REG - Tanfield Group PLC - Snorkel Investment Update

TanfieldAnnouncement

26/05/2022 11:45

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RNS Number : 9486M  Tanfield Group PLC  26 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 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 first quarter of 2022, Snorkel continued to see a recovery
following the impact of the global COVID-19 pandemic with sales of US$41.7m,
compared to US$31.4m for the same period in 2021, an increase of 32.7%.

 

·    Despite a 32.7% increase in sales, the EBITDA loss for the first
quarter of 2022 increased to US$3.5m, compared to US$2.6m for the same period
in 2021, largely as a result of the gross profit margin dropping yet further
to 4.1%.

 

 

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
first quarter of 2022 increase by 32.7% to US$41.7m as compared to sales in
the first quarter of 2021 of US$31.4m.

 

Despite the increase in sales in the first quarter of 2022, the EBITDA loss
for the period increased to US$3.5m as compared to US$2.6m in the first
quarter of 2021.  The Board once again note that the gross profit margin has
reduced to around 4.1% for the first quarter of 2022, compared to 6.4% for the
first quarter of 2021.  The Board is unaware of the reason for the reduction
and continues to believe that the gross profit margins achieved generally do
not appear to be in line with the industry averages. There is currently
ongoing work to investigate this but due to the deficiencies in the documents
produced by Snorkel / Xtreme in relation to the US Proceedings, as reported on
10 May 2022, this continues to cause delays.

 

Below is a summary of the quarterly consolidated operating statement for the
first quarter 2022, including comparative figures for the previous 5 years:

 

 US$000's                                Q1 2022  Q1 2021  Q1 2020  Q1 2019  Q1 2018  Q1 2017

 Net sales                               41,706   31,431   43,423   51,604   44,535   34,878
 Cost of goods sold                      39,993   29,407   39,746   45,732   38,924   30,097
 Gross profit                            1,713    2,024    3,677    5,872    5,611    4,781
 Gross profit margin                     4.1%     6.4%     8.5%     11.4%    12.6%    13.7%
 Selling, general, admin &               5,192    4,655    5,637    6,827    6,269    4,403

    currency costs

 EBITDA                                  (3,479)  (2,631)  (1,960)  (955)    (658)    378
 Depreciation & non-operating costs      543      567      584      619      641      688

 Net loss                                (4,022)  (3,198)  (2,544)  (1,574)  (1,299)  (310)

 

 

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
increase to sales as a positive development and is not aware of any reason why
this improving trend should not continue.

 

As reported on 10 May 2022, the US Proceedings and UK Proceedings are
continuing, and the Board still believes that a positive outcome to either or
both proceedings is possible.  So far as it is necessary, 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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