of the
financial statements describe the judgements made by the
Board with regards to the need for an impairment to be booked
in respect of each of these investments and, in particular, the
uncertainty concerning the carrying value of the company’s
£36.3m investment in Snorkel International Holdings LLC. The
investment in Smith Electric Vehicles US Corp has already been
fully impaired.
The investment in Snorkel represents the sole significant asset
held within the Statement of Financial Position of the company
and accordingly any uncertainty as to the likely realisation of this
investment for either more or less than its carrying value could
have a material impact on the financial statements. The Board
has only limited financial information upon which to calculate its
estimate of the realisation value and our audit work has
information, the
considered the nature of that financial
assumptions used by management to calculate the estimated
realisation value and such other audit evidence as was available
to consider the reasonableness of these assumptions and
calculations.
The Critical Accounting Estimates and Key Judgements on pages
18 and 19 set out the basis whereby the Directors have
considered the fair value of the investment, based on its
possible recoverable amount, and the assumptions made
therein. The timing of when the company will be able to realise
its interest in Snorkel and the sum to be realised are both
dependent on the underlying trading performance of Snorkel
over the period to a realisation of value beyond September 2018
and on the applicable rate of exchange at the time that the US$
proceeds are converted into GBP. The Board have undertaken a
series of sensitivities based on the trading information for
Snorkel and have set out on pages 18 and 19 a range of potential
recoverable amounts between £22m and £40m. The actual
outcome will be dependent on both the future trading
performance of Snorkel and the exchange rate at the date of
realisation. Having undertaken these sensitivities, because of the
significant uncertainties over the amount and timing of
it remains
realisation,
appropriate to include the investment at the existing fair value
of £36.3m. In carrying out our audit work described above we
have considered the range of outcomes and the sensitivities
applied by the directors, the conclusion the directors have
reached about the reliability of any alternative valuation and the
disclosures on pages 18 and 19 and in Note 6.
the Board have concluded
that
Our application of materiality
When establishing our overall audit strategy, we set certain
thresholds which help us to determine the nature, timing and
extent of our audit procedures and to evaluate the effects of
misstatements, both individually and on the financial statements
10
TANFIELD GROUP PLC FINANCIAL STATEMENTS
REPORT OF THE INDEPENDENT AUDITOR (CONTINUED)
as a whole. During planning we determined a magnitude of
uncorrected misstatements that we judge would be material
for the financial statements as a whole (FSM). During planning
FSM was calculated as £248,000, which was not changed during
the course of our audit. We agreed with the Audit Committee
that we would report to them all unadjusted differences in
excess of £1,000, as well as differences below those thresholds
that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our audit scope covered 100% of revenue, profit and total
assets and liabilities. It was performed to the materiality levels
set out above.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the
annual report, other than the financial statements and our
auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to
the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
the other
information
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether
is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or
apparent material misstatements, we are
to
determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report in this regard.
required
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
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; and
the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the
company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters
in relation to which 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’
specified by law are not made; or
remuneration
we have not received all the
information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully
in the directors’ responsibilities
statement set out on page 9, the directors are responsible for
the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
the directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
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.
