Snorkel Investment Update

RNS Number : 3664J

Tanfield Group PLC

16 August 2019

 

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 Tanfield Group Plc and Xtreme Manufacturing LLC, a company owned by Don Ahern of Ahern Rentals Inc ("Ahern"), relating to Snorkel, in October 2013.

·    As reported in the 2018 Interim Results, the Board impaired the Snorkel investment value from £36.3m to £19.1m.

·    Snorkel's growth trend continues with sales in the second quarter of 2019 increasing by around 18% to US$60.8m (Q2 2018: US$51.8m). 

·    In November 2018 the Company announced it had received a call option notice over its interest in Snorkel which the Board rejected as being invalid.  This continues to be the position and discussions are ongoing.

Business Update

Tanfield is a 49% shareholder in the equity of Snorkel following the joint venture between Tanfield Group Plc and Xtreme Manufacturing LLC ("Xtreme"), a Company owned by Don Ahern of Ahern Rentals Inc ("Ahern"), relating to Snorkel, in October 2013. 

Snorkel has provided the latest management account information for the business.  Snorkel's sales in the second quarter of 2019 were US$60.8m (Q2 2018: US$51.8m), an increase of 18% in comparison to the same period in 2018.  The gross profit margin for the period saw an increase to 13% compared to the average in 2018 of 12.4%.  Following the Q1 2019 results, where the gross profit margin reduced to 11.4%, the Board were informed by Snorkel that it was likely the reduced margin would continue.  The Board is therefore happy to see that this does not appear to be the case and welcomes the increased margin this quarter.  However, due to this volatility the Board is unable to provide an opinion at this juncture on the gross profit margin expectation for the remainder of 2019.  Selling, general & administrative costs for the quarter have reduced slightly to US$6.1m compared to US$6.6m in the first quarter of 2019.  This is still however, an increase of 17% when compared to the average quarterly costs in H2 2018 which were US$5.2m.  The operating loss, excluding depreciation, was US$1.8m (Q2 2018: US$1.0m).

The combined results for the first half of 2019 shows sales of US$112.5m (2018: US$96.3m), an increase of around 17% with an average gross profit margin of 12.2% (2018: 12.7%).  Selling, general and administrative costs increased to US$12.7m (2018: US$11.5m).  The operating loss, excluding depreciation dropped to US$1.1m (2018: US$1.5m) despite the 17% sales increase due to the reduced gross profit margin and increased to selling, general and administrative costs.

The Board is of the opinion that growth in sales may continue in 2019 but it is unable to give an opinion on operating profitability.

Below is a summary of the consolidated operating statement for the second quarter of 2019, as well as the second quarter of 2018, along with the half year figures for 2018 and 2019:

US$000's	Q2 2019	H1 2019	Q2 2018	Q1 2018
Net sales	60,848	112,452	51,766	96,302
Cost of goods sold	52,950	98,682	45,109	84,033
Gross profit	7,897	13,770	6,658	12,269
	13.0%	12.2%	12.9%	12.7%
Selling, general & administrative costs	6,119	12,718	5,609	11,458
Operating profit/(loss) excl depreciation	1,779	1,052	1,049	811
Depreciation & non-operating costs	730	1,577	453	1,515
Net profit/(loss)	1,049	(525)	596	(704)

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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