TIDMTAN
RNS Number : 7118B
Tanfield Group PLC
14 June 2021
The Tanfield Group Plc
("Tanfield" or "the Company")
Final Results and Annual Accounts for the year ended 31 December
2020 and Notice of AGM
Tanfield Group Plc, a passive investing company as defined by
AIM Rules, announces its final results and annual accounts for the
year ended 31 December 2020. Posting of the Annual Report &
Accounts to shareholders will take place today and will be made
available on the Company website at www.tanfieldgroup.com
shortly.
Tanfield announces that, in light of the ongoing Covid-19
circumstances, the Company's Annual General Meeting ("AGM") will be
held on 7 July 2021 and will be convened with the minimum quorum of
two shareholders facilitated by Tanfield Group Plc. Unfortunately
shareholders will not be able to attend the AGM in person but are
encouraged to submit their votes by proxy in accordance with the
instructions set out in the 2021 AGM Notice and to appoint the
'Chair of the meeting' as their proxy to vote on their behalf.
Posting of the Notice of Annual General Meeting to shareholders,
including information on the resolutions, will take place today and
will be made available on the Company website at
www.tanfieldgroup.com shortly.
For further information:
Tanfield Group Plc
Daryn Robinson 020 7220 1666
WH Ireland Limited - Nominated Advisor / Broker
James Joyce / Lydia Zychowska 020 7220 1666
STRATEGIC REPORT
CHAIRMAN'S STATEMENT
The Company's main investment, Snorkel International Holdings
LLC ("Snorkel International") , was, like many businesses, impacted
by the Covid-19 pandemic resulting in the first annual reduction in
sales for several years. The Board continues to closely monitor
performance and is hopeful that 2021 will see increased sales
levels, although it is not expected that 2021 will see a return to
the pre Covid-19 sales levels. Following Tanfield's 51% joint
venture partner Xtreme Manufacturing LLC ("Xtreme"), via its
subsidiary SKL Holdings LLC ("SKL") and Snorkel International,
filing a Summons and Complaint (the "US Proceedings") against the
Company and its subsidiary HBWP Inc ("HBWP"), the Board remains
disappointed that an amicable resolution has not been possible. The
Board therefore continues 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 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 investment in Snorkel
International (currently valued at GBP19.1m, 2019: GBP19.1m)
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.
Since the injection of working capital following the Joint
Venture, Snorkel achieved increased year on year sales levels
however, during 2020 the impact of the Covid-19 pandemic saw the
first reduction of sales. A summary of sales (unaudited) and the
operating loss (unaudited), excluding depreciation is shown
below:
Increase/ Operating profit/
Year Sales (decrease) (loss) excluding
depreciation
-------- -------- ------------ ------------------
2020 $110.8m (50%) ($12.3m)
-------- -------- ------------ ------------------
2019 $220.8m 10% $0.3m
-------- -------- ------------ ------------------
2018 $200.5m 21% $2.9m
-------- -------- ------------ ------------------
2017 $165.8m 27% $1.6m
-------- -------- ------------ ------------------
2016 $130.5m 19% ($2.8m)
-------- -------- ------------ ------------------
2015 $109.9m 29% ($10.6m)
-------- -------- ------------ ------------------
2014 $85.3m - ($14.9m)
-------- -------- ------------ ------------------
Despite the ongoing impact of the Covid-19 pandemic, the Board
is not aware of any market factors and have not been made aware of
any specific reason why sales growth should not be achieved in
2021, when compared to 2020 sales, as the impact of the pandemic
continues to subside.
In October 2019, the Board received the US Proceedings, in which
Xtreme, via its subsidiary SKL and Snorkel International, allege
that Tanfield has refused to comply with its contractual
obligations by not agreeing to sign over its interest in Snorkel
International for GBPnil consideration. It is the Board's belief
that the intent of Tanfield, its non-conflicted directors at the
time and 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 shareholders in advance of shareholders
approving the 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.
The position 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 an adjusted priority
amount of $22.5m (adjusted from the headline $50m value detailed in
the Circular, and 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
adjusted Priority Amount, plus accrued interest, simply
disappeared; allowing Xtreme to acquire Tanfield's 49% interest for
GBPnil 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 net fair market 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 continues to seek advice and
vigorously defend its position.
Despite the allegations, which the Board believe are without
merit, t he 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
estimates and key judgments 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.
Both proceedings have continued to progress during 2020 however,
due to Covid-19 and other factors, delays were unavoidable. Further
updates in relation to progress and timing will be provided as and
when appropriate. The outcome of the US Proceedings, if completed
before the UK Proceedings, may have a direct and material impact on
the UK Proceedings, including the quantum of any claim.
Valuation of Snorkel International holding: GBP19.1 million
(2019: GBP19.1 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 GBP19.1m, which once paid, would have
allowed the Company to exercise its put option, compelling the
purchase / sale 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 statements 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 given the action taken by Don Ahern
against the Company 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, or more, 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 GBP19.1m, which it believes is underpinned by the
value of the Preferred Interest, so feel the valuation of GBP19.1m
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 which further explain the
uncertainty and to the Auditors' report 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.
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 GBPnil.
The Board understand that Smith has not been trading in recent
years and as Smith are unable to provide any certainty on its
future, the Board maintains its opinion that the investment value
should be held at GBPnil.
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
Interest cost of GBP100k was incurred in the period (2019:
GBPnil) and interest income of GBPnil (2019: GBP1k) was received on
bank balances.
Loss from operations
The loss from operations before tax was GBP697k (2019: GBP317k),
the most significant difference compared to the prior year being
GBP100k of interest cost (2019: GBPnil) and an increase in legal
fees due to the ongoing US Proceedings and UK Proceedings.
Loss per share
Loss per share from continuing operations was 0.43 pence (2019:
0.20 pence). No dividend has been declared (2019: GBPnil).
Cash
At 31 December 2020, the Company had cash of GBP0.5m (2019:
GBP0.1m) and approximately GBP0.8m as at the date of this report.
