Somero Enterprises Inc. Trading Update (2241D)
June 20 2023 - 1:00AM
UK Regulatory
TIDMSOM
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
Jack Cooney, CEO +1 239 210 6500
John Yuncza, President
Vincenzo LiCausi, CFO
Howard Hohmann, EVP Sales
finnCap Ltd (NOMAD and Broker)
Matt Goode/Seamus Fricker/Fergus
Sullivan (Corporate Finance)
Tim Redfern/Harriet Ward (ECM) +44 (0)20 7220 0500
Alma PR (Financial PR Advisor) somero@almapr.co.uk
David Ison +44 (0)20 3405 0205
Pippa Crabtree
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