REG - Tanfield Group PLC - Snorkel Investment Update

TanfieldAnnouncement

10/07/2020 07:00

RNS Number : 6023S
  
Tanfield Group PLC
  
10 July 2020
  
 

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.  
 
 
Highlights
 
·    Snorkel's sales in the fourth quarter of 2019 were US$51.3m, up 7.4% compared to the same period in 2018 (Q4 2018 US$47.8m).    
 
·    Sales for the full year of 2019 were up 10.1% to US$220.8m (2018: US$200.5m).
 
·    Despite the sales increase, EBITDA reduced from US$3.0m for the full year in 2018 to a negative US$0.1m in 2019, a reduction of US$3.1m.
 
·    As with many manufacturing businesses around the world, Snorkel has been materially impacted by the global COVID-19 pandemic and as a result, sales in the first 6 months of 2020 were only US$60.2m, a reduction of 46.4% compared to the same period in 2019 (H1 2019: US$112.5m).
 
 
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. 
 
As reported on 19 May 2020, at that time, the Company had not yet received the Snorkel management account information for either 31 December 2019 or 31 March 2020.  After further attempts by the Board to obtain the information, the Snorkel CFO informed the Board that he and all of the staff in the UK were on furlough and that this would cause a delay in providing the financial information.  
 
The Board is however, pleased to report that the overdue financial information has now been provided for the quarters ending 31 December 2019 and 31 March 2020, as well as the financial information for the quarter ending 30 June 2020.
 
Financial Information 2019
 
Snorkel's sales in the fourth quarter of 2019 were US$51.3m, up 7.4% compared to the same period in 2018 (Q4 2018 US$47.8m) with sales for the full year of 2019 up 10.1% to US$220.8m (2018: US$200.5m).  The gross profit in 2019 increased to US$25.4m compared to US$24.8m in 2018.  Despite both sales and gross profit increases, EBITDA reduced from US$3.0m in 2018 to a negative US$0.1m in 2019 as a result of selling, general, admin & currency costs increasing further to US$25.5m (2018: US$21.9m).  As reported on 22 May 2019, the Board have asked both Snorkel and Xtreme questions to ascertain the reason for the increased costs but an adequate explanation, including details of the specific increases, has not been provided.
 
Below is a summary of the quarterly consolidated operating statement for 2019, including comparative figures for the 2018 full year:
 



US$000's


Q1 2019


Q2 2019


Q3 2019


Q4 2019


YTD 2019


YTD 2018


































Net sales


51,604


60,848


57,051


51,340


220,844


200,507




Cost of goods sold


45,732


52,950


49,005


47,749


195,437


175,684




Gross profit


5,872


7,898


8,046


3,591


25,408


24,823








11.4%


13.0%


14.1%


7.0%


11.5%


12.4%




Selling, general, admin & currency costs


6,827


5,927


6,368


6,375


25,496


21,859


































EBITDA


(955)


1,971


1,678


(2,783)


(89)


2,964




Depreciation & non-operating costs


619


922


354


560


2,456


3,364


































Net loss


(1,574)


1,049


1,324


(3,343)


(2,544)


(400)



 
 
For reference, below is a summary of the consolidated operating statement for the last 4 years:
 



US$000's


2019


2018


2017


2016


























Net sales


220,844


200,507


165,811


130,490




Cost of goods sold


195,437


175,684


144,828


118,087




Gross profit


25,408


24,823


20,982


12,403








11.5%


12.4%


12.7%


9.5%




Selling, general, admin & currency costs


25,496


21,859


19,621


14,511


























EBITDA


(89)


2,964


1,361


(2,107)




Depreciation & non-operating costs


2,456


3,364


2,360


2,777


























Net loss


(2,544)


(400)


(999)


(4,885)



 
 
Financial Information 2020
 
As with many manufacturing businesses around the world, Snorkel has been significantly impacted by the global COVID-19 pandemic and many of its manufacturing locations have been closed for substantial periods in order to protect both the workforce as well as other stakeholders and to comply globally with a number of stay at home orders.  
 
Consequently, the first 6 months of 2020 have been materially impacted and sales were only US$60.2m, down 46.4% compared to the same period in 2019 (H1 2019: US$112.5m).  The increasing impact of the pandemic is further evident when comparing the first and second quarter of 2020 with the corresponding quarters in 2019 which saw the first quarter sales reduced by 15.9% to US$43.4m (Q1 2019: US$51.6m) whereas the second quarter sales reduced by 72.4% to only US$16.8m (Q2 2019: US$60.8m).
 
Below is a summary of the quarterly consolidated operating statement for 2020, including comparative figures for the 2019 year to date:
 



US$000's


Q1 2020


Q2 2020


YTD 2020


YTD 2019


























Net sales


43,423


16,818


60,242


112,452




Cost of goods sold


39,746


16,852


56,598


98,682




Gross profit


3,677


(34)


3,643


13,770








8.5%


-0.2%


6.0%


12.2%




Selling, general, admin & currency costs


5,637


4,219


9,856


12,754


























EBITDA


(1,960)


(4,252)


(6,212)


1,016




Depreciation & non-operating costs


584


522


1,107


1,541


























Net profit/(loss)


(2,544)


(4,775)


(7,319)


(525)



 
 
The Board is not able to determine how long COVID-19 will continue to impact Snorkel or when the market for Snorkel's equipment will regain momentum.  The Board understand that Snorkel are working towards a phased opening of the UK facility in either July or August, the US facilities are currently operating at a fraction of the usual operating levels and the New Zealand facility, while previously ordered to close, recently restarted operations with plans to gradually return to some form of normality.
 
As outlined in the update on 19 May 2020, both the US Proceedings and the UK Proceedings are continuing to progress, with the Board continuing to seek advice, and 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 / Lydia Zychowska                                                 020 7220 1666


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