GBP0.5m of cash is held on deposit with the English Court as
security in relation to the UK Proceedings.
Risks and uncertainties
Loan note instruments totalling GBP1.7m were put in place during
2020 with GBP1.5m of notes currently issued. Having discussed
matters with the Company's shareholders, the directors believe
that, if required, the Company should be able to source sufficient
working capital, in the form of further loans, to provide the
resources to allow it to continue for a period of 12 months from
the date of this report. However, there is no guarantee if and when
a realisation of value from one of the 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.
The ongoing global Covid-19 pandemic is continuing to impact the
performance of the investment in Snorkel International but signs
are that Snorkel's markets are starting to recover. However, at
this stage, it is not possible to estimate how long it will be
until the pandemic no longer impacts the performance of Snorkel.
The Board note that any impact would likely be limited to timing
and currently do not believe that it should 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 to
ensure that its strategy and performance are clearly
understood.
The Annual General Meeting is the principal forum for
shareholders, and we encourage all shareholders to attend (where
appropriate, subject to Covid-19 restrictions) 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 communications are 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
11 June 2021
DIRECTORS' REPORT
The directors submit their report and the financial statements
of Tanfield Group Plc for the year ended 31 December 2020. 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.
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 DIVIDS
The financial result for the year to 31 December 2020 reflects
the principal activity of the company being that of an investment
company.
Turnover for the year was GBPnil (2019: GBPnil). The operating
loss in the year of GBP597k (2019: GBP318k) arose from operating
costs.
The statement of financial position shows total assets at the
end of the year of GBP19.6m (2019: GBP19.3m). Net Current Assets
were GBP0.5m (2019: GBP0.1m) with cash balances of GBP0.5m (2019:
GBP0.1m). Having discussed matters with the Company's shareholders,
the directors believe that, if required, the Company should be able
to source sufficient working capital, in the form of further loans,
to provide the resources to allow it to continue for a period of 12
months from the date of this report. Note 19 provides details of
further loans already provided since the year end.
No dividend has been paid or proposed for the year (2019:
GBPnil). The loss of GBP697k (2019: GBP317k) has been transferred
to reserves .
FINANCIAL INSTRUMENTS
The Company's financial instruments comprise cash, non-current
investments, current receivables, current payables arising from its
operations and borrowings. The principal financial instruments used
by the Company during the year are cash balances raised from
borrowings. The Company has not established a formal policy on the
use of financial instruments but assesses the risks faced by the
Company as economic conditions and the Company's operations
develop.
DIRECTORS
The present membership of the Board is set out on the Company
website.
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.
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.
Trade creditor days based on trade payables at 31 December 2020
were 37 days (2019: 72 days).
SUBSTANTIAL SHAREHOLDINGS
On 31 December 2020 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 54,117,147 33.2%
----------------------------- ----------- ------
CHASE NOMINEES LIMITED 36,746,672 20.7%
----------------------------- ----------- ------
AURORA NOMINEES LIMITED 19,450,971 11.9%
----------------------------- ----------- ------
VIDACOS NOMINEES LIMITED 12,734,252 7.8%
----------------------------- ----------- ------
THE BANK OF NEW YORK
(NOMINEES) 12,507,684 7.7%
----------------------------- ----------- ------
LYNCHWOOD NOMINEES
LIMITED 5,446,346 3.3%
----------------------------- ----------- ------
DIRECTORS' INTEREST IN CONTRACTS
No director had a material interest at any time during the year
in any contract of significance, other than a service contract,
with the Company or any of its subsidiary undertakings.
AUDITOR
A resolution to reappoint RSM UK Audit LLP as auditor will be
put to the members at the annual general meeting. RSM UK Audit LLP
has indicated its willingness to continue in office.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
The directors in office on the date of approval of the financial
statements have confirmed that, as far as they are aware, there is
no relevant audit information of which the auditor is unaware. Each
of the directors has confirmed that they have taken all the steps
that they ought to have taken as directors in order to make
themselves aware of any relevant audit information and to establish
that it has been communicated to the auditor.
DIRECTORS INDEMNITY
Every Director shall be indemnified by the Company out of its
own funds.
Approved by the Board of Directors and signed on behalf of the
Board
Daryn Robinson
Chairman
11 June 2021
CORPORATE GOVERNANCE
All members of the board believe strongly in the value and
importance of good corporate governance and in our accountability
to all of Tanfield's stakeholders, including shareholders 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).
Tanfield is a passive investment company with investments in
Snorkel International and Smith. It is the intention that where
distributions or realisations are made that these are distributed
to shareholders, subject to compliance with any legal requirements
associated with such distributions .
The Board is mindful of and monitors its corporate risks. The
main risks the business faces are that the investments may not
achieve their operational goals, resulting in no realisation event
and the potential for disputes with the controlling shareholders as
to the terms of a realisation event should one occur. As a passive
investment company, the Board is not able to influence the decision
making or strategy of the investment companies and so its ability
to mitigate some risks is limited.
The Company operates as a passive investment company and has put
in place a board structure that can best provide the strategic
advice, leadership and continuity required. The board structure
consists of two non-executive directors, Daryn Robinson and Martin
Groak, both sitting on the PLC Board. Due to the nature of the
business, executive directors and an operational Board are not
deemed necessary and therefore the non-executive directors are
deemed not to be independent. During the year 8 board meetings, all
fully attended, took place.
The Board considers the Board composition in terms of skills,
experience and balance. Its committees seek external expertise and
advice where required. With only two Board members, due to the
limited activities of the Company, Board cohesion is paramount and
this is regularly reviewed. The Board members have held roles and
directorships in other publicly listed companies where they have
gained a wealth of financial and public market experience which
collectively has provided them with the balance of skills and
expertise to deliver the business strategy.
