REG - Tanfield Group PLC - Snorkel Investment Update

TanfieldAnnouncement

18/05/2023 07:00

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RNS Number : 8107Z  Tanfield Group PLC  18 May 2023

18 May 2023

 

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
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 (the "UK Proceedings")
against its former solicitors acting for the Company at the time of the
Contemplated Transaction.  On 18 October 2022, the Company announced that it
had settled its claims in relation to the UK Proceedings on a no-fault basis.

 

 

Highlights

 

·    In the 2022 financial year, Snorkel's sales increased by 8.9% to
US$168.8m (2021: US$155.0m).  Despite the increase in sales, the EBITDA loss
for the 2022 year increased to US$13.8m (2021: US$9.6m).

 

·    In the first quarter of 2023, Snorkel's sales increased by 4.4% to
US$43.5m (Q1 2022: US$41.7m).  Whilst the increase in sales was a fairly
modest US$1.8m in value, the EBITDA for the first quarter of 2023 improved to
a US$0.2m profit (Q1 2022: US$3.5m loss), an improvement of some US$3.7m.

 

·    As reported in the media towards the end of 2022, Don Ahern, the
owner of the Company's 51% joint venture partner, sold the trade and assets of
Ahern Rentals, who has been Snorkel's largest customer since the Contemplated
Transaction in 2013, to United Rentals for around US$2bn.  While the trade
and assets of Ahern Rentals were sold, the Board understand that Don Ahern
retained ownership of the company Ahern Rentals Inc.

 

 

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.

 

In the 2022 financial year, Snorkel's sales increased by 8.9% to US$168.8m,
compared to US$155.0m in 2021.  Despite the increase in sales, the EBITDA
loss for the 2022 year increased to US$13.8m, compared to US$9.6m in 2021.
This was largely down to the gross profit margins becoming even lower in 2022
(4.2%) when compared to the already low gross profit margin in 2021 (5.4%).
As previously reported, the Board has believed for some time that the gross
profit margins are not in line with the industry averages and continue to try
and investigate this.

 

In the first quarter of 2023, Snorkel's sales increased by 4.4% to US$43.5m,
compared to US$41.7m for the first quarter of 2022.  Whilst the increase in
sales was a modest US$1.8m in value, the EBITDA for the first quarter of 2023
was a profit of US$0.2m, compared to a loss of US$3.5m in the first quarter of
2022, an improvement of some US$3.7m.  This resulted primarily from a marked
improvement in the gross profit margin, which in the first quarter of 2023
increased to 12.7%, up from 4.2% for the full year 2022 and up from 2.9% in
the fourth quarter of 2022.  The Board is unaware of the reason behind this
sudden improvement from one quarter to the next but hopes that its ongoing
work to try and investigate the current and historic gross profit margins may
provide some further clarification.

 

As reported in the media towards the end of 2022, Don Ahern, the owner of the
Company's 51% joint venture partner, sold the trade and assets of Ahern
Rentals to United Rentals for around US$2bn.  Since the Contemplated
Transaction in 2013, Ahern Rentals has been Snorkel's largest customer by a
long way and the Board are therefore pleased to see that despite the change of
ownership, sales have not only continued to increase in the first quarter of
2023 but it would appear that sales are now at improved gross profit
margins.

 

As shown in the summary below, Snorkel's 2022 consolidated financial statement
reported a US$31.8m related party forgiveness which resulted in the company
reporting a US$15.3m net profit for the year.  Without this entry, Snorkel
would have achieved a net loss of US$16.5m for 2022 (2021: US$12.0m).

 

Below is a summary of the consolidated financial statement for the full year
of 2022 and 2021, along with the first quarters of 2023 and 2022.

 

 US$000's                                     2022      2021          Q1 2023  Q1 2022

 Net sales                                    168,752   154,951       43,541   41,706
 Cost of goods sold                           161,677   146,651       37,990   39,993
 Gross profit                                 7,075     8,301         5,551    1,713
                                              4.2       5.4           12.7     4.1

 Selling, general & administrative costs      19,393    17,443        5,408    4,912
 Foreign currency exchange (gain)/loss        1,505     418           (92)     281

 EBITDA profit/(loss)                         (13,822)  (9,560)       235      (3,479)

 Depreciation & non-operating costs           2,725     2,448         349      543
 Related Party Forgiveness                    31,809    -             -        -

 Net profit/(loss)                            15,261    (12,008)      (113)    (4,022)

 

 

The Board views the increase in sales in both periods, and the increased gross
profit margin in the first quarter of 2023, to be a positive development and
is not aware of any reason why this improving trend should not continue.

 

As reported on 18 October 2022, the Company is now focussed on the US
Proceedings which are continuing, with a jury trial currently expected to take
place in early 2024.  The Board continue to believe that a positive outcome
to those proceedings is possible.  So far as it is necessary, the Company
will continue to vigorously defend its position 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 / Andrew de Andrade / Enzo Aliaj
020 7220 1666

 

 

 

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