TANFIELD GROUP PLC FINANCIAL STATEMENTS
TANFIELD GROUP PLC
REPORT AND FINANCIAL
STATEMENTS 2018
Registered in England & Wales
Company number 04061965
TANFIELD GROUP PLC FINANCIAL STATEMENTS
REPORT AND FINANCIAL STATEMENTS 2018
SUMMARY OF CONTENTS
Directors and Advisors
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
8
9
12
13
14
15
16
18
20
1
TANFIELD GROUP PLC FINANCIAL STATEMENTS
DIRECTORS AND ADVISORS
Chairman
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
DIRECTORS
NON-EXECUTIVE
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
REGISTRAR
Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
2
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STRATEGIC REPORT
CHAIRMAN’S STATEMENT
The Company’s main investment, Snorkel, once again saw a
period of growth in sales and the Board continues to closely
monitor performance. However, due to matters further
explained in this document, the investment value has been
reduced from £36.3 million to £19.1 million. The Board
continues to be pleased with the progress made by Snorkel,
seeing another period of year on year sales growth in 2018, and
should this progress continue, the Board believe it makes the
likelihood of a realisation of value more probable.
The investment in Smith continues to be held at nil value,
despite the settlement of the legal dispute with Smith’s former
strategic partner and investor FDG Electric Vehicles Limited
("FDG").
The Board did not agree with this statement and does not
believe that the contractual agreements, or the circular
distributed to shareholders to fully explain the terms of the
transaction - and thereby seek their authority to enter in to the
transaction - allow for a call option whereby Xtreme can acquire
Tanfield’s interest in Snorkel for a nil value. The Board therefore
rejected the call option notice.
The Board is currently of the opinion that the investment in
Snorkel will result in a return to shareholders in the future, but
would like to draw your attention to the “Valuation of Snorkel
holding” below and the critical accounting estimates and key
judgments on pages 18 and 19 which further explain the
potential risks.
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 retain an investment in Snorkel (currently
valued at £19.1m, 2017: £36.3m) consisting of a 49% interest
and a preferred interest position, which it has held since the
joint venture was established in October 2013.
Sales levels (unaudited) have continued to grow during 2018,
increasing by 21% resulting in sales of $200.5m (2017: $165.8m
& 27% / 2016: $130.5m & 19% / 2015: $109.9m & 29% / 2014:
$85.3m). 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 2019.
The Snorkel unaudited accounts for 2018 report an operating
profit, excluding depreciation, of $2.9m (2017: $1.6m / 2016:
$2.8m loss / 2015: $10.6m loss / 2014: $14.9m loss). The Board
is once again pleased to see the trading performance of Snorkel
improve further with increases in both sales and operating
profitability. This is evidence of the continuing hard work and
improvements that have taken place in recent years. With
continued focus, the Board sees no reason why Snorkel could
not once again see growth in 2019.
In November 2018, the Board received a call option notice in
which Xtreme, via its subsidiary SKL Holdings, requested to
exercise a call option to acquire Tanfield's interest in Snorkel. In
the request, SKL Holdings stated that the option price to acquire
Tanfield’s holding was $0 (nil) and that payment of the priority
amount and preferred return (collectively "the Preferred
Interest") was not required.
Valuation of Snorkel holding: reduction to £19.1
million (2017: £36.3 million)
At the end of September 2018 the fixed terms of the agreement
came to end. In summary, if the trailing 12 month EBITDA had
reached $25m by 30 September 2018, this would have triggered
payment of the Preferred Interest, valued at £19.1m, which once
paid, would have allowed the Company to exercise its put
option, compelling the purchase of Tanfield's remaining holding
in Snorkel. As a $25m trailing 12 month EBITDA was not reached
by the deadline, the put option expired, Tanfield retains a 49%
interest in Snorkel and its Preferred Interest position, but it can
no longer compel Xtreme to pay the Preferred Interest position
and acquire its 49% interest. However, the Board remain of the
opinion that the Preferred Interest is the minimum payment
required under the terms of the contractual agreements, as
described in the circular, in order for Xtreme to acquire
Tanfield’s interest and that this is therefore an appropriate basis
for determining the value the investment is to be carried at.
