Financial Highlights
· Revenue growth led by robust trading in the US and Europe
· Efficient conversion of revenue growth to profit
· Strong operating cash flow, increased return of cash to shareholders
· US$ 0.055 per share interim dividend declared, 100% increase compared to 2017
|
|
H1 2018 US$ |
H1 2017 US$ |
% Increase |
|
Revenue |
$ 45.0m |
$ 42.4m |
6% |
|
Adjusted EBITDA(1,2) |
$ 14.5m |
$ 13.2m |
10% |
|
Adjusted EBITDA margin(1,2) |
32% |
31% |
100 bps |
|
Profits before tax |
$ 13.6m |
$ 12.0m |
13% |
|
Adjusted net income(1,3) |
$ 10.4m |
$ 8.7m |
20% |
|
Diluted adjusted net income per share(1,3) |
$ 0.18 |
$ 0.15 |
20% |
|
Cash flow from operations |
$ 12.3m |
$ 9.4m |
31% |
|
Net cash position (4) |
$ 20.7m |
$ 18.3m |
13% |
|
Interim dividend per share |
$ 0.055 |
$ 0.0275 |
100% |
Chairman's and Chief Executive Officer's Statement
Overview
Somero has delivered another strong set of results in the first half of 2018. Total revenues grew 6% over H1 2017 with four of the Company's six markets reporting increased sales compared to H1 2017. Europe and North America, the Company's two largest markets, led the way with strong sales growth of 24% and 7%, respectively, while the Middle East and our Rest of World territories also provided meaningful contributions to growth in the period. In China, while H1 2018 trading ended slightly down from H1 2017, Somero remains encouraged by the activity level in the market and is pleased to report that the Company has filled its China National Sales Director role, a key addition to the team which should help drive revenue in the region. In addition, as described in the trading update (announced on July 17, 2018), sales were down in H1 2018 in Latin America, compared to H1 2017, due in part to the timing of certain customer projects. The Company expects improvement in H2, as future activity levels are anticipated to be healthy in this territory.
On a product basis, sales in three of the five product categories increased compared to H1 2017 with sales of Boomed screeds, Ride-on screeds and Other revenues increasing 13%, 21% and 4%, respectively. The top line growth converted efficiently to increased profit through effective cost management and gross margin improvement. Gross margins increased to 57.5% in H1 2018 from 56.8% in H1 2017 while operating expenses decreased by US$ 0.1m due to decreased amortization costs of US$ 0.8m offset by increases in selling, marketing, customer support, engineering and product development costs. Adjusted EBITDA grew to US$ 14.5m, representing a 32% margin, compared to US$ 13.2m in H1 2017, or a 31% margin. The Company's financial position remains very strong, supported by cash flows from operations that increased to US$ 12.3m, 31% growth compared to H1 2017. Net cash increased to US$ 20.7m at June 30, 2018 from US$ 19.0m at December 31, 2017 despite returning US$ 9.2m in cash to shareholders with the dividend paid in April 2018. On top of the strong H1 2018 financial performance, Somero also continued to make good progress with the new product development that is key to driving the long-term growth and value of the business.
Based on the strong performance in H1 2018 and the Board's confidence in the outlook for the business, we are pleased to report that the Board has approved an interim dividend for the six months ended June 30, 2018 of 5.50 US cents per share representing a 100% increase from the H1 2017 interim dividend. The interim dividend will be payable on October 17, 2018 to shareholders on the register at September 28, 2018. Following an internal review, the Board has decided to rebalance its dividend in order that a greater portion of the full year dividend shall be paid as an interim dividend meaning a one-off rebasing of the interim dividend this year.
Current Trading and Outlook
The positive trading momentum experienced in North America has carried over into H2 2018 reflecting robust non-residential construction markets and a high-level of confidence by our customer base. We are pleased with these strong market conditions as well as in the broad customer interest across our product lines highlighting a wide-range of project activity in the market. Positive market conditions and healthy customer project backlogs give us confidence in delivering a solid performance in North America for the remainder of 2018.
The momentum of trading activity in Europe is expected to carry over in H2 2018 and we expect sales in the territory will be broad-based, with a variety of countries contributing meaningfully to sales. We expect the market will continue to be driven by demand for replacement equipment and technology upgrades, as well as interest in new products.
In China, we are aiming to gain increased traction in H2 2018 with the sales and marketing initiatives launched at the beginning of the year starting to deliver returns, in addition to positive contributions to market performance over the medium-term from the recently added local leadership. We continue to view China as a significant long-term opportunity for the business and one which we are committed to pursuing.
In the Middle East, we expect to see a continuation of the H1 2018 performance for the rest of the year while in Latin America, we anticipate H2 2018 will improve due to the meaningful opportunities and solid level of activity across a variety of countries in this territory. In our Rest of World territories, we also anticipate that the solid H1 2018 performance will continue through the remainder of the year and are particularly pleased with the traction we are gaining in the India market.
Overall, we see strong activity across our entire geographic footprint and strong interest across our product categories in H2 2018. With the broad-based opportunity for growth and the performance of the Company in the first half of 2018, the Board remains confident in delivering another year of profitable growth for our shareholders in line with current market expectations.
Larry Horsch
Non-Executive Chairman