REG - Tanfield Group PLC - Snorkel Investment & Legal Proceedings Update

TanfieldAnnouncement

10/05/2022 07:00

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RNS Number : 8316K  Tanfield Group PLC  10 May 2022

The information contained within this announcement is deemed by the Company to
constitute inside information under the Market Abuse Regulation (EU) No.
596/2014. Upon the publication of this announcement via a Regulatory
Information Service ("RIS"), this inside information is now considered to be
in the public domain

 

 

Tanfield Group Plc

("Tanfield" or the "Company")

 

 

Snorkel Investment & Legal Proceedings Update

 

 

The Board of Tanfield (the "Board") is pleased to update the market on its
investment in Snorkel International Holdings LLC ("Snorkel"), the aerial work
platform business.

 

Investment Background

 

·    Tanfield is a 49% shareholder in the equity of Snorkel following the
joint venture between the Company and Xtreme Manufacturing LLC ("Xtreme") (the
"Contemplated Transaction"), a company owned by Don Ahern of Ahern Rentals
Inc, relating to Snorkel, in October 2013.

 

·    The Snorkel investment is valued at £19.1m.  The outcome of the US
and UK Proceedings referenced below could have an impact on this valuation.

 

·    On 22 October 2019, the Company announced that it had received a
Summons and Complaint, filed in Nevada (the "US Proceedings") by subsidiaries
of Xtreme, relating to the Contemplated Transaction.

 

·    On 24 October 2019, the Company announced it had become necessary to
issue and serve a claim in the English High Court against Ward Hadaway (the
"UK Proceedings"), the solicitor acting for the Company at the time of the
Contemplated Transaction, in order to fully protect the Company's rights
pending the outcome of the US Proceedings.

 

·    On 26 February 2021, Ward Hadaway was granted permission to join
Foulston Siefkin, Tanfield's US based law firm who were retained in 2013 to
draft the documents governed by US law relating to the Contemplated
Transaction, into the UK Proceedings.  As a result, the Company amended its
claim to include Foulston Siefkin as a second defendant.

 

 

Highlights

 

·    In the final quarter of 2021, Snorkel continued to see a recovery
following the impact of the global COVID-19 pandemic with sales of US$41.0m,
compared to US$24.2m for the same period in 2020, an increase of 69.2%.

 

·    The full year sales of Snorkel in 2021 were US$155.0m, compared to
US$110.8m in 2020, an increase of 39.9%.

 

·    Both the US and UK Proceedings are continuing.  The US Proceedings
trial window is currently scheduled to begin in February 2023, with the UK
Proceedings trial set for November 2022.

 

 

Business Update

 

Tanfield is a 49% shareholder in the equity of Snorkel following the joint
venture between the Company and Xtreme, a company owned by Don Ahern of Ahern
Rentals Inc, relating to Snorkel, in October 2013.

 

Snorkel continues to recover from the impact of the global COVID-19 pandemic,
which impacted its ability to operate as normal, and has seen sales for the
fourth quarter of 2021 increase by 69.2% to US$41.0m as compared to sales in
the fourth quarter of 2020 of US$24.2m.  Sales for the full year of 2021
increased by 39.9% to US$155.0m as compared to US$110.8m in 2020.

 

Despite the increase in sales in the fourth quarter of 2021, the EBITDA loss
for the period remained consistent at US$4.3m as compared to US$4.4m in the
fourth quarter of 2020.  The Board once again note that the gross profit
margin has reduced yet further to around 1.5% for the fourth quarter of 2021,
compared to 6.6% for the fourth quarter of 2020.  Furthermore, the gross
profit margin for the full year of 2021 has reduced to 5.4%, compared to 7.2%
in 2020.  The Board are unaware of the reason for the reduction and continue
to believe that the gross profit margins generally do not appear to be in line
with the industry averages. There is currently ongoing work to investigate
this.

 

Below is a summary of the consolidated operating statements for the last 5
years:

 

 US$000's                                      2021      2020      2019     2018     2017

 Net sales                                     154,951   110,764   220,844  200,507  165,811
 Cost of goods sold                            146,651   102,783   195,437  175,684  144,828
 Gross profit                                  8,301     7,981     25,408   24,823   20,982
 Gross profit margin                           5.4%      7.2%      11.5%    12.4%    12.7%
 Selling, general, admin & currency costs      17,861    20,565    25,496   21,859   19,621

 EBITDA                                        (9,560)   (12,584)  (89)     2,964    1,361
 Depreciation & non-operating costs            2,448     2,240     2,456    3,364    2,360

 Net loss                                      (12,008)  (14,824)  (2,544)  (400)    (999)

 

 

The Board is not able to determine when the market for Snorkel's equipment
will return to previous levels.  However, it views the ongoing recovery and
increases to sales as a positive development and is not aware of any reason
why this improving trend should not continue.  The Board expects to receive
the results for the first quarter of 2022 shortly and will provide a further
update at that time.

 

 

US & UK Proceedings

 

Further to the update on 31 January 2022, there are still ongoing deficiencies
in the documents produced by Snorkel / Xtreme in the US Proceedings which
continue to cause delays.  Despite the Board's best efforts to have Snorkel /
Xtreme resolve these deficiencies, it nevertheless became necessary to move
back the US Proceedings trial window once more until after the UK Proceedings
trial in November 2022.  The US Proceeding trial window is therefore
currently scheduled to begin in February 2023.

 

On 31 January 2022, the Company announced that it had amended its claim in the
UK Proceedings to include Foulston Siefkin as a second defendant.  Following
this amendment, further pleadings have been exchanged and the claim continues
to progress towards trial in November 2022.  One of the next stages before
trial is the preparation of expert accountancy evidence which seeks to value
the Snorkel division at the time of the Contemplated Transaction.  The
Company has recently, as part of its disclosure obligations, provided the
defendants with an appraisal report of the tangible and intangible assets of
Snorkel at the time of the Contemplated Transaction, prepared in 2014 by
independent experts in the field for Xtreme, which the Board understand is the
basis for the $45.5m net fair market value that Snorkel / Xtreme declared was
contributed by Tanfield as part of the Contemplated Transaction.  The Board
therefore continues to believe that the value of the Snorkel division at the
time of the Contemplated Transaction was substantial.

 

The Board believes that a positive outcome to either or both of the US and UK
Proceedings is a reasonable expectation, and the Company will continue to
vigorously defend and advance its position in both proceedings, whilst
continuing to seek advice.

 

 

Further updates will be provided to Shareholders as and when appropriate.

 

 

 

For further information:

 

Tanfield Group
Plc
020 7220 1666

Daryn
Robinson

 

WH Ireland Limited - Nominated Advisor / Broker

James Joyce / Megan
Liddell
                020 7220 1666

 

 

 

 

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