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 acquire Tanfield’s interest in Snorkel at some
point in the future. One possible outcome is that Tanfield
continues to hold its 49% interest for the foreseeable future
however, the Board do not believe such a scenario would be in
the best interest of shareholders and are considering options
that may assist in moving from this position.
As the $25m EBITDA trigger was not achieved by the expiry date,
any future realisation of value from the investment in Snorkel
will be dependent on the financial performance of Snorkel at the
time of realisation. The Board does not believe the current
financial performance of Snorkel will result in an additional
value, on top of the Preferred Interest amount of £19.1m, for its
49% interest, and so the Board has taken the decision to impair
the value of its investment to that ascribed to the Preferred
Interest only, which at 31 December 2018 was valued at £19.1m.
The Board will continue to assess the performance of Snorkel
and, if appropriate, revalue the investment if it believes the
future performance should result in an increased realisation in
value.
3
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STRATEGIC REPORT (Continued)
Due to the risks involved with the ongoing different opinions
regarding the contractual agreements, it is possible the actual
realisation of value could be less than the current valuation. A
the valuation and
number of
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.
factors could
influence
Due to these inherent uncertainties, the Board is unable to
determine whether the actual outcome will be less than the
current valuation of £19.1m, which it believes is underpinned by
the value of the Preferred Interest, so feel the valuation of
£19.1m 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.
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. With regard to
Smith, due to the ongoing uncertainty, the Board is unable to
say, at this time, whether it will result in a return of value to
shareholders. The Directors will update shareholders should this
view change.
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 will continue to fulfil its obligation to its
shareholders in seeking to optimise the value of its investments.
The Board would like to draw the reader’s 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 9 in which it is also highlighted.
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.
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 in January 2019, an out
of court settlement of all claims was reached. This settlement
took the form of Smith being issued with a number of FDG
shares but to date, Smith have not been able to provide the
Board with an understanding as to the value of these shares or
when it may be possible to realise value from them.
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, which have now been concluded.
In the light of Smith not being able to provide the Board with a
valuation of the shares it has received in settlement of the
dispute, nor any certainty on the future of Smith, the Board
maintains its opinion that the investment value should be held
at nil.
Finance expense and income
No interest cost was incurred in the period (2017: £nil) and
interest income of £1k (2017: £nil) was received on bank
balances.
Loss from operations
The loss from operations was £17,377k (2017: £148k), the most
significant difference compared to the prior year being the
impairment of investments of £17,183k.
Loss per share
Loss per share from continuing operations was 10.99 pence
(2017: 0.09 pence). No dividend has been declared. (2017: £nil)
Cash
At 31 December 2018, the Company had cash of £0.2m (2017:
£0.1m) and approximately £0.3m as at the date of this report.
Risks and uncertainties
Following the successful placing of shares on 31 May 2019
raising £0.23m, the Board believes the business has sufficient
cash funds to continue for 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, or
of the costs associated in securing a realisation, 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 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
12 June 2019
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 2018.
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 2018 reflects
the principal activity of the company being that of an
investment company.
Turnover for the year was £nil (2017: £nil). The operating loss
before impairments in the year of £195k (2017: £148k) arose
from operating costs.
The statement of financial position has reduced following the
impairment of investments with total assets at the end of the
year of £19.3m (2017: £36.4m). Net Current Assets were £0.2m
(2017: £0.1m) with cash balances of £0.2m (2017: £0.1m). The
directors believe the Company has sufficient working capital to
allow it to continue for a period of 12 months from the date of
this report.
No dividend has been paid or proposed for the year (2017: £nil).
The loss of £17,377k (2017: £148k) has been transferred to
reserves.
