Tanfield Group PLC Snorkel Investment Update (7865E)
October 22 2018 - 8:44AM
UK Regulatory
TIDMTAN
RNS Number : 7865E
Tanfield Group PLC
22 October 2018
Tanfield Group Plc
("Tanfield" or the "Company")
Snorkel Investment Update
The Board of Tanfield (the "Board") provides the following
update to the market relating to its investment in Snorkel
International Holdings LLC ("Snorkel"), the aerial work platform
business.
Investment Update
The Board of Tanfield has recently become aware that on 9
October 2018 KHL Access International published an interview with
Don Ahern, owner of Ahern Rentals and Xtreme Manufacturing, and
Matthew Elvin, CEO of Snorkel and Xtreme Manufacturing. In the
article, opinions are expressed in relation to past, present and
future market conditions as well as comments surrounding strategic
decisions that have been made by Don Ahern which the Board believe
could have a positive impact on the future trading of Snorkel. The
full interview can be found on the KHL website at the following
address
https://www.khl.com/access-international/interview-don-ahern/135227.article.
In the interview, Don Ahern was asked if Ahern's majority
acquisition of Snorkel in 2013 has become everything he expected it
to be. "Almost", he replied, "We are very pleased with it. We have
taken a company that was distressed and was barely operating and
was probably within a very short time of not operating. You could
call it ground zero, and now we are annualising around $300
million." While the Board take great comfort that the Don Ahern,
owner of Xtreme Manufacturing, is very pleased with the progress of
Snorkel, and that it has almost become everything he expected it to
be, the statement "and now we are annualising around $300 million"
differs to an opinion recently expressed by the Board.
As reported in the Snorkel Investment Update on 6 September
2018, the Board commented that it believes sales in 2018 could be
in excess of $200m if the trend of sales growth continues for the
second half of 2018. Snorkel have stated to the Board that the
statement "now we are annualising around $300 million" is not
accurate. The Board have not been made aware of the accurate value
and so at present, the Board remain of the opinion that if the
trend of sales growth continues, it believes sales could be in
excess of $200m in 2018 (2017: $166m), which would be an increase
of at least 20%.
The Board expects to be able to update the market further on the
recent performance of Snorkel, specifically the third quarter of
2018, by the end of November 2018 when the current sales levels of
Snorkel can be confirmed.
For further information:
Tanfield Group Plc
Daryn Robinson 020 7220 1666
WH Ireland Limited - Nominated Advisor / Broker
James Joyce / Chris Viggor 020 7220 1666
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014.
Background
-- Tanfield is a 49% shareholder in the equity of Snorkel
following the joint venture between Tanfield Group Plc and Xtreme
Manufacturing LLC ("Xtreme"), a Company owned by Don Ahern of Ahern
Rentals Inc ("Ahern"), relating to Snorkel, in October 2013.
-- As reported in the Interim Results on 28 September 2018, the
Board impaired the Snorkel investment value from GBP36.3m to
GBP19.1m ($25.3m), which represents approximately 12p per
share.
-- In June 2018, Snorkel indicated to the Board that it expects
Xtreme will cause SKL Holdings to exercise its call option at the
earliest opportunity, in October 2018. Since June 2018, the Board
has received no further indication from either Snorkel or Xtreme as
to the intent of SKL Holdings.
-- The Board reported in the 2017 Annual Report that entering
into the next phase would bring with it a level of uncertainty. In
the event that the call option is exercised in October 2018, the
Board anticipates that there will most likely be a period of
negotiation - potentially protracted - prior to any financial
realisation and the Board will need to assess the Company's
position and, if necessary, take appropriate advice and initiate an
audit at or prior to that time.
-- Based on the information currently available to the Board, it
is likely that the trailing 12 month EBITDA at October 2018 will
result in the price of the call option being at best a modest
amount, possibly nil, but this will need to be validated at the
time and consequently the Board has restricted its current
valuation of the Company's interest in Snorkel to the priority
amount and preferred return values only.
-- The Q2 results show a material restatement of the Snorkel
balance sheet and a significant increase in the value of
non-current liabilities from $27m at 31 March 2018 to $79m at 30
June 2018. The Board has requested information on these changes but
currently has not received a response.
-- As reported in the Snorkel Investment Update on 20 September
2018, Charles Brooks, the former Chief Financial Officer of
Tanfield Group Plc, who had significant input into the key
documents pertaining to the joint venture between Tanfield and
Xtreme and whose employment transferred following the joint venture
to become the Chief Financial Officer of both Snorkel and Xtreme,
has made assertions that the preferred interest position is only
applicable until 30 September 2018, after which date the value will
be nil. The Board does not agree with the assertions made by Mr
Brooks and is of the belief that the intent of the agreement
requires the payment of the preferred interest position prior to or
in conjunction with Xtreme seeking to exercise the call option to
acquire Tanfield's equity in Snorkel.
-- Whilst there is no formal dispute with Xtreme currently, the
Board has inferred from its correspondence with Mr Brooks that this
may occur in due course. Should Xtreme attempt to exercise its call
option and dispute that the adjusted preferred interest position is
payable, the Board will vigorously defend its position that the
preferred interest is payable.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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