Press Releases

Unaudited second interim results - 26 September 2007

26th September 2007

MANGANESE BRONZE HOLDINGS PLC

UNAUDITED SECOND INTERIM RESULTS

Manganese Bronze Holdings PLC, the leading manufacturer of the distinctive London taxi, announces its unaudited second interim results for the twelve months to 31 July 2007.

Highlights

• Chinese Joint Venture  finalised - all regulatory and shareholder approvals received


• TX4 taxi successfully launched in October – UK taxi sales up 39.0% since launch.


• New, larger London retail facilities opened in December contributing to a significant increase in retail profit in London.


• Significant profit improvement – EBITDA of £8.6 million (2006: £5.7 million excluding one off profit on sale of Ipswich property), an increase of 49.7%.


• Continued strong cash generation from operating activity of £12.2 million (2006: £1.1 million). Net funds of £9.1 million (2006: £2.6 million).


• Transfer of intellectual property to Geely complete. High levels of international interest in Shanghai produced London Taxis.


• Appointment of new Chief Executive in March bringing a depth of automotive industry and international business experience to the company.


• New Long Term Incentive Plan (LTIP) soon to be distributed to shareholders for approval.

Commenting on the results, John Russell, Chief Executive, said;

"This is another strong set of results for Manganese Bronze. Our Chinese joint venture with Geely has been now finalised and we are progressing our plans to commence production in late 2008.  The successful launch of the TX4 saw UK taxi sales increase by 39% and this was supported by our move to new, larger retail facilities in London.

"We anticipate continued strong demand for the TX4 and will continue to deliver the best possible results from our business in the UK. Overseas, we will work to ensure the success of our joint venture, SLTI, whilst preparing to market its vehicles internationally as we progress further in making the London Taxi a global brand."

For further information:

CHAIRMAN’S STATEMENT

Manganese Bronze had an excellent year with the finalisation of the transaction to establish our joint venture with Geely in Shanghai, the highly successful launch of the TX4, a well executed move to our new retail facilities in London and the appointment of a Chief Executive with a wealth of international sales and marketing experience.

Overall sales volumes increased by 27% to 3,153 vehicles (2006: 2,480) with higher growth since the launch of our new model, the TX4. This has resulted in an excellent set of results with a 50% increase in EBITDA to £8.6 million (2006: £5.7 million excluding the Ipswich sale) and a 58% increase in EBIT to £4.6 million (2006: £2.9 million excluding Ipswich).

Our cash generation continues to be impressive, despite capital expenditure of £4.1 million (including £2.2 million on engineering the TX4 and £0.8 million refurbishing our new London dealership), with net funds increasing by £6.5 million to £9.1 million (2006: £2.6 million). Reduced working capital has contributed significantly to cash generation with finished stock reduced by almost two thirds since the start of the year and halved since the half year. Inventory is now running at lower than optimal levels from an operating perspective.
 
The group has continued to perform strongly in the second six month interim period, with the TX4 continuing to deliver strong sales, particularly in London, where the opening of our new dealership has significantly improved the quality of sales, service and parts support we are able to provide to our customers.

In June, the final regulatory approvals were granted in China for the establishment of our Chinese joint venture, Shanghai LTI (SLTI) to produce the London taxi, a limousine and two large saloon cars. We are now working with our partner, Geely, to put the TX4 into production at the highest quality and lowest cost, and develop the infrastructure and capability to sell the vehicles internationally.

Linkstate Overseas limited, a wholly owned subsidiary of Geely, now has an interest in 5,700,000 Ordinary Shares of 25p, representing 22.83% of the issued ordinary share capital of the Company. This holding strongly aligns Geely’s interests with our future profitable growth. Geely now has two non-executive directors on our Board of Directors.

We decided earlier this year to change the accounting reference date for the Company from 31 July to 31 December.  This will ensure that the financial results of SLTI are reported simultaneously to shareholders of both Manganese Bronze and Geely. It is for this reason that we are reporting a second set of interim results for the twelve months to 31st July 2007. The Company will produce its next set of full audited accounts for the seventeen month period to 31 December 2007.

Vehicle sales
Total vehicle sales in the second interim period increased by 32.2% to 1,806 (2006: 1,366). For the 12 months, total vehicle sales increased by 27.1% to 3,153 (2006: 2,480). The sales increase has been largely driven by the launch of the TX4, with its new VM powertrain and additional refinements, rather than any short term impact from the Public Carriage Office’s emissions strategy, which requires all London taxis to at least comply with Euro III emissions by July 2008. As expected, the majority of drivers have fitted a conversion kit that allows compliance with Euro III rather than immediately purchasing a new, or compliant used, vehicle.

To meet increasing demand for TX4s, we moved into new, much larger London retail premises in December 2006. These facilities are three times larger than those we used previously and have enabled Mann & Overton, our wholly owned retail dealership, to contribute a significant increase in operating profit.

