North American demand remained strong for Somero Enterprises Inc (LON: SOM) but trading in the rest of the world was mixed. Cash generation remains impressive.
Somero Enterprises Inc designs, assembles and supplies concrete levelling equipment. There have been some supply problems that have hampered progress and inventory levels have been raised.
In the six months to June 2022, revenues increased from $64.4m to $68.5m – new products generated $3.2m. US revenues were 9% ahead, while European sales fell due to delays in shipping machines. Pre-tax profit dipped from $23.5m to $22.4m. There have been additional costs as part of expansion as well as some inflationary pressures.
The interim dividend is 11% higher at 10 cents a share, which is partly a rebasing of the interim dividend so that it is a larger percentage of the underlying total.
Additional capacity will come on stream before the end of the year and capital expenditure is likely to be lower next year.
Full year revenues are expected to improve from $133.3m to $138.8m, while pre-tax profit may edge up from £45.9m to £46.2m. Net cash of $40m is forecast for the year end. A total dividend of 43.3 cents a share is forecast, which includes an element of special dividend funded by excess cash.
At 415p, the shares are trading on eight times prospective 2022 earnings. Currently, next year’s revenues are expected to be flat and pre-tax profit slightly lower. This reflects the economic uncertainty and is a cautious estimate. Demand is still strong.
The yield is around 9%. Although it will depend on the exchange rate at the time of the dividend payment.
