I hold SOM and I know a lot of Readers do as well. The Chart below is showing a lovely Uptrend and I have used the ShareScope Toggle the Trendlines Button to put those Lines in. SOM made a new All Time High last Week and this is Bullish Behaviour. With an AGM on Tuesday 12th June I am expecting SOM to keep moving higher in the run up to that - Better to Travel than to Arrive and all that.
On a Forward P/E of 14 and a Forward Divvy of 4.7% it still looks cheap to me (Note, I have taken the Forecast Numbers from ShareScope of 40 Cents EPS and 27 Cents for the Dividend for 2019 and converted them into Pounds/Pence using 1.35 as the Exchange Rate)."
It's been reported that Kroger's new contract with Ocado to use their technology implies a nationwide rollout across the USA of e-commerce warehouses furnished with advanced robotics, with substantial capital spending.
This is a very good indication of where the world is heading - and why SOM's products, which are globally dominant for this type of warehousing, are so in demand.
High-tech concrete levelling might not sound like the most fascinating specialism, but Somero Enterprises (SOM) is proving just how lucrative this industry can be. Last years performance took Somero ever closer to its $90m sales target for 2018. And the company now targets a net cash balance of at least $15m, with plans to distribute 50 per cent of excess cash as a special dividend.
Where could future growth lie? Europe has enjoyed excellent revenue momentum, and the equipment fleet here may be due for technological upgrades, possibly engendering new opportunities. Meanwhile, bosses have identified a serious addressable market in China and also plan to focus on wider international expansion, along with new product development.
At 395p, Somero trades on a multiple of 15 times broker FinnCaps forecast adjusted EPS for 2018. More demanding than when we tipped the company (279p, 28 Dec 2017), but supported by compound annual revenue growth of 17 per cent from 2013 to 2017, and the attractive prospect of supplementary dividends. Buy."
"The Industry's Best! Proof - for 2017 the S-22 won 3 Golden Trowel Awards and set a world record for the levelest floors in the world! Also industry leading production rates, unsurpassed power, features, and maneuverability.
New for 2018: EZ Clean Head, compartment layout, convenience items, improved ergonomics. With so many exclusives, the S-22EZ options platform allows you to build the machine the way you want
I guess there is some nervousness about trade wars - Dow down yesterday as China announces tariff tit for tats. Done expect that SOM will grow much in China next year but you never know. On thee other hand growth elsewhere especially in the US should balance that.
An excellent presentation, well worth listening to.
The section about the new high rise product from 11 minutes in particular is very exciting, especially as they're expecting decent sales from as early as Q4 of this year.
This year's January selling trade show in the USA was their "best show in 10 years" with attendances up, customers "really busy", "work going into next year" etc. In Europe customers are "getting busier" - "all across Europe".
Howard Hohman, EVP Sales
2017 highlights 1:24
Sales by territory 2:38
Sales by product 3:38
John Yuncza, CFO
Financial highlights 4:16
Operating results - 6:17
Balance sheet 8:17
Cash flows - 8:40
Dividend policy 9:03
US tax law changes - 9:47
Jack Cooney, CEO
Current trading & outlook - 10:21
Discussion about the new vertical screeding product 11:30
Marketing and development spend - 24:56
Chinese market - 26:20
India - 30:10
Share options - 32:35
Forward visibility - 33:15
Cyclical nature of construction industry - 34:39
Cash/debt position - 37:17
Weather & new tax rate - 38:32
Manufacturing flexibility - 39:25
Regional operation - 41:22
H2 weighting - 42:37
Outlook for 2018- 44:45
Europe - 46:10
elsewhere from Glaws2 and rhomboid, which I hope they won't mind me posting here. The new high rise machine sounds very exciting. I love SOM's caution and work in ensuring that the demand is out there.
Firstly from Glaws2:
"I went to a management presentation yesterday - some feedback from that :
Tax rate reduced to 28% for year (from 33%)will reduce to 21% going forward
Main US trade (selling) show (World of Concrete in Las Vegas in Jan) busiest they have encountered in a decade. All customer feedback from both US and Europe is that the market is very strong and continues from the 2017 H2 strength.
