02.12.2015

Tanfield reports on Snorkel

Tanfield has issued an update on its 49 percent stake in Snorkel, indicating a strong rise in revenues, but not profit.

The update says that Snorkel is expecting to report revenues this year of $120 million, roughly 30 percent higher than last year. However Tanfield is only paid for its stake if the company achieves a profit before interest, tax and depreciation of $25 million by 2018 and Snorkel will report a small loss as it ploughs everything back into new models and new facilities etc…

Significant progress continues to be made in both increasing sales levels and reducing costs and if this trend continues, the Tanfield board would expect Snorkel should achieve and sustain an operating profit in the year ending 31 December 2016 and beyond. It also recognises that the continued improvements are positive and reassuring and that should they continue as expected, the investment in Snorkel is well positioned to achieve a return to shareholders in the future.

Tanfield expects Snorkel to move into a positive EBITDA in 2016.

Vertikal Comment

Don Ahern has made substantial progress with Snorkel, but the business needs a year or two – or more to grow into its overheads. That is almost certainly what Ahern has in mind and this is not unusual for a privately held company owned and run by someone who is passionate about what they do.

However for Tanfield this will most likely mean that the business will not reach the $25 million threshold before the September 2018 cut-off date. It would appear to be far more advantageous to keep investing for the future than struggling to reach a target for which there is little apparent incentive?