Press Releases
Manganese Bronze Holdings Plc
Unaudited Interim Results
Mexican License And Distribution Agreement And Trading Update 11th March 2004
Manganese Bronze Holdings PLC, the leading manufacturer of the distinctive London black taxi and operator of Zingo, the mobile phone taxi hailing service announces its unaudited interim results for the six months to 31 January 2004.
Key Figures
- Turnover £42.4m (2003: £37.9m from continuing operations)
- Loss before exceptional items and tax from continuing operations reduced to £1.9m (2003: £2.2m loss)
- Interim dividend 1.0p per share (2003: nil per share)
Operational Highlights
- Taxi sales in the first six months up by 19% to 1,242 (2003: 1,046)
- Strong growth in Zingo fleet
Key Developments
- Signing of distribution and license agreements for Mexico
- Letter of intent for China signed with Bluestar and the Lanzhou Municipal People's Government for manufacturing joint venture in China
- Sale of the site of the Group's London taxi dealership realising a gain of £4.7m
- Combination of Zingo and LTIF operations in second half now that Zingo is an established ongoing operation
- Development of zero and low-emission vehicles underway
- Lower than expected taxi sales and Zingo hails in early 2004
Commenting on the results and recent developments Ian Pickering, Chief Executive of Manganese Bronze said:
“These results are an improvement on last year particularly within the Vehicles Division. Zingo incurred higher losses than in the first half of 2003 as the service had not been launched at that time and higher costs were incurred post launch particularly for marketing to drivers and passengers. The level of expenditure is being reduced in the second half.
“I am delighted that we have reached the agreements for our vehicle to be assembled in Mexico and sold throughout Latin America. TransPacific's experience and local knowledge will be central to opening up this market and we look forward to a long and successful relationship.
“This is another important step in our plans to expand the traditional taxi business into global markets following the signing of the letter of intent with Bluestar and the Lanzhou Municipal People's Government in February.
“The combination of the skills of Zingo and LTIF will provide enhanced service for London's taxi drivers and hopefully soon outside London.
“The development of vehicles with zero or low-emissions capability is widely regarded in the automotive industry and in the wider community as the way forward for the industry. It is important that LTI's product strategy reflects this trend.
“Whilst recent trading conditions have been a little more challenging than expected, the Group remains committed to implementing its strategy of international expansion, new product development and the growth of its service activities to deliver real value to our shareholders.”
CHAIRMAN'S STATEMENT The transformation of the Group, which began last year with the disposal of the Components Division and the sale and leaseback of the Coventry site, has continued in 2004. Good progress has been made in the plans to expand the Group's taxi business into global markets and to develop its service activities whilst continuing to realise value for shareholders from its property assets and to reduce the pension deficit.
Results
The Group reduced its operating loss before exceptional items to £1.8m in the six months to 31 January 2004 (2003 £1.9m). Overall the Group incurred a loss before tax of £2.0m (2003 £1.6m including £1.0 exceptional income).
Net borrowings at 31 January 2004 reduced to £5.1m from £13.7m at the same time last year and benefited from the proceeds of the share placing in November 2003.
Vehicles Division
Vehicles Division turnover increased by 10.4% to £41.9m (2003 £37.9m). Taxi sales increased to 1,242 in the first half of 2004 (including 162 exports) from 1,046 (including 8 exports) in 2003. The number of taxis sold or registered in the UK during the month of February 2004 was 90 (2003 182). Sales of taxis to the USA in the second half of the financial year are expected to be adversely affected by the current strength of sterling to the US dollar. Nevertheless the weekly production rate of taxis will be increased in April from 55 to 71 per week.
In September 2003, the Public Carriage Office announced that they planned to conduct a second limited review of the London Conditions of Fitness. The results of this review are not expected to be known until the late summer.
The recommendation by the Office of Fair Trading to deregulate the taxi and private hire industry in the United Kingdom has met with much resistance from within the industry. The review is currently being considered by the appropriate government departments and an announcement from them is expected shortly.
