TANFIELD GROUP PLC FINANCIAL STATEMENTS
TANFIELD GROUP PLC
REPORT AND FINANCIAL
STATEMENTS 2019
Registered in England & Wales
Company number 04061965
TANFIELD GROUP PLC FINANCIAL STATEMENTS
REPORT AND FINANCIAL STATEMENTS 2019
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
6
7
8
9
10
13
14
15
16
17
19
21
1
TANFIELD GROUP PLC FINANCIAL STATEMENTS
DIRECTORS AND ADVISORS
Chairman
Non-Executive Director
NOMINATED ADVISOR
WH Ireland
24 Martin Lane
London
London
EC4R 0DR
NOMINATED BROKER
WH Ireland
24 Martin Lane
London
London
EC4R 0DR
DIRECTORS
NON-EXECUTIVE
D Robinson
M Groak
SECRETARY
D Robinson
REGISTERED OFFICE AND ADVISORS
REGISTERED OFFICE
c/o Weightmans LLP
1 St James’ Gate
Newcastle upon Tyne
Tyne and Wear
NE99 1YQ
AUDITOR
RSM UK Audit LLP
1 St James’ Gate
Newcastle upon Tyne
NE1 4AD
SOLICITOR
Weightmans LLP
1 St James’ Gate
Newcastle upon Tyne
Tyne and Wear
NE99 1YQ
REGISTRAR
Link Asset Services
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 International Holdings
LLC ("Snorkel International"), has once again seen a period of
growth in sales. The Board continues to closely monitor
performance and is expecting to see year on year sales growth
for the 6th consecutive year in 2019 when it receives the final
quarter of 2019 results (due 120 days after the year end).
However, while the Board is pleased with the ongoing growth of
Snorkel International, it is disappointed that despite seeking to
amicably resolve a dispute with Tanfield’s 51% joint venture
partner, Xtreme Manufacturing LLC (“Xtreme”), as announced on
22 October 2019, Xtreme (via its subsidiary SKL Holdings LLC
International) filed a Summons and
(“SKL”) and Snorkel
Complaint in the District Court, Clark County, Nevada (the “US
Proceedings”) against Tanfield and its subsidiary HBWP Inc
(“HBWP”). The Board of Tanfield continue to seek advice and
vigorously defend its position.
The investment in Smith Electric Vehicles Corp. ("Smith")
continues to be held at nil value.
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 in 2009 and the formation of a
joint venture between Tanfield Group Plc and Xtreme relating to
the Snorkel division in October 2013 (the “Joint Venture”).
Tanfield currently owns 5.76% of Smith and 49% of Snorkel
International.
OVERVIEW
Snorkel International
Tanfield continues to retain an
in Snorkel
International (currently valued at £19.1m, 2018: £19.1m)
consisting of a 49% interest and a preferred interest position,
incorporating a Priority Amount and a Preferred Return
(collectively the “Preferred Interest”), which it has held since the
Joint Venture was established in October 2013.
investment
Sales levels (unaudited) have continued to grow during the first
9 months of 2019 by 11% resulting in sales for the period of
$169.5m compared to $152.7m for the same period in 2018 (Full
year 2018: $200.5m / 2017: $165.8m / 2016: $130.5m / 2015:
$109.9m / 2014: $85.3m). The Board is not aware of any market
factors and have not been made aware of any specific reason
why sales growth should not have continued in the final quarter
of 2019.
Despite the sales growth and slightly improved gross margins for
the first 9 months of 2019 (12.9% vs 12.8% for the same period
in 2018), the Snorkel International (unaudited) accounts for the
period reported a reduction in operating profit (unaudited),
excluding depreciation, to $2.7m, from $2.9m for the same
period in 2018 (Full year 2018: $2.9m / 2017: $1.6m / 2016:
$2.8m loss / 2015: $10.6m loss / 2014: $14.9m loss). This was the
result of a further $2.5m increase to selling, general and
administrative costs in the period.
its non-conflicted directors at the time and
In October 2019, the Board received the US Proceedings, in which
Xtreme, via its subsidiary SKL and Snorkel International, allege
Tanfield has refused to comply with its contractual obligations by
not agreeing to sign over its interest in Snorkel International for
£nil consideration. It is the Board’s belief that the intent of
Tanfield,
its
shareholders, as well as the contractual terms, require that the
Preferred Interest is paid to the Company before its 49% holding
in Snorkel International can be acquired. Notwithstanding that,
in the Board’s opinion, payment of the Preferred Interest is a clear
requirement described in the Circular that was distributed to
the
shareholders
contemplated transaction, Xtreme allege that this was not their
intent or understanding of the contemplated transaction despite
both they, and their advisers, reviewing and commenting on the
Circular prior to its distribution. They also allege that they do not
believe payment of the Preferred Interest is a requirement of the
contractual agreements.
