Tanfield Group PLC Snorkel Investment Update (4727O)
21 August 2017 - 4:00PM
UK Regulatory
TIDMTAN
RNS Number : 4727O
Tanfield Group PLC
21 August 2017
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 ("AWP") business.
Investment Background
-- Tanfield is a 49% shareholder in the equity of Snorkel,
following the disposal of 51% of the Snorkel business in 2013.
-- The carrying value, as set out in the Company's 2016 Report
and Financial Statements, is GBP36.3 million. This represents
approximately 23p per share.
-- The trigger event for Tanfield to request payment of the
calculated realisation of the preferred interest holding in Snorkel
is dependent upon Snorkel achieving an annualised trailing EBITDA
of $25 million in any 12 month period by 30 September 2018.
-- After 30 September 2018, should the above event not be met,
Tanfield's ability to request payment of the calculated realisation
value (which is the basis of the GBP36.3 million balance sheet
value) comes to an end, Tanfield remain a 49% shareholder but the
outcome becomes uncertain and the return could be greater or less
than the current carrying value.
Business Update
Tanfield continues to own 49% of Snorkel, which it has held
since the disposal of the business in October 2013. Sales in the
second quarter of 2017 were $44.9m, an increase of 20% in
comparison to the same period in 2016, with an operating profit,
excluding depreciation, of $1.1m. This resulted in year to date
sales for the first half of 2017 of $79.7m, an increase of 13% in
comparison to the same period in 2016, with an operating profit,
excluding depreciation, of $1.5m (2016: $1.4m loss).
As reported in the Snorkel investment update on 1 June 2017, the
focused cost down activity during 2015 and 2016 assisted in
reducing the bill of material costs. Largely as a result of this
cost down activity, the gross margin for the first half of 2017 has
improved by 40% when compared to the gross margin for the 2016 full
year. The reduction in the bill of material cost has played a
significant role in Snorkel's progression to a period of sustained
operating profitability.
Snorkel have continued to achieve improved market share in
targeted regions allowing them to create a broader and more diverse
customer base that helped them achieve the further growth during
the first half of 2017. These have included some large rental
companies which have not purchased Snorkel product for a number of
years, which is testament to the progress made and the improvements
to the product range, build quality and customer service.
As reported on 1 June 2017, Snorkel were targeting double digit
growth in 2017 from their UK manufacturing facility but, given the
extent to which the US manufacturing facility is dependent upon
Ahern Rentals as its principal customer, it was unclear whether
there would be growth in that facility in 2017. The Board has not
been provided with any information that would allow it to ascertain
the level of sales achieved by the UK and US manufacturing
facilities and therefore cannot comment further on how the global
growth is split between the two locations.
The Board is not aware of any reason why the continuing trend of
sales growth at the improved margin level should not continue for
the remainder or the year and therefore believes 2017 could be a
profitable year.
Should economic conditions materially change in the latter
stages of 2017, this may have an impact on the expected outcome.
The Board is currently of the opinion that the investment in
Snorkel will result in a return to shareholders in the future
however, at the current rate of growth it is not expected to
materialise until after 30 September 2018, when the outcome becomes
uncertain and could therefore be greater or less than the current
carrying value.
For further information:
Tanfield Group Plc
Daryn Robinson 0700 349 7489
WH Ireland Limited - Nominated Advisor
James Joyce / Alex Bond 020 7220 1666
Peterhouse Corporate Finance - Broker
Peter Greensmith / Duncan Vasey 020 7220 9797
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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