Tanfield Group PLC Snorkel Investment Update (8808W)
20 November 2017 - 6:00PM
UK Regulatory
TIDMTAN
RNS Number : 8808W
Tanfield Group PLC
20 November 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 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 51% of its stake in the business in October
2013. Sales in the third quarter of 2017 were $44.3m, an increase
of 32% 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 9 months to September 2017 of $124.1m, an
increase of 19% in comparison to the same period in 2016, with an
operating profit, excluding depreciation, of $2.6m (2016: $1m
loss).
As reported in the Snorkel investment update on 21 August 2017,
the focused cost down activity assisted in reducing the bill of
material costs, resulting in increased gross margin levels, which
has continued in to the third quarter of 2017. As evidenced by the
growth in sales in both the third quarter of 2017 and the year to
date, Snorkel continues to improve its market share in targeted
regions and has had success selling to some large rental companies
which have not purchased Snorkel products for a number of
years.
As reported on 21 August 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 at that stage whether there would be growth in that
facility in 2017. While the Board has not been provided with any
information that would allow it to ascertain the level of exact
sales achieved by the US manufacturing facility, based on the
overall growth in sales, the Board is of the opinion that the US
manufacturing facility has likely achieved double digit growth so
far this year.
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. Therefore, should this trend continue,
the Board estimates sales for 2017 will be around $150m to $160m
and believes that 2017 will be a profitable year.
Should economic conditions materially change in the final
quarter 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, the Board continues to
believe that it will likely not 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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