in advance of shareholders approving
The opinion of Xtreme, which is the premise of the US
Proceedings, is that while they accept that Tanfield received a
49% interest in Snorkel International and a priority amount of
$22.5m (with interest accruing) in exchange for contributing the
entire Snorkel division, including all its assets and intellectual
property, to the Joint Venture, and gave Xtreme a 51% controlling
interest, they allege that because Snorkel International, under
Xtreme’s control, failed to achieve a 12 month EBITDA of $25m
prior to 30 September 2018, that Tanfield’s $22.5m Priority
Amount, plus accrued interest, simply disappeared; allowing
Xtreme to acquire Tanfield’s 49% interest for £nil consideration.
Accordingly, in summary, it is alleged by Xtreme that the terms of
the transaction were such that after (a) Tanfield contributed all of
the assets and intellectual property of its Snorkel division to the
Joint Venture, which Snorkel’s own tax returns declare as having
a value of $45.5m, (b) Tanfield conceded management control of
the Snorkel division to Xtreme, (c) Xtreme ran the business as it
saw fit for approximately 5 years and Snorkel International failed
to achieve an annualized $25m EBITDA, (d) Tanfield’s value
disappears completely and Xtreme can take 100% ownership of
Snorkel International without paying any consideration to
Tanfield.
The Board vigorously deny that this was the intent of the parties,
or the meaning of the contractual agreements. It would have
made absolutely no commercial sense to contribute the
considerable value, trade and assets of the Snorkel division, which
both parties agreed from the outset was fundamentally a viable
company, while also relinquishing control of the division, to then
receive no consideration for the considerable value contributed
to the Joint Venture, because the controlling party failed to
achieve the target. The Board therefore intends to continue to
seek advice and vigorously defend its position.
Despite the allegations, which the Board believe are without
merit, the Board is currently of the opinion that the investment in
Snorkel International will result in a return to shareholders in the
future, but would like to draw your attention to the “Valuation of
Snorkel International holding” below and the critical accounting
3
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STRATEGIC REPORT (Continued)
estimates and key judgments on pages 19 and 20 which further
explain the potential risks.
As a result of the issues arising from the US Proceedings, Tanfield
also sought to preserve its position against Ward Hadaway, the
Company’s former solicitor, as, depending on the outcome of the
US Proceedings, the Company may need to hold the firm to
account for its role in and/or advice to Tanfield in relation to the
Joint Venture transfer. Due to statutory time limitation issues,
and because a suitable Standstill Agreement - which would have
fully protected the Company - could not be agreed, it became
necessary for the Company to issue and serve a claim against
Ward Hadaway in the English High Court (the “UK Proceedings”)
in order to ensure that the Company's rights were fully protected
pending the outcome of the US Proceedings.
The outcome of the US Proceedings will have a direct and
material impact on the UK Proceedings, including the quantum
of any claim, and so a stay of the UK Proceedings would be a
logical next step. To that end, since being forced to issue the UK
Proceedings, Tanfield has tried tirelessly to agree a suitable stay
of the UK Proceedings, pending the outcome of the US
Proceedings. The Board is disappointed to note that a suitable
stay of the UK Proceedings has not been agreed with Ward
Hadaway, despite best efforts.
In the absence of such an agreement, it once again became
necessary for the Company to act and so an application for a stay
of the UK Proceedings, pending the outcome of the US
Proceedings, has been filed with the English court. At this stage,
it is unknown if a stay will be obtained but, for the reasons
explained above, the Company believes this to be the most
appropriate and likely outcome.
Valuation of Snorkel International holding: £19.1
million (2018: £19.1 million)
On 30 September 2018 the fixed terms of the agreement came
to an 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 International. As a $25m trailing 12 month EBITDA was
not reached by the deadline, the put option expired. Tanfield
retains a 49% interest in Snorkel International and, in the Board’s
opinion, the Preferred Interest, but it can no longer compel
Xtreme to pay the Preferred Interest and acquire its 49% interest.
The Board therefore remains of the opinion that the Preferred
Interest is the minimum payment required under the terms of
the contractual agreements 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.
As the US Proceedings have been brought against Tanfield, it is
evident that Don Ahern, the owner of Xtreme, wishes to own
100% of Snorkel International. However, based on the statement
within the US Proceedings, it is evident that Don Ahern does not
believe he should have to pay anything in order to acquire
Tanfield’s 49% of Snorkel International. One possible outcome is
that Tanfield continues to hold its 49% interest for the
foreseeable future however, the Board does not believe such a
scenario would be in the best interest of shareholders and, should
it become necessary, would consider options that may assist in
moving from this position.
