REG - Somero Enterprises - Trading Update

Somero EnterprisesAnnouncement

20/06/2023 07:00

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RNS Number : 2241D  Somero Enterprises Inc.  20 June 2023

20 June 2023

Somero Enterprises, Inc.

("Somero" or "the Company")

 

Trading Update

 

Somero Enterprises, Inc. provides the following update on trading for the five
months ended 31 May 2023 and on expectations for 2023 results.

 

The US non-residential construction market has remained active, supported by
customers reporting extended project backlogs across a wide range of sectors
and project types including large manufacturing facilities, data centres and
medical facilities. Alongside this, the positive momentum in Europe and
Australia has carried over from 2022 into 2023.  The health of
non-residential construction activity in the US, Europe and Australia, the
Company's three main markets, that formed the basis for the 2023 outlook
provided in the Company's Final Results statement on 8 March 2023, has
remained intact.

 

While underlying market conditions remain positive, new factors have emerged
to impact the translation of construction activity into trading in the US.
Elevated interest rates, tightened bank lending standards and, to a lesser
degree, construction permitting delays due to large complex projects creating
bottlenecks in the approval process in certain portions of the US, have led to
an increase in delayed starts to non-residential construction projects. While
US customers have not reported project cancellations, certain customers have
indicated these project delays have impacted the timing of their equipment
purchase decisions.  In addition, the S-22EZ, re-launched in early 2023, is
not scheduled to reach full production until the end of H1 2023, and its
limited availability has delayed sales to customers with a preference for
it.  Other market factors noted in the Final Results statement, most notably
a limited supply of concrete across the US, have remained unchanged.

 

Having considered these current factors, the Company expects H1 2023 revenue
will range between 15% and 20% below the record US$ 68.5m revenue reported in
H1 2022.  The Company now expects 2023 revenue will approximate US$ 120.0m,
approximately 10% below 2022 revenue of US$ 133.6m.  The Company anticipates
an improvement in H2 2023 revenues over H1 2023 driven primarily by increased
availability of the S-22EZ during the second half of the year.  Lowered
expectations for H1 2023 and FY 2023 revenue have been driven primarily by the
US market.  We continue to anticipate strong contributions to 2023 revenue
from Europe, Australia, and the Rest of World territories, with Europe and
Australia each expected to report H1 2023 revenue that meets or exceeds the
comparable H1 2022 total.

 

Somero's operating model enables it to adjust quickly to changing
circumstances.  Due to the anticipated 10% reduction in 2023 sales compared
to previous expectations, the Company has reduced its operational workforce by
10%, a restructuring that takes effect alongside this trading update.  The
workforce reduction combined with strict cost controls for the remainder of
2023 partly offset the profitability impact of the revised 2023 revenue
expectations.  The Company has also taken additional steps to minimize
inventory levels.  These measures include frequent reviews of safety stock
levels to ensure carrying amounts are optimal, and aggressively adjusting
inbound inventory purchasing to align with anticipated volume.  The impact of
these efforts along with maintaining accounts receivable at low levels are
anticipated to have a positive impact on year-end cash.

 

In consideration of the aforementioned factors, the Company now expects FY
2023 revenues of approximately US$ 120.0m (compared to the previous market
consensus estimate of US$ 132.1m), EBITDA of approximately US$ 36.0m (compared
to the previous market consensus estimate of US$ 42.8m), and year-end cash of
approximately US$ 32.0m (compared to the previous market consensus estimate of
US$ 31.0m).  The improvement in 2023 year-end cash compared to the market
estimate is attributable to expectations for a meaningfully lower level of net
working capital investment in 2023 due to the drivers previously noted.

 

Jack Cooney, CEO of Somero, said:

 

"Our customers continue to report high levels of non-residential construction
activity across our territories. While some projects in the US are
experiencing delays, we are confident the underlying market remains in good
health and provides the Company meaningful opportunity.  We expect to see an
improved second-half with strong demand for the S-22EZ that will reach full
production imminently.

 

Outside the US, we are pleased with the performance in Europe and Australia
that are each poised to deliver strong first half and full year contributions.

 

Our proven operating model provides the Company the flexibility, through a
high level of variable costs, to adapt quickly and effectively to changing
conditions.  This continues to be a key strength of the Company. As such, we
have been able to mitigate the impact of reduced near-term volumes on
profitability without compromising our long-term growth initiatives."

 

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.                                            www.somero.com (http://www.somero.com)

 Jack Cooney, CEO                                                    +1 239 210 6500

 John Yuncza, President

 Vincenzo LiCausi, CFO

 Howard Hohmann, EVP Sales

 finnCap Ltd (NOMAD and Broker)                                      +44 (0)20 7220 0500

 Matt Goode/Seamus Fricker/Fergus Sullivan (Corporate Finance)

Tim Redfern/Harriet Ward (ECM)

 Alma PR (Financial PR Advisor)                                      somero@almapr.co.uk

 David Ison                                                          +44 (0)20 3405 0205

 Pippa Crabtree

 

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