Snorkel Investment Update

RNS Number : 9127Y

Tanfield Group PLC

18 May 2021

 

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 have breached their contractual obligation to provide the Company with its year end accounts within 120 days of the year end. 

· Snorkel have instead provided the accounts for the first quarter of 2021 but caveat that they may be subject to adjustment once the 2020 year end accounts are completed.  However, it is not expected that the underlying trading performance should be impacted by any adjustments.

· Snorkel continue to be impacted by the global COVID-19 pandemic which has resulted in sales for the first quarter of 2021 being US$31.4m, compared to US$43.4m for the same period in 2020, a reduction of 27.6%.

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 .  

Under the terms of the agreements entered in to in October 2013, Snorkel has a contractual obligation to provide the Company with its year end accounts within 120 days of the year end.  Unfortunately, Snorkel have not provided this information to date and are therefore in breach of the agreement.  The Board are informed by Snorkel that as soon as their audit is completed, the year end accounts will be provided, and that they expect this to happen in early June 2021.  Consequently, the Board do not intend to take action at this time as a result of the breach but will keep the matter under review and, once the year end accounts are received, a further update will be provided.

Snorkel continues to be affected by the global COVID-19 pandemic, which has impacted its ability to operate as normal, but the Board is pleased to report that there are indications that the impact of the pandemic is reducing.  

Sales in the first quarter of 2021 reduced by 27.6% to US$31.4m, compared to US$43.4m for the same period in 2020.  This compares to a reduction of 72.4% in the second quarter of 2020, at the peak of the pandemic, compared to the same period in 2019.   

Despite gross profit margins increasing from 6.0% for the first six months of 2020 to 10.4% for the third quarter of 2020, only slightly lower than the full year 2019 margins of 11.5%, the reported gross profit margin for the first quarter of 2021 has reduced back down to 6.4% which, on sales of US$31.4m, amounts to only US$2.0m.  The Board is unaware of the reason for this reduction and steps to investigate this, and the underlying gross profit margins generally, are being considered as the margins do not appear to be in line with industry averages. 

Below is a summary of the quarterly consolidated operating statement for the first quarter 2021, including comparative figures for the 2020:

US$000's			Q1 2021		Q1 2020
Net sales			31,431		43,423
Cost of goods sold			29,407		39,746
Gross profit			2,024		3,677
			6.4%		8.5%
Selling, general, admin & currency costs			4,655		5,637
EBITDA			(2,631)		(1,960)
Depreciation & non-operating costs			567		584
Net profit/(loss)			(3,198)		(2,544)

The Board is not able to determine when the market for Snorkel's equipment will return to previous levels.  However, it views the reduced impact of COVID-19 in the first quarter of 2021 as a positive development and is not aware of any reason why this improving trend should not continue. The Board therefore anticipates improved results for the remainder of 2021, compared to the same periods in 2020.  

The US Proceedings and UK Proceedings are continuing and a further update will be provided 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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