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
number of factors could influence the valuation of Snorkel
International between now and a potential realisation date,
including the outcome of all relevant legal proceedings, Xtreme’s
negotiating stance and the exchange rate at the time of any
realisation.
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 exchange rate fluctuations.The
Board would like to draw the reader’s attention to the critical
accounting estimates and key judgments on pages 19 and 20
which further explain the uncertainty and to the Auditors’ report
on pages 10 to 12 in which it is also highlighted.
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, and if, 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.
As Smith are unable 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.
4
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STRATEGIC REPORT (Continued)
Strategy of Tanfield Board of Directors in relation
to its Investments
The Board believes its investment in Snorkel International will
result in a return of value to shareholders but cannot predict the
timeframe for such a return. 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 investments are defined as passive investments and in line
with this definition Tanfield does not hold Board seats in either
Snorkel International or Smith. There is no limit on the amount of
time the existing investments may be held by the Company.
Finance expense and income
No interest cost was incurred in the period (2018: £nil) and
interest income of £1k (2018: £1k) was received on bank
balances.
Loss from operations
The loss from operations was £317k (2018: £17,377k), the most
significant difference compared to the prior year being the
impairment of investments of £17,183k in 2018.
Loss per share
Loss per share from continuing operations was 0.20 pence (2018:
10.99 pence). No dividend has been declared (2018: £nil).
Cash
At 31 December 2019, the Company had cash of £0.1m (2018:
£0.2m) and approximately £0.2m as at the date of this report.
Risks and uncertainties
A loan note instrument for up to £700k was put in place by
Tanfield on 27 March 2020, with a minimum of £500k being
subscribed to. The Board therefore believes the business has
sufficient cash funds to continue for a period of 12 months from
the date of this report. As at the date of this report, there
remains a minimum £0.3m available to draw down of the
subscribed loan. 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 somewhat reliant
on their continued performance within their markets.
As the global Covid-19 pandemic is still unfolding, it is not
possible at this stage, largely due to the limited Snorkel
International information available to the Board, to estimate the
likely impact the pandemic may have. The Board note that any
impact would likely be limited to timing and that it should not
alter what it believes to be the minimum contractual value.
Section 172: Companies Act Statement
The Board takes seriously its duties towards a wide range of
stakeholders and acts in a way to ensure that its decision making
promotes the success of the Company for the benefit of these
stakeholders in accordance with Section 172. The Board’s ability
to do this is as a result of the Company status – as an investment
Company it has no employees or customers and its activities have
no impact on the wider community and environment. The
statements below provide further information as to how the
directors have had regard to the relevant matters.
The likely consequences of decisions in the long term. As
discussed earlier in this report, the sole aim of the Board is to
maximise the return to shareholders through its investment
holdings. This is of necessity a short-term focus, and the financial
outcome will determine the future position and strategy of the
Company.
The need to foster the Company’s business relationships with
suppliers and the desirability of the Company to maintain a
reputation for high standards of business conduct. Engagement
with suppliers is a key part of the business as the Board looks to
bring a resolution to its investment position. Therefore, we are
selective in the suppliers we chose to work with, demonstrating
the Board’s commitment to maintaining high standards of
business conduct and professionalism.
The need to act fairly between members of the Company.
Responsibility for investor relations rests with the Chairman. The
Board is committed to communicating openly with shareholders
its strategy and performance are clearly
to ensure that
understood.
The Annual General Meeting
is the principal forum for
shareholders, and we encourage all shareholders to attend
(where appropriate) and participate. The notice of the meeting is
sent at least 21 days before the meeting. The Chairman of the
Board and other directors, where possible, are present and are
available to answer questions raised by shareholders. The Board
ensure regular communication is made to all shareholders via
periodic RNS announcements.
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
22 April 2020
5
TANFIELD GROUP PLC FINANCIAL STATEMENTS
DIRECTORS’ REPORT
The directors submit their report and the financial statements of
Tanfield Group Plc for the year ended 31 December 2019.
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.
INVESTING POLICY
The holdings in Snorkel International Holdings LLC and Smith
Electric Vehicles Corp. are passive investments. It 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 2019 reflects the
principal activity of the company being that of an investment
company.
Turnover for the year was £nil (2018: £nil). The operating loss
before impairments in the year of £318k (2018: £195k) arose
from operating costs.
The statement of financial position shows total assets at the end
of the year of £19.3m (2018: £19.3m). Net Current Assets were
£0.1m (2018: £0.1m) with cash balances of £0.1m (2018: £0.2m).
