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 - news of Ford JV and shares mysteriously surge!

News of the Ford JV, where there is little expectancy of short term profit, mysteriously resulted in a surging share price for Tanfield - but at least there are fewer liquidity problems with this AIM stock!

The recent trading update confirmed what most of us already knew, that trading conditions in the second half for Tanfield were difficult.

The year-end cash figure is £11.1m, down on the previous figure of c£13.3m on 31st October 2008. With £8m being collected in the weeks following the year end, cash balances at the end of January 2009 were £13.1m. There was also encouragement from the announcement of a JV with Ford, but more of that below!

Trading conditions in all markets remain challenging, with little visibility and reduced order intake. Given the restricted horizon of the order book, visibility for 2009, in line with peers, is limited according to management.

The better news is of the Smiths Electric Vehicles JV in the US with Ford, in which it will have a 49% stake – thankfully it won’t have to shell out any cash! Tanfield will work with Ford to introduce a battery-electric light van based on the European-designed Ford Transit Connect which goes on sale in North America this year.

It appears that Tanfield will be sole supplier to Ford for the Transit Connect rather than the motor group’s electric offering as a whole (it’s worth visiting the following link ).

The press release includes the statement:
‘As for Ford’s electrification strategy, this is merely the first step: by 2011, Ford will bring a battery-electric small car to North America, followed by next-generation hybrid and plug-in hybrid vehicles in 2012.’
Tanfield’s Smith Electric Vehicle division has been subcontracted to take care of the electric vehicle conversion production line i.e. it’s providing short run assembly for the initial test vehicles. I assume key components, such as the 50 Kw electric motor, will be brought in. The 40 Kw/hr iron-phosphate lithium-ion battery pack is apparently being supplied by Valence Technology.

The shares rocketed on the news which was somewhat mystifying given the long term nature of the Ford deal and the small number of vehicles involved - Tanfield will manufacture a limited number of electric Ford Transit Connect vehicles in North America during 2010.

Tanfield needs all the encouragement it can get in the current market and management confirmed that they remain debt-free, without banking covenants or interest costs and do not anticipate this changing in the short to mid-term.

Furthermore, at least Tanfield doesn’t have to suffer with the same poor liquidity as the majority of AIM companies. For a company of its small size (£36m market cap) the trading volumes are truly wondrous – for AIM at least - which naturally creates a different problem!

We have been hard on this one in the past, but that was simply down to the ridiculous rating assigned to the company by a few too many wacky shareholders/traders/speculators etc.

Author: Blogger StanWellaway | Posted: 2:16 am  
Can I just correct something? The 49% refers to Tanfield Group's stake in SEVUS (Smith Electric Vehicles US) which is a company being set up to build and market Smith vehicles in the US, under the Smith name. It is nothing to do with the wholly separate Ford deal, under which Smith will do the subcontract conversion work and the vans will be fully badged as Ford.
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