(Alliance News) - Tanfield Group PLC on Thursday said its loss multiplied in 2018 due to a substantial impairment on its investment in Snorkel International Holdings LLC.
Tanfield's pretax loss for 2018 was GBP17.4 million, widened substantially from GBP148,000 in 2017, with no revenue recorded in either 2018 or 2017.
The passive investor holds a 49% stake in Snorkel, its joint venture with Xtreme Manufacturing LLC. At the end of September 2018, the fixed terms of an agreement between Tanfield and Xtreme came to an end and Xtreme's put option for Tanfield's stake expired.
However, Tanfield can no longer compel Xtreme to acquire Tanfield's 49% interest, which is valued at GBP19.1 million, down from GBP36.3 million in 2017. Nonetheless, Tanfield believes this GBP19.1 million figure is the minimum payment required under contract terms for the interest.
Tanfield's Snorkel holding is being held as a non-current investment at fair value. As this has fallen to GBP19.1 million from GBP36.3 million, the result was a GBP17.2 million cumulative impairment provision against the Snorkel investment for 2018, with no such impairment in 2017.
The Snorkel impairment makes up substantially all of Tanfield's loss. Tanfield's loss from operations before impairments increased 32% to GBP195,000 from GBP148,000.
"The board continues to hold the view that Don Ahern, the owner of Xtreme, would wish to one day own 100% of Snorkel and will therefore seek to acquire Tanfield's interest in Snorkel at some point in the future. One possible outcome is that Tanfield continues to hold its 49% interest for the foreseeable future; however, the board do not believe such a scenario would be in the best interest of shareholders and are considering options that may assist in moving from this position," said Tanfield.
"The board is unable to determine whether the actual outcome will be less than the current valuation of GBP19.1 million, which it believes is underpinned by the value of the preferred interest, so feel the valuation of GBP19.1 million should be maintained. This valuation has been assessed against various criteria, including past performance, production capacity, market conditions, the capability of the business to increase output and exchange rate fluctuations," the company added.
Snorkel, which makes and distributes industrial aerial work platforms, recorded an operating profit, excluding depreciation, of USD2.9 million in 2018, up from USD1.6 million in 2017, on sales of USD200.5 million, up from USD165.8 million.
Shares in Tanfield were down 6.3% at 5.25 pence on Thursday afternoon in London.
Tanfield (TAN)