REG - Tanfield Group PLC - Snorkel Investment Update

TanfieldAnnouncement

17/08/2023 07:00

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RNS Number : 5584J  Tanfield Group PLC  17 August 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.

 

 

Highlights

 

·    In the second quarter of 2023, Snorkel's sales increased by 7.7% to
US$50.5m (Q2 2022: US$46.8m).  Whilst the increase in sales was US$3.6m in
value, the EBITDA in the second quarter of 2023 improved to a US$1.6m profit
(Q2 2022: US$4.3m loss), an improvement of some US$5.9m.

 

·    Year to date sales for the first 6 months of 2023 saw an increase of
6.2% to US$94.0m (YTD 2022: US$88.6m).  Whilst the increase in sales was
US$5.4m in value, the EBITDA for the first 6 months of 2023 improved to a
US$1.8m profit (YTD 2022: US$7.7m loss), an improvement of some US$9.6m.

 

 

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 second quarter of 2023, Snorkel's sales increased by 7.7% to US$50.5m,
compared to US$46.8m for the second quarter of 2022.  Whilst the increase in
sales was US$3.6m in value, the EBITDA for the second quarter of 2023 was a
profit of US$1.6m, compared to a loss of US$4.3m in the second quarter of
2022, an improvement of some US$5.9m.  This resulted primarily from a marked
improvement in the gross profit margin, which in the second quarter of 2023
increased to 13.0%, up from 2.8% in the second quarter of 2022, and up from
4.2% for the full year 2022.

 

This resulted in year-to-date sales for the first 6 months of 2023 to increase
to US$94.0mm, compared to US$88.6m for the same period in 2022, an increase of
6.2%.  Whilst the year-to-date increase in sales was US$5.4m in value, the
EBITDA for the first six months of 2023 was a profit of US$1.8m, compared to a
loss of US$7.7m for the same period in 2022, an improvement of some US$9.6m.
This resulted primarily from a marked improvement in the gross profit margin,
which in the first 6 months of 2023 increased to 12.9%, up from 3.4% for the
same period in 2022, and up from 4.2% for the full year 2022.

 

The Board continues to be unaware of the reason behind the gross profit margin
improvement from 2022 to 2023 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.  While the trade and assets of
Ahern Rentals were sold, the Board understand that Don Ahern retained
ownership of the company Ahern Rentals Inc.  Since the Contemplated
Transaction in 2013, Ahern Rentals has been Snorkel's largest customer by far
and the Board are therefore pleased to see that despite the change of
ownership, sales have again continued to increase in the second quarter of
2023 and that sales now appear to be achieving improved gross profit
margins.

 

Below is a summary of the consolidated financial statement for the second
quarters of 2023 and 2022, along with the respective year to date totals.

 

 US$000's                                     Q2 2023  YTD 2023      Q2 2022  YTD 2022

 Net sales                                    50,459   94,001        46,848   88,554
 Cost of goods sold                           43,920   81,910        45,521   85,514
 Gross profit                                 6,540    12,091        1,327    3,040
                                              13.0%    12.9%         2.8%     3.4%

 Selling, general & administrative costs      5,430    10,839        4,957    9,869
 Foreign currency exchange (gain)/loss        491      583           (635)    (915)

 EBITDA profit/(loss)                         1,600    1,835         (4,265)  (7,744)

 Depreciation & non-operating costs           419      768           638      1,181

 Net profit/(loss)                            1,180    1,068         (4,903)  (8,925)

 

 

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

 

The Company is now focussed on the US Proceedings which are continuing, with a
jury trial currently scheduled to take place in early 2024.  However, as
reported on 24 July 2023, the Board expect the trial date will be rescheduled
to around the summer of 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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