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 (2018: £nil).
The loss of £317k (2018: £17,377k) has been transferred to
reserves.
FINANCIAL INSTRUMENTS
The Company’s financial instruments comprise cash, non-current
investments, current receivables and current payables arising
from its operations. The principal financial instruments used by
the Company during the year are cash balances raised from share
issues by the Company and post year end cash balances raised
from a Loan Note Instrument. 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 trade payables at 31 December
2019 were 72 days (2018: 45 days).
SUBSTANTIAL SHAREHOLDINGS
On 31 December 2019 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
54,986,622
33.75%
CHASE NOMINEES LIMITED
31,572,472
19.38%
AURORA NOMINEES LIMITED
19,548,946
12.00%
THE BANK OF NEW YORK (NOMINEES)
12,204,494
7.49%
VIDACOS NOMINEES LIMITED
11,908,112
7.31%
EUROCLEAR NOMINEES LIMITED
6,897,399
4.23%
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 8.
Daryn Robinson
Chairman
22 April 2020
6
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 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
22 April 2020
7
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
QCA Code. The members of the committee during the year were
D Robinson and M Groak and the committee was chaired by D
Robinson.
Share options
The directors had options granted to them under the terms of the
Share Option Scheme which, as at the date of this report, have
expired. Share options were awarded as set out in the table
below. No new share options have been granted as at the date
of this report.
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.
•
•
•
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 2019 and 31
December 2018 are shown below:
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.
D Robinson
M Groak
Total
Number of shares
2019
942,785
40,000
982,785
2018
942,785
40,000
982,785
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.
The directors, as a group, beneficially own 0.6% of the company’s
shares.
As at the date of this report, no director has any remaining 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.
Remuneration review
Directors emoluments for the financial year were as follows:
M Groak
D Robinson
Total
Salary
2019
£000's
20
52
72
Pension
2019
£000's
-
2
2
Total
2019
£000's
20
54
74
Salary
2018
£000's
20
52
72
Pension
2018
£000's
-
2
2
Total
2018
£000's
20
54
74
Directors share options held at 31 December 2019 were as follows:
M Groak
D Robinson
Total
31 December
2018
100,000
100,000
200,000
Granted/
(Lapsed)
-
-
-
Exercised
-
-
-
31 December
2019
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 2019 the market price of the ordinary shares was 4.50p. The range during 2019 was 2.26p to 7.13p
Approval
This report was approved by the board of directors and authorised for issue on 22 April 2020 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
and the Directors’ Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law 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 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 2019 which
comprise the Statement of Comprehensive
Income, the
Statement of Financial Position, the Statement of Changes in
Equity Attributable to Equity Shareholders, 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 2019 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.
Summary of our audit approach
•
Key audit matters - Carrying value of non current
investments
• Materiality
- Overall materiality:
£405,000,
•
performance materiality: £304,000
Scope - Our audit procedures covered 100% of
revenue, 100% of total assets and 100% of profit
before tax.
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
Key audit matter description
Included in the Statement of Financial Position are non current
investments with a carrying value of £19.1m. This represents
holdings of 5% and 49% respectively in Smith Electric Vehicles US
Corp and Snorkel International Holdings LLC (‘Snorkel’). Note 6
and the Accounting Policies of the financial statements describes
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 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.
As described on pages 19 and 20 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. The 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 limited financial and non financial information
upon which to calculate/base its estimate of the realisation value
and timing thereof. The Critical Accounting Estimates and Key
Judgements on pages 19 and 20 set out the basis of the Directors
consideration of the fair value of the investment, based on its
expected recoverable amount, and the assumptions made
therein. The assessments and conclusion of the directors are
based on the Investment 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 assessment made by the Directors as to
the sums falling due under the Investment Circular differs to the
assessment made by Xtreme which has
the
commencement of the initial stages of legal proceedings by
Xtreme against the company to obtain control of the remaining
49% of Snorkel. The directors have concluded that the most
appropriate basis for determining the carrying amount continues
to be the amount represented by the Preferred Interest element,
which was established at the time of the Transaction, and was the
value the investment in Snorkel was impaired to following the
expiry of the put option in 2018.
led
to
10
TANFIELD GROUP PLC FINANCIAL STATEMENTS
REPORT OF THE INDEPENDENT AUDITOR (CONTINUED)
As explained in the Critical Accounting Estimates and Key
Judgements, the timing of realisation and the sum to be realised
are dependent on definitive clarification as to the legal position
of the call option still held by Xtreme. The eventual amount
realised is also dependent on the applicable rate of exchange at
the time that the US$ proceeds are converted into GBP.