Vehicle sales operating profit of £3.2 million for the second interim period is a significant improvement over the first half of £0.9 million, due to seasonality, higher TX4 sales and run off costs of selling the final TXIIs in the first half of £0.7 million. The total £5.5 million development and tooling cost of the TX4 is being written off over five years.  This has seen the total depreciation and amortisation charge increase to £4.0 million (2006: £2.8 million). Vehicle sales operating profit for the 12 months increased by 47.8% to £4.1 million (2006: £2.8m). This includes a strong contribution from the parts business which increased profits over 2006.

During the year, we were able to exploit our flexible manufacturing capabilities to increase the vehicle production rate from 15 to 18 vehicles a day to meet seasonal demand.

Vehicle Services
The vehicle services segment compromises taxi financing and a US taxi services and advertising business. Overall, the segment produced a profit for the 12 months of £0.5 million (2006: £0.4 million), with the taxi finance business making a contribution of £1.2 million (2006: £0.9 million) and the US business generating a loss of £0.7 million (2006: £0.5 million) of which almost 40% is accounted for by depreciation and amortisation. The Directors have reviewed the goodwill of £1.3 million (2006: £1.4 million) associated with the US business and have confirmed its value with no impairment required. A new President and new Sales Director have been appointed and the quality of the advertising leads has improved giving confidence that the high level of interest we generate can be converted into future advertising revenue. The opportunity from importing SLTI produced vehicles into the US market is significant.

Shanghai LTI

We were delighted to announce, in November 2006, that we had signed agreements with Geely to form a joint venture to produce the London Taxi, a limousine and two large saloon cars in Shanghai. This development followed several years of attempting to find the right partner in China.  Manganese Bronze shareholder approval was obtained in January 2007 with Geely’s shareholder approval following in March and regulatory approval in June 2007. This was slightly later than was originally envisaged when the agreements were signed in November 2006 and consequently the planned start of production is now expected to begin in late 2008 with a ramp up of production quickly thereafter. Our respective engineering teams are working hard to mitigate this impact by accelerating the supply of lower cost components for our Coventry facility.

There has been intense activity in recent months to finalise SLTI’s production plan, to ensure it is robust and deliverable. We have agreed with Geely that MBH will take more responsibility for quality, project management and supplier development.  This has resulted in the allocation of key personnel in the UK to support SLTI. Our recent appointment of Paul Stowe as Executive Deputy General Manger of SLTI will, we believe, be pivotal to ensuring that vehicles of the required quality are delivered on time and to budget. Paul was previously Quality Director for Nanjing MG Motor Company in China where he was a senior member of the team responsible for the start of production of the MG7 vehicle in Nanjing.

All intellectual property has now been transferred from Manganese Bronze to Geely and the engineering, procurement and facilities staff from both companies are working closely together to achieve production start up.

International market development

We have started work on the development of our sales, marketing and distribution capabilities in international markets and we are providing support to Geely as they develop their plans for China and Asia. This initiative will be led directly by John Russell, who will follow up on the large volume of requests for vehicles which we have previously been unable to meet on cost grounds. The press coverage of our plans has already generated significant interest from existing and new prospects from around the world, confirming the international appeal of a lower cost taxi. We believe that, in addition to selling our products directly to taxi drivers and fleet operators, there is an opportunity for us to broaden our business by expanding into the provision of taxi services with existing operators in targeted markets outside the UK.

Finance

Net funds at 31 July 2007 were £9.1 million (2006: £2.6 million) with strong EBITDA performance, and lower working capital more than offsetting spend on the TX4 and Brewery Road (our new dealership).

The board has declared a second interim dividend of 3.5p (2006 final dividend 3.0p and special dividend of 1.0p as a result of the sale of surplus properties) following the interim dividend of 2.25p (2006 interim 2.0p). The second interim dividend will be paid on 2 November 2007 to shareholders on the register on 5 October 2007.

People

We were delighted to announce the appointment of John Russell as Chief Executive in March. His depth of automotive industry and international business experience will be invaluable to the company. The Board is confident that he will be an excellent Chief Executive and will lead our efforts to make the London Taxi a global brand.

In June, we appointed Mark Devin as Company Secretary on a part time basis. This allows Mark Fryer, Group Finance and Business Development Director, to relinquish the responsibilities of Company Secretary and focus on supporting John in developing the international side of our business in advance of vehicles being available from SLTI .

Sheng Yue Gui and Siu Lun Lawrence Ang have been appointed as non-executive directors of Manganese Bronze. Mr Gui is Chief Executive Officer of Geely and Mr Ang is an executive director of Geely. Both bring an international outlook to our business and will help ensure our long term profitable growth.
We will soon be distributing to shareholders the terms for a revised Long Term Incentive Plan for approval. This scheme is intended to strongly motivate the Directors and Senior Managers across the Group to achieve the high level of potential from SLTI and international markets.

Current trading and prospects

We believe that UK demand for the TX4 will remain strong because of the combination of excellent product acceptance by drivers supplemented by the impact of the emissions regulations in London. We also expect to maintain or improve UK demand outside London, with the appeal of the TX4 more than offsetting the increasing pressure from competition and deregulation. We will continue to deliver the best possible results from our UK business whilst applying appropriate additional resources to ensure that SLTI delivers high quality, low cost products on time and we have in place the means to market those vehicles internationally.

Tim Melville-Ross
Chairman

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