The Board considers evaluation of its committees and individual
directors to be an integral part of corporate governance to ensure
it has the necessary skills, experience and abilities to fulfil its
responsibilities. To ensure the skills and knowledge of the Board
are kept up to date, it works with its Nominated Advisor &
Broker, Auditor and Solicitor to ensure that any relevant new or
amended accounting standards and interpretations, AIM rules or
Companies Act legislation are fully understood and implemented.
The Board recognises that a corporate culture based on sound
ethical values and behaviours is an asset. In accordance with the
Company's stated social responsibilities it endeavours to conduct
its business in an ethical, professional and responsible manner. As
the Company has no control over operational matters relating to its
investments, it is unable to influence the values and behaviours
directly but it supports a culture of dealings with both
shareholders and investee companies with integrity and respect.
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 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 a full explanation
of the approach taken in relation to each in the details of our
approach to Corporate Governance which can be found on the
Company's website www.tanfieldgroup.com/about#governance . The
board considers that it does not depart from any of the principles
of the QCA Code.
Going Concern
The directors are satisfied that the Company has access to
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
11 June 2021
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.
Remuneration policy
There were four main elements of the remuneration packages for
directors:
-- Basic annual salary (including directors' fees) and benefits;
-- Annual bonus payments;
-- Share option incentives; and
-- Pension arrangements.
Basic salary
The basic salary of the directors is reviewed annually having
regard to the commitment of time required and the level of fees in
similar companies. Non-Executive Directors are employed on
renewable fixed term contracts not exceeding three years.
Annual bonus
The committee established the objectives which must be met for
each financial year if a cash bonus was to be paid. The purpose of
the bonus was to reward directors for achieving above average
performance which also benefits shareholders.
Share options
The directors 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.
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 2020 and 31 December
2019 are shown below:
Number of shares
---- ----------------------------------------------------------------------------
2020 2019
-------------------------------------------- -------------------------- --------
D Robinson 942,785 942,785
-------------------------------------------- -------------------------- --------
M Groak 40,000 40,000
-------------------------------------------- -------------------------- --------
Total 982,785 982,785
-------------------------------------------- -------------------------- --------
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:
Salary Pension Total Salary Pension Total
2020 2020 2020 2019 2019 2019
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
---------------------------------------- ---------- ------------ --------- ---------------- ----------------- ---------
M Groak 20 - 20 20 - 20
---------------------------------------- ---------- ------------ --------- ---------------- ----------------- ---------
D Robinson 61 2 63 52 2 54
---------------------------------------- ---------- ------------ --------- ---------------- ----------------- ---------
Total 81 2 83 72 2 74
---------------------------------------- ---------- ------------ --------- ---------------- ----------------- ---------
Directors share options held at 31 December 2020 were as follows:
Option
Granted/ price
(Lapsed) per Date from
31 December 31 December share which normally
2019 Exercised 2020 a exercisable Expiry Date
------------ ------------- ---------- ---------- ------------ --------- ---------------- ----------------------------
M Groak 100,000 (100,000) - - 27p 02/02/2015 02/02/2020
------------ ------------- ---------- ---------- ------------ --------- ---------------- ----------------------------
D Robinson 100,000 (100,000) - - 27p 02/02/2015 02/02/2020
------------ ------------- ---------- ---------- ------------ --------- ---------------- ----------------------------
Total 200,000 (200,000) - -
------------ ------------- ---------- ---------- ------------ --------- ---------------- ----------------------------
a On 31 December 2020 the market price of the ordinary shares was 2.54p.
The range during 2020 was 1.45p to 4.79p
Approval
This report was approved by the board of directors and authorised
for issue on 11 June 2021 and signed on its behalf by:
Daryn
Robinson
Chairman
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 accounting standards in conformity with the
requirements of the Companies Act 2006.
The financial statements are required by law and international
accounting standards in conformity with the requirements of the
Companies Act 2006 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. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006;
d. 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 financial statements comply with the 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.
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.
REPORT OF THE INDEPENT 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 2020 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 significant accounting policies. The
financial reporting framework that has been applied in their
preparation is applicable law and International Accounting
Standards in conformity with the requirements of the Companies Act
2006.
In our opinion the financial statements:
-- give a true and fair view of the state of the company's
affairs as at 31 December 2020 and of its loss for the year then
ended;
-- have been properly prepared in accordance with International
Accounting Standards in conformity with the requirements of the
Companies Act 2006; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to SME listed entities and we
have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the directors' assessment of the company's ability to
continue to adopt the going concern basis of accounting included a
review of the forecasts prepared by management and the assumptions
underpinning these, along with an assessment of the cash funding
available to the company to meet its commitments as they become
due.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
company's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Summary of our audit approach
-- Key audit matters - Carrying value of non-current investments
-- Materiality - Overall materiality: GBP409,000 (2019:
GBP405,000), Performance materiality: GBP306,750 (2019:
GBP304,000)
-- Scope - Our audit procedures covered 100% of revenue, 100% of
total assets and 100% of losses 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 investment
Key audit matter description
Included in the Statement of Financial Position are non current
investments with a carrying value of GBP19.1m. 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 GBP19.1m 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 in the Critical Accounting Estimates and Key Judgements
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 disclosures 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 along with 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 led to 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.
As explained in the Critical Accounting Estimates and Key
Judgements section, 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.
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 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 - GBP409,000 (2019: GBP405,000)
-- Basis for determining overall materiality - 2% of total assets.
-- Rationale for benchmark applied - Consistent with prior year,
the company's principal activity continues to be that of an
investment company. As such, we deemed total assets to be the key
benchmark for users of the financial statements.
-- Performance materiality - GBP306,750 (2019: GBP304,000).
-- Basis for determining performance materiality - 75% of overall materiality.
-- Reporting of misstatements to the Audit Committee - Misstatements in excess of GBP4,090 and misstatements below that threshold that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
The company has been subject to a full scope audit.
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information contained within the annual report. 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.
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 course of 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 this gives rise to a material misstatement in the financial
statements themselves. 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.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities, 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.