As a result, there remains significant doubt over the timing and
value at which this asset will be realised – the range of values
estimated at being between £nil and £19.1m.
How the matter was addressed in the audit
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 estimated timing and realisable value of the
investment, and such other audit evidence as was available, to
form a view on the reasonableness of these assumptions,
estimates and calculations. We have also re-performed the
calculations undertaken by management of the expected
realisable value based on the information used by management.
In carrying out our audit work we have considered and
challenged the range of outcomes used 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. We also circularised the Company’s legal advisors in
both the UK and United States.
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. When evaluating whether the
effects of misstatements, both individually and on the financial
statements as a whole, could reasonably influence the economic
decisions of the users we take into account the qualitative
nature and the size of the misstatements. Based on our
professional judgement, we determined materiality as follows:
• Overall materiality - £405,000
•
•
•
•
•
Basis for determining overall materiality - 2% of total
assets
Rationale for benchmark applied - As the company’s
principal activity is that of an investment company, we
deemed total assets to be the key benchmark for users
of the financial statements
Performance materiality - £304,000
Basis for determining performance materiality - 75%
of overall materiality in the current year
Reporting of misstatements to the Audit Committee
- Misstatements
in excess of £4,000 and
misstatements below that threshold that, in our view,
warranted reporting on qualitative grounds
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.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information 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 required 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.
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.
An overview of the scope of our audit
The company has been subject to a full scope audit.
11
TANFIELD GROUP PLC FINANCIAL STATEMENTS
REPORT OF THE INDEPENDENT AUDITOR (CONTINUED)
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:
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 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 (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
Date: 22 April 2020
12
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
Notes
2019
£000's
2018
£000's
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
1
3
6
2
2
4
-
(74)
23
(267)
(318)
-
(318)
-
1
(317)
-
(317)
-
(74)
28
(149)
(195)
(17,183)
(17,378)
-
1
(17,377)
-
(17,377)
Loss per share
Loss per share from operations
Basic and diluted (p)
5
(0.20)
(10.99)
13
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION (Company registration number 04061965)
AS AT 31 DECEMBER 2019
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
2019
£000's
19,100
19,100
23
136
159
2018
£000's
19,100
19,100
11
188
199
19,259
19,299
104
104
104
8,145
17,336
331
66,837
1,534
(75,028)
19,155
52
52
52
7,920
17,336
331
66,837
1,534
(74,711)
19,247
Total equity and liabilities
19,259
19,299
The financial statements on pages 13 to 26 were approved by the board of directors and authorised for issue on 22 April 2020 and
are signed on its behalf by:
Daryn Robinson
Chairman
14
TANFIELD GROUP PLC FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN EQUITY ATTRIBUTABLE TO EQUITY
SHAREHOLDERS
FOR THE YEAR ENDED 31 DECEMBER 2019
At 1 January 2018
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
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 2019
Share
capital
Share
premiuma
£000's
7,816
£000's
17,190
Share
option
reserveb
£000's
331
Merger
reservec
Special
reserved
Retained
earningse
Total
£000's
1,534
£000's
66,837
£000's
(57,334)
£000's
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
-
-
-
-
-
-
-
-
-
-
(317)
(317)
(317)
(317)
225
8,145
-
17,336
-
331
-
1,534
-
66,837
-
(75,028)
225
19,155
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.
15
TANFIELD GROUP PLC FINANCIAL STATEMENTS
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
Loss before interest and taxation
Loss on impairment of investments
Operating cash flows before movements in working capital
(Increase)/decrease in receivables
Decrease/(increase) 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 (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
2019
£000's
(318)
-
(318)
(12)
52
(278)
1
1
225
225
(52)
188
136
2018
£000's
(17,378)
17,183
(195)
2
(4)
(197)
1
1
250
250
54
134
188
16
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”), IFRS Interpretation Committee 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, except for
the revaluation of certain financial assets and liabilities measured
at fair value.
The financial statements present the company accounts only and
have not been consolidated as the adjustments made to the
financial statements upon consolidation would be immaterial.
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 2019 the Company had cash balances of
£0.1m and is debt free.
loan note
The Directors are confident that, following a
instrument for up to £700k being put in place by Tanfield on 27
March 2020, with a minimum of £500k being subscribed, the
available resources will be sufficient to a) allow the Company to
continue in operation for a minimum of 12 months and b) see the
US Proceedings through to conclusion, based on the expected
procedural outcomes, timing and cost estimates. It is not
currently expected that Covid-19 will impact on this, but as the
full extent of the pandemic is not yet known, should the US
Proceedings be delayed materially, additional resources may be
required in order to see the US Proceedings through to
conclusion. Having taken the uncertainties into account the
Board believes
is appropriate to prepare the financial
statements on the going concern basis. The financial statements
do not include any adjustments 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.
it
The Directors do not believe that the post year end global Covid-
19 pandemic will have a direct impact on the Company’s ability
to continue as a going concern due to the nature of its’ activities
as an investment company.
