Somero Enterprises, Inc.
(“Somero” or “the Company”)
Trading Update
Strong finish to 2021 that exceeds previous guidance, healthy North American market drives results
Somero provides the following update on trading for the financial year ended 31 December 2021 (the “Period”).
The Board is pleased to report that with strong, profitable trading and excellent operational performance to deliver on customer orders in the fourth quarter, and in particular December, it now expects the Company to report 2021 revenue, EBITDA, and year-end cash ahead of guidance provided in the Company's 7 December 2021 trading update. The Board expects the Company to report revenue of approximately US $133.0m (+50% v 2020) ahead of previous guidance of US$ 130.0m, annual adjusted EBITDA of approximately US$ 48.0m (+83% v 2020) ahead of previous guidance of US$ 45.0m, and ending cash of approximately US$ 42.0m (+18% v 2020) ahead of previous guidance of US$ 39.0m. These estimates remain subject to any audit adjustments.
Leading Through Production Innovation
The Company made meaningful progress executing its product innovation growth strategy during the Period completing another active year of new product development. In June 2021, the Company launched the SkyStrip® high-rise structural shoring plywood removal solution, a disruptive product for the high-rise structural market. In 2021, the Company completed development of the S-PS50, a large boomed-screed that provides a mechanical alternative to the traditional manual process used to level concrete in tilt-up panel casting applications. Also in 2021, the Company completed development of the S-28EZ, the next generation large boomed-screed that replaces the S-22EZ.
The SkyScreed, SkyStrip and Somero Broom+Cure TM , all recently launched products, contributed a combined US$ 1.8m to H2 2021 revenues and US$ 3.2m to the Period, representing an increase of US$ 1.0m in 2021 revenues compared to 2020. H2 2021 SkyScreed © sales were US$ 0.7m, an improvement from H1 2021 that reflects a modestly higher volume of jobsite product demonstrations, critical to the selling process, during the last six months of the year. The Company sees a significant opportunity in the high-rise structural market and expects continued, measured progress in penetrating it in 2022 and beyond. The Company also remains focused on identifying other opportunities to expand the product offering, such as with the recent Somero Broom+Cure TM and just introduced S-PS50, to increase the Company's addressable market and to create a runway for long-term growth.
Regional and Product Breakdown
North America reported particularly strong trading results in H2 2021, representing improvement from H1 2021 revenues, to end a record-breaking year. In North America, full-year 2021 revenues grew an extraordinary 50% from the US$ 70.7m reported in 2020, robust trading performance that reflects the healthy, highly active US non-residential construction market in place throughout the year. Entering 2022, US non-residential market conditions remain positive, a view supported by customers reporting extended project backlogs that carry well into 2022.
H2 2021 trading in Europe was comparable to H1 2021 and on a full-year basis in 2021 revenues grew approximately 40% from the US$ 8.7m reported in 2020, a meaningful contribution to growth for the year. As in the US, European non-residential market conditions remain positive entering 2022, similarly supported by reported customer project backlogs.
H2 2021 trading in Australia increased compared to H1 2021, and increased significantly compared to H2 2020, to result in full-year 2021 revenues that grew more than 450% from the US$ 1.1m reported in 2020. This impressive performance was driven by an effective in-country direct sales and support team that capitalized on positive market conditions and favorable currency exchange rates to significantly improve the contribution from this market. Going forward, the Australian market is expected to provide a meaningful opportunity for growth from new products.
China reported H2 2021 trading that declined modestly from H1 2021 and full-year 2021 revenues that declined approximately 30% from the US$ 3.9m reported in 2020. The quality market segment in China, the Company's primary target, initially driven by western multi-national company development in the country, has been slower to grow than originally anticipated. In light of current market conditions and recent performance, the Company plans to reduce the cost structure of its China operations to begin 2022 while continuing to maintain consistency in supporting the customer base as we continue to evaluate our approach to target the long-term opportunity in this market.
H2 2021 trading activity in the remaining regions, specifically Latin America, the Middle East, and the Rest of World territories that includes India, was positive and these regions on a combined basis reported H2 2021 revenues that were comparable to H1 2021. Full year 2021 revenues, for these regions combined, grew approximately 38% from the US$ 4.3m reported in 2020.
On a product basis, while H2 2021 trading across all product categories increased significantly compared to H2 2020, the most notable, significant driver of H2 2021 trading was the Boomed-screed product line. H2 2021 boomed-screed revenues improved compared to H1 2021 and 2021 full-year revenues for this product line grew more than 100% from the US$ 31.7m reported in 2020. The robust 2021 performance in this product category reflects a high-level of large footprint, non-residential construction projects in the US that includes new warehousing required to support the rapid growth of e-commerce activity, factors that translated to an all-time record in unit sales of the Company's largest boomed-screed, the S-22EZ, in 2021.
Outlook
The Board is pleased with the strong finish to 2021 and looks forward to 2022 with confidence based on the strength of the US market, positive market conditions in Europe and Australia, targeted opportunities for growth from the other regions, and opportunities for growth from new products. Regarding new products, and taking a longer-term view, the Board recognizes the significant long-term value creation opportunity that comes from increasing the Company's addressable market by developing innovative solutions for new applications and market segments. As such, the Company remains committed to investment in product development, sales, and support resources to drive this effort, a necessary near-term investment and cost with longer-term benefit. With a combined view of these factors, the Board expects 2022 will be a highly profitable year with healthy cash generation, modest revenue growth, and EBITDA comparable to 2021 that reflects the planned investment in resources for future growth and the full-year impact of 2021 staffing additions required to support the growth of the business.
Somero's final 2021 results announcement is scheduled for release on 9 March 2022.