Trading Update

RNS Number : 3080O

Somero Enterprises Inc.

31 January 2023

 

31 January 2023

Somero Enterprises, Inc.

("Somero" or "the Company")

Trading Update

Record revenues driven by a healthy North American market, significant contributions from Europe and Australia

Somero® provides the following update on trading for the financial year ended 31 December 2022 ("the Period").

The Board is pleased to report that with strong, profitable trading and excellent operational performance in delivering global customer orders during H2 2022, it expects the Company to report 2022 revenue of approximately US$ 134.0m.  This is a new record for the Company, surpassing 2021 revenues of US$ 133.3m, which in turn grew a remarkable 50% over 2020.  

This 2022 revenue expectation falls modestly below previous guidance of US$ 138.8m, reflecting the impact, albeit limited, of supply chain shortages in our North America market on our customers' pace of work. This risk was noted in the Company's 7 September 2022 interim results release. 

Commensurate with the level of expected revenue, the Board expects the Company to report annual adjusted EBITDA of approximately US$ 46.0m, modestly below previous guidance of US$ 47.7m, and expects the Company to report ending cash of approximately US$ 34.0m, with some impact from the timing of tax refunds and working capital investment. These estimates remain subject to any audit adjustments.

Regional Breakdown

Trading in North America during the second half of 2022 reflected a healthy and active underlying non-residential construction market, although H2 2022 trading was somewhat down from H1 2022. On a full-year basis, trading was slightly down albeit from the record setting 2021 revenue of US$ 106.7m.  This was due in large part to supply chain shortages, most notably the inconsistent availability of concrete nationwide that stems from a shortage of cement and drivers to transport material to job sites, that have slowed the pace of customers' work on certain projects.  As we move into 2023, while it is difficult to predict when and to what extend the aforementioned challenges will ease, underlying market conditions in North America remain positive, with customers reporting a significant volume of work comparable to 2022 levels and extended project backlogs.

H2 2022 trading in Europe increased significantly from H1 2022 and grew on a full-year basis by over 20% from the US$ 12.1m reported in 2021. 2022 reported revenues in Europe are a record for the region, surpassing the previous high of approximately US$ 14.0m (US$ 10.1m on a constant currency basis) recorded in 2007.  Trading during H2 2022 benefitted from a healthy non-residential construction market along with increased availability of inventory and the positive impact of the previously announced strategic shift internationally to focus on, and allocate resources, to the European and Australian markets.

In Australia, we expect to report increased H2 2022 revenues compared to H1 2022, growing nearly 40% on a full-year basis compared to the US$ 6.1m reported in 2021. This again represents a record performance.  Trading during H2 2022 reflected a high-level of non-residential construction activity, increased availability of inventory, and the positive impact of increased selling and support staff in the market following the Company's decision to go direct at the end of 2020. 

We expect to report that H2 2022 revenue in China grew modestly from H1 2022 as COVID restrictions lessened in the second half of the year.  As expected, following the previously announced shift in the Company's international strategy away from China, full-year revenue in the region declined by over 50% from the US$ 2.7m reported in 2021, amounting to only a modest contribution to the Company's annual 2022 revenues.

H2 2022 trading activity in the remaining regions, the most significant of which are India, Latin America, the Middle East, grew modestly on a combined basis compared to H1 2022 and on a full-year basis compared to 2021.  Market conditions across these regions were positive during the second half of the year and remain so entering 2023.

Product Breakdown

On a product basis, H2 2022 trading in the Boomed-screed product line grew slightly compared to H1 2022 and on a full-year basis compared to 2021.  This was driven by sales of the  S-28EZ, the Company's largest machine.  The success of the S-28EZ is a result of the Company's commitment to improving and adding value to its core existing product offering, which sits alongside its innovation strategy for entirely new solutions. 

H2 2022 trading across all other product lines, including Ride-on screed equipment, was balanced reflecting healthy diversity in the size of and type of customer projects.  On a combined basis, whilst H2 2022 revenue across all products excluding Boomed-screeds was down modestly from H1 2022, we expect to report 2022 revenue at a comparable level to FY 2021.

2022 revenues from newer products released since 2019 that target entirely new market segments, including the SkyScreed, SkyStrip®, S-PS50, and Somero Broom+Cure, grew modestly on a combined basis from 2021 to contribute approximately US$ 4.0m to 2022 revenue.  The Company remains focused on gaining traction in these new markets with the understanding the pace of market adoption for these disruptive products takes time. 

Strategy Update

Led by Europe and Australia, full-year 2022 revenue outside North America on a combined basis grew nearly 20% compared to 2021.  This meant the contribution to revenue from international markets grew to approximately 24% of total sales compared to 20% in 2021.  The 2022 growth is the direct result of the shift in international focus to Europe and Australia and the addition of key sales and support personnel to these markets.  The Company continues to see an attractive international growth opportunity from new customers and new products, particularly in Europe and Australia. 

In Q4 2022, the Company completed the US$ 9.5m project to add 50,000 square feet to the Houghton, Michigan facility and expects the expansion will be fully operational in early Q1 2023.  Completion of this project is essential to Company's longer-term growth strategy adding manufacturing capacity and workflow efficiencies while expanding in-house engineering capabilities.

Outlook

The Board is pleased with the strong finish to 2022 and looks forward to 2023 with confidence based on the strength of the US market, direct feedback from our customer base on activity, and the growth opportunity in Europe and Australia and from new products. To capture this opportunity, the Company remains committed to adding product development, sales, and support resources; a necessary near-term investment and cost with longer-term benefit.  

With consideration to these factors, the Board expects 2023 will be a highly profitable year with healthy cash generation, revenues that are comparable to 2022, and EBITDA that reflects the planned investment to add strategic resources for future growth. 

Somero's final 2022 results announcement is scheduled for release on 8 March 2023.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 as retained as part of UK law by virtue of the European Union (Withdrawal) Act 2018 as amended. Upon the publication of this Announcement, this inside information is now considered to be in the public domain.

Enquiries:
Somero Enterprises, Inc.  Jack Cooney, CEO  John Yuncza, President Vincenzo LiCausi, CFO Howard Hohmann, EVP Sales	www.somero.com [phone]
finnCap Ltd (NOMAD and Broker) Matt Goode (Corporate Finance)  Seamus Fricker (Corporate Finance)  Fergus Sullivan (Corporate Finance)  Tim Redfern (ECM) Harriet Ward (ECM)	[phone]
Alma PR (Financial PR Advisor)    David Ison Pippa Crabtree	[e-mail]  [phone]

 

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