Andrew Allchin FCA (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
1 St James’ Gate
Newcastle upon Tyne
NE1 4AD
23 April 2018
11
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
Revenue
Staff costs
Other operating income
Other operating expenses
Loss from operations
Finance expense
Finance income
Net finance expense
Loss from operations before tax
Taxation
Loss & total comprehensive income for the year attributable to equity
shareholders
Notes
2017
£000's
2016
£000's
1
3
2
2
4
-
(83)
84
(149)
(148)
-
-
-
(148)
-
(148)
-
(85)
30
(182)
(237)
(13)
1
(12)
(249)
-
(249)
Earnings per share
Loss per share from operations
Basic and diluted (p)
5
(0.1)
(0.2)
12
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION (Company registration number 04061965)
AS AT 31 DECEMBER 2017
Non current assets
Non current Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Total liabilities
Equity
Share capital
Share premium
Share option reserve
Special reserve
Merger reserve
Retained earnings
Total equity attributable to equity shareholders
Notes
6
8
7
9
10
10
2017
£000's
36,283
36,283
13
134
147
2016
£000's
36,283
36,283
61
269
330
36,430
36,613
56
56
56
7,816
17,190
331
66,837
1,534
(57,334)
36,374
91
91
91
7,816
17,190
459
66,837
1,534
(57,314)
36,522
Total equity and liabilities
36,430
36,613
The financial statements on pages 12 to 25 were approved by the board of directors and authorised for issue on 23 April 2018 and
are signed on its behalf by:
Daryn Robinson
Chairman
13
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY ATTRIBUTABLE TO EQUITY
SHAREHOLDERS
FOR THE YEAR ENDED 31 DECEMBER 2017
At 1 January 2016
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 10)
Share based payments (note 11)
At 31 December 2016
Comprehensive income
Loss for the year
Total comprehensive income for
the year
Transactions with owners in their
capacity as owners:-
Share based payments (note 11)
At 31 December 2017
Share
capital
Share
premiuma
£000's
7,546
£000's
16,800
Share
option
reserveb
£000's
461
Merger
reservec
Special
reserved
Retained
earningse
Total
£000's
1,534
£000's
66,837
£000's
(57,067)
£000's
36,111
-
-
-
-
270
-
7,816
390
-
17,190
-
-
-
-
-
-
-
(2)
459
-
-
-
-
-
-
(249)
(249)
(249)
(249)
-
-
1,534
-
-
66,837
-
2
(57,314)
-
-
-
-
(148)
(148)
660
-
36,522
(148)
(148)
-
7,816
-
17,190
(128)
331
-
1,534
-
66,837
128
(57,334)
-
36,374
a The share premium account represents amounts subscribed for share capital in excess of nominal value, net of directly attributable share issue costs.
b The share option reserve represents the cumulative share-based payment expense.
c The merger reserve has arisen on the legal acquisition of subsidiary companies.
d The special reserve relates to a previous reclassification of the share premium account.
e The retained earnings represents the accumulated retained profits and losses less dividend payments.
14
TANFIELD GROUP PLC FINANCIAL STATEMENTS
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
Loss before interest and taxation
Operating cash flows before movements in working capital
Decrease in receivables
Decrease in payables
Net cash used in operating activities
Cash flow from financing activities
Proceeds from issuance of ordinary shares net of costs
Net cash generated by financing activities
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
2017
£000's
(148)
(148)
48
(35)
(135)
-
-
(135)
269
134
2016
£000's
(237)
(237)
25
(273)
(485)
660
660
175
94
269
15
TANFIELD GROUP PLC FINANCIAL STATEMENTS
ACCOUNTING POLICIES
(i) Basis of preparation of
statements
the
financial
Tanfield Group Plc is a public company incorporated in England
and quoted on AIM. 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 financial statements present the company accounts only
and have not been consolidated as the changes to the accounts
upon consolidation would be immaterial. The preparation of
financial statements in conformity with IFRS requires the use of
accounting estimates. The financial statements are prepared in
sterling, which is the functional currency of the company.
Monetary amounts in these financial statements are rounded to
the nearest thousand.
the
financial
statements
requires
The preparation of
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 financial
in “Critical accounting
statements, are disclosed below
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 2017 the Company had
cash balances of £0.1m and is debt free.
The Directors are confident that, following the successful
placing of shares on 22 February 2018 raising £0.25m, the cash
balances will allow the Company continue for a minimum of 12
months, or until it realises the value of its investments, and that
the assumptions underlying their opinion are reasonable and
that the Company can operate within its cash balances. Having
taken the uncertainties into account the Board believes 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 statement of financial position
assets or provisions for further liabilities, which would result
should the going concern assumption not be valid.
in
than
currencies other
(iii) Foreign currencies
Transactions
the
presentational currency of the company, are recorded at the
rates of exchange prevailing on the dates of the transactions. At
each statement of financial position date, monetary assets and
liabilities that are denominated
in foreign currencies are
retranslated at the rates prevailing on the statement of financial
position date.
sterling,
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.
(iv) Retirement benefit cost
The company operates a defined contribution pension scheme
and pays contributions to an externally administered pension plan.
The company has no further payment obligations once the
contributions have been paid. The contributions are recognised as
an employee benefit expense in the period in which they fall due.
(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 statement of financial position 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 impairment.
Trade receivables do not carry any interest and are stated at their
nominal value as reduced by appropriate allowances for estimated
irrecoverable amounts.
Provisions for impairment are made specifically where there is
evidence of a risk of non-payment, taking into account ageing,
previous losses experienced and general economic conditions.
