TIDMTAN
RNS Number : 1310T
Tanfield Group PLC
12 November 2019
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 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 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.
-- The Snorkel investment is valued at GBP19.1m. The outcome of
the US Litigation referenced below could have an impact on this
valuation.
-- In November 2018 the Company announced it had received a call
option notice over its interest in Snorkel which the Board rejected
as being invalid. On 22 October 2019, the Company announced that it
had received a Summons and Complaint, filed in Nevada (the "US
Litigation"), relating to the purported call option notice.
-- 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 solicitor acting for the Company in 2013,
in order to fully protect the Company's rights pending the outcome
of the US Litigation. Those proceedings seek to ensure that the
Company can, if necessary, hold Ward Hadaway to account for the
firm's role in and/or advice to Tanfield in relation to the
Contemplated Transaction.
-- Snorkel's sales for the 9 months to 30 September 2019 were
US$169.5m, an increase of 11% compared to the same period in 2018
when sales were US$152.7m.
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.
Snorkel has provided the latest management account information
for the business. Snorkel's sales for the first 9 months of 2019
were US$169.5m (2018: US$152.7m), an increase of 11% compared to
the same period in 2018. The gross profit for the 9-month period
increased by US$2.3m to US$21.8m (12.9% margin) compared to
US$19.5m (12.8% margin) for the same period in 2018. Selling,
general & administrative costs for the 9-month period increased
significantly to US$19.1m, compared to only US$16.6m for the same
period in 2018, an increase of US$2.5m (15%). As reported on 22 May
2019, the Board have asked both Snorkel and Xtreme questions to
ascertain the reason for the increase but their response provided
no useful analysis, other than to say the increased costs are
likely to continue.
Despite the increase in sales and gross profit, as a result of
the significant increase in selling, general and administrative
costs, the EBITDA for the 9-month period fell slightly to US$2.7m
from US$2.8m for the same period in 2018. Depreciation and other
non-operating costs for the 9-month period were US$1.9m (2018:
US$2.2m) resulting in a net profit for the 9-month period of
US$0.8m (2018: US$0.7m).
The Board has not been made aware of any reason why the sales
trend should not continue in the final quarter of 2019 and would
therefore expect sales for the full 2019 year to be in the region
of US$220m (2018: US$200.5m). The Board is unable to give an
opinion on the EBITDA or net profitability.
Below is a summary of the consolidated operating statement for
the first three quarters of 2019, as well as the year to date
figures for 2019 and 2018:
US$000's Q1 2019 Q2 2019 Q3 2019 YTD 2019 YTD 2018
Net sales 51,604 60,848 57,051 169,503 152,708
Cost of goods sold 45,732 52,950 49,005 147,687 133,218
Gross profit 5,872 7,898 8,046 21,816 19,490
-------- -------- -------- ----------- ---------
11.4% 13.0% 14.1% 12.9% 12.8%
Selling, general & administrative
costs 6,599 6,119 6,369 19,087 16,618
Foreign currency exchange
(gain)/loss 228 (192) (1) 35 38
EBITDA profit/(loss) (955) 1,971 1,678 2,694 2,834
Depreciation & non-operating
costs 619 922 354 1,895 2,166
Net profit/(loss) (1,574) 1,049 1,324 799 668
-------- -------- -------- ----------- ---------
The Snorkel investment is valued at GBP19.1m based on the
Board's understanding of the terms of the agreements and the intent
of the parties. As a requirement of the AIM rules, as well as a
requirement of the agreements, the terms of the Contemplated
Transaction required approval by Tanfield's shareholders before the
agreements could be entered into. Therefore, the terms of the
agreement and the intent of the parties were summarised within the
Circular dated 20 September 2013, which were put to shareholders
and approved at the General Meeting held on 7 October 2013. The
outcome of the US Litigation could have an impact on this
valuation.
On 22 October 2019, the Company announced that it had received a
Summons and Complaint in relation to the US Litigation, regarding
the purported call option notice announced by the Company in
November 2018. As reported, despite the Board seeking to resolve
the dispute amicably, Snorkel and Xtreme, by filing the Summons and
Complaint, continue in their attempt to take ownership of
Tanfield's 49% investment in Snorkel for an overall nil
consideration, having not paid any consideration to Tanfield for
Xtreme's initial 51% of the joint venture and purporting that no
consideration is due to Tanfield before it can compel the Company
to transfer its remaining 49% investment to Snorkel / Xtreme. The
Company is preparing to vigorously defend its position and
continues to seek advice, including considering whether to bring
counterclaims against Snorkel and Xtreme.
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 solicitor acting for the Company in 2013,
in order to fully protect the Company's rights pending the outcome
of the US Litigation. Those proceedings seek to ensure that the
Company can, if necessary, hold Ward Hadaway to account for the
firm's role in and/or advice to Tanfield in relation to the
Contemplated Transaction (given that the Company was unable to
agree a suitable Standstill Agreement with Ward Hadaway which would
have protected the Company and avoided the need for the claim to be
brought at this time). The Company has recently served its
Particulars of Claim on Ward Hadaway (through its solicitors) as
part of the natural progression of the claim. As previously
reported though, it remains the intention of the Board to seek a
stay of the claim, pending the outcome of the US Litigation, as the
outcome of that litigation will have a direct and material impact
on the Company's claim, including the quantum of the claim. To
date, it has not been possible to agree an amicable stay of
proceedings with Ward Hadaway. Should the Company continue to be
unsuccessful in its attempts to agree a stay, it is the intention
of the Board, at an appropriate time, to apply to the court for a
stay of proceedings pending the outcome of the US Litigation.
The Board will provide further updates 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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