Zingo
The Zingo mobile phone taxi hailing service was launched successfully last year and the Zingo taxi fleet has since grown to over 1,150 vehicles. Use of the service grew rapidly in the second half of last year but that rate of growth has yet to be repeated in 2004 following a reduction in the number of hails over the Christmas and New Year holiday period. As the development of the service is now complete, the Group has decided to combine Zingo with its taxi finance business (LTIF). Bringing together these two activities is expected to result in a reduction of more than half in the level of Zingo's normal monthly expenditure of £250,000 for a one off cost of not more than £300,000. At the same time the Group has started discussions to launch Zingo in other cities both in the UK and abroad.
Pensions
The Group reached an agreement in December 2003 with the Trustees of its defined benefit pension scheme (which was closed to new members in 1995) to reduce the level of monthly contributions to the scheme from £125,000 to £100,000 from January 2004 onwards. This will result in a saving for the Group of £175,000 in the current financial year and a pro forma £300,000 annual saving.
The reduction followed the transfer by the scheme Trustees of the Guaranteed Minimum Pension element of the scheme back into the State Earnings Related Pension Scheme (SERPS). To achieve the transfer to SERPS, the Trustees paid a premium of £2.5m to the National Insurance Contributions Office (NICO) out of the scheme's assets which reduced the scheme's liabilities valued in accordance the Minimum Funding Requirement (MFR) regulations by £4.0m.
The SERPS buy-back has the benefit of reducing the deficit of the pension scheme under the MFR regulations as at 31st July 2003 from £5.3m to £3.8m, after payment of the premium to NICO.
Sale of London Taxi Dealership Site
In March 2004 the Group announced that it had sold the site of its London taxi dealership to English Partnerships for a total consideration of £7.9m. It had a book value of £2.9m and the sale will generate a profit after costs of £4.7m. Simultaneously, the Group purchased the leasehold of a property at Brewery Road, near to Kings Cross, London from British Telecommunications PLC for a total consideration of £4.6m.
Mexican License and Distribution Agreement
On 10 March 2004, the Group signed Distribution and Limited License agreements with London Taxi Mexico LLC and Transpacific Capital LLC for the assembly and sale of taxis in Mexico and certain countries in Latin America. Production of taxis in Mexico is expected to start in early 2005.
Mexico, with a population of more than 100 million is centrally urbanized around three major cities together comprising more than 35 million people. There is a clear need for a purpose built taxi fleet to serve this high population concentration. There are currently approximately 600,000 taxis in Mexico with a replacement rate of 50,000 per year. The agreements will enable the world's most famous taxi to be distributed in Mexico from a local assembly facility, maximizing the ability to meet this large local demand. The agreements also provide for LTI Ltd (LTI) to procure components for its own taxi production from LTM's Mexican supply base.
China Letter of Intent
In February 2004 the Group announced that it had signed a letter of intent with China National Bluestar (Group) Corporation and the Lanzhou Municipal People's Government for the establishment of a joint venture company to manufacture purpose built taxis in China. A feasibility study to be submitted to the Chinese government is under preparation.
Low Emission Vehicles
In April of last year the Group announced that LTI had reached an agreement with Azure Dynamics Corporation of Canada (Azure), a leading developer of hybrid electric powertrains for commercial vehicles, to develop black taxis with hybrid electric powertrains. The first prototype developed under this agreement is expected to start trials in London in May of this year.
LTI has also been working with Azure on the initial development of a new inner-city utility vehicle using Azure's advanced powertrain technology. This program has been partially funded by grants from the Energy Savings Trust. LTI is planning to produce three prototype vehicles on which it will incur expenditure of up to £500,000 in the second half of the current financial year. The development of a new vehicle will only be continued if sufficient orders can be secured to justify the related expenditure.
Dividend
In light of the Board's confidence in its strategy and the recent sale of the site of the London taxi dealership, the Board has declared an interim dividend of 1.0 pence per share. This will be paid on 30 April 2004 to shareholders on the register on 2 April 2004.
Current Trading and Prospects
The Group's overall results for the year will benefit from the £4.7m exceptional gain on the disposal of the site used by its London taxi dealership. However, as a result of the lower than expected demand for taxis and Zingo hails in recent months mentioned above, the Group's pre exceptional results for the current financial year are likely to be below market expectations. The outcome for the year will, of course, depend on the rate of take up of Zingo and future taxi sales.
Tim Melville-Ross
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