See signs of growth in Middle East, Latin America and ROW
India a particular growth area sales grew from $100k in 2016 to $745k in 2017; now have 3 people in country. Generally small scale projects, lack of infrastructure means large warehouses cant be supported.
China expected to grow (up until now demand has been generated by multi-nationals demanding quality in the country) are increasingly hopeful that local operatives will now buy. My gut feel dont see that there will be much growth here)
Have been developing a machine to screed in Structural High Rise sector. Concept developed after meeting with concrete contractors identified need. This opporutinty has
New market for Somero
Different customer base
Have not been able to quantify the market only establish a need
Prototypes developed been working on this for 12 months now
Expected to go into production in Q4 2019 with first revenues in 2020.
In summary - management were very bullish."
And from rhomboid:
"I attended the same presentation but your summary is better than mine would have been , some additional points
1) they mentioned U.K. was growing strongly, one customer Stanford flooring had just ordered $1.2m of equipment.. this is them;
I was intrigued to see how credit worthy these customers were so pulled the accounts and was amazed to see they have c 40 staff but make over £5m a year profit which is v reassuring in the context of Somero enjoying v high margins, it seems everyone at the top end of the concrete flooring market may be doing the same!
Secondly on the new high rise product I asked could it be Somero2 ie a similar size market to the one Somero addressed with their current products back in the day. Howard as the main sales guy was nodding his head vigorously..before Jack could utter slightly more cautious but still bullish statements..
Thirdly to ensure the new product was what the market wanted they got a panel together of some industry experts over 2 days, that feedback is informing the product design, they may need some modest bought in additional engineering expertise to get it to market, theyve already had prototypes out at work. In terms of the market size my take is they didnt see the need to scope it accurately as they were in no doubt it was big enough to get excited about.
Fourthly , they have a v flexible make to order assembly operation and theyve never been unable to deliver in a timely fashion, because theyve high margins theyre happy to keep inventory high to facilitate this.
Finally all their products (inc the new high rise) are expected to deliver similar margins.
"SHARES IN CONCRETE levelling specialist Somero Enterprises (SOM:AIM) hit an all-time high of 379p following the publication of its full year results on 14 March.
The 2017 numbers were very impressive with pre-tax profit up 21% to $25.7m, a 40% increase in the ordinary dividend, the declaration of a special dividend and the continuation of a debt-free balance sheet.
The company tells Shares that the performance was down to the sales team capturing business opportunities, good execution and positive market conditions.
As well as winning new business, existing customers are either buying more equipment from Somero to expand their fleet or upgrading old kit with new technology ¡V the latter particularly the case in Europe. Approximately 15% of revenue comes from sales of spare parts and components.
Product development continues to be very important. For example, it is looking to engineer solutions to place concentrate on multiple stories of high-rise properties.
SHARES SAYS: ¹
This is a well-run business generating significant value for shareholders. China is the only weak part of Somero where operations have been below the board¡¦s expectations. It continues to believe there is a bigger opportunity in this part of Asia.
We remain fans of the business and still rate the shares as a ¡¥buy¡¦ despite recent share price strength."
Finncap's increased 465p target price is summarised as follows FYI:
"Full-year results ¡V dividend turbo boosted
Full-year results were slightly above expectations and point to being on track to exceed our previous FY 2018 forecasts slightly. Market conditions remain robust in its main US market, with significant growth seen in Europe. A revised dividend policy gives new clarity to cash returns, (backed by $19m of net cash), and triggers a strong uplift in ordinary dividend plus a supplementary dividend. The shares remain attractive on an earnings basis but also have premium yield attractions. Our raised 465p TP is based on a P/E of 17.0x in 2018 and 16.0x in 2019 and offers strong upside scope to the shares. Market conditions remain favourable and cash returns underwrite our positive stance.
