Tanfield Group PLC - Trading Statement
Extract from press release:
Smith Electric Vehicles
ALTHOUGH NOT IMMUNE FROM THE FACTORS IMPACTING TANFIELD'S OTHER MARKETS, DEMAND FOR ELECTRIC VEHICLES HAS HELD UP, HELPED BY THE STRONG RISE IN THE OIL PRICE.
THROUGH JUNE A NUMBER OF SUPPLIERS MISSED THEIR COMMITTED RAMP-UP PLANS DUE TO TECHNICAL AND PRODUCTION ISSUES WITH A NUMBER OF SPECIALISED COMPONENTS - SPECIFICALLY A NEW SERIES OF COMPONENTS REQUIRED FOR THE TRANSITION TO THE LATEST GENERATION OF VEHICLES. THESE SUPPLY CHAIN ISSUES INCLUDE HARD TOOLING ON BATTERY CONTAINER SYSTEMS (THIS IS THE LONGEST LEAD TIME COMPONENT WITH A 16 WEEK RESOLUTION), TECHNICAL PRODUCTION ISSUES WITH DASHBOARD AND DRIVER INTERFACE MODULES, VEHICLE CHARGER AND ELECTRIC POWER STEERING SYSTEMS AVAILABILITY AND DELIVERY RATES.
THE CONSEQUENCE OF THESE SUPPLY CHAIN CONSTRAINTS IS THAT OUTPUT IN THE SECOND QUARTER WAS REDUCED BY 112 VEHICLES. GIVEN THE SHORT PAYMENT TERMS, THE REVENUE FROM THESE VEHICLES WAS FORECAST TO HAVE BEEN COLLECTED. THIS HAS HAD AN IMPACT ON WORKING CAPITAL. THESE VEHICLES HAVE BEEN RE-SCHEDULED.
ALTHOUGH THE DIRECTORS EXPECT THAT THE CURRENT SUPPLY CHAIN ISSUES WILL BE RESOLVED BY THE END OF THIS YEAR, THERE CONTINUE TO BE AREAS WHERE VOLUME SUPPLY IS UNPROVEN, AND THE FORECAST SALES OF ELECTRIC VEHICLES ARE NOW LOWER THAN CURRENT MARKET EXPECTATIONS.
INPUT COSTS HAVE RISEN FOR CERTAIN KEY COMPONENTS. WHILST SOME OF THIS IS BEING PASSED ON THROUGH SALES PRICE RISES, ELECTRIC VEHICLE MARGINS WILL COME UNDER PRESSURE. WE ARE ATTEMPTING TO MITIGATE THESE RISES THROUGH DESIGN AND PURCHASING INITIATIVES.
THE ENQUIRY LEVEL AND THE NUMBER OF NEW CUSTOMERS INITIATING TRIALS ARE BUOYANT. THE COMPANY IS ALSO IN RECEIPT OF A NUMBER OF LETTERS OF INTENT AND STATEMENTS OF INTEREST FROM TARGETED US CUSTOMERS BASED UPON THE AVAILABILITY OF US SPECIFIC ELECTRIC VEHICLES. HOWEVER WE ANTICIPATE THAT DUE TO THE ECONOMIC CLIMATE AND THE TRADING CONDITIONS OUR CUSTOMERS ARE EXPERIENCING, IT WILL TAKE LONGER FOR THESE TRIALS TO CONVERT INTO VOLUME ORDERS.
IN LIGHT OF THE ABOVE FACTORS THE DIRECTORS HAVE MADE TWO KEY STRATEGIC DECISIONS:
POSTPONEMENT OF THE MOVE TO A DEDICATED ELECTRIC VEHICLE SITE. THE CURRENT FACILITY HAS SUFFICIENT CAPACITY HEADROOM FOR THE COMING 18 MONTHS AND THIS DECISION WILL BE KEPT UNDER REVIEW.
REVISION OF THE EXPANSION IN USA. THIS IS NOW LIKELY TO BE EXECUTED THROUGH A JOINT VENTURE WITH A BUSINESS THAT ALREADY HAS FACILITIES AND INFRASTRUCTURE IN THE US IN A RELATED INDUSTRY. WE ARE IN DISCUSSIONS WITH A NUMBER OF INDUSTRY PARTNERS IN THIS REGARD.
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