Tanfield Group Plc

('Tanfield' or 'the Company')

Snorkel Investment Update

The Board of Tanfield is pleased to update the market on its investment in Snorkel International Holdings LLC ('Snorkel'), the powered access 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 of its 49% holding and its preferred interest holding (Loan note) is $60.1 million as set out in the Company's interim accounts which, based on today's exchange rate, is around £39.8 million.  This represents approximately 26p per share.

·     The trigger event for the initial realisation of the Snorkel investment occurs when the company has achieved an annualised trailing EBITDA of $25 million dollars in any 12 month period by  30 September 2018.

Business Update

Based on information provided by Snorkel, Tanfield estimates Snorkel  should achieve sales of approximately $120 million in 2015. This would be approximately 30% higher than sales in 2014 as the business continues to progress year on year and it is expected that on this level of sales the business will make a smaller operating loss for the year compared to prior years. 

The significant growth in the sales of the business has been helped by the introduction of several new products earlier in the year which increased the range of products available to meet the needs of the customers.  In order to support increased demand and to assist  future growth aspirations, there has also been an increase in the global engineering, sales and customer service teams.  In addition to this, Ahern has made a substantial investment in setting up a sales and distribution centre in Germany. This centre will bolster the German and mainland European sales presence. It will also ensure that the product support and customer service levels continue to be maintained at high levels throughout Europe.  These combined factors are expected to significantly increase the future sales opportunities at a reduced cost to the business. 

While sales levels have been increasing, cost down activity has continued across the business. This includes redesigning the product range to improve both end user performance and the manufacturing process. Operating costs have been reduced through the integration of the Japanese and Australian distribution centres to Ahern Rentals earlier in 2015 and a reduction in the fixed cost base of the business has been achieved by centralising functions in a newly established Las Vegas facility.

The supply chain has been consolidated and improved to ensure adequate material stock levels are held for both production and product support to allow the business to provide high levels of customer service.  The business maintains a good level of finished stock that allows it to react to customer needs and provide products with minimal lead times.

Significant progress continues to be made in both increasing sales levels and reducing costs and if this trend continues, the Tanfield board would expect Snorkel should achieve and sustain an operating profit in the year ending 31 December 2016 and beyond. It also recognises that the continued improvements are positive and reassuring and that should they continue as expected, the investment in Snorkel is well positioned to achieve a return to shareholders in the future. 

For further information:

Tanfield Group Plc

Daryn Robinson                                                                               020 7220 1666

WH Ireland Limited - Nominated Advisor

James Joyce / Nick Prowting                                                      020 7220 1666

Peterhouse Corporate Finance - Broker

Peter Greensmith / Duncan Vasey                                           020 7220 9797