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 £36.3 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 £36.3 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