The extent to which the audit was considered capable of
detecting irregularities, including fraud
Irregularities are instances of non-compliance with laws and
regulations. The objectives of our audit are to obtain sufficient
appropriate audit evidence regarding compliance with laws and
regulations that have a direct effect on the determination of
material amounts and disclosures in the financial statements, to
perform audit procedures to help identify instances of
non-compliance with other laws and regulations that may have a
material effect on the financial statements, and to respond
appropriately to identified or suspected non-compliance with laws
and regulations identified during the audit.
In relation to fraud, the objectives of our audit are to
identify and assess the risk of material misstatement of the
financial statements due to fraud, to obtain sufficient appropriate
audit evidence regarding the assessed risks of material
misstatement due to fraud through designing and implementing
appropriate responses and to respond appropriately to fraud or
suspected fraud identified during the audit.
However, it is the primary responsibility of management, with
the oversight of those charged with governance, to ensure that the
entity's operations are conducted in accordance with the provisions
of laws and regulations and for the prevention and detection of
fraud.
In identifying and assessing risks of material misstatement in
respect of irregularities, including fraud, the audit engagement
team:
-- obtained an understanding of the nature of the industry and
sector, including the legal and regulatory framework that the
company operates in and how the company is complying with the legal
and regulatory framework;
-- inquired of management, and those charged with governance,
about their own identification and assessment of the risks of
irregularities, including any known actual, suspected or alleged
instances of fraud;
-- discussed matters about non-compliance with laws and
regulations and how fraud might occur including assessment of how
and where the financial statements may be susceptible to fraud.
The most significant laws and regulations were determined as:
International Accounting Standards in conformity with the Companies
Act 2006 and the AIM listing rules. Additional audit procedures
performed by the audit engagement team were:
-- Review of the financial statement disclosures and testing
these to supporting documentation.
-- Completion of disclosure checklists to identify areas of non-compliance.
-- Review of announcements made during the year via RNS.
The area that we identified as being susceptible to material
misstatement due to fraud was: the risk of management override of
controls. The audit procedures performed by the audit engagement
team included:
-- Testing the appropriateness of journal entries and other adjustments;
-- Assessing whether the judgements made in making accounting
estimates are indicative of a potential bias; and
-- Evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of
business.
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 FCA (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
1 St James' Gate, Newcastle upon Tyne, NE1 4AD
11 June 2021
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2020
2020 2019
Notes GBP000's GBP000's
======================================= ==== ==== ====== ========= =========
Revenue - -
Staff costs 1 (83) (74)
Other operating income 18 23
Other operating expenses 3 (532) (267)
--------------------------------------------------- ------ --------- ---------
Loss from operations (597) (318)
Finance expense 2 (100) -
Finance income 2 - 1
--------------------------------------------------- ------ --------- ---------
Loss from operations before
tax (697) (317)
Taxation 4 - -
--------------------------------------- ---- ---- ------ --------- ---------
Loss & total comprehensive income for
the year attributable
to equity shareholders (697) (317)
--------------------------------------------------- ------ --------- ---------
Loss per share
Loss per share from operations
Basic and diluted (p) 5 (0.43) (0.20)
STATEMENT OF FINANCIAL POSITION (Company registration number
04061965)
AS AT 31 DECEMBER 2020
2020 2019
Notes GBP000's GBP000's
================================================================== ==== ==== ====== ========= =========
Non current assets
Non current Investments 6 19,100 19,100
------------------------------------------------------------------------------ ------ --------- ---------
19,100 19,100
---- ---- ------ --------- ---------
Current assets
Trade and other receivables 8 24 23
Cash and cash equivalents 7 524 136
------------------------------------------------------------------------------ ------ --------- ---------
548 159
---- ---- ------ --------- ---------
Total assets 19,648 19,259
------------------------------------------------------------------------------ ------ --------- ---------
Non current liabilities
Borrowings 10 1,100 -
------------------------------------------------------------------------------ ------ --------- ---------
1,100 -
------------------------------------------------------------------ ---- ---- ------ --------- ---------
Current liabilities
Trade and other payables 9 90 104
------------------------------------------------------------------------------ ------ --------- ---------
90 104
---- ---- ------ --------- ---------
Total liabilities 1,190 104
------------------------------------------------------------------------------ ------ --------- ---------
Equity
Share capital 11 8,145 8,145
Share premium 11 17,336 17,336
Share option reserve 12 331 331
Special reserve 66,837 66,837
Merger reserve 1,534 1,534
Retained earnings (75,725) (75,028)
------------------------------------------------------------------------------ ------ --------- ---------
Total equity attributable
to equity shareholders 18,458 19,155
------------------------------------------------------------------------------ ------ --------- ---------
Total equity and liabilities 19,648 19,259
------------------------------------------------------------------------------ ------ --------- ---------
The financial statements were approved by the board of directors
and authorised for issue on 11 June 2021 and are signed on its behalf
by:
Daryn Robinson
Chairman
STATEMENT OF CHANGES IN EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS
FOR THE YEARED 31 DECEMBER 2020
Share Share Share Merger Special Retained Total
capital premium option reserve reserve earnings
a reserve c d e
b
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
------------------------------ --------- --------- --------- ----------- ----------- --------- ---------
At 1 January 2019 7,920 17,336 331 1,534 66,837 (74,711) 19,247
------------------------------ --------- --------- --------- ----------- ----------- --------- ---------
Comprehensive income
Loss for the year - - - - - (317) (317)
------------------------------ --------- --------- --------- ----------- ----------- --------- ---------
Total comprehensive
income for the year - - - - - (317) (317)
Transactions with
owners in their capacity
as owners:-
Issuance of new
shares (note 11) 225 - - - - - 225
------------------------------ --------- --------- --------- ----------- ----------- --------- ---------
At 31 December 2019 8,145 17,336 331 1,534 66,837 (75,028) 19,155
------------------------------ --------- --------- --------- ----------- ----------- --------- ---------
Comprehensive income
------------------------------ --------- --------- --------- ----------- ----------- --------- ---------
Loss for the year - - - - - (697) (697)
------------------------------ --------- --------- --------- ----------- ----------- --------- ---------
Total comprehensive
income for the year - - - - - (697) (697)
------------------------------ --------- --------- --------- ----------- ----------- --------- ---------
At 31 December 2020 8,145 17,336 331 1,534 66,837 (75,725) 18,458
------------------------------ --------- --------- --------- ----------- ----------- --------- ---------
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.
CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2020
2020 2019
GBP000's GBP000's
============================================= ==== ============= =========
Loss from operations (697) (318)
Adjustment for:
Finance costs 100 -
Changes in operating assets and liabilities
/ working capital:
Increase in receivables (1) (12)
(Decrease) / increase in payables (14) 52
---------------------------------------------------- ------------- ---------
Net cash used in operating activities (612) (278)
Cash flow from Investing Activities
Interest received - 1
---------------------------------------------------- ------------- ---------
Net cash from investing activities - 1
---------------------------------------------------- ------------- ---------
Cash flow from financing activities
Proceeds from issuance of ordinary
shares net of costs - 225
Proceeds from borrowings 1,000 -
--------------------------------------------- ---- ------------- ---------
Net cash generated by financing activities 1,000 225
---------------------------------------------------- ------------- ---------
Net (decrease)/increase in cash and
cash equivalents 388 (52)
Cash and cash equivalents at the start
of year 136 188
---------------------------------------------------- ------------- ---------
Cash and cash equivalents at the end
of the year 524 136
---------------------------------------------------- ------------- ---------
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 accounting
standards in conformity with the requirements of the Companies Act
2006. 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 preparation of the financial statements 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 2020 the Company had cash balances of GBP0.5m and
approximately GBP0.8m as at the date of this report, with GBP0.5m
held on deposit with the English Court as security in relation to
the UK Proceedings.
Having discussed matters with the Company's shareholders, the
directors believe that, if required, the Company should be able to
source sufficient working capital, in the form of further loans, to
provide the resources to a) allow the Company to continue in
operation for a minimum of 12 months and b) see the legal
proceedings continue, possibly to a conclusion, during that period.
It is not currently expected that the ongoing Covid-19 pandemic
will impact on this. Having taken the uncertainties into account
the Board believes it is appropriate to prepare the financial
statements on the going concern basis.
The Directors do not believe that the ongoing 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.
(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 profit and loss.
(iv) Retirement benefit cost
The company operates a defined contribution pension scheme and
pays contributions to an externally administered pension plan. The
company has no further payment obligations once the contributions
have been paid. The contributions are recognised as an employee
benefit expense in the period in which they fall due.
(v) Share based payments
The Company issues equity-settled share-based payments to
certain employees and has applied the requirements of IFRS2
"Share-based payments".
Equity settled share-based payments are measured at fair value
at the date of the grant. Fair value is measured using a
Black-Scholes model.
The fair value is expensed on a straight-line basis over the
vesting period, based on the Company's estimate of shares that will
eventually vest.
(vi) Financial instruments
Recognition of financial assets and financial liabilities
Financial assets and financial liabilities are recognised on the
Company's statement of financial position when the Company has
become a party to the contractual provisions of the instrument.
Financial assets
Investments
Investments are included at fair value with fair value gains and
losses recognised in profit or loss.
Trade and other receivables
Financial assets within trade and other receivables are
initially recognised at fair value, which is usually the original
invoiced amount and are subsequently carried at amortised cost less
provisions made for impairment.
Trade receivables do not carry any interest and are stated at
their nominal value as reduced by appropriate allowances for
estimated irrecoverable amounts.
An impairment loss is recognised for the expected credit losses
on receivables when there is an increased probability that the
counterparty will be unable to settle an instrument's contractual
cash flows on the contractual due dates, a reduction in the amounts
expected to be recovered, or both.
Impairment losses and any subsequent reversals of impairment
losses are adjusted against the carrying amount of the receivable
and are recognised in profit or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand less short-term
bank overdrafts.
Financial liabilities and equity
Financial liabilities and equity 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.
Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Borrowings are classified as current liabilities
unless the group has an unconditional right to defer settlement of
the liability for at least 12 months after the reporting
period.
(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
Termination benefits (leaver costs) are payable when 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, interpretations and amendments to
published accounts
During the year ended 31 December 2020, the Company has applied
the following standards and amendments for the first time:
-- Definition of Material - amendments to IAS 1 and IAS 8
-- Revised Conceptual Framework for Financial Reporting
The amendments listed above did not have any impact on the
amounts recognised in prior periods and are not expected to
significantly affect the current or future periods.
New and amended standards and interpretations effective from 1
January 2021 not yet adopted by the Company.
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2020 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 .
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 GBPnil.
Subsequently, 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 GBP19.1m), 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, Snorkel achieved increased year on year sales levels
however, during 2020 the impact of the Covid-19 pandemic saw the
first reduction of sales. A summary of sales (unaudited) and the
operating loss (unaudited), excluding depreciation is shown
below:
Increase/ Operating profit/
Year Sales (decrease) (loss) excluding
depreciation
-------- -------- ------------ ------------------
2020 $110.8m (50%) ($12.3m)
-------- -------- ------------ ------------------
2019 $220.8m 10% $0.3m
-------- -------- ------------ ------------------
2018 $200.5m 21% $2.9m
-------- -------- ------------ ------------------
2017 $165.8m 27% $1.6m
-------- -------- ------------ ------------------
2016 $130.5m 19% ($2.8m)
-------- -------- ------------ ------------------
2015 $109.9m 29% ($10.6m)
-------- -------- ------------ ------------------
2014 $85.3m - ($14.9m)
-------- -------- ------------ ------------------
Despite the ongoing impact of the Covid-19 pandemic, the Board
is not aware of any market factors and have not been made aware of
any specific reason why sales growth should not be achieved in
2021, when compared to 2020 sales, as the impact of the pandemic
continues to subside.
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 financial information, incorporating a consolidated
operating statement, balance sheet and cashflow.