Results were slightly better than the year-end update, with a strong December. Revenue increased by 8% to $85.6m, with EBITDA at $28.0m, an increase of 14%. Adjusted PBT was $26.2m up 19% and following a lower tax rate adjusted EPS at 33.3ȼ, was up 27%. A final dividend of 12.75ȼ was declared, making 15.5ȼ in total ¡V a 40% increase. A supplementary dividend was declared at 3.6ȼ ¡V tobe paid alongside the final. Net cash of $19.0m, was down $1.1m on the prior year with $19.8m of operating cash flow and $13.9m paid on dividends.
Four out of six regions saw growth. The US was up 2% with a strong H2 following a weaker H1, with a strong outlook. Europe was the star performer, seeing 54% growth, helped by strengthening economies. China was down 14%, but is responding to marketing measures instigated later in the year. LATAM was up 35%, offsetting a weaker Mid-East. New product introductions continue to boost sales growth. Ride on screeds were up 29%, with stronger 3D profilers and accessories & spares also strong. Remanufactured sales were down 5% and in part reflect the Chinese experience.
We slightly upgrade our 2018 forecasts, with a $0.7m increase in adjusted PBT to $27.7m, boosting EPS by 2.5% to 37.7ȼ. We introduce new 2019 forecasts based on modest sales growth of 4.4% and EBITDA margins of 32.1%, giving YoY EPS growth of 6%. Cash conversion remains strong, allowing a 39% upgrade to annual dividend in 2018 and significant further scope for supplemental dividends.
The shares have been strong performers over the past year, reflecting robust market conditions and the gain from US tax changes. We increase our price target from 450p to 465p pointing to a P/E of 17.0x in 2018 followed by 16.0x in 2019. Cash returns and a 5.4% yield are key features of the investment case. We therefore still see upside to the shares and remain positive on the group¡¦s prospects."
Record full-year revenue took Somero (SOM) within striking distance of its $90m (£65m) sales target. The concrete levelling specialists adjusted cash profit also reached a new high, rising 14 per cent to $28m. In somewhat of a hat-trick, operating cash flow simultaneously rose to an unprecedented $19.8m from $17m year on year. Topping off an excellent set of results, Somero has updated its dividend policy: management now targets a year-end net cash balance of $15m, whereby 50 per cent of any surplus cash will be distributed to investors for 2017, this meant a special dividend of 3.6¢ a share.
The proportion of non-US revenue rose to 32 per cent, reflecting an increasingly diversified top line. Europe was the star performer with eye-catching growth of 53 per cent to $12.2m. Management says the company's European equipment fleet is relatively old so technological upgrades could breed new opportunities.
China endured a 14 per cent decline in sales to $5.5m, largely driven by a sluggish first half. Somero still sees a strong opportunity to expand its market presence here, albeit over a longer timeframe. Middle Eastern sales also fell 28 per cent to $2.1m, although activity levels were maintained.
Analysts at finnCap forecast adjusted pre-tax profit of $27.7m and EPS of 37.7¢ for 2018, up from $26.2m and 36.5¢ in 2017.
Trading on an undemanding forward multiple of 14, the shares still represent good value particularly given managements confidence in US growth prospects. The new dividend policy is an added bonus. Buy."
It's a busy reporting day for me - 4 companies I hold shares in all reporting finals. The first 2 I looked at were both doing so well they were awarding special dividends (next 2 not so good) but for half an hour or so life was good.
Agree with all you say Gretel: very good results and all indicators suggest more of the same in the future.
Excellent results - well ahead of forecasts for sales, EBITDA, PBT and EPS.
PBT of $25.7m compares to just $24m forecast by Finncap.
And 0.31c EPS compares to forecast 27.4c. Upgrades coming for this year?
Plus there's a 3.6c special divi on top of the 15.5c normal divi.
Most importantly, current trading for both the USA and Europe is very strong indeed:
"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."
Results will be on 14th March. With a booming US economy, huge potential in China and India and this outlook from January, there's every reason to believe SOM's upswing will continue for some time yet:
Following record results in 2017, the Board is confident in the Company's ability to deliver another year of profitable growth in 2018 as the underlying market conditions in our core markets remain positive and as the Board continues to see significant growth opportunities in our other territories. The Board's confidence is further supported by recently enacted pro-growth US corporate tax law changes which are expected to stimulate increased economic activity in the Company's largest market."