FINANCIAL INSTRUMENTS
The Company’s financial
instruments comprise cash, non-
current investments, current debtors and 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.
Trade creditor days based on creditors at 31 December 2018
were 45 days (2017: 65 days).
SUBSTANTIAL SHAREHOLDINGS
On 31 December 2018 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
46,690,559
29.48%
CHASE NOMINEES LIMITED
30,616,087
19.33%
AURORA NOMINEES LIMITED
19,903,349
12.56%
VIDACOS NOMINEES LIMITED
12,379,078
7.81%
THE BANK OF NEW YORK (NOMINEES)
11,733,594
7.41%
EUROCLEAR NOMINEES LIMITED
6,897,399
4.35%
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.
DIRECTORS
The present membership of the Board is set out on page 2.
Approved by the Board of Directors and signed on behalf of the
Board
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 page 7.
Daryn Robinson
Chairman
12 June 2019
5
TANFIELD GROUP PLC FINANCIAL STATEMENTS
CORPORATE GOVERNANCE
All members of the board believe strongly in the value and
in our
importance of good corporate governance and
accountability to all of Tanfield’s stakeholders,
including
shareholders, staff, clients and suppliers.
Changes to AIM rules on 30 March 2018 require AIM companies
to apply a recognised corporate governance code by 28
September 2018.
The corporate governance framework which the company
operates, including board leadership and effectiveness, board
remuneration, and internal control is based upon practices
which the board believes are proportional to the size, risks,
complexity and operations of the business and is reflective of
the company’s values. Of the two widely recognised formal
codes, we have therefore decided to adhere to the Quoted
Companies Alliance’s (QCA) Corporate Governance Code for
small and mid-size quoted companies (revised in April 2018 to
meet the new requirements of AIM Rule 26).
The QCA Code is constructed around ten broad principles and a
set of disclosures. The QCA has stated what it considers to be
appropriate arrangements for growing companies and asks
companies to provide an explanation about how they are
meeting the principles through the prescribed disclosures. We
have considered how we apply each principle to the extent that
the board judges these to be appropriate in the circumstances,
and we provide an explanation of the approach taken in
relation to each in the full details of our approach to Corporate
Governance which can be found on our website. The board
considers that it does not depart from any of the principles of
the QCA Code.
Full details of our Corporate Governance approach can be found
on our website www.tanfieldgroup.com/about#governance
Going Concern
The directors are satisfied that the Company has adequate
resources to continue for a period of 12 months from the date
of this report. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
Daryn Robinson
Chairman
12 June 2019
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 D Robinson and M Groak and the committee was
chaired by D Robinson.
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.
Remuneration review
Directors emoluments for the financial year were as follows:
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 below.
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 2018 and 1
January 2018 are shown below:
D Robinson
M Groak
Total
Number of shares
2018
942,785
40,000
982,785
2017
942,785
-
942,785
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.
M Groak
J Pithera
D Robinson
Total
a
J Pither resigned on 31 May 2017
Salary
2018
£000's
20
-
52
72
Pension
2018
£000's
-
-
2
2
Total
2018
£000's
20
-
54
74
Salary
2017
£000's
25
14
42
81
Pension
2017
£000's
-
-
2
2
Total
2017
£000's
25
14
44
83
Directors share options held at 31 December 2018 were as follows:
M Groak
D Robinson
Total
31 December
2017
100,000
100,000
200,000
Granted/
(Lapsed)
-
-
-
Exercised
-
-
-
31 December
2018
100,000
100,000
200,000
Option
price per
sharea
27p
27p
Date from
which normally
exercisable
02/02/2015
02/02/2015
Expiry Date
02/02/2020
02/02/2020
a
On 31 December 2018 the market price of the ordinary shares was 4.99p. The range during 2018 was 4.56p to 13.50p
Approval
This report was approved by the board of directors and authorised for issue on 12 June 2019 and signed on its behalf by:
Daryn Robinson
Chairman
7
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.
