Tandem makes £2m loss

Group turnover was £42,760,000 compared to £52,683,000 in the previous year. After deducting exceptional costs and goodwill amortisation and impairment the operating loss was £1,796,000. There was a loss before taxation of £2,157,000.

Group chairman Graham Waldon said:

"Turnover in the bicycle business, with the well known brands of Falcon, Dawes, Claud Butler, Shogun, British Eagle and Optima, was lower than the previous year as we maintain the policy of withdrawing from low margin business with questionable profitability. Although there are no reliable statistics produced it was generally believed that sales in the UK of lower priced bikes in 2005 were down on the previous year in line with the difficult market conditions. Our continuing policy of reducing costs resulted in an increase in profitability.

"With our reputation for product design and service our customer base continues to grow, from which we should benefit as the retail environment improves. Further sales resources have been added. Production at the Group’s manufacturing facilities in the UK has been reducing over the last few years and has been concentrating on the higher value bikes. This will cease in the summer of 2006 as production is moved abroad. Overhead savings will be made which, together with a reduction in working capital, should lead to increased profitability."

Turnover at MV – the supplier of ‘character’ bikes and toys with licensed images from Barbie, Groovy Chick, Bang on the Door Baby, Thomas the Tank Engine, and Bob the Builder – is also down.

Waldron said: "A significant catalogue shop customer closed. There was increased competition against some of our longer established licences and a challenging retail sector. Sales opportunities with low margins were not pursued. Lower overheads failed to compensate for the reduced turnover.

"The success of the MV business is down to having the right brands and licences and product innovation. More resources have been placed in these areas."

On the group’s prospects as a whole, Waldron said:

"Trading in the first quarter of the current financial year is in line with budget on a reduced turnover following the withdrawal from low margin or unprofitable business. As in previous years our profits will be concentrated in the second half of the financial year.

"[The] board and the management in the businesses are fully aware of the need to return to the level of progress that the Group made in previous years."

Coverage of the Tandem Group losses in tomorrow’s newspaper will likely lead on the fact that Tandem is the ‘last volume bike manufacturer in the UK to outsource all its production overseas.’

This was news back in April when Falcon closed its UK production line. 40 employees were made redundant, although were offered alternative positions in Brigg. Falcon has been outsourcing for some time but some high-end bikes were still assembled in the UK. All production moves overseas in June.