18 May 2023

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 £19.1m.  The outcome of the US Proceedings referenced below could have an impact on this valuation.

·    On 22 October 2019, the Company announced that it had received a Summons and Complaint, filed in Nevada (the "US Proceedings") by subsidiaries of Xtreme, relating to the Contemplated Transaction.

·     On 24 October 2019, the Company announced it had become necessary to issue and serve a claim in the English High Court (the "UK Proceedings") against its former solicitors acting for the Company at the time of the Contemplated Transaction.  On 18 October 2022, the Company announced that it had settled its claims in relation to the UK Proceedings on a no-fault basis.

Highlights

·    In the 2022 financial year, Snorkel's sales increased by 8.9% to US$168.8m (2021: US$155.0m).  Despite the increase in sales, the EBITDA loss for the 2022 year increased to US$13.8m (2021: US$9.6m). 

·    In the first quarter of 2023, Snorkel's sales increased by 4.4% to US$43.5m (Q1 2022: US$41.7m).  Whilst the increase in sales was a fairly modest US$1.8m in value, the EBITDA for the first quarter of 2023 improved to a US$0.2m profit (Q1 2022: US$3.5m loss), an improvement of some US$3.7m. 

·    As reported in the media towards the end of 2022, Don Ahern, the owner of the Company's 51% joint venture partner, sold the trade and assets of Ahern Rentals, who has been Snorkel's largest customer since the Contemplated Transaction in 2013, to United Rentals for around US$2bn.  While the trade and assets of Ahern Rentals were sold, the Board understand that Don Ahern retained ownership of the company Ahern Rentals Inc.

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.

In the 2022 financial year, Snorkel's sales increased by 8.9% to US$168.8m, compared to US$155.0m in 2021.  Despite the increase in sales, the EBITDA loss for the 2022 year increased to US$13.8m, compared to US$9.6m in 2021.  This was largely down to the gross profit margins becoming even lower in 2022 (4.2%) when compared to the already low gross profit margin in 2021 (5.4%).  As previously reported, the Board has believed for some time that the gross profit margins are not in line with the industry averages and continue to try and investigate this. 

In the first quarter of 2023, Snorkel's sales increased by 4.4% to US$43.5m, compared to US$41.7m for the first quarter of 2022.  Whilst the increase in sales was a modest US$1.8m in value, the EBITDA for the first quarter of 2023 was a profit of US$0.2m, compared to a loss of US$3.5m in the first quarter of 2022, an improvement of some US$3.7m.  This resulted primarily from a marked improvement in the gross profit margin, which in the first quarter of 2023 increased to 12.7%, up from 4.2% for the full year 2022 and up from 2.9% in the fourth quarter of 2022.  The Board is unaware of the reason behind this sudden improvement from one quarter to the next but hopes that its ongoing work to try and investigate the current and historic gross profit margins may provide some further clarification.

As reported in the media towards the end of 2022, Don Ahern, the owner of the Company's 51% joint venture partner, sold the trade and assets of Ahern Rentals to United Rentals for around US$2bn.  Since the Contemplated Transaction in 2013, Ahern Rentals has been Snorkel's largest customer by a long way and the Board are therefore pleased to see that despite the change of ownership, sales have not only continued to increase in the first quarter of 2023 but it would appear that sales are now at improved gross profit margins. 

As shown in the summary below, Snorkel's 2022 consolidated financial statement reported a US$31.8m related party forgiveness which resulted in the company reporting a US$15.3m net profit for the year.  Without this entry, Snorkel would have achieved a net loss of US$16.5m for 2022 (2021: US$12.0m).

Below is a summary of the consolidated financial statement for the full year of 2022 and 2021, along with the first quarters of 2023 and 2022. 

The Board views the increase in sales in both periods, and the increased gross profit margin in the first quarter of 2023, to be a positive development and is not aware of any reason why this improving trend should not continue. 

As reported on 18 October 2022, the Company is now focussed on the US Proceedings which are continuing, with a jury trial currently expected to take place in early 2024.  The Board continue to believe that a positive outcome to those proceedings is possible.  So far as it is necessary, the Company will continue to vigorously defend its position 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 / Andrew de Andrade / Enzo Aliaj                  020 7220 1666