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Cab maker Manganese prepares for rough ride
By Tim Bradshaw in London
Published: March 6 2009 02:00 | Last updated: March 6 2009 02:00
Manganese Bronze, the manufacturer of the distinctive London black cab, has scrapped its dividend amid a "significant downturn" in taxi sales, as it warned of increasing supply-chain risk.
The parent company of London Taxis International said the restriction of credit from suppliers could have a "marked effect" on the company's working capital.
The warning came as Manganese reported a pre-tax loss of £14.2m ($20.1m) in the year to December 31, 2008. Losses were compounded by exceptional charges of £8.1m, which analysts said had taken the market by surprise.
The group reported exceptional costs of £3.8m relating to the recall of 1,500 cabs after 12 under-bonnet fires last September, less than originally expected.
Falling demand in North America and London led to writedowns of used vehicle inventory and redundancy costs totalling £3.9m.
Manganese, which said it would be able to operate within the current level of its borrowing facilities, has cut its staffing by 20 per cent as part of a cost reduction programme, as total vehicles sold fell from 2,480 to 2,124. Volumes could be even lower in 2009, it warned.
It was forced to suspend its dividend after providing additional security over two properties to renew its overdraft facility of £2.5m until the end of the year.
The shares, which have fallen nearly 90 per cent in the past year, fell 15.6 per cent to 58½p.
John Russell, chief executive, said: "2008 was a challenging year for our UK taxi manufacturing operation coupled with significant progress towards our international ambitions.
"Current trading continues to be adversely impacted by the wider downturn in the automotive market whereas our confidence in the medium term prospects for the group continues to grow." Mr Russell's optimism rests on Shanghai LTI, its Chinese joint venture with Geely, the Chinese car maker. SLTI began commercial production of its TX4 black cabs in January, with indicative orders of 8,000 vehicles, of which only 200 are firm contracts.
The Chinese joint venture is well funded, although analysts expect the UK business to make a loss this year. Mr Russell said that Manganese had more than £8m of headroom on its lending facilities. "We are very comfortable with that," he said.
Total revenues fell 27.8 per cent from £106.9m in 2007 to £77.2m last year, with the UK suffering a greater decline due to falling used-car sales and discounting.
Manganese has changed its year end to match that of its joint venture partners. Total sales for the 17 months ending December 31, 2007, were £144.5m, with pre-tax profits of £4.9m.
Staff have also taken a 10 per cent pay cut.
Copyright The Financial Times Limited 2009
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