In 2018, the Board impaired Tanfield's investment value in
Snorkel International down to GBP19.1m, from the previous valuation
of GBP36.3m. The valuation of GBP19.1m 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 GBP36.3m 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 statements 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.
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 GBP19.1m.
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 2020 to 31 December 2020, the range of the GBP
to USD exchange rate has a low of 1.1475 and a high of 1.3652, the
average being 1.2841. If GBP19.1m is assumed to represent the
average exchange rate then based on the low of 1.1475 the valuation
increases by approximately 11% to GBP21.4m and based on the high of
1.3652 the valuation reduces by approximately 6% to GBP18.0m giving
a potential movement of 17% in the valuation. Whilst the Board is
not in a position to mitigate 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 the GBP19.1m which is underpinned by
the Preferred Interest element. However, the Board has considered
various Snorkel International trading scenarios, based around
historic sales growth trends and does not believe the valuation is
likely to materially increase from GBP19.1m in the near future.
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 for further information), the
outcome of the UK Proceedings and the ongoing 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 GBPnil as alleged by Xtreme and
depending on the outcome of ongoing legal proceedings. As the
global Covid-19 pandemic continues, it is not possible at this
stage to estimate what likely future impact the pandemic may have.
The Board note that any ongoing impact of Covid-19 would likely be
limited to the performance of Snorkel International and the timing
of a possible realisation but currently do not believe that it
should 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 GBP19.1m remains appropriate and there is not an
alternative, more reliable valuation of the investment than the
current estimate.
NOTES TO THE ACCOUNTS
1. Staff costs
2020 2019
Aggregate remuneration comprised GBP000's GBP000's
----------------------------------------------------------- ---------- --------- ------------------
Wages and salaries 81 72
Other pension costs 2 2
----------------------------------------------------------- ---------- --------- ------------------
Total staff costs 83 74
----------------------------------------------------------- ---------- --------- ------------------
2020 2019
Average monthly number of employees No. No.
Directors 2 2
----------------------------------------------------------- ---------- --------- ------------------
Total 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.
2. Finance expense and finance income
2020 2019
Finance expense GBP000's GBP000's
Interest on borrowings 100 -
------------------------------------------------------------------- ------------------ ---------
Total finance expense 100 -
------------------------------------------------------------------- ------------------ ---------
2020 2019
Finance income GBP000's GBP000's
------------------------------- ---------------- ---- ---------------------------------- ---------
Interest on cash, cash equivalents & financial
instruments - 1
Total finance income - 1
------------------------------------------------------------------- ------------------ ---------
3. Other operating expenses
2020 2019
GBP000's GBP000's
---------------------------- ------------------- ---- ---------------------------------- ---------
Property related expenses 27 33
Auditor's remuneration
(see below) 22 25
Other operating expenses 483 209
---------------------------- ------------------- ---- ---------------------------------- ---------
Total operating expenses 532 267
---------------------------- ------------------- -------------------- ------------------ ---------
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:
2020 2019
GBP000's GBP000's
----------------------------------------------------------------------- ------------------ ---------
Audit Services
* statutory audit of accounts 22 23
Other services relating to
taxation
* compliance services - -
------------------------------------------------- -------------------------------------- ---------
22 23
Comprising
* Audit services 22 23
* Non audit services - -
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:
2020 2019
GBP000's GBP000's
----------------------------------------------------------- ------ ------------------ ---------
Loss before taxation (697) (317)
----------------------------------------------------------- ------ ------------------ ---------
Notional taxation charge at UK rate of 19%
(2019: 19%) (132) (60)
Effects of:
Non-deductible expenses 80 -
Deferred tax asset not recognised in the
period 52 60
Total taxation charge in the income statement - -
----------------------------------------------------------- ------ ------------------ ---------
The Company has tax losses of approximately GBP4.3m (2019: GBP4.0m)
available to carry forward against future profits of the same
trade. No deferred tax asset has been recognised due to the uncertainty
of future profitability of the Company.
5. Loss per share
Basic loss per share is calculated by dividing the loss attributable
to equity shareholders by the weighted average number of shares
in issue during the period. In calculating the dilution per share,
share options outstanding and other potential ordinary shares
have been taken into account where the impact of these is dilutive.
As the potential dilutive ordinary shares from share options reduce
the loss per share these shares are omitted from the dilutive
loss per share calculation. The average share price during the
year was 2.75p (2019: 5.36p).
2020 2019
No. No.
Number of shares 000's 000's
--------------------------------------------------- ------------------ ------------------ ---------
Weighted average number of ordinary shares for
the purposes of basic earnings per share 162,907 160,971
Effect of dilutive potential ordinary
shares from share options - -
--------------------------------------------------- ------------------ ------------------ ---------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 162,907 160,971
----------------------------------------------------------------------- ------------------ ---------
Loss
2020 2019
From operations GBP000's GBP000's
--------------------------------------------------- ------------------ ------------------ ---------
Loss for the purposes of basic earnings per share
being net profit attributable to owners of the
parent (697) (317)
Potential dilutive ordinary shares from share - -
options
----------------------------------------------------------- ------------- -------
Loss for the purposes of diluted earnings per
share (697) (317)
----------------------------------------------------------- ------------- -------
Loss per share from operations
Basic and diluted (p) (0.43) (0.20)
6. Non current investments
A summary of the Non current investments is shown below:
2020 2019
GBP000's GBP000's
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------- ------------------- -----------
Investment in Smith Electric Vehicles
US Corp - -
Investment in Snorkel International
Holdings LLC 19,100 19,100
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------- ------------------- -----------
Total non current investments 19,100 19,100
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------- ------------------- -----------
Smith Electric Vehicles US Corp
At 31 December 2020, the Company held a 5.76% (2019: 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 GBPnil and they continue to maintain
this position. However, the Board will continue to monitor the
investment.
Snorkel International Holdings LLC
At 31 December 2020, the Company held a 49% (2019: 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 (2020: GBP19,100k, 2019:
GBP19,100k). The cumulative impairment provision against this investment
is GBP17,183k (2019: GBP17,183k). See Strategic Report for further
considerations.
