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Tanfield slumps as profits miss forecasts

Created:
22 April 2008
Written by:
Malar Velaigam

The key event for Tanfield last year was the acquisition of US-based powered access provider Snorkel. This provided inroads into North America and Australasia as well as broadening the product offering. But £3.2m in one-off costs relating to leasehold improvements at Snorkel's Kansas facility, and a £35m working capital injection, were the main reasons for these disappointing results.

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The extra costs meant that profits missed expectations, while increased working capital constrained cash flow and resulted in lower-than-expected net cash. But chief executive Darren Kell says it will be worth it, with the added scale allowing the group to compete with larger players and realise cross-selling opportunities..

The group's order book - 523 vehicles in the electric vehicles division and £101m of orders in Powered Access - remains strong and underpins broker's earnings estimates. In addition, production capability has improved to 30 vehicles per week and is to rise to 58 vehicles per week when the division moves to its new facility in the second half of 2008.

Broker Cenkos forecasts 2008 EPS of 8.29p (4.29p in 2007), rising to 10.02p in 2009.

TANFIELD GROUP (TAN)
ORD PRICE: 101p MARKET VALUE: £374m
TOUCH: 101-101.25p 12-MONTH HIGH: 204p LOW: 87p
DIVIDEND YIELD: NIL PE RATIO: 28
NET ASSET VALUE: 45p NET CASH: £26.8m

Year to 31 Dec Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2005 22.4 2.00 1.00 nil
2006 40.6 3.73 1.22 nil
2007 123 12.40 3.59 nil
% change +204 +232 +194 -

*Including intangible assets of £54m, or 15p a share

Click here for a guide to the terms used in IC results tables.

SHARE TIP UPDATE:

GoodValue

Tanfield shares have risen 84 per cent since we featured them as a tip of the year (55p, 5 January 2007). But they've clearly run out of power in the last six months. While they may struggle to make headway in the near term, they're modestly rated and given the positive outlook, rate good value in the medium term.

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