Last checked at 26 May 2022 11:44
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.
· On 26 February 2021, Ward Hadaway was granted permission to join Foulston Siefkin, Tanfield's US based law firm who were retained in 2013 to draft the documents governed by US law relating to the Contemplated Transaction, into the UK Proceedings. As a result, the Company amended its claim to include Foulston Siefkin as a second defendant.
Highlights
· In the first quarter of 2022, Snorkel continued to see a recovery following the impact of the global COVID-19 pandemic with sales of US$41.7m, compared to US$31.4m for the same period in 2021, an increase of 32.7%.
· Despite a 32.7% increase in sales, the EBITDA loss for the first quarter of 2022 increased to US$3.5m, compared to US$2.6m for the same period in 2021, largely as a result of the gross profit margin dropping yet further to 4.1%.
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.
Snorkel continues to recover from the impact of the global COVID-19 pandemic, which impacted its ability to operate as normal, and has seen sales for the first quarter of 2022 increase by 32.7% to US$41.7m as compared to sales in the first quarter of 2021 of US$31.4m.
Despite the increase in sales in the first quarter of 2022, the EBITDA loss for the period increased to US$3.5m as compared to US$2.6m in the first quarter of 2021. The Board once again note that the gross profit margin has reduced to around 4.1% for the first quarter of 2022, compared to 6.4% for the first quarter of 2021. The Board is unaware of the reason for the reduction and continues to believe that the gross profit margins achieved generally do not appear to be in line with the industry averages. There is currently ongoing work to investigate this but due to the deficiencies in the documents produced by Snorkel / Xtreme in relation to the US Proceedings, as reported on 10 May 2022, this continues to cause delays.
Below is a summary of the quarterly consolidated operating statement for the first quarter 2022, including comparative figures for the previous 5 years:
| US$000's | Q1 2022 | Q1 2021 | Q1 2020 | Q1 2019 | Q1 2018 | Q1 2017 |
| Net sales | 41,706 | 31,431 | 43,423 | 51,604 | 44,535 | 34,878 |
| Cost of goods sold | 39,993 | 29,407 | 39,746 | 45,732 | 38,924 | 30,097 |
| Gross profit | 1,713 | 2,024 | 3,677 | 5,872 | 5,611 | 4,781 |
| Gross profit margin | 4.1% | 6.4% | 8.5% | 11.4% | 12.6% | 13.7% |
| Selling, general, admin & currency costs | 5,192 | 4,655 | 5,637 | 6,827 | 6,269 | 4,403 |
| EBITDA | (3,479) | (2,631) | (1,960) | (955) | (658) | 378 |
| Depreciation & non-operating costs | 543 | 567 | 584 | 619 | 641 | 688 |
| Net loss | (4,022) | (3,198) | (2,544) | (1,574) | (1,299) | (310) |
The Board is not able to determine when the market for Snorkel's equipment will return to previous levels. However, it views the ongoing recovery and increase to sales as a positive development and is not aware of any reason why this improving trend should not continue.
As reported on 10 May 2022, the US Proceedings and UK Proceedings are continuing, and the Board still believes that a positive outcome to either or both proceedings is possible. So far as it is necessary, the Company will continue to vigorously defend and advance its position in both proceedings, whilst continuing to seek 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 / Megan Liddell 020 7220 1666