16
TANFIELD GROUP PLC FINANCIAL STATEMENTS
ACCOUNTING POLICIES (continued)
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand less short
term bank overdrafts.
liabilities and equity
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 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.
(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 it only has one segment and that the role of chief operating
decision-maker is performed by the Tanfield Group Plc's board
of directors.
(ix) Termination benefits
(leaver costs) are payable when
Termination benefits
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.
17
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. The Board previously advised that the company had
ceased operations and did not feel that Smith had made
sufficient progress towards achieving its plan of obtaining a
public listing to maintain the previous valuation and had
therefore decided to impair the investment in Smith to nil.
Subsequently, a plan to joint-venture was beset by litigation
(see Strategic Review above) and Smith has not been able to
raise further funds, so the Board is maintaining its view that the
investment currently has nil value.
Nevertheless, the Board acknowledges that there is a chance
the investment could result in a return to Shareholders and will
continue to monitor the investment. Should progress be made
in the future the valuation of the investment will be revisited.
The status of the Company’s holding in Snorkel International
Holdings was reviewed. The Board has concluded that, while
Tanfield continues to own 49% of Snorkel, under the terms of
the joint venture, they are unable to exercise significant
influence over the activities and strategic direction of Snorkel
and therefore holding the investment as a trade investment
continues to be the correct treatment.
Since the injection of working capital, following the joint
venture in October 2013, Snorkel has continued to progress well
with sales levels (unaudited) growing by 27% in 2017 (2016:
19% / 2015: 29%) resulting in sales of $165.8m in 2017 (2016:
$130.5m / 2015: $109.9m / £2014: $85.3m). The 2017
operating profit (unaudited), excluding depreciation, was $1.6m
(2016: $2.8m loss / 2015: $10.6m loss / 2014: $14.9m loss).
The Board is not aware of any market factors and have not been
made aware of any specific reason why sales growth and the
trend of improved gross margins should not continue and
therefore the board sees scope for further sales growth and
increased operating profitability in 2018. Tanfield are, however,
unsure if the dependency in the US upon Ahern Rentals as its
principal customer may impact upon the possible outcome.
Nevertheless, as the Board has not been made aware of an
expected material reduction in sales from Ahern Rentals, the
Board believes Snorkel could still achieve a reasonable level of
sales growth, and therefore increase the level of sales and
operating profitability, in 2018.
Under the terms of the joint venture, the level of financial
information available to the Board to assess the fair value of the
investment in Snorkel is limited to quarterly historical financial
information, incorporating a consolidated operating statement,
balance sheet and cashflow.
The current valuation of £36.3m was calculated in 2013 and
assumed the $25m EBITDA trigger, compelling the payment of the
$22.4m adjusted priority amount and the purchase of Tanfield's
interest in Snorkel, would be reached within the pre defined
period ending September 2018. At the end of 2017 there were 9
months left to run before the fixed term of the agreement after
which Tanfield can no longer compel the purchase of the 49%
interest in Snorkel.
The Board continues to hold the view that Don Ahern, the owner
of Xtreme, would wish to one day own 100% of Snorkel and will
seek to exercise the call option to buy Tanfield's holding in Snorkel
at some point in the future. The Board has reviewed the historic
financial information, along with the global industrial and aerial
work platform market conditions, and has concluded that the
range of potential valuations, beyond the expiry date of
September 2018, can be broad. However, based on the
information available to the Board, it is felt the valuation of
£36.3m should be maintained.
in bill of material costs and
This valuation has been assessed against various criteria, including
past performance (including but not limited to a growth in sales, a
improved operating
reduction
profitability), production capacity, market conditions,
the
capability of the business to increase output and exchange rate
fluctuations. In coming to this opinion, the Board has considered
the trends within the business and their consistency; in particular:
the rate of sales growth being more or less than that recently
achieved by Snorkel.
the level of operating profitability improvement being more
or less than that recently achieved by Snorkel.
The impact of exchange rate movements given that any
proceeds will be received in USD, considering current, historic
and average exchange rates.
Between January 2017 to March 2018, the range of the GBP to
USD exchange rate has been vast with a low of 1.205 and a high of
1.427, the average being 1.309. If £36.3m is assumed to represent
the average exchange rate then based on the low of 1.205 the
valuation increases by approximately 8% to £39.4m and based on
the high of 1.427 the valuation reduces by approximately 9% to
£33.3m giving a potential movement of 17% in the valuation.
