Snorkel Investment Update

RNS Number : 8628G

Tanfield Group PLC

01 June 2017

 

Tanfield Group Plc

('Tanfield' or 'the Company')

Snorkel Investment Update

The Board of Tanfield is pleased to update the market on its investment in Snorkel International Holdings LLC ('Snorkel'), the aerial work platform ('AWP') business.

Investment Background

·     Tanfield is a 49% shareholder in the equity of Snorkel, following the disposal of 51% of the Snorkel business in 2013.

·     The carrying value, as set out in the Company's interim accounts, is £36.3 million. This represents approximately 23.2p per share.

·     The trigger event for the calculated realisation of the preferred interest holding in Snorkel is dependent upon Snorkel achieving an annualised trailing EBITDA of $25 million in any 12 month period by 30 September 2018.

·     After 30 September 2018, should the above event not be met, the calculated realisation value (which is the basis of the £36.3 million balance sheet value) comes to an end, Tanfield remain a 49% shareholder but the outcome then becomes uncertain and the return could be more or could be less than the calculated realisation value.

Business Update

Tanfield continues to own 49% of Snorkel, which it has held since the disposal of the business in October 2013.  Sales levels have continued to grow during 2016 and sales for the year have increased by 19% to $130.5m (2015: $109.9m / 2014: $85.3m). Despite market conditions continuing to be challenging, Snorkel have been able to achieve improved market share in targeted regions allowing them to also create a broader and more diverse customer base.  This is expected to help to underpin further growth that is expected for 2017, including some large rental companies who have not purchased Snorkel product for a number of years.  This is testament to the progress Snorkel have made in recent years and the improvements to the product range, build quality and customer service.

The Snorkel 2016 year end accounts report an operating loss, excluding depreciation, of $2.8m (2015: $10.6m / 2014: $14.9m) with $1.9m of this loss being incurred in the first quarter of the year and the business operationally breaking even during some of the later periods.  The significantly reduced operating loss is partially linked to the increased sales levels but is mainly as a result of the focused cost down activity that has taken place during 2015 and 2016 coming to fruition, thereby reducing the bill of material costs and lowering the break-even sales point. 

Despite the challenging trading conditions, the Board understands Snorkel are again targeting double digit growth in 2017 from their UK manufacturing facility which mainly provides product to the European marketplace.  Given the extent to which the US manufacturing facility is dependent upon Ahern Rentals as its principal customer, Tanfield are unsure at this point whether there will be growth in that facility in 2017.  That said, as a result of the success of the cost down activity and the double digit European growth expectation, the Board believe Snorkel could still achieve combined growth, as evidenced in the March 2017 quarterly accounts, and are expecting to be profitable for the 2017 year.

Should economic conditions materially change in the latter stages of 2017, this may have an impact on the expected outcome but the Tanfield Board is currently of the opinion that the investment in Snorkel will result in a return to shareholders in the future and it should be noted that, this may not materialise until after 30 September 2018 when the outcome then becomes uncertain and could be more or could be less than the calculated realisation value.

For further information:

Tanfield Group Plc

Daryn Robinson                                                                                                0700 349 7489

WH Ireland Limited - Nominated Advisor

James Joyce / Nick Prowting                                                                      020 7220 1666

Peterhouse Corporate Finance - Broker

Peter Greensmith / Duncan Vasey                                                          020 7220 9797

 

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