Somero Regulatory News (SOM)

30 July 2024

Somero Enterprises, Inc.

("Somero" or "the Company")

Trading Update

Somero® is pleased to provide an update on trading ahead of its interim results announcement scheduled to be released on Thursday, 29 August 2024.

While the broad US non-residential construction market remains healthy, supported by an active manufacturing sector, onshoring, and electric vehicle and battery plants, trading in North America continues to be impeded by project start delays and pauses caused by elevated interest rates, labor shortages and concrete rationing, as previously reported in the 20 June 2023 announcement. This has been coupled with significant inclement weather in H1 2024. As a result, H1 2024 trading in North America is expected to end below the comparable H1 2023 period.

The European market was active during H1 2024, reflective of positive non-residential construction market conditions and a busy customer base with healthy project backlogs. As a result, H1 2024 trading in Europe was comparable to H1 2023. Australia also experienced inclement weather that caused project delays resulting in H1 2024 trading down compared to a record performance in H1 2023. Trading in the Rest of World region declined compared to H1 2023, driven primarily by lower sales volume in the Middle East and Latin America. As previously stated, given the relatively small base of business in each region within this category, trading will fluctuate from period to period. 

The Company anticipates an improvement in H2 2024 over H1 2024 driven by a combination of new product revenue growth, including the launch of a third new machine, and an expectation of improved weather conditions. Due to the anticipated reduction in 2024 revenue compared to previous expectations and consistent with Somero's agile operating model, the Company has initiated a company-wide workforce reduction of approximately 15%, a restructuring that takes effect alongside this trading update. The workforce reduction combined with a reduction in variable expenses tied to revenue and strict cost controls for the remainder of 2024 partly offset the profitability impact of the revised 2024 revenue expectations. 

In consideration of the aforementioned factors, the Company now expects FY 2024 revenues of approximately US$ 110.0m (compared to the previous market consensus estimate of US$ 120.7m), EBITDA of approximately US$ 30.0m (compared to the previous market consensus estimate of US$ 34.0m), and year-end cash of approximately US$ 27.0m (compared to the previous market consensus estimate of US$ 31.7m). 

Jack Cooney, President & CEO of Somero, said:

"Despite the impact of persistent challenges and poor weather conditions on trading in the first half, the non-residential construction market remains fundamentally sound. Importantly, the long-term growth drivers remain intact and we are working hard to expand our product offering and build our presence internationally to capitalize. As those factors outside our control abate, we would expect performance to improve. In the meantime, Somero is built to withstand challenging conditions. We have a solid track record of adapting to changing conditions and then emerging strongly."

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.