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.
2020 2019
GBP000's GBP000's
---------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------ ---------------------- ----------------------------- ---------------
Cash and cash
equivalents a 524 136
---------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------ ---------------------- ----------------------------- ---------------
a At 31 December 2020 GBP500k was held on deposit with the English
Court as security in relation to the UK Proceedings (2019:GBPnil)
8. Trade and other receivables
2020 2019
GBP000's GBP000's
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --- ---------------------- ------------------------ ---------------
Receivable within one year
Other debtors and prepayments 24 23
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --- ---------------------- ------------------------ ---------------
24 23
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --- ---------------------- ------------------------ ---------------
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.
2020 2019
GBP000's GBP000's
--------------------------------------------------------------------------------------------- -------------- ------------------------------------------------------------------------------------- ------------- ------------------- ---------------
Payable within one year
Trade payables 53 52
Social security and other
taxes 1 1
Accrued expenses 36 51
90 104
------------------------------------------------------------------------------- ------------------------------------ ---------------------------------------------------- -------------------- -------------- ------------
Average credit period taken on trade
purchases (days) a 37 72
a Creditor days have been calculated as trade payables over other
operating expenses multiplied by 365 days.
10. Borrowings
2020 2019
Non-current Total Non-current Total
GBP000's GBP000's GBP000's GBP000's
------------------ -------------- --------- -------------- ---------
Unsecured
Loan notes 1,100 1,100 - -
-------------------------- -------------- --------- -------------- ---------
Total borrowings 1,100 1,100 - -
-------------------------- -------------- --------- -------------- ---------
Unsecured 10% loan notes 2025
The Company issued 212,500 loan notes for GBP212,500 on 30 March
2020, 143,750 loan notes for GBP143,750 on 30 June 2020 and 143,750
loan notes for GBP143,750 on 14 September 2020. Interest is charged
on the initial loan note value at 10% per annum which is rolled
up and included above. A loan note holder may at any time after
28 February 2025 serve notice upon the Company requesting the
redemption of all the Loan Notes, plus accrued interest, held
by them. In the event of a realisation from the US Proceedings
and/or the UK Proceedings exceeding GBP2.5m, any amount in excess
of GBP2.5m will be used to realise a proportion of Loan Notes
and accrued interest. Should a repayment take place prior to 28
February 2025, a 20% early redemption premium shall apply.
Unsecured 10% second loan notes 2025
The Company issued 500,000 second loan notes for GBP500,000 on
29 July 2020. Interest is charged on the initial loan note value
at 10% per annum which is rolled up and included above. A loan
note holder may at any time after 28 February 2025 serve notice
upon the Company requesting the redemption of all the Loan Notes,
plus accrued interest, held by them. In the event of a realisation
from the US Proceedings and/or the UK Proceedings exceeding GBP1.5m,
any amount in excess of GBP1.5m will be used to realise a proportion
of Loan Notes and accrued interest. Should a repayment take place
prior to 28 February 2025, a 20% early redemption premium shall
apply.
11. 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.
Nominal Number of Share capital Share premium
share value shares GBP000's GBP000's
--------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- ----------------- ------------------------- ------------------------
At 1 January 2019 5p 158,406,850 7,920 17,336
--------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- ----------------- ------------------------- ------------------------
New share issue 6 June
2019 a 5p 4,500,000 225 -
At 31 December 2019 5p 162,906,850 8,145 17,336
--------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- ----------------- ------------------------- ------------------------
At 31 December 2020 5p 162,906,850 8,145 17,336
--------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------- ----------------- ------------------------- ------------------------
a On 31 May 2019 the Company announced that it had conditionally
raised gross proceeds of GBP225k. 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.
12. 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.
All share based payments are equity settled and details of the
share option activity during 2020 and 2019 are shown below.
2020 2019
Number Weighted Number Weighted
of share average exercise of share average exercise
options price (pence) options price (pence)
------------------------------------------------------------------------------ ----------------------------- ------------------------------------------------------------------ ----------------- ------------------------- --------------------
Outstanding at the beginning
of the year 4,100,000 27 4,100,000 27
------------------------------------------------------------------------------ ----------------------------- ------------------------------------------------------------------ ----------------- ------------------------- --------------------
Lapsed (300,000) 27 - -
Outstanding at the end
of the year 3,800,000 27 4,100,000 27
Exercisable 3,800,000 27 4,100,000 27
------------------------------------------------------------------------------ ----------------------------- ------------------------------------------------------------------ ----------------- ------------------------- --------------------
The outstanding options at 31 December 2020 had a weighted average
remaining contractual life of 0.05 years (2019: 1.0 years)
The following table relates to share options outstanding and exercisable
at 31 December 2020.
Option exercise prices
27p Total
--------------------------------------------- --------------- -------------- ------------- ---------------------------------------------------------------------------------- ----------------- ------------------------- --------------------
No of share options 3,800,000 3,800,000
--------------------------------------------- --------------- -------------- ------------- ---------------------------------------------------------------------------------- ----------------- ------------------------- --------------------
No of exercisable
options 3,800,000 3,800,000
--------------------------------------------- --------------- -------------- ------------- ---------------------------------------------------------------------------------- ----------------- ------------------------- --------------------
A charge to the income statement of GBPnil (2019: GBPnil) and
a credit directly to equity of GBPnil (2019: GBPnil) have been
made during the year in accordance with IFRS2 'Share-based payments'.
