(TAN.L) Tanfield Group PLC Buy/Sell

(Reporting by Tresa Sherin Morera in Bangalore; Editing by Vinu Pilakkott) Keywords: TANFIELD/ (tresa.sherin@thomsonreuters.com; +44 207 542 7717; Reuters Messaging: tresa.sherin@thomsonreuters.com)

COPYRIGHT

Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

((London Equities Newsroom; +44 20 7542 7717)) (For more news, please click here)

COPYRIGHT

Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

Tanfield is pleased to announce further developments from its associate company, Smith Electric Vehicles US Corp ("SEV US Corp").

SEV US Corp, together with AM General, a leading manufacturer of military and commercial vehicles, headquartered in South Bend, Indiana, USA, is developing a prototype electric version of the gasoline-powered Long Life Vehicle for the United States Postal Service ("USPS"). There are currently approximately 178,000 Long Life Vehicles in service with the USPS. AM General will manufacture the chassis and SEV US Corp will supply the electric drive train, including the motor, battery pack, electronics and ancillary systems.

Darren Kell, CEO of The Tanfield Group Plc, said: "With AM General we combine a global leader in specialist vehicles with a world leader in electric vehicle integration. The goal is to deliver an electric vehicle that is perfect for the United States Postal Service; a vehicle that is energy efficient, cost-effective, reduces US reliance on oil and lowers greenhouse gas emissions."

As announced on 6 August 2009, SEV US Corp won $10m in grant funding from the US Department of Energy (DoE), to facilitate its growth towards volume production and to build a demonstration fleet of electric trucks. In addition, SEV US Corp customers have been awarded funding for 65 Smith Newton electric trucks, amounting to $4.5m, through the US Clean Cities Program. SEV US Corp is applying for more funding through the US Government "green vehicles" programmes.

SEV US Corp has commenced production of the Smith Newton electric truck platform at its assembly facility in Kansas City, Missouri. Appetite for the Smith Newton truck is strong in North America and SEV US Corp now has an order book of 255 trucks.

In light of the swift growth in demand for the production ready Smith Newton, SEV US Corp mutually agreed with Ford to terminate its development project with Ford of an electric car-derived van based on Transit Connect. In the short to medium term, forecast volumes did not justify the investment requirement and limited the working capital available to support the growth of Newton. SEV US Corp believes that investing in the existing Smith platforms represents a better use of its financial resources, allowing it to take full advantage of a potentially very sizeable market and to gain market traction more quickly. It was concerned that the market for electric car-derived vans would become increasingly competitive. In North America, Ford still intends to launch its own electric version of the Connect.

In other markets, the Board of Directors believes that the best strategy going forward for the Company is to focus on preserving and enhancing Tanfield's market-leading position in the medium-duty commercial vehicle sector, through its many variants of Newton truck and Edison van platforms. Tanfield remains Ford of Europe's official collaborator on commercial electric vehicles, initially focused solely on the Ford Transit platform, which is marketed as the Smith Edison.

Whilst consolidating its market-lead position in this sector, Tanfield continues to pursue an order for the delivery of over 50 Smith Edison vans with a leading UK retailer. Additionally, Tanfield is now confirmed as the largest supplier to Phase One of the UK Government's Low Carbon Vehicle Procurement Programme. Tanfield will supply a total of 57 Smith Edison vans in the first phase.

Darren Kell added:

"Tanfield is gaining real traction with its core products in the electric van and truck sectors across the world"

For further information:
The Tanfield Group Plc +44 (0)845 1557 755

Darren Kell, CEO Charles Brooks, FD

Arbuthnot Securities +44(0)20 7012 2000

Nomad and Broker James Steel

Andrew Fairclough

ENDS

This information is provided by RNS The company news service from the London Stock Exchange

TSTDBLBXKBBFFBD

Darren Kell, CEO of Tanfield, said: "Sales performance across the Group continues to be constrained by the global recessionary environment.

"However, we took appropriate and timely corrective action to reshape the business. Throughout the period we have consciously run the Company for cash ahead of profitability; a strategy that has maintained the cash position, with the group still retaining a strong balance sheet.

"We continue to prepare for an eventual upturn in market demand in both our core business sectors, and are already witnessing positive developments in the Zero Emission Vehicles division."

