TX4 Update - Press Release Manganese Bronze Holdings

Press Release

Interim Management Statement

22nd October 2008

Manganese Bronze Holdings PLC (‘’Manganese Bronze’’ or the ‘’Group’’), the leading manufacturer of the distinctive London taxi, today announces its interim management statement for the period 1 July to 21 October 2008.

Current Trading

Trading in the UK continues to be impacted by the uncertain macro economic conditions, as we previously flagged in our interim results in July. As reported then, the Board believes that demand for new vehicles in the second half of the year will follow the normal seasonal pattern and be below that of the first half. UK business conditions continue to be uncertain, which makes forecasting the level of demand for new vehicles more challenging. Overall vehicles sales for the nine months to the end of September are down 37.5%, to 1,628 vehicles versus 2,604 vehicles in the comparable period last year. This is due to a combination of uncertain economic conditions and the fact that the comparative period saw a near record sales volume following the successful launch of the TX4.
Earnings continue to be negatively impacted by three factors: the strength of the Euro increasing the cost of engines purchased from Italy; the costs of supporting the joint venture set up with engineers; and the cost of the international sales and marketing team.
We have responded to lower sales and higher working capital by reducing vehicle output to lower inventory levels, implementing an aggressive reduction in operating costs, and headcount reductions. The result of these actions is a 15% reduction of the manufacturing break-even level to approximately 2,000 vehicles per annum.

TX4 Update

LTI, a wholly owned subsidiary of Manganese Bronze PLC, has been carrying out a full and thorough investigation into the root cause of the twelve under bonnet fires that have occurred over the last few months in early production models of the TX4 taxi.
As announced on 26 September 2008, a product recall of all TX4 vehicles was commenced with product actions including modifications to the emission control equipment, the heat management system and under bonnet insulation. To date nearly 400 vehicles have had the rework completed and as a result there are now 600 vehicles off the road awaiting the rework. There are an additional 4400 operational vehicles that will require the rework and this is planned to be completed by the end of February 2009.
We still expect the costs of the recall to be approximately £4m, and that this will be fully expensed in the current financial period to 31 December 2008. Manganese Bronze is already in discussions with its insurers and relevant suppliers to establish liability and opportunities for recovery of some of these costs. When legal liability has been determined there may be additional costs for driver compensation for the period the vehicles are off the road.

Progress on China and International Sales

Our joint venture in China, Shanghai LTI, offers the greatest potential to secure the long-term profitable future for the Group. On 25 June, we were very pleased to report further excellent progress with the start of prototype production on schedule. The prototype vehicles are now being subjected to the planned programme of thorough testing leading to the start of commercial production at the end of 2008.
Contracted procurement savings for Chinese produced parts for our Coventry facility are in line with market expectations with the impact of lower cost Chinese parts now expected to make a positive contribution in 2009.
Further encouraging progress has been made with the development of the Group’s international sales pipeline. We now have signed memoranda for over 8,000 vehicles over a period of three years with deliveries commencing in early 2009, and there remains a significant pipeline of further potential customers.
Initial production in Shanghai will meet the homologation requirements for China. European Whole Vehicle Type Approval (‘’EWVTA’’) is on target to be achieved in the first half of 2009. EWVTA is the homologation standard for the markets for which we have signed MOUs. The plan for homologation compliance for the North and South American markets is not yet finalised but we still believe North America represents the biggest market opportunity for the Shanghai built TX4.

Prospects

The UK market place remains challenging and the Board does not expect that UK sales will exceed the manufacturing break-even point in 2008. Shanghai LTI remains on plan to deliver a step change in the Group’s prospects and financial performance with significant profit contributions from mid 2009 to the group from procurement savings and international sales.

Cautionary statement

This Interim Management Statement (“IMS”) has been prepared solely to provide additional information to shareholders to access the Group’s strategies and the potential for those strategies to succeed. The IMS should not be relied on by any other party for any other purpose.
The IMS contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
Further updates will be made in due course.

	For further information, please contact:
	Manganese Bronze Holdings plc
	John Russell, Group Chief Executive	02476 572108
	Mark Fryer, Group Finance and Business Development Director	02476 572 223

	Financial Dynamics
	Jon Simmons	020 7831 3113

bookings

ONLINE BOOKINGS