17
(iii) Foreign currencies
Transactions in currencies other than sterling, 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.
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
the
contributions have been paid. The contributions are recognised as
an employee benefit expense in the period in which they fall due.
further payment obligations once
(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.
TANFIELD GROUP PLC FINANCIAL STATEMENTS
ACCOUNTING POLICIES (continued)
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.
New and amended standards and interpretations
effective from 1 January 2019 adopted by the
Company
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.
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
confirm that neither this new standard, nor any of the matters
raised in any recent Annual Improvements projects, nor any
recent amendments to specific IAS and IFRS standards, have a
material impact on the financial statements.
New and amended standards and interpretations
effective from 1 January 2020 not yet adopted by
the Company.
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2019 reporting
periods and have not been early adopted by the group. These
standards are not expected to have a material impact on the entity
in the current or future reporting periods and on foreseeable future
transactions.
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 amortised cost.
(vii) Segmental reporting
In accordance with IFRS 8 operating segments are determined 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.
Accounting standards,
amendments to published accounts
interpretations and
The Company considered the implications of, if any, and applied
the following standard and amendments for the first time during
the year ended 31 December 2019.
18
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
Smith
The status of the Company’s holding in Smith Electric Vehicles US
Corp was reviewed during the year. 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 Report on pages 3 to 5) and while the
litigation has now been settled, no progress has since been made
that gives rise to an expectation of a realisation in value. As such,
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.
Snorkel International
The status of the Company’s holding in Snorkel International
Holdings LLC was reviewed during the year. The Board has
concluded that, while Tanfield continues to retain an investment
in Snorkel International (currently valued at £19.1m), consisting
of a 49% interest and the Preferred Interest, under the terms of
the Joint Venture, they are unable to exercise significant
influence over the activities and strategic direction of Snorkel
International and therefore holding the investment as a trade
investment, as opposed to applying equity accounting, continues
to be the correct treatment.
Since the injection of working capital, following the Joint Venture
in October 2013, Snorkel International has continued to progress
well with sales levels (unaudited) growing by 11% in the first 9
months of 2019 (Full year 2018: 21% / 2017: 27% / 2016: 19% /
2015: 29%) resulting in sales of $169.5m for the first 9 months of
2019 compared to $152.7m for the same 9 months in 2018 (Full
year 2018: $200.5m / 2017: $165.8m / 2016: $130.5m / 2015:
$109.9m / £2014: $85.3m). The operating profit (unaudited),
excluding depreciation, for the 9 months to 30 September 2019
was $2.7m compared to $2.9m for the same 9 months in 2018
(Full year 2018: $2.9m / 2017: $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 should not
have continued in the final quarter of 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 International is limited to quarterly historical
incorporating a consolidated operating
financial
statement, balance sheet and cashflow.
information,
In 2018, the Board impaired Tanfield’s investment value in Snorkel
International 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 the Snorkel division contributed to
the Joint Venture, plus the preferred return, being interest accruing
on the priority amount. This is the basis of valuation that was set
out in the Circular issued to Shareholders at the time of the Joint
Venture. 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.
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 International by Xtreme, would be reached within the
predefined period ending 30 September 2018. As Snorkel
International, under Xtreme’s control, failed to achieve the EBITDA
trigger, Tanfield retains a 49% interest in Snorkel International and
the Preferred Interest, but it can no longer compel Xtreme to pay
the Preferred Interest and acquire its 49% interest.
In November 2018, the Board received a call option notice in which
Xtreme, via its subsidiary SKL, requested to exercise a call option to
acquire Tanfield's interest in Snorkel International. In the request,
SKL stated that the option price to acquire Tanfield’s holding was
$0 (nil) and that payment of 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 International for a nil value. The Board therefore rejected
the call option notice and sought to amicably resolve the dispute
with Tanfield’s 51% joint venture partner, Xtreme. As announced
on 22 October 2019, Xtreme (via its subsidiary SKL and Snorkel
International) filed the US Proceeding against Tanfield and its
subsidiary HBWP.
As the US Proceedings have been brought against Tanfield, it is
evident that Don Ahern, the owner of Xtreme, wishes to own 100%
of Snorkel International. However, based on the statement within
the US Proceedings, it is evident that Don Ahern does not believe
he should have to pay anything in order to acquire Tanfield’s 49%
interest in Snorkel International. 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, should it become
necessary, would consider options that may assist in moving from
this position.