There is an added element of uncertainty in the foreign currency
markets due to the Brexit process which may result in the GBP to
USD exchange rate improving or worsening as the process
progresses. Whilst the Board is not in a position to mitigate
against any potential exchange rate variation, until such time as
the realisation of the Snorkel investment is known, it will continue
to consider such means as may be possible to maximise the GBP
return to shareholders.
18
TANFIELD GROUP PLC FINANCIAL STATEMENTS
CRITICAL ACCOUNTING ESTIMATES AND KEY JUDGEMENTS (continued)
If the assumption is made that both the progress within Snorkel
and the wider global market conditions will continue to
improve, then the current £36.3m valuation could still be a fair
reflection of the investment value beyond the 5 year period. As
the Board is of the view that the EBITDA target will not be met,
it has considered scenarios that resulted in assumed realisation
values, beyond September 2018, ranging from $29m to $52m
(or £22m to £40m based on the average exchange rate); with
the caveat that a number of factors could influence the
valuation and performance of Snorkel between now and a
potential realisation date, including Xtreme’s negotiating stance
and the exchange rate at the time of any realisation.
Given the range of possible realisation values, which includes
the potential for sums below the investment value of £36.3m,
the Board has considered whether an impairment loss should
be recognised but, due to the inherent uncertainties it is unable
to determine whether it is likely that an impairment exists and,
if it does, the quantum of this.
Should economic conditions materially change during the
remainder of 2018, this may have an impact on the expected
outcome, but the Tanfield Board is currently of the opinion that
the investment in Snorkel will result in a return to shareholders
in the future, although it should be noted that this is not
expected to materialise until after 30 September 2018, when
the outcome then becomes uncertain and could be less than
the current fair value of the investment.
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 2017.
New and amended standards and interpretations
effective from 1 January 2018 not yet adopted by
the Company
At the date of authorisation of these financial statements, the
following Standards and Interpretations which have not been
applied in these financial statements were in issue but not yet
effective:
IFRS9 Financial instruments
The IASB issued IFRS9 to include a logical model for classification
loss
and measurement, a single forward
impairment model, and a substantially reformed approach to
hedge accounting. Endorsed by the EU and effective from 1
January 2018.
looking expected
IFRS15 Revenue from contracts with customers
Dealing with the recognition of revenues from contracts and
customers. Endorsed by the EU and effective from 1 January 2018.
IFRS16 Leases
Introduces a single lessee accounting model, and eliminates the
previous distinction between an operating lease and a finance
lease. Endorsed by the EU and effective from 1 January 2019.
Given the operational status of the company, the Directors do not
think these new standards will have a material impact on the
financial statements.
and
amended
New
and
interpretations effective from 1 January 2017
adopted by the Company
standards
During the year ended 31 December 2017, 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. Staff costs
Aggregate remuneration comprised
Wages and salaries
Other pension costs
Total staff costs
Average monthly number of employees
Directors
Total
2017
£000's
81
2
83
2017
No.
2
2
2016
£000's
85
-
85
2016
No.
3
3
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 7 to 8.
2. Finance expense and finance income
Finance expense
Interest on director loans
Total finance expense
Finance income
Interest on cash, cash equivalents & financial instruments
Total finance income
3. Other operating expenses
Property related expenses
Auditor's remuneration (see below)
Other operating expenses
Total operating expenses
2017
£000's
-
-
2017
£000's
-
-
2017
£000's
43
26
80
149
2016
£000's
13
13
2016
£000's
1
1
2016
£000's
43
24
115
182
Auditor's remuneration
Amounts payable to RSM 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
2017
£000's
2016
£000's
24
2
26
24
2
22
2
24
22
2
20
TANFIELD GROUP PLC FINANCIAL STATEMENTS
4. Taxation
Analysis of and 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:
Loss before taxation
Notional taxation charge at UK rate of 19.25% (2016: 20%)
Effects of:
Deferred tax asset not recognised in the period
Total taxation charge in the income statement
2017
£000's
(148)
(28)
28
-
2016
£000's
(249)
(50)
50
-
The Company has tax losses of approximately £3.1m (2016: £3.0m) available to carry forward against future profits of the
same trade. No deferred tax asset has been recognised due to the uncertainty of future profitability of the Company.
5. 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. As the potential dilutive ordinary shares from
share options reduce the loss per share these shares are omitted from the dilutive loss per share calculation. The average
share price during the year was 14.10p (2016: 12.88p).
