TIDMTAN
RNS Number : 7245A
Tanfield Group PLC
03 June 2021
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 GBP19.1m. 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 GBP250k 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 GBP1m with GBP500,000 initially being
subscribed to, and the update on 26 January 2021, in which the
Company announced that an additional GBP200,000 of the second loan
note instrument was subscribed to, the Board is pleased to announce
that an additional GBP250,000 has now been subscribed to, taking
the total subscription value to GBP950,000. 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 GBP250,000, 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 GBP100,000 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
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END
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June 03, 2021 04:34 ET (08:34 GMT)
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