19
TANFIELD GROUP PLC FINANCIAL STATEMENTS
CRITICAL ACCOUNTING ESTIMATES AND KEY JUDGEMENTS (continued)
The Board, however, caveat that a number of factors could
influence the valuation and performance of Snorkel International
between now and a potential realisation date, including Xtreme’s
opinion of the contractual agreements which has resulted in the US
Proceedings (see Strategic Report on pages 3 to 5 for further
information) as well as the recent global Covid-19 pandemic. 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, potentially as low as
£nil as alleged by Xtreme and depending on the outcome of ongoing
legal proceedings. As the global Covid-19 pandemic
is still
unfolding, it is not possible at this stage, largely due to the limited
Snorkel International information available to the Board, to
estimate the likely impact the pandemic may have. The Board note
that any impact of Covid-19 would likely be limited to the
performance of Snorkel International and the timing of a possible
realisation but it shouldn’t alter what it believes to be the minimum
contractual value.
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 Board is currently of the opinion that the
investment in Snorkel International will result in a return to
shareholders in the future, that the current value of the investment
of £19.1m remains appropriate and there is not an alternative,
more reliable valuation of the investment than the current
estimate.
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 International based on what the Board
understands are the contractual arrangements and so at an
amount based on the Preferred Interest amount of £19.1m.
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 International.
the level of operating profitability improvement being more
or less than that recently achieved by Snorkel International.
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 2019 to 31 December 2019, the range of the
GBP to USD exchange rate has a low of 1.204 and a high of 1.335,
the average being 1.277. If £19.1m is assumed to represent the
average exchange rate then based on the low of 1.204 the
valuation increases by approximately 6% to £20.3m and based on
the high of 1.335 the valuation reduces by approximately 4% to
£18.3m giving a potential movement of 10% in the valuation.
There is an added element of uncertainty in the foreign currency
markets due to the uncertainty of what the future trading
relation with the EU will be 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 International 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
International 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 International 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.
20
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
2019
£000's
72
2
74
2019
No.
2
2
2018
£000's
72
2
74
2018
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 8.
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
2019
£000's
-
-
2019
£000's
1
1
2019
£000's
33
25
209
267
2018
£000's
-
-
2018
£000's
1
1
2018
£000's
40
25
84
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
2019
£000's
2018
£000's
23
-
23
23
-
23
2
25
23
2
21
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% (2018: 19%)
Effects of:
Non-deductible expenses
Deferred tax asset not recognised in the period
Total taxation charge in the income statement
2019
£000's
(317)
(60)
-
60
-
2018
£000's
(17,377)
(3,302)
3,265
37
-
The Company has tax losses of approximately £4.1m (2018: £3.8m) 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 5.36p (2018: 10.35p).
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
2019
No.
000’s
160,971
-
160,971
2019
£000's
(317)
-
(317)
2018
No.
000’s
158,070
-
158,070
2018
£000's
(17,377)
-
(17,377)
(0.20)
(10.99)
2019
£000’s
-
19,100
19,100
2018
£000’s
-
19,100
19,100
Smith Electric Vehicles US Corp
At 31 December 2019, the Company held a 5.76% (2018: 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 2019, the Company held a 49% (2018: 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 (2019: £19,100k,
2018: £19,100k). The cumulative impairment provision against this investment is £17,183k (2018: £17,183k). See Strategic Report
for further considerations.
22
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 cash and cash equivalents in Sterling bank accounts.
Cash and cash equivalents
8. Trade and other receivables
Receivable within one year
Other debtors and prepayments
2019
£000's
136
2019
£000's
23
23
2018
£000's
188
2018
£000's
11
11
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.
2019
£000's
2018
£000's
52
1
51
104
72
18
1
33
52
45
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 2018
New share issue 28 February 2018a
At 31 December 2018
New share issue 6 June 2019b
At 31 December 2019
a
Nominal share
value
5p
5p
5p
5p
5p
Number of shares
156,323,517
2,083,333
158,406,850
4,500,000
162,906,850
Share capital
£000’s
7,816
104
7,920
225
8,145
Share premium
£000’s
17,190
146
17,336
-
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.
b
On 31 May 2019 the Company announced that it had conditionally raised gross proceeds of £225k. These funds were raised by way of a placing of 4,500,000 new Ordinary Shares of 5 pence
("Shares") with institutional investors at a price of 5.0 pence per Share which were issued onto the AIM market on 6 June 2019.
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. The share based
payment expense is recognised in profit or loss over the vesting period.
