Snorkel Investment Update

Tanfield Group PLC

20 November 2023

 

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 third quarter of 2023, Snorkel's sales increased by 20.5% to US$51.1m (Q3 2022: US$42.4m).  The EBITDA in the third quarter of 2023 improved to a US$1.0m profit (Q3 2022: US$3.1m loss).

·    Year to date sales for the first 9 months of 2023 saw an increase of 10.8% to US$145.1m (YTD 2022: US$131.0m).  Whilst the increase in sales was US$14.1m in value, the EBITDA for the first 9 months of 2023 improved to a US$2.8m profit (YTD 2022: US$10.9m loss), an improvement of some US$13.7m. 

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 third quarter of 2023, Snorkel's sales increased by 20.5% to US$51.1m, compared to US$42.4m for the third quarter of 2022.  The EBITDA for the third quarter of 2023 was a profit of US$1.0m, compared to a loss of US$3.1m in the third quarter of 2022, an improvement of US$4.1m.  This largely resulted from the ongoing improvement in the gross profit margin, which in the third quarter of 2023 was 12.9%, compared to 4.2% for the full year 2022. 

This resulted in year-to-date sales for the first 9 months of 2023 increasing to US$145.1m, compared to US$131.0m for the same period in 2022, an increase of 10.8%.  Whilst the year-to-date increase in sales was US$14.1m in value, the EBITDA for the first 9 months of 2023 was a profit of US$2.8m, compared to a loss of US$10.9m for the same period in 2022, an improvement of some US$13.7m.  This largely resulted from the ongoing improvement in the gross profit margin, which in the first 9 months of 2023 increased to 12.9%, up from 4.2% for the full year 2022. 

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.

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 towards the end of 2022.  Since the Contemplated Transaction in 2013 through to the end of 2022, Ahern Rentals was Snorkel's largest customer and therefore the Board are pleased to see that Snorkel has still been able to increase its sales in each quarter of 2023, and that overall the sales now appear to be at vastly improved gross profit margins, despite Don Ahern selling Ahern Rentals. 

Below is a summary of the consolidated financial statement for the third quarters of 2023 and 2022, along with the respective year to date totals. 

US$000's	Q3 2023	YTD 2023		Q3 2022	YTD 2022
Net sales	51,122	145,123		42,422	130,976
Cost of goods sold	(44,505)	(126,414)		(39,487)	(125,001)
Gross profit	6,617	18,709		2,935	5,975
	12.9%	12.9%		6.9%	4.6%
Selling, general & administrative costs	(5,611)	(16,450)		(4,945)	(14,814)
Foreign currency exchange gain/(loss)	(16)	567		(1,125)	(2,040)
EBITDA profit/(loss)	990	2,826		(3,135)	(10,879)
Depreciation & non-operating costs	(352)	(1,120)		(650)	(1,831)
Net profit/(loss)	638	1,706		(3,785)	(12,710)

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. 

The Company is fully focussed on the US Proceedings which are continuing and while the jury trial was previously scheduled to take place in early 2024, in part as a result of Tanfield's amended counterclaims earlier in the year, the Board now expects a new trial date to be set around the end of 2024 instead.  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                                                                          020 7220 1666

Daryn Robinson                                                                                               

WH Ireland Limited - Nominated Advisor / Broker

James Joyce / Andrew de Andrade                                          020 7220 1666

 

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