12.04.2012

Snorkel revenues up 11%

Tanfield, owner of Snorkel aerial lifts has published its preliminary full year results for 2011, which show an 11 percent rise in revenues.

Tanfield, which is now dedicated to aerial lifts, reported sales of £48.3 million ($77 million) for the year, held back it says by supply chain problems, which transferred into a quadrupling of the company’s order book from £7.7 million at the end of 2010 to £30.5 million at the end of 2011.

The company says that it managed to boost gross margins from 29 to 37 percent during the period which resulted in a modest reduction in the pre-tax losses from £15.8 million in 2010 to £14.99 million in 2011. Net cash at the end of the period remained at similar levels thanks to payments from the electric vehicle business it sold during the year. Total cash at year end was £3.5 million, but this has been boosted by a rights issue to £10.3 million at the start of this month.

Chief executive Darren Kell said: "Customers began to return in key markets in early 2011 and we delivered an increase in sales of 25 percent in the first half. Demand further increased in the second half of the year, but we were unable to accelerate our production capacity due to weakness in the industry's supply chain. This is evidenced both in our sales growth for the year and the £30.5m order book we carried into 2012 - almost four times the order book at the end of 2010.”

“We continued to execute our strategy of enhancing the Snorkel product portfolio, launching a new range of boom lifts that share a common chassis. We have appointed a dedicated team to target Latin America, which continues to experience strong growth in the adoption of aerial work platforms and strengthened our sales team in North America. In 2011 we also appointed new distributors in China, Czech Republic, Romania and Turkey.”

“In March 2012, Tanfield completed a £12 million placing, the net proceeds of which have provided additional working capital to allow significant reductions in Snorkel product lead times. This influx of working capital allows us to place larger orders with principal suppliers, make investments in strategic supply channels and, where necessary, offer incentives to prioritise supply chain commitments from key supply chain partners.”

“We begin 2012 with an extremely healthy order book and a clear strategy to realise this as sales. Despite the on-going economic uncertainty in some key markets, we believe that replacement of aged equipment alone will deliver growth this year.”

Vertikal Comment

These results are no surprise and suggest that Snorkel could at least break even this year, subject to it being able to efficiently ramp up production. With the aerial lift market improving on an international basis and a strong starting point, in terms of orders, it should have a good year and be looking at revenues in the region of £70 million ($110 million), possibly more.

The company ideally needs to take revenues closer to the £100 million level by this time next year in order to justify its international production and sales base and to be ready to gain the maximum benefit from the stronger upward cycle that we ought to be seeing from 2014 onwards.

Snorkel punches well above its weight when it comes to brand recognition and distribution, thanks to substantial investment by Tanfield in marketing and the foundation provided by the UpRight international distribution network. As such the company has to be a prime takeover target for Chinese manufacturers looking to acquire these less tangible but highly valuable assets?

The next 12 months will be interesting.