Member Article

Tanfield Group’s Snorkel expects turnover of £63.9 million for 2014

Washington-based Snorkel International Holdings, the power access platforms manufacturer partly owned by Tanfield Group, is estimating a 2014 turnover of £63.9 million which is expected to rise to £95.8 million in 2015.

Tanfield holds 49% of the equity of Snorkel. The carrying value of its 49% holding and its preferred interest holding (Loan note) is £38.3 million as set out in the Company’s interim accounts and this represents approximately 26p per share.

Tanfield’s other investment, Smith, has an estimated current value per share of approximately 5p resulting in a combined estimated value from investments of 31p per share.

Snorkel’s production throughout the year has increased significantly from its run rate during 2013 as the business has taken advantage of the general uplift in the market for its products.

The order book through the year rose substantially compared to 2013. There has been a significant level of working capital invested into the company currently totalling in excess of £28.7 million.

This has meant that supplier constraints have been reduced and the spares business has improved dramatically. This is important in that it means that Snorkel can more effectively support its machines in the field, which was difficult last year due to cash restraints.

Ahern Rental, a related company through ownership of Snorkel, has absorbed the full costs of certain Snorkel assembly and distribution centres.

Also a number of functions have been consolidated onto one site. This strategic restructuring has had the benefit of extending Ahern’s reach whilst maintaining Snorkel distribution at much reduced cost.

A number of temporary staff have been laid off to accommodate the move into the winter months when the market tends to reduce demand and the company builds stock in anticipation of increased demand in the spring. These actions have reduced the breakeven level of turnover of the business.

The Snorkel business is going through a process of redesigning its catalogue of equipment with a view to increasing the commonality of parts, reducing build cost and improving functionality for the end user.

Snorkel also is undertaking an extensive program of rebuilding machines. A 200,000 square feet centre dedicated to rebuild has been established in Kansas USA.

Tanfield said: “The Board takes the view that the signs are very promising for Snorkel in its progress to sustainable profitability.

“Mr Don Ahern, the owner of Extreme and Ahern Rentals has made a number of positive statements about Snorkel in trade magazine articles supporting the above update, which the Board views as very encouraging.

“As a note of caution the Board would point out that the market is cyclical. The business is moving into the winter months which are typically quieter in the industry.

“Building stock in anticipation of the upturn in spring depends upon the availability of working capital which Snorkel now seems to have at its disposal.”