For further information:

The Tanfield Group Plc +44 (0) 845 155 7755

Darren Kell, CEO

Charles Brooks, FD

Arbuthnot Securities +44(0)20 7012 2000

Nomad & Broker

James Steel

Media Enquiries: Dan Jenkins +44 (0) 191 461 6842

Summary

Throughout the period, the Company continued to experience volatility in all its market sectors as a direct consequence of the worldwide economic recession. Turnover declined 68% to £29.9m, resulting in a loss of £11.0m for the period.

Market pricing continued to decline in the period, particularly in the Powered Access division, where our revenue performance declined in line with the market and our peers. Access to credit for capital goods purchases remains the most significant challenge faced by the Company's customers in both the Powered Access and Zero Emission Vehicles divisions.

We took decisive action to reduce the cost base and improve business efficiency at the beginning of 2009, coupled with measures including shorter working weeks and periods of unpaid leave. This resulted in a reduction of staff costs by 40% whilst retaining the core skills base of the workforce. However, price erosion in Powered Access markets has meant that even after this level of resizing, the business has reported a loss. We have consciously focused on cash generation, ahead of profitability, to ensure that we maintained the cash position and the Company remained debt-free, rather than reduce the size of the business to a level that would have jeopardised recovery.

Strategic Developments

The Board of Directors is currently engaged in a strategic review of the business. Detailed consideration is being given to a possible de-merger of the two core trading divisions, thereby creating two separate companies focused on Powered Access and Zero Emission Vehicles respectively. The Board is reviewing how this could improve shareholder value, whilst providing sustained growth opportunities in each of the business units. The Board will, in due course, provide more detailed information on the outcome of this strategic review.

Powered Access: Turnover of £21.2m (H1 2008: £72.9m / H2 2008: £41.5m)

A focus on inventory reductions during the period generated cash and harmonised Tanfield's finished goods stock with production target levels.

During the first half, Tanfield further expanded its global dealer network, with the appointment of new distributors in Latin America, North Africa and Europe. The Company also appointed a national network of sales agents in North America, to target smaller, family-owned equipment rental companies.

Tanfield has substantially strengthened the core competencies of its workforce in North East England. The Company took advantage of workforce training opportunities and has received 3,750 man-hours of education for employees in the Powered Access Division. This has resulted in improved skills and qualifications for every production operative.

The almost blanket cessation of fleet purchases by equipment rental companies seen in the second half of 2008 continued throughout this period. This has fuelled increased competition for the end user market, resulting in heavy discounting from all the Company's major competitors. However, while revenues in the period have declined, our performance is in line with, or better than, our sector peers.

Zero Emission Vehicles: Turnover of £8.1m (H1 2008: £15.6m / H2 2008: £9.5m)

The Tanfield Group is already recognised worldwide as a leading manufacturer of electric vehicles and is therefore well placed to capitalise on the growing demand for these products. In the light of this, the Company continues to exploit opportunities for the advancement of electric vehicle sales across the world.

During the first half, Tanfield ramped up its strategy to grow export sales into countries that are aggressively incentivising electric vehicle procurement. The company has since appointed new distributors in Hong Kong, Southern China and Denmark, adding to existing dealers in The Netherlands and the Republic of Ireland. This strategy is already bearing fruit; in September 2009, Tanfield received purchase orders for 50 electric vans in Holland. The vehicles will be deployed by Dutch utility company Eneco. Our distributor in Hong Kong, also appointed in September, has ordered 15 commercial electric vehicles, which are destined for the fleet of the Hong Kong government.

As previously reported, Tanfield successfully completed a Licence Agreement with its US associate company Smith Electric Vehicles US Corporation (SEV US Corp). Under this arrangement, Tanfield will hold 49% of the equity of SEV US Corp and the company will manufacture and distribute Tanfield products under licence in North America. This strategic development has enabled Tanfield to achieve a low cost entry into the US market, which has already won financial support from the Federal Government and sold vehicles to high profile customers including Coca-Cola and Staples.

In the UK, Tanfield was one of four producers of low carbon vans to be selected for the Government's Low Carbon Vehicle Procurement Programme.

In Phase One, Tanfield will deliver 54 vehicles out of a total 129 electric and hybrid vans, making the Company the largest supplier of electric vans into the programme.