Company law requires the directors to prepare financial
statements for each financial year. Under that law and the AIM
Rules of the London Stock Exchange 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
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.
in relation to such
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.
8
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 2018
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 2018 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 in accordance with the requirements
of the Companies Act 2006.
•
•
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
resources
in the audit and directing the efforts of the
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
The risk
Included in the Statement of Financial Position are non current
investments with a carrying value of £19.1m. This represents
holdings of 6% and 49% respectively in Smith Electric Vehicles
US Corp and Snorkel International Holdings LLC. Note 6 and the
Accounting Policies 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 significant uncertainty
concerning the carrying value of the company’s £19.1m
investment
International Holdings LLC. The
investment in Smith Electric Vehicles US Corp has already been
fully impaired.
in Snorkel
The investment in Snorkel represents the sole significant asset
held within the Statement of Financial Position of the company.
As described on pages 18 and 19 there are significant
uncertainties over the timing of any realisation, and the amount
that might ultimately be realised on this investment, that could
have a material effect on the recoverable amount. Accordingly,
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 timing thereof.
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 assessments and conclusion of the directors are
based on the Circular setting out the Proposed Transaction
issued to Shareholders in September 2013, the legal advice
obtained at the time and subsequent to that date and the
information received in respect of the financial performance and
position of Snorkel. The directors have concluded that the most
appropriate basis for determining the carrying amount is the
Preferred Interest element, which was established at the time of
the Transaction and have consequently written down the
investment in Snorkel to this amount.
As explained on page 3, the timing of realisation and the sum to
be realised are dependent on whether Xtreme wish to own
100% of Snorkel and will therefore seek to acquire Tanfield’s
investment in Snorkel and definitive clarification as to the legal
position of the call option notice. The eventual amount realised
is also dependent on the applicable rate of exchange at the time
that the US$ proceeds are converted into GBP.
9
TANFIELD GROUP PLC FINANCIAL STATEMENTS
REPORT OF THE INDEPENDENT AUDITOR (CONTINUED)
Our response
Our audit work has considered the nature of the financial and
other information held by management described above and in
the public domain, the assumptions used by management to
assess the timing of realisation and calculate the estimated
realisation value, and such other audit evidence as was
available, to consider the reasonableness of these assumptions
and calculations. We have also re-performed the calculations
undertaken by management of the realisation value based on
the information used by management.
In carrying out our audit work we have considered the range of
outcomes applied by the directors, the conclusion the directors
have reached about the reliability of any alternative valuation
and the disclosures made in the Strategic Report and financial
statements, specifically in the Critical Accounting Estimates and
Judgements disclosures and in Note 6.
individually and on
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
financial
statements 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 £708,000, 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.
the
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
to
apparent material misstatements, we are
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’ remuneration specified by
law are not made; or
• 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 8, 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.
