Trading Update

RNS Number : 4551B

Somero Enterprises Inc.

07 June 2019

 

7 June 2019

Somero Enterprises, Inc.

("Somero" or the "Company")

Trading Update

Somero Enterprises, Inc. (the "Company") provides the following trading update in advance of its upcoming Annual General Meeting scheduled for 11 June 2019. 

Trading during the five month period to the end of May 2019 has fallen below management's expectations, primarily due to adverse weather conditions in the US, the Company's largest market. Broad sections of the US experienced the highest levels of rainfall on record.*

The record rainfall seen in the US has delayed project starts which in turn has slowed the pace of equipment purchased by our customers, the impact of which was seen through historically strong trading months of March and April. Whilst there was an improvement in trading to end the month of May, and although the Company expects weather conditions and therefore trading in the US will improve throughout the rest of 2019, the Board now does not expect the Company to fully recapture the shortfall caused by this extended period of poor weather in the current financial year.

As such, the Company now expects to deliver 2019 revenues of approximately US $87m, EBITDA of approximately US $28m, and expects to have net cash at 31 December 2019 of approximately US $18m, after one-off investments of $4.0 million related to building expansions for the Skyscreed ® 25 and the Fort Myers Training Facility as well as the $2.0 million acquisition of Line Dragon.

Somero continues to see growth opportunities across all its markets, particularly in the US, where customer optimism for 2019 and beyond is reinforced by extended backlogs and healthy new project starts, albeit much delayed. The positive US market conditions described in the Company's 14 March 2019 trading update have not changed and whilst we anticipate it will take some time for momentum to rebuild, the level of work in front of our customers remains significant. The Company's strong balance sheet, flexible operating model and diversity across territories gives the Board confidence for the medium to long term.

In the Company's other main markets, Europe and China, as well as in the Rest of World territories, trading in 2019 is at comparable levels to 2018, and the Company continues to see opportunities for growth in H2. Growth in India has been steady, as the Company continues to gain traction in the region. The Middle East and Latin America are trading below 2018 levels, however the Company expects improvement in H2 2019, notwithstanding the political uncertainly and economic challenges seen in these regions.

Given the aforementioned positive market indicators, Somero is continuing to make long-term investments for growth by proceeding with the planned expansions of the Houghton Operations and Support Offices and Fort Myers Training Facility and by continuing to add product development, engineering and sales resources focused on new products. The Company is pleased with progress on the new SkyScreed ® 25, having sold the first unit and with continued strong interest in the product. Traction gained so far with the SkyScreed ® 25 is in line with what the Company would expect when bringing a disruptive product of this nature to market. In addition, the Company is also pleased with the impact of the SP-16 Concrete Hose Pulling & Placing System and Line Dragon combination. Despite the impact of poor weather in the US on sales of these products, interest in the product line is strong and trading in 2019 has grown meaningfully compared to 2018.

* An average of 36.2 inches of precipitation has fallen over the Lower 48 from May 2018 to April 2019 representing the highest level recorded in over 120 years and six inches over average.

Source: National Oceanic and Atmospheric Administration data

  https://www.ncdc.noaa.gov/temp-and-precip/us-maps/ 

Jack Cooney, CEO of Somero, commented:

"While we are disappointed to revise our outlook for full year expectations in 2019, caused largely by poor weather in the US, we do not see a fundamental change in our markets and continue to have an optimistic outlook for the business in 2019 and beyond as our customers return to more typical levels of productivity. We are committed to delivering strong profits and healthy cash flows to our shareholders, while also making sound strategic investments for long-term growth. We are pleased with the progress we are making with our new product initiative and remain focused on growing our portfolio of products to capture new sources of revenue."

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

Enquiries:
Somero Enterprises, Inc. Jack Cooney, CEO John Yuncza, CFO Howard Hohmann, EVP Sales	www.somero.com [phone]
finnCap Ltd (NOMAD and Broker) Matt Goode (Corporate Finance) Carl Holmes (Corporate Finance) Tim Redfern (Corporate Broking)	[phone]
Alma PR (Financial PR Advisor) Rebecca Sanders-Hewett                                                                          Susie Hudson Sam Modlin	[e-mail] [phone]

 

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