23
TANFIELD GROUP PLC FINANCIAL STATEMENTS
11. Share based payments (continued)
All share based payments are equity settled and details of the share option activity during 2019 and 2018 are shown below.
Outstanding at beginning and end of the
year
Number of
share options
4,100,000
2019
Weighted average
exercise price
(pence)
27
Number of
share options
4,100,000
2018
Weighted average
exercise price
(pence)
27
Exercisable
4,100,000
27
4,100,000
27
No share options expired, or were granted, exercised or forfeited during the periods covered by the table above. The
outstanding options at 31 December 2019 had a weighted average remaining contractual life of 1.0 years (2018: 2.0 years)
The following table relates to share options outstanding and exercisable at 31 December 2019
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
A charge to the income statement of £nil (2018: £nil) and a credit directly to equity of £nil (2018: £nil) have been made during
the year in accordance with IFRS2 ‘Share-based payments’.
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
2019
£000's
2
136
138
2018
£000's
2
188
190
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.
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.
Within 1 year
£000's
1 to 5 years
£000's
Over 5 years
£000's
Total
£000's
2019
Trade and other payables
2018
Trade and other payables
-
-
-
-
-
-
-
-
104
104
52
52
104
104
52
52
24
TANFIELD GROUP PLC FINANCIAL STATEMENTS
12. Financial risk management (continued)
Foreign exchange risk management
The Company is exposed to movements in foreign exchange rates due to any realisation of its investment in Snorkel International
being denominated in foreign currencies. The carrying amount of the company’s investment in Snorkel International at 31
December 2019, which is denominated in USD, is £19.1m (2018: £19.1m). During 2019, the GBP to USD exchange rate averaged
1.2769 with a low of 1.2037 and a high of 1.3351. The company has no other material assets or liabilities denominated in foreign
currencies. If appropriate the Company can use currency derivative financial instruments such as foreign exchange contracts to
reduce exposure. These were not used in the period.
Capital management
The Company’s main objective when managing capital is to protect returns to shareholders. The Company also aims to maximise
its capital structure of debt and equity so as to minimise its cost of capital. The Company manages its capital with regard to risks
inherent in the business and the sector in which it operates by monitoring its gearing ratio on a regular basis. The Company
considers its capital to include share capital, share premium, special reserve, share option reserve and retained earnings. No
gearing is currently calculated as the Company had no borrowings during the year.
13. Contingencies
Authorised Guarantee Agreement
At the time of the Joint Venture between Tanfield Group Plc and Xtreme Manufacturing LLC relating to Snorkel International in
October 2013, Tanfield Group Plc was the tenant of the Vigo Centre manufacturing facility from which the Snorkel division 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 8.
Salaries and short term benefits including NI
Post employment benefits
2019
£000’s
72
2
74
2018
£000’s
72
2
74
15. Retirement benefits
The Company operates a defined contribution retirement benefit plan for all qualifying employees. The total cost charged to
income of £2k (2018: £2k) represents contributions payable to that scheme by the Company at rates specified in the rules of the
scheme. As at 31 December 2019, contributions of £nil (2018: £nil) due in respect of the current reporting period had not been
paid over to the scheme.
16. Financial instruments recognised in the statement of financial position
Assets
Current financial assets
Trade and other receivables
Investments
Cash and cash equivalents
Total
Amortised
cost
£000’s
2019
Fair value
through profit
and loss
£000’s
Total
Loans and
receivables
£000’s
£000’s
2018
Fair value
through profit
and loss
£000’s
2
-
136
138
-
19,100
-
19,100
2
19,100
136
19,238
2
-
188
190
-
19,100
-
19,100
Total
£000’s
2
19,100
188
19,290
25
TANFIELD GROUP PLC FINANCIAL STATEMENTS
16. Financial instruments recognised in the statement of financial position
(continued)
Liabilities
Current liabilities
Trade and other payables
Total
Other
financial
liabilities
£000’s
104
104
2019
Held for
trading
Total
£000’s
£000’s
-
-
104
104
Other
financial
liabilities
£000’s
51
51
2018
Held for
trading
Total
£000’s
£000’s
-
-
51
51
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 2019 and the year ended 31 December 2018.
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 to 5 and in the critical accounting estimates and key
judgements on pages 19 and 20.
17. Investments
The tables below give brief details of the Company’s investments at 31 December 2019. The Company had no operating subsidiaries
as of 31 December 2019.
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
Powered Access
Powered Access
Powered Access
Powered Access
Powered Access
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 put in place a loan note instrument for up to £700k, with a minimum of £500k subscribed, on 27 March 2020.
All share options granted to Directors under the terms of their employment contracts lapsed on 2 February 2020.
26