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Tanfield makes US move

Created:
28 June 2007
Written by:
Graeme Davies

Electric vehicles and industrial powered access specialist Tanfield Group has continued its rapid progress with a £115m fund raising and the acquisition of Snorkel Holdings, a US-based powered access manufacturer.

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Tanfield's management have struck while the iron is hot, raising more funds following a 700 per cent-plus surge in its share price over the past 12 months. The acquisition of Snorkel follows its highly successful acquisition of Upright Powered Access last year, which kick started the growth of this division.

Upright's performance has been turned around, its range of products reinvigorated and distribution network extended. Snorkel provides a good fit as its range of powered access vehicles is generally larger than Upright's, therefore there is little overlap in customers. It also provides a strong foothold in the US, which is the biggest global market for powered access, and a bigger presence in Asia.

There is less scope for the dramatic improvement in performance that Tanfield has effected at Upright, which was seriously underperforming, but the combined business should be able to grab a significant share of the global market. House broker St Helens Capital reckons the deal will make the combined entity the third biggest powered access manufacturer in the world.

Snorkel is being sold by a group of private investors, who originally acquired it from US conglomerate Textron in late 2002 for an undisclosed price. The group has changed hands several times since it was founded in 1958.

The global powered access market has recovered well over the past two years, driven by legislative factors such as the EU's working at height directive. Tanfield's timing in the market thus far has been excellent and the Snorkel deal seems to make good sense. It's worth noting, though, that this is essentially a cyclical business. If construction industry activity slumps, demand for units will fall, although equipment hire companies like Ashtead and Lavendon, with their high operational gearing, would probably be hit first.

At the same time the company's Smiths Electric Vehicles division, originally a milk float manufacturer, has caught the imagination of delivery and logistics companies with its range of electric powered delivery vans winning orders from the likes of TNT, Marks & Spencer, Sainsbury and the Royal Mail. Indeed £10m of the placing proceeds has been set aside for the development of the Smiths brand in the US, with plans for an assembly facility in California already well advanced.

TIP UPDATE

Buy

We recommended Tanfield as one of our tips of the year (55p, 5 January 2007) and its shares have since more than trebled as management has maintained momentum in both sides of the business. St Helens Capital has upgraded EPS forecasts on the back of the Snorkel deal to 7.6p for 2008, valuing the company at 24 times earnings. This is punchy, but the company has delivered what it said it would thus far. The shares remaina buy at 189p.

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