10
TANFIELD GROUP PLC FINANCIAL STATEMENTS
REPORT OF THE INDEPENDENT AUDITOR (CONTINUED)
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting
Council’s website at:
http://www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a
in accordance with Chapter 3 of Part 16 of the
body,
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
12 June 2019
11
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
Revenue
Staff costs
Other operating income
Other operating expenses
Loss from operations before impairments
Impairment of Investments
Loss from operations after impairments
Finance expense
Finance income
Loss from operations before tax
Taxation
Loss & total comprehensive income for the year attributable to equity
shareholders
Notes
2018
£000's
2017
£000's
1
3
6
2
2
4
-
(74)
28
(149)
(195)
(17,183)
(17,378)
-
1
(17,377)
-
(17,377)
-
(83)
84
(149)
(148)
-
(148)
-
-
(148)
-
(148)
Loss per share
Loss per share from operations
Basic and diluted (p)
5
(10.99)
(0.09)
12
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION (Company registration number 04061965)
AS AT 31 DECEMBER 2018
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
2018
£000's
19,100
19,100
11
188
199
2017
£000's
36,283
36,283
13
134
147
19,299
36,430
52
52
52
7,920
17,336
331
66,837
1,534
(74,711)
19,247
56
56
56
7,816
17,190
331
66,837
1,534
(57,334)
36,374
Total equity and liabilities
19,299
36,430
The financial statements on pages 12 to 25 were approved by the board of directors and authorised for issue on 12 June 2019 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 2018
At 1 January 2017
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
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)
At 31 December 2018
Share
capital
Share
premiuma
£000's
7,816
£000's
17,190
Share
option
reserveb
£000's
459
Merger
reservec
Special
reserved
Retained
earningse
Total
£000's
1,534
£000's
66,837
£000's
(57,314)
£000's
36,522
-
-
-
-
-
-
-
-
-
-
(148)
(148)
(148)
(148)
-
7,816
-
17,190
(128)
331
-
1,534
-
66,837
128
(57,334)
-
36,374
-
-
-
-
-
-
-
-
-
-
(17,377)
(17,377)
(17,377)
(17,377)
104
7,920
146
17,336
-
331
-
1,534
-
66,837
-
(74,711)
250
19,247
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 2018
Loss before interest and taxation
Loss on impairment of investments
Operating cash flows before movements in working capital
Decrease in receivables
Decrease in payables
Net cash used in operating activities
Cash flow from Investing Activities
Interest received
Net cash from investing activities
Cash flow from financing activities
Proceeds from issuance of ordinary shares net of costs
Net cash generated by financing activities
Net increase/(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
2018
£000's
(17,378)
17,183
(195)
2
(4)
(197)
1
1
250
250
54
134
188
2017
£000's
(148)
-
(148)
48
(35)
(135)
-
-
-
-
(135)
269
134
15
TANFIELD GROUP PLC FINANCIAL STATEMENTS
ACCOUNTING POLICIES
(i) Basis of preparation of
the
financial
statements
Tanfield Group Plc is a public company incorporated in England
and quoted on AIM. These financial statements have been
prepared on the going concern basis in accordance with
International Financial Reporting Standards as adopted by the
EU (“IFRS”),
interpretation
(“IFRSIC“) 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.
Interpretation Committee
IFRS
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
The preparation of
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 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 2018 the Company had
cash balances of £0.2m and is debt free.
The Directors are confident that, following the successful
placing of shares on 31 May 2019 raising £0.23m, the cash
balances will allow the Company continue in operation for a
minimum of 12 months 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) 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 fair value with fair value gains and
losses recognised in profit or loss.
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 amortised cost 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.
An impairment loss is recognised for the expected credit losses
on receivables when there is an increased probability that the
counterparty will be unable to settle an instrument’s contractual
cash flows on the contractual due dates, a reduction in the
amounts expected to be recovered, or both.
Impairment losses and any subsequent reversals of impairment
losses are adjusted against the carrying amount of the receivable
and are recognised in profit or loss.
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.
IFRS9 Financial instruments
The IASB issued IFRS9 to include a logical model for classification
and measurement, a single
loss
impairment model, and a substantially reformed approach to
hedge accounting. Endorsed by the EU and effective from 1
January 2018.
forward-looking expected
Given the nature of the company’s financial instrument, the
Directors confirm that the transition to IFRS9 has resulted no
measurement differences because the change from incurred to
expected loss model does not result in material difference in
impairment provisions.
Following transition, loans and receivables have been reclassified
as financial assets held at amortised cost.
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 amortised cost.
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.
(vii) 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.
(viii) 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.
(ix) 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.
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 2018.
Given the operational status of the company and the fact that it
generates no revenue, the Directors confirm that the new
standard does not have a material impact on the financial
statements.
