Tanfield shrugs off broker doubt

Jan 10 2008 by Andrew Mernin, The Journal

ELECTRIC vehicles maker Tanfield has insisted it is set for another year of growth despite heavy falls in its share price after a broker lowered its recommendation from “hold” to “sell”.

In the past five days the Washington firm has seen its share price fall from a peak above the 135p mark to a low of 99p.

The plunge came as Investec downgraded its recommendation for the manufacturer from hold to sell and cut its price target from 186p to 112p.

Investec analyst Chris Dyett said: “2007 was a good year, but we believe 2008 will be trickier.

“We move from a ‘wait and see’ stance to one where our concerns start to outweigh the positives. Management is clearly confident of future delivery. However, much execution risk remains and we believe the challenges to come look greater than those overcome to date.”

The broker’s note warned that the downturn in the US industrial and commercial markets could hit Tanfield’s recently-acquired American operations. Last year the company acquired US aerial platform maker Snorkel for £49.9m and also bought a factory in Fresno, California.

The Investec note said: “Softness in the North American and European industrial and commercial markets will free up capacity at the other players and cause downwards pricing pressure in a market where pricing power is limited, in our opinion.”

However Tanfield chief executive Darren Kell shrugged off the broker’s suggestions and maintained that the firm’s prospects for 2008 remained strong.

He said: “We think the Investec note is so out of kilter with the rest of the consensus of other brokers. We are not concerned about our performance in the US and we see a very strong year there and we know that we’ve got tremendous growth ahead of us. The thing I find strange about the broker’s note is that it vehemently agrees that we have done a tremendous job, but then downgrades us.” In fact, such is Mr Kell’s confidence in the US market this year that he expects to double the production capacity of the firm’s $150m-a-year Snorkel plant from 70 to 140 aerial platforms a week.

On a positive note, the report acknowledged that the electric vehicles market was becoming increasingly viable as oil prices continued to increase.

However, it warned: “Our concerns are that it is never an easy process to ramp up production significantly – Tanfield is broadly indicating volumes will go from 260 to 1,000, 5,000 and then 10,000 in 2010, which is some ask – and that, in our opinion, it is likely that a number of incumbents will enter the market at much lower volumes than Tanfield’s management expects.”

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

In the fast lane

LAST year, Tanfield made huge strides towards becoming a major global player.

January: Signs a lucrative deal to fit motors to 200 trucks for US giant Enova.

February: The group’s aerial platform division announces that it has racked up £9m sales in just seven days.

March: Reveals annual revenues have doubled to £40.9m.

April: Clinches a deal to sell 50 battery-powered electric trucks to TNT in the UK and a further five in Europe.

May: Outlines plans for a huge expansion of its North American business amid reports it is to spend “tens of millions of pounds” on two new factories for the manufacture of its electrical vehicles, lifts, articulated booms, and extending masts.

June: Sells the Royal Mail two of its electric vehicles for trials to pave the way for much larger deals with what could be its biggest UK customer.

July: Broker Investec cuts its earnings forecast for Tanfield Group and reduces its price target to 108p from 186p.

August: Makes the first move in its plan to conquer Europe by launching two left-hand drive vehicles as part of a £250,000 deal in Holland.

September: Reveals plans to build a multi-million-pound manufacturing plant which will employ 500 people in the region.

December: Announces ambitious sales expectations in the US of 10,000 electric vehicles a year by 2010.

PAGE TWO: Read the full Investec report.