Somero Enterprises second warning of the summer and profits slide 23%

Florida focused building technology and concrete levelling specialist Somero Enterprises Inc (LON: SOM) will have to have its darling status on the stock market called into question, with its earnings dropping for the first time since 2010.

The Company’s performance has been hampered by unexpected rainfall in the US, with shares diving 40% since June. H1 revenues dropped 13% on a year-on-year comparison, down to $39.0 million. This drove down adjusted EBITDA and profits before tax by 22.8%, down to $11.2 million and $10.5 million respectively. Somero Enterprises added that their cash flow from operations dipped 64.2% to $4.4 million.

The Group’s shareholders had a mixed first half, with their diluted adjusted net income per share down 22.2% from $0.18 to $0.14. However, their interim dividend per share rose 4.5% to $0.0575.

Somero Enterprises comments

Jack Cooney, CEO, said,

“As announced in June, our first six months of 2019 fell short of our full year expectations at the beginning of the year, primarily due to extraordinarily heavy rainfall during H1 2019 in the US that depressed sales in our largest market. The US non-residential construction market remains very healthy, and we are pleased to note that as the weather improves, we expect to see improvement in H2.”

“Whilst towards the end of the period, trading in Europe and the Middle East fell below the prior year in part due to the timing of certain contracts, we remain confident to deliver improved H2 2019 results, broadly in line with guidance for the full year, notwithstanding the wider macro pressures in Europe, particularly Germany, the Middle East and Australia. Pleasingly, a number of our other markets delivered growth, alongside growth from new products.”

“Despite our disappointment with H1 2019 trading, we do not see a fundamental change in our end-markets and maintain a positive outlook for the remainder of 2019 particularly as our customers in the US return to more typical levels of productivity. Our confidence is based on our close customer contacts through which we can assess customer workloads, backlogs and business outlook.”

“We continued to make long-term investments and to add key talent to the organization, striking the right balance of leveraging our flexible operating model to control costs and protect profits with making strategically important investments to grow the business over the long-term. With this operating flexibility and confident outlook in hand, we remain committed to continued sales execution in our core markets, progressing on our new product initiatives, and making sound strategic investments for medium to long-term growth, to deliver strong profits and healthy cash flows to our shareholders.”

Investor notes

After a slight recovery, the Company’s shares have dipped 21.61% or 60.50p a share, to 219.50p a share 04/09/19 15:26 BST. Analysts from finnCap reiterated their ‘Corporate’ stance on Somero Enterprises stock. The Group’s p/e ratio is 8.91; their dividend yield is extremely inviting at 6.65%.

Elsewhere in building and development news, there have been updates from; Barratt Developments Plc (LON: BDEV), Wincanton plc (LON: WIN) and Travis Perkins Plc (LON: TPK).

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Senior Journalist at the UK Investor Magazine. Also a contributing writer at the Investment Observer, UK Property Journal and UK Startup Magazine. Postgraduate of King's College London with a specialisation in Business Ethics. Interested in Development Economics and David Hume.