Losses widen at taxi maker Manganese Bronze as rival looks to capitalise

COVENTRY-based black cab manufacturer Manganese Bronze has seen losses widen to almost £4.7m due to accounting errors and a slump in orders to its traditional London market.

The firm said an increase in overseas sales had failed to make up for a near 23% fall in UK sales volumes and it was therefore unlikely the firm would return to profit during the final quarter of the year.

The announcement failed to make too much of an impact on the stock markets as the AIM-listed company only filed its interim report late on Friday afternoon.

However, the markets were quick to react this morning and in early trading the firm was down more than 9%.

The results showed that group revenue for the six months to June 30, 2012 fell 11.3% to £34.3m as the challenging UK market conditions continued. UK sales volumes were down 22.9% to 577 vehicles (2011: 748) although international sales grew 6.3% to 504 vehicles (2011: 474).

Operating margins reduced due to supply chain issues and increased warranty costs and the operating loss before exceptional items increased to £3.1m (2011: £1.9m). The restated figure for the 2011 full year is £4.692m before exceptional items.

Despite the situation, the company said it continued to receive the backing of its Chinese joint venture partner Geely although it confirmed it owed the Chinese firm £18.6m for component parts and vehicles supplied through the SLTI joint venture.

Manganese Bronze is hoping it can claw back some of its losses when it become the outlet for Geely to distribute its vehicles in the UK later this year.

Manganese Bronze had been forced to delay the publication of its interims after discovering accounting errors, blamed on a new computing system. These required adjustment to prior year accounts resulting in operating losses widening by £4.25m.

The firm said trading since June 30, 2012 had been in line with revised expectations.

John Russell, Manganese Bronze Group Chief Executive, said the board was disappointed by the results.

“The board expects that sales in the final quarter of the year will be at similar levels to the current running rate but this will not allow the Group to return to profit in the second half of the year.

“In light of the continuing weak economic outlook for the UK, the board is taking steps to review its cost base with the objective of achieving a breakeven or better result in the new financial year. However, the level of this profitability is directly linked to UK new vehicle sales volumes, which are difficult to predict in the current economic environment.”

To add insult to injury, one of the main rivals to Manganese Bronze in the growing turf war over London’s black cab market has announced a 40% growth in half year revenues.

Eco City Vehicles said that in the six months to June 30, 2012 revenues increased by 40.5% to £16.4m (H1 2011: £11.6m). It said this reflected the increased momentum of sales and the growing popularity of the latest Mercedes Vito Euro V model.

Gross margin increased slightly to 13.9% (H1 2011: 13.7%) and its net loss excluding non-recurring items reduced to £0.1m (H1 2011: £1m).

The figures will make uncomfortable reading for Manganese Bronze in what remains its most traditional market.

Operationally, the total number of new Vito licenses in the six month-period increased by 116% to 324 (H1 2011: 150) and represents 98% of the license sales achieved in the whole of last year.

Eco City increased its share of the new London licensed taxi market to 38.3% (H1 2011: 21.1%) – based on data supplied by Transport for London.

In outlook, the company said demand for new taxis had improved significantly in 2012 amid growing market acceptance of the latest ‘Blue Efficiency’ Vito taxi. It said this was due to its strong quality standards, six seater capacity and lower total cost of ownership.

As a result, it said sales of new vehicles in the year to date together with its share of the London taxi market were well ahead of the same period last year. Sales of new Vito taxis increased by 104% to £11.0m (H1 2011: £5.4m).

Peter DaCosta, the firm’s chief executive, said: “Our first half results reflect the growing popularity of the latest Mercedes Euro V Vito taxi.”

He said net proceeds from a placing earlier in September would be used to repay debt, fund capital investment and provide additional working capital to support the continued growth of the company.