Financial Highlights
|
|
FY17 |
FY16 |
% Increase |
|
Revenue |
US$85.6m |
US$79.4m |
8% |
|
Adjusted EBITDA(1,2) |
US$28.0m |
US$24.6m |
14% |
|
Adjusted EBITDA margin(1,2) |
33% |
31% |
200 BPS |
|
Profits before tax |
US$25.7m |
US$21.3m |
21% |
|
Adjusted net income(1,3) |
US$17.5m |
US$15.6m |
12% |
|
Diluted adjusted net income per share(1,3) |
US$0.31 |
US$0.27 |
15% |
|
Cash flow from operating activities |
US$19.8m |
US$17.0m |
16% |
|
Net cash(4) |
US$19.0m |
US$20.2m |
(6%) |
|
Ordinary dividend per share |
US$0.155 |
US$0.111 |
40% |
|
Supplemental dividend per share |
US$0.036 |
– |
N/A |
· Annual revenues grew to a record US$ 85.6m, up 8% from 2016
· Healthy profit conversion and cash flow generation:
· Adjusted EBITDA increased 14% to a record US$ 28.0m (2016: US$ 24.6m)
· Adjusted EBITDA margin improved to 33% (2016: 31%)
· Cash flow from operating activities increased 18% to US$ 19.8m (2016: US$ 17.0m)
· Strong, secure financial position:
· Debt-free balance sheet
· Strong cash flow generation leading to a net cash position at 31 December 2017 of US$ 19.0m despite US$ 13.9m of dividend payments in 2017
· Increased dividend payout ratio to 50% of adjusted earnings for 2017:
· Final dividend of 12.75 US cents per share declared for a total 2017 dividend of 15.5 US cents per share, a 40% increase over last year
· Supplemental dividend of 3.6 US cents per share declared to be paid with final 2017 dividend
Operational Highlights
· Growing contribution from international markets and healthy demand across entire product line:
· Four of six regions grew in 2017 led by Europe, North America, Latin America and Rest of World territories
· Sales of Ride-on screeds grew 29% to US$ 18.6m (2016: US$ 14.4m)
· 3-D Profiler System® revenues grew 11% to US$6.8 (2016: US$ 6.1m)
· Other revenues, driven by sales of parts and accessories grew 12% to US$ 18.7 (2016: US$ 16.7m)
· New products contributed meaningfully to growth
· Planned move into a new leased facility in Chesterfield, UK in Q2 2018 to accommodate growth
Jack Cooney, CEO of Somero, said:
“2017 was a strong trading year for Somero delivering a financial performance ahead of market expectations. We delivered record revenues, profits and cash flow from operations for our shareholders. We have made significant progress on executing our strategy and now, as we enter the last year of the five-year plan we established back in 2014, we are closing in on achieving our target of US$ 90m revenue in 2018. While we have seen many changes in recent years, the one constant has been our unrelenting commitment to helping our customers build successful, profitable businesses. It is this tremendous effort and passion of our employees who pursue this mission day in and day out that earns the loyalty of our customer base and delivers these exceptional results for our shareholders.
Somero is financially stronger than ever and well positioned to capture growth across our broad global footprint. We have identified a broad range of opportunities in related products and new markets, and our secure financial position will therefore enable us to increase investment to accelerate product development initiatives over the next year. In addition, the Board has adopted a supplementary dividend policy to enable the distribution of any excess capital to shareholders. All the while, as we work to execute our growth strategy, I am confident the Company will deliver strong results and dividends for our shareholders that will continue to create shareholder value.”
Chairman's Statement
Performance and Dividend
I am pleased to report that Somero has delivered another year of outstanding results for our shareholders in 2017. It was a very successful year, with record sales and profits, growing contributions from our international markets, new product launches contributing meaningfully to growth, a significant and meaningful return of cash to shareholders through dividends, and most importantly, continued progress on identifying new product and new market opportunities.
I am also delighted to report that with the Company's impressive 2017 results, healthy financial position, and the Board's confidence in the business outlook, the Board has approved increasing the dividend payout ratio to 50% of 2017 adjusted net income. The increased payout results in a final 2017 dividend of 12.75 US cents per share payable on April 20, 2018 to shareholders on the register at April 3, 2018. Together with the interim dividend paid in October 2017 of 2.75 US cents per share, the 2017 full year regular dividend payment to shareholders is 15.5 US cents per share, a 40% increase from 2016.
