Good morning, it's Paul here!

EDIT at 15:19: thanks for all the interesting reader comments today on Somero Enterprises Inc (LON:SOM) - some outstanding contributions, bravo! End of edit.

Somero Enterprises Inc (LON:SOM)

Share price: 280p (down c.20% today, at 09:08)
No. shares: 56.3m
Market cap: £157.6m

Trading update (profit warning)

This company is based in the USA (its largest market), and sells laser-guided concrete screeding machines, to lay perfectly flat concrete floors for warehouses, etc.

I'll spend some time, properly looking into this, because I've always liked this company and am thinking in terms of buying the dip, possibly.

What's gone wrong? 

Trading during the five month period to the end of May 2019 has fallen below management's expectations, primarily due to adverse weather conditions in the US, the Company's largest market. Broad sections of the US experienced the highest levels of rainfall on record.*

[Paul Scott: The asterisk relates to some rainfall data, given at the end of the announcement.]

The record rainfall seen in the US has delayed project starts which in turn has slowed the pace of equipment purchased by our customers, the impact of which was seen through historically strong trading months of March and April.

If this is true, then it fits my definition of a good profit warning - i.e. something that's a one-off negative, and should be easy to recover from. Therefore I'm starting to get interested - re a possible purchase on the dip.

The downside risk is that the adverse weather explanation might be masking a more negative cyclical trend, or a deterioration in Somero's competitive position, possibly?

Things have started to improve - which is positive, and adds weight to the adverse weather argument being true;

Whilst there was an improvement in trading to end the month of May, and although the Company expects weather conditions and therefore trading in the US will improve throughout the rest of 2019, the Board now does not expect the Company to fully recapture the shortfall caused by this extended period of poor weather in the current financial year...

Revised guidance is provided - extremely useful - all companies should do this when putting out a profit warning. If they're not…

Unlock this Article with a 14 day free trial

or Unlock with your email

Already have an account?
Login here