Tanfield is also part of two consortia that both won funding for Technology Strategy Board programmes. These programmes will see the Company deliver 16 electric passenger vehicles and develop new, high-efficiency vehicle ancillary systems.

Official figures for June 2009 showed that year-on-year total van sales in the UK had declined by approximately 40%. Inevitably this has been reflected in Tanfield's sales performance of electric commercial vehicles during the period. Furthermore, the inability of some fleet operators to access credit during this period has resulted in a number of UK customers postponing - and in some cases reducing - orders.

Other: Turnover of £0.6m (H1 2008: £4.3m / H2 2008: £2.0m)

The core customer base of Tanfield's Engineering operations is construction vehicle manufacturers. These customers continued to experience a sharp decline in sales during this period, reflected in lower turnover for this business unit.

Outlook

The Board is confident that the worldwide demand for low emission vehicles, especially in the commercial vehicle sector, will remain a major market driver and provide significant medium and longer term growth prospects for the Zero Emission Vehicles division. Short term predictions are modest, with any substantial growth opportunity dependent upon worldwide economic recovery.

The short term outlook for Powered Access remains challenging. Major rental companies have applied a capital expenditure moratorium on new equipment and are actively reducing inventory. This has resulted in a large number of used machines entering the market, which has in turn impacted on new product sales and pricing. Rental customers, that globally account for over two-thirds of all powered access sales, are indicating that their 'purchasing holiday' could continue throughout 2010.

Notwithstanding these market challenges, the Board expects that the strong customer relationships and product support capabilities of Tanfield's distributor network will sustain sales, albeit at the significantly reduced levels and pricing similar to those experienced so far this year.

Overall, the Board expects trading conditions in the second half of 2009 will be similar to the first half of the year.

Given the focus on cash generation, Tanfield is not proposing to pay a dividend for the period. The business remains well funded with zero debt and a strong balance sheet.

Consolidated Income Statement For the six months ending 30th June

Six months Six months Year to
to 30 Jun 09 to 30 Jun 08 31 Dec 08
(unaudited) (unaudited) (audited)
£000's £000's £000's

Continuing operations
Revenue 29,928 92,785 145,734

Changes in inventories of finished 840 (3,896) 4,808

goods and WIP
Raw materials and consumables used (24,103) (53,374) (102,724)
Staff costs (9,501) (16,971) (32,197)
Depreciation and amortisation (1,539) (1,400) (3,195)

expense
Other operating income - - 500
Other operating expenses (6,672) (6,858) (11,221)
Restructuring costs - - (372)
Profit from operations (11,047) 10,286 1,333
Impairment of Goodwill - (33,155) (31,895)
Impairment of Intangible assets - (15,260) (12,605)
Impairment of Property, plant & - - (83)

equipment
Impairment of Inventories - (15,325) (22,185)
Impairment of Receivables - (11,549) (22,894)
(Loss) / Profit from continuing (11,047) (65,003) (88,329)

operations
Finance costs (374) (549) (913)
Interest receivable 26 288 457
(Loss) / profit before taxation (11,395) (65,264) (88,785)
838 (2,807) 239

Income tax expense
Net (loss) / profit from continuing (10,557) (68,071) (88,546)

operations

Earnings per share before exceptional items From continuing operations
Basic (pence) (14.25) 9.75 2.01
Diluted (pence) (14.25) 9.40 1.96

From continuing and discontinued operations
Basic (pence) (14.25) 9.75 2.01
Diluted (pence) (14.25) 9.40 1.96

Consolidated Balance Sheet
As at 30th June 2009 30 Jun 09 30 Jun 08 31 Dec 08
(Unaudited) (Unaudited) (Audited)
£000's £000's £000's

Non Current Assets
Goodwill 356 - 356
Intangible assets 14,583 13,110 15,153
Property, plant and equipment 5,630 8,106 6,346
Deferred tax asset 1,781 785 1,779
Trade and other receivables 1,500 - 1,500
23,850 22,001 25,134

Current Assets
Inventories 49,426 61,300 60,560
Trade and other receivables 13,103 46,197 20,595
Investments 208 130 251
Current tax assets 59 - -
Cash and cash equivalents 10,813 12,009 11,130
73,609 119,636 92,536
Total Assets 97,459 141,637 117,670

Current liabilities
Trade and other payables 15,176 32,169 19,807
Tax liabilities - 1,293 687
Obligations under finance leases 547 671 565
Other creditors 9,138 3,728 9,954
24,861 37,861 31,013