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
Loss
From operations
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
Loss for the purposes of diluted earnings per share
Loss per share from operations
Basic and diluted (p)
6. 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
2017
No.
000’s
156,324
-
156,324
2017
£000's
(148)
-
(148)
2016
No.
000’s
153,677
122
153,799
2016
£000's
(249)
-
(249)
(0.1)
(0.2)
2017
£000’s
-
36,283
36,283
2016
£000’s
-
36,283
36,283
Smith Electric Vehicles US Corp
At 31 December 2017, the Company held a 5.76% (2016: 5.76%) share of the issued share capital of Smith Electric Vehicles US
Corp, a company registered in the US. In 2015 the Board decided to impair the investment in Smith to nil and they continue to
maintain this position. However, the Board will continue to monitor the investment.
Snorkel International Holdings LLC
At 31 December 2017, the Company held a 49% (2016: 49%) share of the issued share capital of Snorkel International Holdings
LLC, a company registered in the US. This shareholding is being held as a non current investment at fair value (2017: £36,283k,
2016: £36,283k). See Strategic Report for impairment considerations.
21
TANFIELD GROUP PLC FINANCIAL STATEMENTS
7. Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term deposits held by the Company. The carrying amount of these assets
approximates their fair value. The Company primarily holds Sterling. Currency denominated balances are translated to sterling
at the statement of financial position date.
Cash and cash equivalents
8. Trade and other receivables
Receivable within one year
Other debtors and prepayments
2017
£000's
134
2017
£000's
13
13
2016
£000's
269
2016
£000's
61
61
The directors consider that the carrying amounts of trade and other receivables approximates to their fair value.
9. Trade and other payables
The directors consider that the carrying amounts of trade and other payables approximates to their fair value.
Payable within one year
Trade payables
Social security and other taxes
Accrued expenses
Average credit period taken on trade purchases (days)a
a
Creditor days have been calculated as trade payables over other operating expenses multiplied by 365 days.
2017
£000's
2016
£000's
23
1
32
56
65
23
37
31
91
48
10. 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 2016
Share options exercised
New share issue 22 March 2016a
New share issue 10 October 2016b
At 31 December 2016
At 31 December 2017
a
Nominal share
value
5p
5p
5p
5p
5p
Number of shares
150,924,073
30,000
2,758,620
2,610,824
156,323,517
Share capital
£000’s
7,546
1
138
131
7,816
Share premium
£000’s
16,800
-
254
136
17,190
5p
156,323,517
7,816
17,190
On 16 March 2016 the Company announced that it had conditionally raised gross proceeds of £400k. These funds were raised by way of a placing of 2,758,620 new Ordinary Shares of 5
pence ("Shares") with institutional investors at a price of 14.5 pence per Share which were issued onto the AIM market on 22 March 2016. Costs of £8k attributable to the share issue have
been charged against the Share Premium account.
b
On 5 October 2016 the Company announced that Directors and former Directors of the Company were converting £267k of convertible loan and accrued interest in to equity which resulted
in 2,610,814 new Ordinary Shares of 5 pence ("Shares") being issued. Under the terms of the convertible loan agreements, the shares were issued at a price of 10.25 pence per Share and were
admitted onto the AIM market on 10 October 2016.
22
TANFIELD GROUP PLC FINANCIAL STATEMENTS
11. Share based payments
IFRS2 requires share based payments to be recognised at fair value. The company measures the fair value of its share based
payments to employees, “share options”, using the Black-Scholes valuation method at the date of grant and recognised in profit
or loss over the vesting period.
All share based payments are equity settled and details of the share option activity during 2017 and 2016 are shown below.
Outstanding at the beginning of the year
Granted/(Lapsed)
Exercised
Outstanding at the end of the year
Exercisable
Number of
share options
4,300,000
(200,000)
-
4,100,000
4,100,000
2017
Weighted average
exercise price
(pence)
26
5
-
27
27
Number of
share options
4,330,000
-
(30,000)
4,300,000
4,300,000
2016
Weighted average
exercise price
(pence)
24
-
(5)
26
26
The outstanding options at 31 December 2017 had a weighted average remaining contractual life of 4.0 years (2016: 3.8 years)
The following table relates to share options outstanding and exercisable at 31 December 2017
Exercise price (pence)
No of share options
No of exercisable options
Option exercise prices
27p
4,100,000
4,100,000
Total
4,100,000
4,100,000
Income statement charge
In accordance with IFRS2 the company determined the fair value of its options at ‘grant date’. The company 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 £nil (2016: £nil), a credit directly to equity of £nil (2016: £2k) and a reserves transfer of
£128k (2016: £nil) due to the lapse of share options have been made during the year in accordance with IFRS2 ‘Share-based
payments’.