New and amended standards and interpretations
effective from 1 January 2019 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:
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 this new standard, nor any of the matters raised in the
Annual Improvements projects 2014 - 2016 and 2015 – 2017, nor
the amendments to IAS1 and IAS8, will have a material impact on
the financial statements.
and
amended
New
and
interpretations effective from 1 January 2018
adopted by the Company
standards
During the year ended 31 December 2018, the following new
IFRS, IAS or amendments issued by the IASB, and interpretations
by the IFRS Interpretations Committee, came into effect.
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 Vehicles
US 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 establish a joint-venture was beset by
litigation (see Strategic Review above) and while the litigation
has now been settled, no progress has since been made to give
rise to an expectation of a realisation in value, 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 LLC was reviewed. The Board has concluded that,
while Tanfield continues to retain an investment in Snorkel
(currently valued at £19.1m), consisting of a 49% interest and a
Preferred Interest position, 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, as opposed to
applying equity accounting, continues to be the correct
treatment.
Following a material increase in Snorkel’s selling, general and
administrative costs in Q1 2018, which continued in to Q2 2018,
the Board impaired Tanfield’s investment value in Snorkel down to
£19.1m, from the previous valuation of £36.3m. The valuation of
£19.1m is based on the value of the Preferred Interest which is
made up of the priority amount, set in 2013 based upon the assets
of Snorkel contributed to the joint venture, plus the preferred
return, being interest accruing on the priority amount. This is the
basis that was set out in the Circular issued to Shareholders at the
time. The Board have not included the effect of discounting for
the timing of a future realisation as they do not believe this
materially impacts on the valuation set.
The previous valuation of £36.3m was originally calculated in 2013
and assumed the $25m EBITDA trigger, compelling the payment of
the Preferred Interest and the purchase of Tanfield's interest in
Snorkel by Xtreme, would be reached within the predefined
period ending September 2018. As this trigger was not reached,
Tanfield retains a 49% interest in Snorkel and its Preferred Interest
position, but it can no longer compel Xtreme to pay the Preferred
Interest position and acquire its 49% interest.
In November 2018, the Board received a call option notice in
which Xtreme, via its subsidiary SKL Holdings, requested to
exercise a call option to acquire Tanfield's interest in Snorkel. In
the request, SKL Holdings stated that the option price to acquire
Tanfield’s holding was $0 (nil) and that payment of the priority
amount and preferred return (collectively "the Preferred Interest")
was not required.
The Board did not agree with this statement and does not believe
that the contractual agreements, or the circular distributed to
shareholders to fully explain the terms of the transaction - and
thereby seek their authority to enter in to the transaction - allow
for a call option whereby Xtreme can acquire Tanfield’s interest in
Snorkel for a nil value. The Board therefore rejected the call
option notice and continues to have discussions with Xtreme in
relation to the ongoing different opinions regarding the
contractual agreements.
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 21% in 2018 (2017:
27% / 2016: 19% / 2015: 29%) resulting in sales of $200.5m in
2018 (2017:$165.8m / 2016: $130.5m / 2015: $109.9m / £2014:
$85.3m). The 2018 operating profit (unaudited), excluding
depreciation, was $2.9m (2017: $1.6m / 2016: $2.8m loss /
2015: $10.6m loss / 2014: $14.9m loss).
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 buy Tanfield's holding in Snorkel at some point in the
future. One possible outcome is that Tanfield continues to hold its
49% interest for the foreseeable future however, the Board do not
believe such a scenario would be
interest of
shareholders and are considering options that may assist in
moving from this position.
in the best
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 operating profit should not continue and
therefore the board sees scope for further sales growth and
increased operating profitability in 2019.
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 Board has reviewed the historic financial information, along
with the global industrial and aerial work platform market
conditions and has concluded it is appropriate to value Tanfield’s
investment in Snorkel based on what the Board understands are
the contractual arrangements and so at an amount based on the
Preferred Interest amount of £19.1m, compared to the 31
December 2017 valuation of £36.3m which attributed a variable
element linked to Snorkel’s potential future EBITDA.