Non Current Liabilities
Other creditors - 5,066 -
Deferred tax liability 307 - 307
Obligations under finance leases 303 800 569
610 5,866 876
Total Liabilities 25,471 43,727 31,889

Equity
Share capital 3,704 3,704 3,704
Share premium account 138,511 138,511 138,511
Share option reserve 1,653 992 1,653
Loan stock equity reserve - - -
Merger reserve 1,534 1,534 1,534
Translation reserve 6,054 1,627 9,290
Capital reduction reserve 7,228 7,228 7,228
Profit and loss account (86,696) (55,686) (76,139)
Total Equity 71,988 97,910 85,781
Total Equity and Liabilities 97,459 141,637 117,670

Consolidated Cash Flow Statement For the six months ending 30th June

Six months Six months Year to
to 30 Jun 09 to 30 Jun 08 31 Dec 08
(unaudited) (unaudited) (audited)
£000's £000's £000's

Operating Activities
Profit / (loss) from continuing and (11,047) (65,003) (88,329)

discontinuing operations
Depreciation of property, plant and 621 535 1,165

equipment
Amortisation of intangible fixed 918 865 2,030

assets
impairments - 75,289 89,662
(Gain) loss on disposal of fixed - (15) (587)

assets
Operating cash flows before movements (9,508) 11,671 3,941

in working capital
(Increase) decrease in debtors 7,029 (10,247) 4,585
Increase (decrease) in creditors (3,881) 4,598 (8,140)
(Decrease) Increase in provisions - 3,216 2,612
(Increase) decrease in inventories 8,072 (15,764) (13,933)
Cash (used) generated from operations 1,712 (6,526) (10,935)
Tax paid (69) (46) 510
Interest paid (374) (549) (913)
Net Cash (used) generated from 1,269 (7,121) (11,338)

Operating activities

Investing Activities
Payment of deferred consideration (349) - (252)
Purchase of property, plant and (80) (2,513) (1,087)

equipment
Proceeds from sale of property, plant - - 623

and equipment
Purchase of investments (3) (3) (45)
Purchase of intangible fixed assets (349) (6,417) (6,431)
Interest received 26 288 457
Net cash used in investing activities (755) (8,645) (6,735)

Financing Activities
Proceeds from issuance of ordinary - 19 19

shares
Increase in bank loans and other - - -

borrowings
Repayment of borrowings - - -
Repayment of obligations under finance (278) (327) (693)

leases
Net cash used in financing (278) (308) (674)
Net Increase/(Decrease) in Cash and 236 (16,074) (18,747)

Cash Equivalents
Cash and cash equivalents at beginning 11,130 27,952 27,952

of the period
Effect of foreign exchange changes (553) 131 1,925
Cash and cash equivalents at end of 10,813 12,009 11,130

the period

Consolidated Statement of Changes in Equity
For the six month period ended Share capital Share Premium Share Option Reserve Loan Stock Reserve Merger Reserve Capital Reduction Translation reserve Profit and Loss Total Equity
30th June 09 Reserve Account
£000's £000's £000's £000's £000's £000's £000's £000's £000's
Balance at 1 January 2009 3,704 138,511 1,653 - 1,534 7,228 9,290 (76,139) 85,781
Exercise of share options - - - - - - - - -
Net gains/(losses) not - - - - - - - - -

recognised in the income statement
Issue of new share capital - - - - - - - - -
Capital Reduction - - - - - - - - -
Conversion of convertible loan - - - - - - - - -

notes
Foreign exchange differences - - - - - - (3,236) - (3,236)

on retranslation of investments
Shares issued for - - - - - - - - -

consideration
Net (loss) for the period - - - - - - - (10,557) (10,557)
Balance at 30 June 2009 3,704 138,511 1,653 - 1,534 7,228 6,054 (86,696) 71,988
For the six month period ended Share capital Share Premium Share Option Reserve Loan Stock Reserve Merger Reserve Capital Reduction Translation reserve Profit and Loss Total Equity
30th June 08 Reserve Account
£000's £000's £000's £000's £000's £000's £000's £000's £000's
Balance at 1 January 2008 3,703 138,493 992 - 1,534 7,228 879 12,385 165,214
Exercise of share options 1 18 - - - - - - 19
Net gains/(losses) not - - - - - - - - -

recognised in the income statement
Issue of new share capital - - - - - - - - -
Capital Reduction - - - - - - - - -
Conversion of convertible loan - - - - - - - - -

notes
Foreign exchange differences - - - - - - 748 - 748

on retranslation of investments
Shares issued for - - - - - - - - -

consideration
Net (loss) for the period - - - - - - - (68,071) (68,071)
Balance at 30 June 2008 3,704 138,511 992 - 1,534 7,228 1,627 (55,686) 97,910

