Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

Tanfield- ordinary results but an extraordinary valuation

Preliminary results from Tanfield, the manufacturer of zero emission (i.e. 'electric' in old language) vehicles and aerial work platforms, showed significant growth in sales and profit.

Sales rose from £22.4 to £41m, just slightly below the broker’s estimates and after re-structuring costs of £1.9m, profit before tax rose from £2.1m to £3.6m. Earnings per share were slightly below even the broker’s expectations at an adjusted 1.6p (estimates. 2.6p).

I am aware that business is buoyant for Tanfield, however, the valuation relative to these numbers and the projections looks a bit excessive. It’s definitely the green premium that is pulling things up.

Even the normally bullish house broker has reduced their forecasts from BUY to HOLD against a target price which is now 21x expectations for the current year.

I like one of the comments in the results announcement in respect of the move to new premises:

'......the Chairman and founder of Tanfield, Roy Stanley, successfully negotiated a 15-month rent-free period at Vigo Centre. The Chairman also secured a £1.95m grant for Tanfield, from Regional Development Agency, One NorthEast.'

Clearly the Chairman needs plenty of praise heaped on him. I thought it was in his job description to act in the best interests of the company!

The first of the group’s Smith vehicles have entered service with business-to-business parcel delivery company TNT Express; and contract logistics company CEVA Logistics (formerly TNT Logistics), on behalf of Starbucks.

TNT Express has indicated that there is the potential for it to replace up to 10% of its UK fleet with zero-emission vehicles such as the Smith Newton.

At this stage it appears to be politically correct for big groups to show interest in green initiatives. I just wonder how long it will take for them to really commit to material orders and thereby help to justify Tanfield’s stratospheric share price.

Author: Blogger StanWellaway | Posted: 1:51 pm  
Tanfield Turnover is predicted to double during 2007 and to double again in 2008, more than two thirds of that growth coming from the UpRight aerial platforms division, for which a 300,000 sq ft factory is about to be built (20% bigger than the Vigo facility which is shared by other divisions). Building has yet to start but production is scheduled to start there before November. UpRight is benefitting from the long delivery delays quoted by the two biggest US firms (UpRight is now No.3 there). Both rivals concede that they cannot step up production themselves, being fully stretched. It is a purely fortuitous situation but gives UpRight a free run at a busy market. The Working At Height regs that are driving demand here (since 2005) are only just coming into force in some other European countries, again just as UpRight has increased distributors from 15 to 150 since June. The chairman has indicated in interviews that - even without a confirmed fleet order for large vans till Q4, the doubling of turnover will happen. In fact it appears that firm fleet orders for the Newton are already overtaken by yet-to-be-announced deals for the imminent Edison (I don't know who, but I would guess the National Trust, and Royal Parks).
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