18
TANFIELD GROUP PLC FINANCIAL STATEMENTS
CRITICAL ACCOUNTING ESTIMATES AND KEY JUDGEMENTS (continued)
This valuation has been assessed against various criteria,
including past performance (including but not limited to a
growth in sales, bill of material costs and improved operating
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 1 January 2018 to 31 March 2019, the range of the
GBP to USD exchange rate has a low of 1.252 and a high of
1.433, the average being 1.329. If £19.1m is assumed to
represent the average exchange rate then based on the low of
1.252 the valuation increases by approximately 6% to £20.3m
and based on the high of 1.433 the valuation reduces by
approximately 8% to £17.7m giving a potential movement of
14% in the valuation. There is an added element of uncertainty
in the foreign currency markets due to the extended 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.
If the assumption is made that both the progress within Snorkel
and the wider global market conditions will continue to
improve, then the Board note that the valuation could
potentially increase beyond £19.1m which is underpinned by
the Preferred Interest element. However, the Board has
considered various Snorkel trading scenarios, based around a
continuing sales growth trend and does not believe the
valuation is likely to materially increase from £19.1m in the near
future.
The Board however caveat that a number of factors could
influence the valuation and performance of Snorkel between
now and a potential realisation date, including Xtreme’s opinion
of the contractual agreements and their negotiating stance.
Due to the risks involved with the ongoing different opinions
regarding the contractual agreements, it is possible the actual
realisation of value could be less than the current valuation.
Given the risks, the Board has considered whether a further
impairment loss should be recognised but have concluded that
based on their understanding of the contractual agreements in
place, no further impairment is required at this time.
Whilst the timing and quantum of realisation of the investment
remains unclear, the Tanfield Board is currently of the opinion
that the investment in Snorkel will result in a return to
shareholders in the future and that the current value of the
investment of £19.1m remains appropriate.
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
2018
£000's
72
2
74
2018
No.
2
2
2017
£000's
81
2
83
2017
No.
2
2
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 page 7.
2. Finance expense and finance income
Finance expense
Interest
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
2018
£000's
-
-
2018
£000's
1
1
2018
£000's
40
25
84
149
2017
£000's
-
-
2017
£000's
-
-
2017
£000's
43
26
80
149
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
2018
£000's
2017
£000's
23
2
25
23
2
24
2
26
24
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% (2017: 19.25%)
Effects of:
Non-deductible expenses
Deferred tax asset not recognised in the period
Total taxation charge in the income statement
2018
£000's
(17,377)
(3,302)
3,265
37
-
2017
£000's
(148)
(28)
-
28
-
The Company has tax losses of approximately £3.8m (2017: £3.6m) 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 10.35p (2017: 14.10p).
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
2018
No.
000’s
158,070
-
158,070
2018
£000's
(17,377)
-
(17,377)
2017
No.
000’s
156,324
-
156,324
2017
£000's
(148)
-
(148)
(10.99)
(0.09)
2018
£000’s
-
19,100
19,100
2017
£000’s
-
36,283
36,283
Smith Electric Vehicles US Corp
At 31 December 2018, the Company held a 5.76% (2017: 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 2018, the Company held a 49% (2017: 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 (2018: £19,100k,
2017: £36,283k). The cumulative impairment provision against this investment is £17,183k (2017: £nil). See Strategic Report for
further 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
2018
£000's
188
2018
£000's
11
11
2017
£000's
134
2017
£000's
13
13
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.
2018
£000's
2017
£000's
18
1
33
52
45
23
1
32
56
65
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 2017
Nominal share
value
5p
Number of shares
156,323,517
Share capital
£000’s
7,816
Share premium
£000’s
17,190
At 31 December 2017
New share issue 28 February 2018a
At 31 December 2018
a
5p
5p
5p
156,323,517
2,083,333
158,406,850
7,816
104
7,920
17,190
146
17,336
On 22 February 2018 the Company announced that it had conditionally raised gross proceeds of £250k. These funds were raised by way of a placing of 2,083,333 new Ordinary Shares of 5
pence ("Shares") with institutional investors at a price of 12.0 pence per Share which were issued onto the AIM market on 28 February 2018.
