Manganese Bronze sees profits fall

BLACK cab manufacturer Manganese Bronze today reported a deepening of annual losses after the recession severely impacted on the sales of new taxis.

The Coventry manufacturer said its operating loss before exceptional items and tax fell to £7m last year, compared with losses of £5.4m in 2008.

In the UK it managed to sell just 1,724 vehicles, which compared with 1,951 in 2008. Additional discounts and sales incentives of around 5% represent half the operating loss.

Exceptional income stood at £0.8m, which compared with £8.1m in 2008 when the company as hit with a £3.8m bill after having to recall its TX4 vehicles following a fault.

Despite the challenging market conditions, the company is hopeful that its joint venture with Geely in China will yield better results.

Early last year the company announced the start of production by Shanghai LTI and the UK operation is set to enjoy cost savings as a result of the alliance.

Manganese said a decision by its primer coating supplier – the only viable UK supplier of the service – to cease production from August had caused LTI to change its production strategy.

Later this year, the manufacture of TX4 bodies and chassis in Coventry will cease and production switch to China. The parts will then be shipped back to the UK for assembly.

The move, taken after consultations with stakeholders, will mean the loss of 60 jobs and reduce staffing levels to around 300 people.

Prior to the onset of recession, including temporary workers, the company was employing around 500 people.

The firm said it was on plan to meet cost targets for Chinese produced parts for UK production and this would result in immediate savings of more than £1,200 per vehicle, with a further £800 cut expected within six months.

The Chinese operation has been boosted with the decision by SLTI in September to acquire 100% of Geely’s tooling company, Shanghai Maple Tooling Company, itself based in Shanghai. This company manufactures body tools for Geely.

In addition, Manganese has announced Geely’s intention to develop a new saloon-based global taxi, the TXn. This will address the mainstream low cost taxi market and will supplement the TX4, which targets higher quality niches.

The link with Shanghai could strengthen under a new plan which would see Manganese make a major share placing to Geely.

The placing, a 70p per share, would help fund vehicle assembly, TXn development, and distribution activities.

The placing depends on agreements being finalised with Geely for the distribution of the TXn in Europe and the sale of the latest Geely Emgrand saloon car, the EC718, in the UK.

Following the planned placing, Geely companies would have a controlling stake in Manganese Bronze. The transaction would be subject to approval from shareholders and the relevant regulatory bodies.

Manganese said it was also planning to switch its listing to the Alternative Investment Market, subject to approval by shareholders and listing authorities.

The company will be hoping the partnership boosts international sales. Last year just 209 of the vehicles were sold abroad but Manganese said it was undaunted by the difficult market conditions and has set a target of 1,000 units this year.

Manganese said the situation in the UK remained difficult were the economic conditions in the capital had hit new sales hard.

Elsewhere, in August it closed its loss making North American operation, which last year accounted for a £0.8m loss, which compared with a loss of £1.8m the year before.

The company said its parts business had performed well and the operation would benefit from a reorganisation of its UK dealerships, which would be complete by July.

John Russell, group chief executive, said: “2009 was a difficult year for our UK taxi manufacturing operation with significant discount and sales incentives to stimulate the market combined with price pressure and restricted terms from fragile UK suppliers.

“Our UK consultation process is almost complete which will lead to a smaller lower cost UK operation with a much greater level of supply from China.”

He said the move to AIM and the equity placing to Geely would fully cement the partnership and enhance the group’s capital base.