Earnings per Share The calculation of the basic and diluted earnings per share is based on the following data:

Six months Six months Year to
to 30 Jun 09 to 30 Jun 08 31 Dec 08 (Restated)
(Restated)

Continuing operations Earnings
Earnings for the purposes of (10,557) (68,071) (88,546)

basic earnings per share Effect of dilutive potential ordinary shares:

diluted earnings per share
Impairments - 75,289 89,662
Restructuring - - 372
Adjusted earnings for the (10,557) 7,218 1,488

purposes of earnings per share before exceptional items Number of shares (restated)
Weighted average number of 74,077,218 74,067,218 74,072,218

ordinary shares for the purposes of basic earnings per share
Convertible Loan Notes - - -
Share Options 821,527 2,751,882 1,859,723
Weighted average number of 74,077,218 76,819,100 75,931,941

ordinary shares for the purposes of diluted earnings per share
Basic earnings per share (14.25) (91.90) (119,54)

(pence)
Diluted earnings per share (14.25) (91.90) (119.54)

(pence)
Basic earnings per share (14.25) 9.75 2.01

before exceptional items (pence)
Diluted earnings per share (14.25) 9.40 1.96

before exceptional items (pence)

On the 16th June 2009 the Company's existing Ordinary Shares of 1 pence were consolidated into new Ordinary Shares of 5 pence each. The earnings per share comparatives have been adjusted to reflect this consolidation.

Business Segments

For the six months ending 30.06.09 For the six months ending 30.06.08 For the twelve months ending 31.12.08 (restated)
Zero Emmission Other Group Zero Emmission Other Group Zero Emmission Other Group
Powered Access Vehicles Powered Access Vehicles Powered Access Vehicles
Platforms Platforms Platforms
£000's £000's £000's £000's £000's £000's £000's £000's £000's £000's £000's £000's

Revenue
External Sales 21,184 8,100 644 29,928 72,900 15,600 4,285 92,785 114,388 25,087 6,259 145,734

Inter-segment sales
Total revenue 21,184 8,100 644 29,928 72,900 15,600 4,285 92,785 114,388 25,087 6,259 145,734

Result
Segment Result before (8,084) (1,887) (1,076) (11,047) (66,992) 1,896 93 (65,003) (82,689) (1,389) (3,879) (87,957)

restructuring
Restructuring - - - - - - - - (263) (38) (71) (372)
Loss from operations (8,084) (1,887) (1,076) (11,047) (66,992) 1,896 93 (65,003) (82,952) (1,427) (3,950) (88,329)
Finance costs (348) (261) (456)
Loss before tax (11,395) (65,264) (88,785)

Income tax (expense) 838 (2,807) 239
Loss after tax (10,557) (68,071) (88,546)

Other information
Capital additions 136 293 - 429 2,437 6,471 22 8,930 2,179 5,317 22 7,518
Depreciation and amortisation 700 572 267 1,539 810 455 135 1,400 2,025 904 265 3,195
Impairments - - - - 74,012 1,097 180 75,289 88,385 1,097 180 89,662

Balance Sheet Assets:
Segment assets 69,636 20,706 7,117 97,459 109,301 23,106 9,230 141,637 88,266 21,338 8,066 117,670
Consolidated total assets 69,636 20,706 7,117 97,459 109,301 23,106 9,230 141,637 88,266 21,338 8,066 117,670

Liabilities:
Segment Liabilities 14,493 3,103 7,875 25,471 30,654 4,883 8,190 43,727 19,133 3,677 9,079 31,889
Consolidated total liabilities 14,493 3,103 7,875 25,471 30,654 4,883 8,190 43,727 19,133 3,677 9,079 31,889

This information is provided by RNS The company news service from the London Stock Exchange

IR BRGDCGXDGGCC