REG - Tanfield Group PLC - Snorkel Investment Update

TanfieldAnnouncement

07/08/2024 14:00

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RNS Number : 5973Z  Tanfield Group PLC  07 August 2024

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 fourth quarter of 2023, Snorkel's sales increased by 15.4% to
US$43.6m (Q4 2022: US$37.8m).  The EBITDA in the fourth quarter of 2023 also
improved to a US$3.4m profit (Q4 2022: US$2.9m loss).

 

·    The full year sales for 2023 saw an increase of 11.8% to US$188.7m
(2022: US$168.8m).  Whilst the increase in sales was US$19.9m in value, the
EBITDA for 2023 improved to a US$6.3m profit (2022: US$13.8m loss), an
improvement of some US$20.1m.

 

 

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 fourth quarter of 2023, Snorkel's sales increased by 15.4% to US$43.6m,
compared to US$37.8m for the fourth quarter of 2022.  The EBITDA for the
fourth quarter of 2023 was a profit of US$3.4m, compared to a loss of US$2.9m
in the fourth quarter of 2022, an improvement of US$6.3m.  This largely
resulted from the ongoing improvement in the gross profit margin, which in the
fourth quarter of 2023 was 18.5%, compared to 4.2% for the full year 2022.

 

This resulted in sales for the 2023 financial year increasing to US$188.7m,
compared to US$168.8m in 2022, an increase of 11.8%.  Whilst the year-to-date
increase in sales was US$19.9m in value, the EBITDA for the 2023 was a profit
of US$6.3m, compared to a loss of US$13.8m in 2022, an improvement of some
US$20.1m.  This largely resulted from the ongoing improvement in the gross
profit margin, which in 2023 increased to 14.2%, up from 4.2% for the full
year 2022.  As the cost of goods sold in 2023 (US$162.0m) was almost the same
as in 2022 (US$161.7) the board believe this supports the assumption that the
increase in sales is a result of sales price increases, and consequently
improved product profitability, throughout 2023.

 

As previously reported, Don Ahern, the owner of the Company's 51% joint
venture partner, sold the trade and assets of Ahern Rentals for around US$2bn
at the end of 2022.  Since the Contemplated Transaction in 2013 through to
the end of 2022, Ahern Rentals was Snorkel's largest customer.  The Board are
therefore pleased that despite the sale of Ahern Rentals, Snorkel has still
been able to increase its sales, which now appear to be at vastly improved
gross profit margins, in 2023.

 

The Board is unaware of the reason behind the gross profit margin improvement,
but it continues to seek clarification and access to information that is
sufficient to fully investigate both current and historic gross profit
margins.

 

Below is a summary of the consolidated financial statement for 2023 and 2022,
along with the fourth quarters of 2023 and 2022.  As shown below, Snorkel's
2022 accounts 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,
Snorkel achieved a net loss of US$16.5m in 2022.

 

 US$000's                                     2023     2022          Q4 2023  Q4 2022

 Net sales                                    188,722  168,752       43,599   37,776
 Cost of goods sold                           161,963  161,677       35,549   36,676
 Gross profit                                 26,759   7,075         8,050    1,100
                                              14.2%    4.2%          18.5%    2.9%

 Selling, general & administrative costs      20,920   19,393        4,470    4,579
 Foreign currency exchange gain/(loss)        436      (1,505)       (131)    536

 EBITDA profit/(loss)                         6,275    (13,823)      3,449    (2,943)

 Depreciation & non-operating costs           2,054    2,725         934      894

 Profit/(loss) before forgiveness             4,221    (16,548)      2,515    (3,837)

 Related Party Forgiveness                    -        31,809        -        31,809

 Net Profit                                   4,221    15,261        2,515    27,972

 

 

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.

 

Under the terms of the joint venture, Tanfield should receive Snorkel's annual
accounts within 120 days of the 31 December year end.  The board were
informed that because of delays in the information being audited, Snorkel were
not able to provide the 2023 accounts until very recently.  Also, under the
terms of the agreement, Tanfield should receive Snorkel's quarterly accounts
within 45 days of a quarter end.  The board have requested the accounts
relating to 31 March 2024 on more than one occasion but to date no response or
reason for the ongoing delay has been provided. Once the overdue accounts are
received, an update will be provided.

 

The Company continues to be fully focussed on the US Proceedings which are
continuing.  While the jury trial is currently scheduled for a 5-week stack
beginning in March 2025, because of ongoing delays in obtaining relevant
discovery from Snorkel, and counter-defendants Ahern Rentals Inc and Xtreme,
the board expects a further delay to the trial date is likely unavoidable.

 

The Board continues to believe that a positive outcome to the proceedings is
possible.  So far as it is necessary, the Company will continue to vigorously
defend its position whilst continuing to seek appropriate advice.

 

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

 

 

 

For further information:

 

Tanfield Group
Plc
0203 829 5000

Daryn
Robinson

 

Zeus Capital Limited- Nominated Advisor / Broker

James Joyce / Andrew de Andrade
                                0203 829 5000

 

 

 

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