10.04.2018

Stronger year for Snorkel

Snorkel saw revenues rise over 27 percent in 2017, while posting an operating profit for the year.

The results were revealed in a stock market update from Tanfield, which retains a 49 percent holding in Snorkel. Total revenues were $165.8 million up 27 percent on 2016, with an operating profit of $1.64 million compared to a loss in 2016 of $2.8 million. Gross margins for the year were 12.7 percent, due to lower margins in the fourth quarter.

Looking at the fourth quarter, revenues jumped 60 percent to $40.7 million, but the company lost almost $982,000, compared to a loss of $1.8 million in the same period of 2016. The first three quarters were all positive, while the fourth quarter included accruals and any estimate errors picked up during the annual audit.

Tanfield has also now acknowledged that there is no chance now that Snorkel will achieve the profitability levels needed to trigger its right to demand payment for its shares under the agreed calculated realisation value. It currently has the Snorkel shares on its books for £36.3 million. While this part of the deal will expire, it will retain its 49 percent stake, but acknowledges that the future value of the minority stake is uncertain.

Vertikal Comment

Snorkel continues to make significant and steady progress but was never going to achieve the profitability levels that would trigger the payment to Tanfield - if for no other reason than there was no real incentive for its new owners to do so. The company has preferred - understandably - to invest heavily for the longer term and push any profit growth forward to 2019 or later.

As to Tanfield, it still holds a substantial stake in Snorkel, which does of course have a value, which is a far better result than had it kept Snorkel which would surely have gone bankrupt, leaving precious little for anyone.

We would not be surprised to see some sort of deal struck sometime next year for a great deal less than what Tanfield has on its balance sheet.