The company uses the Black-Scholes model to value its share options.
12. 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
2017
£000's
4
134
138
2016
£000's
61
269
330
2015
£000's
192
61
269
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 statement of financial position liquidity. The Board reviews forecasts,
including cash flow forecasts on a quarterly basis.
23
TANFIELD GROUP PLC FINANCIAL STATEMENTS
12. Financial risk management (continued)
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 statement of financial position date up to the contractual maturity date.
2017
Trade and other payables
2016
Trade and other payables
Within 1 year
£000's
1 to 5 years
£000's
Over 5 years
£000's
Total
£000's
56
56
91
91
-
-
-
-
-
-
-
-
56
56
91
91
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. During 2017, the GBP to USD exchange rate averaged 1.2886 with a low of 1.2053 and a
high of 1.3595. 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, share option reserve and retained
earnings. No gearing is currently calculated as the Company currently has no borrowings.
13. Contingencies
Authorised Guarantee Agreement
At the time of the joint venture between Tanfield Group Plc and Xtreme Manufacturing LLC relating to Snorkel in October 2013,
Tanfield Group Plc was the tenant of the Vigo Centre manufacturing facility from which Snorkel carried out its UK manufacturing
operations. In order to gain permission to assign the lease to Snorkel Europe Limited, Tanfield Group Plc entered into an
authorised guarantee agreement on the 25 year lease which commenced 27 June 2006.
14. Related party 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 7 to 8.
Salaries and short term benefits including NI
Post employment benefits
2017
£000’s
81
2
2016
£000’s
85
-
83 85
15. Retirement benefits
The Company operates a defined contribution retirement benefit plan for all qualifying employees. The total cost charged to
income of £2k (2016: £nil) represents contributions payable to that scheme by the Company at rates specified in the rules of the
scheme. As at 31 December 2017, contributions of £nil (2016: £nil) due in respect of the current reporting period had not been
paid over to the scheme.
24
TANFIELD GROUP PLC FINANCIAL STATEMENTS
16. Financial instruments recognised in the statement of financial position
Assets
Current financial assets
Trade and other receivables
Investments
Cash and cash equivalents
Total
Liabilities
Current liabilities
Trade and other payables
Total
2017
Assets
Available for
Salea
£000’s
-
36,283
-
36,283
Held for
tradinga
Total
£000’s
4
36,283
134
36,421
Total
£000’s
£000’s
-
-
55
55
Loans and
receivables
£000’s
4
-
134
138
Other
financial
liabilities
£000’s
55
55
2016
Assets
Available
for Salea
£000’s
-
36,283
-
36,283
Held for
tradinga
Total
£000’s
61
36,283
269
36,613
Total
£000’s
£000’s
-
-
54
54
Loans and
receivables
£000’s
61
-
269
330
Other
financial
liabilities
£000’s
54
54
a
Assets and liabilities at fair value through profit and loss.
17. Investments
The tables below give brief details of the Company’s investments at 31 December 2017. The Company had no operating
subsidiaries as of 31 December 2017.
Investments
Smith Electric Vehicles US Corp
HBWP Inc
Snorkel International Holdings LLC
Tanfield Engineering Systems US (Inc) a
Snorkel Europe Ltd a
Snorkel International Inc a
Snorkel Australia Limited a
Snorkel New Zealand Limited a
The Company’s interest is held indirectly through HBWP Inc, a wholly owned subsidiary, and its investment in Snorkel International Holdings LLC
Principal activity
Electric vehicle manufacture
Holding Company
Holding Company
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Group Interest in
allotted capital &
voting rights
5.76%
100.00%
49.00%
49.00%
49.00%
49.00%
49.00%
49.00%
a
Country of
incorporation
US
US
US
US
UK
US
AUS
NZ
18. Post balance sheet events
The Company raised a total of £0.25m through the placing of 2,083,333 ordinary shares at a price of 12 pence per share. The
shares were admitted to trading on AIM, a market operated by the London Stock Exchange plc, on 22 February 2018.
25