Last checked at 3 Jun 2021 09:34
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 & Loan Subscription 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, and additional loan funding.
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.
· On 22 October 2019, the Company announced that it had received a Summons and Complaint, filed in Nevada by subsidiaries of Xtreme, relating to the Contemplated Transaction (the "US Proceedings").
· 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.
· The Snorkel investment is valued at £19.1m. The outcome of the US and UK Proceedings could have an impact on this valuation.
Highlights
· Following the update on 18 May 2021, in which the Company announced that Snorkel had breached its contractual obligation to provide the year end accounts within 120 days of the year end, Snorkel have now provided the Company with its 2020 year end accounts.
· In the final quarter of 2020, Snorkel continued to be impacted by the global Covid-19 pandemic which has resulted in sales for the final quarter of 2020 being US$24.2m, compared to US$51.3m for the same period in 2019, a reduction of 52.8%.
· As a result of the global Covid-19 pandemic during 2020, Snorkel's full year sales were US$110.8m, compared to US$220.8mm in 2019, a reduction of 49.8%.
· An additional £250k from the second loan note instrument has been subscribed to by existing shareholders.
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.
Following the update on 18 May 2021, in which the Company announced that Snorkel had breached its contractual obligation to provide the year end accounts within 120 days of the year end, the Company is pleased to announce that Snorkel have now provided the Company with its 2020 year end accounts.
As expected, Snorkel continued to be affected by the ongoing global Covid-19 pandemic, which has impacted its ability to operate as normal, resulting in sales for the final quarter of 2020 being US$24.2m, compared to US$51.3m for the same period in 2019, a reduction of 52.8%. 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 fourth quarter of 2020 reduced back down to only 6.6%.
As reported on 18 May 2021, the results for the first quarter of 2021 also saw a similar gross profit margin of only 6.4%, with the Board unaware of the reason for the reduction and noting that the margins do not appear to be in line with similar companies within the industry. Following careful consideration, the Board have recently made a formal request, on behalf of Tanfield, to inspect Snorkel's books and records for the first quarter of 2021, as is the Company's contractual right under the terms of the agreement. The Board hopes to be granted access and to complete its inspection during the summer and will provide further updates as appropriate.
Sales for the full year of 2020 were US$110.8m, a reduction of 49.8% when compared to sales of $220.8m in 2019.
Below is a summary of the consolidated operating statement for the last 5 years:
US$000's | 2020 | 2019 | 2018 | 2017 | 2016 |
|
|
|
|
|
|
Net sales | 110,764 | 220,844 | 200,507 | 165,811 | 130,490 |
Cost of goods sold | 102,783 | 195,437 | 175,684 | 144,828 | 118,087 |
Gross profit | 7,981 | 25,408 | 24,823 | 20,982 | 12,403 |
| 7.2% | 11.5% | 12.4% | 12.7% | 9.5% |
Selling, general, admin & currency costs | 20,565 | 25,496 | 21,859 | 19,621 | 14,511 |
|
|
|
|
|
|
EBITDA | (12,584) | (89) | 2,964 | 1,361 | (2,107) |
Depreciation & non-operating costs | 2,240 | 2,456 | 3,364 | 2,360 | 2,777 |
|
|
|
|
|
|
Net loss | (14,824) | (2,544) | (400) | (999) | (4,885) |
The Board is not able to determine when the market for Snorkel's equipment will return to previous levels. However, as reported on 18 May 2021, 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 in 2021 when compared to 2020.
Loan Subscription
Further to the update on 30 July 2020, in which the Company announced that it had put in place a second loan note instrument (the "Loan") of up to £1m with £500,000 initially being subscribed to, and the update on 26 January 2021, in which the Company announced that an additional £200,000 of the second loan note instrument was subscribed to, the Board is pleased to announce that an additional £250,000 has now been subscribed to, taking the total subscription value to £950,000. The additional Loan will be used for the purpose of providing the necessary funding for the ongoing US and UK Proceedings and other day to day costs.
The additional Loan is unsecured, carries annual interest of 10% which is to accrue and is repayable on the earlier of (i) 28 February 2025 or (ii) receipt of sufficient funds relating to either the US or UK Proceedings. Should repayment take place prior to 28 February 2025, a 20% early redemption premium shall apply.
A number of existing shareholders have subscribed to the additional Loan of £250,000, which constitutes a related party transaction under Rule 13 of the AIM Rules as a result of OTK Holding A/S and Zoar Invest Aps, which each hold approximately 14% of the issued shares of the Company, subscribing £100,000 each to the Loan. The Directors of the Company, having consulted with WH Ireland Limited, the Company's nominated adviser, consider the terms of the transaction to be fair and reasonable in so far as shareholders are concerned.
Following discussions with the existing shareholders, the Board are of the opinion that further loan funding will take place, if necessary, to ensure the Company can continue to protect its investment in Snorkel.
The Board remain hopeful that a positive outcome to either/both the US Proceedings and UK Proceedings is possible and, 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 / Lydia Zychowska 020 7220 1666