13. 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: 2020 2019
GBP000's GBP000's
------ ------ ------ ------------------------ --------- --------- ----------- --------- -------
----------
Trade and other receivables 2 2
Cash and cash equivalents 524 136
------------------------------------------------ ----------- --------- --------- ------- --------- ---------
----------
526 138
--------------------------------------------------------- --------- --------- ----------- ---------
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 1 to 5 years Over 5 years Total
year
GBP000's GBP000's GBP000's GBP000's
-------------------------- --------- ------------- ------------- ---------
2020
Trade and other payables 90 - - 90
Borrowings - 1,100 - 1,100
---------------------------- --------- ------------- ------------- ---------
90 1,100 - 1,190
-------------------------- --------- ------------- ------------- ---------
2019
Trade and other payables 104 - - 104
---------------------------- --------- ------------- ------------- ---------
104 - - 104
-------------------------- --------- ------------- ------------- ---------
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 2020, which
is denominated in USD, is GBP19.1m (2019: GBP19.1m). During 2020,
the GBP to USD exchange rate averaged 1.2841 with a low of 1.1475
and a high of 1.3652. 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 net debt to capital gearing ratio on a regular basis.
The Company considers its capital to include share capital, share
premium, special reserve, share option reserve, merger reserve
and retained earnings.
Net debt of the company (including changes in liabilities arising
from financing activities)
2020 2019
GBP000's GBP000's
--------------------------------------------------------------- ---------------------------- -------------- ----------------- -----------------------------------------------
Borrowings:
Loan notes
Opening balance of loan notes in
issue - -
Loan notes issued in the year -
cash flows 1,000 -
Other changes including accrued
interest 100 -
--------------------------------------------------------------- ---------------------------- -------------- ----------------- -----------------------------------------------
Total Liability in respect of loan
notes in issue 1,100 -
Less: cash and cash equivalents (524) (136)
Net debt / (cash) at year end 576 (136)
Total Capital 18,458 19,155
--------------------------------------------------------------- ---------------------------- -------------- ----------------- -----------------------------------------------
Net debt to capital ratio (%) 3.1% -
--------------------------------------------------------------- ---------------------------- -------------- ----------------- -----------------------------------------------
During 2020, in order to fund the legal proceedings, the Company
issued some loan notes resulting in a net debt position of GBP576k
at 31 December 2020 as opposed to a net cash position of GBP136k
at 31 December 2019.
14. 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.
15. 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.
2020 2019
GBP000's GBP000's
---------------------------- ---------------- ------------------------------ ----------------------------- ------------------------------------ ---------------------------------
Salaries and short term
benefits including NI 81 72
Post employment benefits 2 2
---------------------------- ---------------- ------------------------------ ----------------------------- ------------------------------------ ---------------------------------
83 74
---------------------------- ---------------- ------------------------------ ----------------------------- ------------------------------------ ---------------------------------
16. Retirement benefits
The Company operates a defined contribution retirement benefit
plan for all qualifying employees. The total cost charged to income
of GBP2k (2019: GBP2k) represents contributions payable to that
scheme by the Company at rates specified in the rules of the scheme.
As at 31 December 2020, contributions of GBPnil (2019: GBPnil)
due in respect of the current reporting period had not been paid
over to the scheme.
17. Financial instruments recognised in the statement of financial
position
2020 2019
Assets Fair value Total Fair value T
otal
through through
Amortised profit Loans and profit
cost and loss receivables and loss
GBP000's GBP000's GBP000's GBP000's GBP000's GBP0
00's
------------- ------- ---- -------------------- ------------- ----------- ---------------- ----------- -------
----
Current financial
assets
Trade and other
receivables 2 - 2 2 -
2
Investments - 19,100 19,100 - 19,100 19
,100
Cash and cash equivalents 524 - 524 136 -
136
---------------------------- -------------------- ------------- ----------- ---------------- ----------- -------
----
Total 526 19,100 19,626 138 19,100 19
,238
---------------------------- -------------------- ------------- ----------- ---------------- ----------- -------
----
2020 2019
Liabilities Other Held for Total Other financial Held for T
otal
financial trading liabilities trading
liabilities
GBP000's GBP000's GBP000's GBP000's GBP000's GBP0
00's
-------------------------------- ---------------- ------------- ----------- ---------------- ----------- -------
----
Current liabilities
Trade and other payables 90 - 90 104 -
104
Borrowings 1,100 1,100
-------------------------------- ---------------- ------------- ----------- ---------------- ----------- -------
----
Total 1,190 - 1,190 104 -
104
-------------------------------- ---------------- ------------- ----------- ---------------- ----------- -------
----
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 2020 and the year ended 31 December 2019.
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 and in the
critical accounting estimates and key judgements.
18. Investments
The tables below give brief details of the Company's investments
at 31 December 2020. The Company had no operating subsidiaries
as of 31 December 2020. Group Interest
Principal in allotted capital Country of
Investments activity & voting rights incorporation
---------------------- ------------------ ------------------------- -----------------
Smith Electric
Vehicles Electric vehicle
US Corp manufacture 5.76% US
---------------------- ----------------------- ------------------ -----------------
HBWP Inc Holding Company 100.00% US
---------------------- ----------------------- ------------------ -----------------
Snorkel International
Holdings LLC Holding Company 49.00% US
---------------------- ----------------------- ------------------ -----------------
Tanfield Engineering Powered Access 49.00% US
Systems US (Inc) a
---------------------- ----------------------- ------------------ -----------------
Snorkel Europe Ltd a Powered Access 49.00% UK
---------------------- ----------------------- ------------------ -----------------
Snorkel International Powered Access 49.00% US
Inc a
---------------------- ----------------------- ------------------ -----------------
Snorkel Australia Powered Access 49.00% AUS
Limited
a
---------------------- ----------------------- ------------------ -----------------
Snorkel New Zealand Powered Access 49.00% NZ
Limited a
---------------------- ----------------------- ------------------ -----------------
a The Company's interest is held indirectly through HBWP Inc, a
wholly owned subsidiary, and its investment in Snorkel International
Holdings LLC
19. Post balance sheet events
The Company issued further unsecured 10% second loan notes 2025
amounting to GBP200,000 on 25 January 2021 and GBP250,000 on 1
June 2021.
All remaining share options lapsed on 21 January 2021.
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END
FR GPUPPQUPGPUG
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June 14, 2021 02:00 ET (06:00 GMT)
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