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 2018 and 2017 are shown below.
Outstanding at the beginning of the year
Lapsed
Outstanding at the end of the year
Exercisable
Number of
share options
4,100,000
-
4,100,000
4,100,000
2018
Weighted average
exercise price
(pence)
27
-
27
27
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
The outstanding options at 31 December 2018 had a weighted average remaining contractual life of 2.0 years (2017: 3.0 years)
The following table relates to share options outstanding and exercisable at 31 December 2018
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 (2017: £nil), a credit directly to equity of £nil (2017: £nil) and a reserves transfer of
£nil (2017: £128k) 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
2018
£000's
2
188
190
2017
£000's
4
134
138
2016
£000's
2015
£000's
330
192
4
134
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.
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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.
2018
Trade and other payables
2017
Trade and other payables
Within 1 year
£000's
1 to 5 years
£000's
Over 5 years
£000's
Total
£000's
52
52
56
56
-
-
-
-
-
-
-
-
52
52
56
56
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 2018, the GBP to USD exchange rate averaged 1.3350 with a low of 1.2697 and a
high of 1.4332. 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 page 7.
Salaries and short term benefits including NI
Post employment benefits
2018
£000’s
72
2
2017
£000’s
81
2
74 83
15. Retirement benefits
The Company operates a defined contribution retirement benefit plan for all qualifying employees. The total cost charged to
income of £2k (2017: £2k) represents contributions payable to that scheme by the Company at rates specified in the rules of the
scheme. As at 31 December 2018, contributions of £nil (2017: £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
Amortised
cost
£000’s
2018
Fair value
through profit
and loss
£000’s
Total
Loans and
receivables
£000’s
£000’s
2017
Fair value
through profit
and loss
£000’s
Assets
Current financial assets
Trade and other receivables
Investments
Cash and cash equivalents
Total
Liabilities
Current liabilities
Trade and other payables
Total
2
-
188
190
Other
financial
liabilities
£000’s
51
51
-
19,100
-
19,100
Held for
trading
2
19,100
188
19,290
Total
£000’s
£000’s
-
-
51
51
4
-
134
138
Other
financial
liabilities
£000’s
55
55
Total
£000’s
4
36,283
134
36,421
Total
-
36,283
-
36,283
Held for
trading
£000’s
£000’s
-
-
55
55
Financial assets and liabilities measured at fair value are measured using a fair value hierarchy that reflects the significance of
the inputs used in making the fair value measurements, as follows:-
•
•
•
Level 1 – Unadjusted quoted prices in active markets for identical asset or liabilities (‘quoted prices’);
Level 2 – Inputs (other than quoted prices in active markets for identical assets or liabilities) that are directly or
indirectly observable for the asset or liability (‘observable inputs’); or
Level 3 – Inputs that are not based on observable market data (‘unobservable inputs’).
All of the company’s financial assets and liabilities measured at fair value are measured using level 3 valuations in both the year
ended 31 December 2018 and the year ended 31 December 2017.
The fair value investment is measured against the contractual terms of the joint venture with Xtreme, as detailed in the circular
distributed to shareholders to fully explain the terms of the transaction – and thereby seek their authority to enter into the
transaction. Further details are provided in the strategic report on pages 3 and 4 and in the critical accounting estimates and
key judgements on pages 18 and 19.
17. Investments
The tables below give brief details of the Company’s investments at 31 December 2018. The Company had no operating
subsidiaries as of 31 December 2018.
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 £0.23m through the placing of 4,500,000 ordinary shares at a price of 5 pence per share on 31 May
2019. The shares were admitted to trading on AIM, a market operated by the London Stock Exchange plc, on 6 June 2019.
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