The recent trading update whilst very upbeat says sales revenue only up by around 5 percent you.
PE ratio is at it's highest since I bought in in early 2016.
I,m very happy to hold here, but am not surprised we are not heading towards the broker,s latest target of 480p just yet. Not too long to wait however!
Yes I don't really understand the recent weakness - the weakening $ may be partly to blame, but we are now where we were before the trading statement; which was very positive, and subsequent press comment has been too.
Paul Scott is a SOM holder - he's commented as follows this morning on Stockopedia:
"Positive update from Somero Enterprises Inc (LON:SOM) today (disclosure: I have a long position)- a very nice, niche business, which makes the laser-guided machines used to lay perfectly flat concrete floors (very important for warehouses). Being based in USA, it should hopefully benefit from tax reductions.
EDIT: I've just seen a broker note, upgrading 2017 EPS forecast by 7.7% to 29.5c, and 2018 by 7.0% to 36.8c. That translates into 21.8p and 27.2p, giving a 2017 PER (based on share price now of 360p) of 16.5 times, and a 2018 PER of 13.2.
Conclusion - it still looks cheap, based on 2018 forecasts. Also note that it has a strong balance sheet, and reports net cash today of $18.5m. Positive outlook comments too. Very nice."
I've had similar issues before. Even though I had filled this in before and the fact I already owned shares proved I must have.
Excuse I was eventually given by Selftrade was that the form needs renewing every 3 years. But they don't warn you that its run out if that's the case. First you known is when you come to sell/buy.
I've not had this problem with other brokers, so treat what Selftrade say with a great deal of sceptism. Anyway that's the reason they gave me.
You should check your last dividend because without this form being up to date then you would have paid 30% tax on it to US authorities instead of 15%.
On the strength of this update I decided to top up my holding, expecting the share price to rise quickly in the early minutes of trading. When I checked in it looked like I'd be paying about 356. I had to complete a W 8BEN before I could trade. This took about 20 minutes & I ended up paying 364.
I did not have to fill in a W 8BEN when I originally bought & I thought the form was for where the company was listed, not where it was registered.
Not too bothered as this is a long term growth story.
"Following record results in 2017, the Board is confident in the Company's ability to deliver another year of profitable growth in 2018 as the underlying market conditions in our core markets remain positive and as the Board continues to see significant growth opportunities in our other territories. The Board's confidence is further supported by recently enacted pro-growth US corporate tax law changes which are expected to stimulate increased economic activity in the Company's largest market."
Finncap's note yesterday supporting their increased 420p target succinctly summarises the US tax reforms I've been banging on about as follows:
"Tax changes. The US tax reforms proposed by the US President passed into
law just before Christmas. The main change is to reduce the headline
corporation tax rate from 35% to 21%, effective 1 January 2018. Profits made
overseas are also allowed to be repatriated back to the US tax free, and a
partial amnesty on historic profits at reduced rates. A readjustment of the
companys deferred tax assets is expected, which will be a one-off non cash
item. In addition, the reforms allow a more generous, immediate expensing of
capital equipment purchases, which is expected to result in customers
accelerating their purchasing of equipment in the short term, while also
potentially stimulating longer-term investment plans by manufacturers."
They've increased EPS for this year by almost 20% to 34.4c, and the forecast cash pile rises to $26.8m - potentially bringing another special dividend.
I just think the share price have been marking time for most of the year year after the meteoric rate of increase in the share price during 2016 and early 2017. I've been happy just to see the cash returns from the divis during the year . Journalists may have some effect having noticed a dip in the share price but they are only writing about the strong fundamentals of the business and its low valuation which I hope will continue to out when the forthcoming trading statement and results are reported.
There should be a one off boost to earnings once the new taxes in the USA are implemented. Enabling the production of smooth floors, with lower labour costs seems a niche business with more growth potential.
I'm expecting to hold until there are signs of new entrants, some disruptive technology emerges or the Company is bought out.
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