In addition, upon completing the review of the Company's year-end cash position and cash requirements for the coming year, the Board has also decided to adopt a supplementary dividend policy. Going forward, the Board will look to maintain a target net cash balance of at least US$ 15.0m, measured at each year end and intends to distribute 50% of the excess of net cash over the year-end target in the form of a supplemental dividend. The cash reserve figure has been raised from US$ 10.0m previously considered to be acceptable, reflecting the increased scale of the business and capital requirements for future investment and product development. The Board believes this policy strikes the appropriate balance between maintaining an adequate cash reserve to manage the business and providing a disciplined return of capital to shareholders. This policy will be subject to periodic review.
The Board has therefore approved a supplemental dividend of 3.6 US cents per share that will be paid at the same time as the final 2017 dividend. The combined regular and supplemental dividend to be paid on April 20, 2018 will be 16.35 US cents per share, a significant and meaningful return of cash to our shareholders.
Strategic Progress
2017 was an important year of significant progress. Revenues from our international markets contributed meaningfully to growth during the year representing US$ 5.0 m in net growth for 2017. In 2017, 32% of total revenues came from regions outside of North America combined, up from 29% in 2016. We are focused on driving international growth and further diversifying the Company's geographic revenue base. We will do this by adding additional resources, such as we did in Europe and India in 2017, and by continuing to promote adoption of wide-placement theory and quality concrete flooring standards across the globe.
We have also enhanced our product development process. In 2017, Somero allocated more resources to developing innovative, new solutions for our customers with a focus on identifying new market segments, such as structural high-rise buildings, where the Company can leverage its core technology and expertise. 2017 also represented a full-year of Somero Innovation Council meetings, which are comprised of a broad group of industry experts that provide input on new product concepts. The Somero Innovation Council has been an invaluable resource to understand customer challenges and needs, and ultimately to identify potential innovative solutions. Somero new product development is and always has been a customer led process. We understand customer involvement throughout the development cycle is critical to ensure our ideas turn into tangible products that create meaningful value for our customers.
Lastly, Somero took another step forward in its commitment to training and education in the concrete contractor industry with the launch of the Somero Concrete Institute (“SCI”) in 2017. The SCI combines classroom education with hands-on training in the placement and finishing of concrete floors. The SCI is a unique endeavor, and we believe a strategically important one as well, to help address the significant shortage of skilled labor in the concrete contractor industry.
Our People
Somero's 177 employees around the globe are the engine that drives the Company. Somero is a people business built on strong employee and customer relationships. Our passionate and dedicated workforce is the foundation of our success and the Board remains committed to ensuring we create the most productive and rewarding work environment possible for each of our employees.
Current Trading and Outlook
The high level of activity in North America during the latter part of 2017 has continued in 2018. We continue to see strong interest in our equipment and remain encouraged by the positive non-residential construction outlook in the US for 2018. The expected positive impact from US corporate tax reform is an additional factor reinforcing our confidence in North American growth prospects.
In Europe, the strong performance of 2017 is also expected to carry forward into 2018. Similar to conditions we see in the North American market, European interest in our equipment remains strong driven by demand for replacement equipment, technology upgrades, and new products. Our confidence in the growth prospects in Europe is supported by improved economic conditions across the territory.
In China, healthy interest in our products continues and we expect to see further improvement in 2018 driven in part by our marketing and demand generation initiatives that gained traction in H2 2017. Although it has taken longer than expected to gain a significant foothold in this important region, longer-term we see a sizable opportunity in the quality-oriented market segment and plan to continue our market development efforts to promote wide-placement methods and flatness and levelness standards to target this segment. In addition, we will continue to grow our customer base by offering competitive entry-level machines, such as the S-158C, that target the productivity-oriented market and provide future up-sell opportunities.
In Latin America, we expect solid performance from Mexico and growth opportunities from the other countries in the region. In our other regions, including the Middle East and our Rest of World territory, we expect to see significant opportunities in 2018 and beyond and, importantly, are encouraged by the positive economic climate across this broad territory.
The Board believes the Company has many meaningful growth opportunities in 2018 across its broad portfolio of markets and products and is confident that Somero is poised to deliver another year of profitable growth to shareholders in 2018.
Larry Horsch
Non-Executive Chairman