Somero H1 Trading update - positive end to the quarter

Tuesday, Jul 18 2017 by
10

Bit annoyed as have to rewrite this as the Stockopedia system crashed as I was trying to post it....

Somero 280p
Mkt Cap £156m
StockRank 96

The important bit is that there has been a pickup in trading at the end of H1 and the Group is on track to meet market expectations

The US, the Group's largest region saw revenues down a bit in H1. This weakness had perplexed me after the AGM statement and I had mentioned it to a fund manager friend. He said he had met the CEO recently and that Jack Cooney had mentioned that the US had been wet over H1. I went to NOAA to verify this https://www.ncdc.noaa.gov/temp-and-precip/us-maps/3/201705#us-maps-select  (have a look at the precipitation maps) 


596dc3dca2341Picture2.png


Well it turns out it has been REALLY wet in Spring 2017. It was the 11th wettest Spring in 123 years. Why didn't the Group or its advisers think to mention this at the AGM ? It would have explained why they were optimistic about the second half. This data point would have had good explanatory power.

Europe sounds like it is going gangbusters and Latin America and RoW (which doesn't include China) are also growing nicely. Not much more quantitative data is given. I am not sure why not, As an aside regarding data on the Group, I think management has put so much into improving trading in the last 4 years that it has really neglected certain, non operational parts of the business like the Investor Relations website. Have a look here https://www.somero.com/investors/investors/. Companies like Somero need to be aware that MIFID II will see less research available for small caps and that they need to go the extra mile to help investors, both institutional and retail. Somero just gives the bare minimum. Management teams must realise there is a competition for investor capital. Investors have hundreds of companies to choose from, so if they cant easily get data regarding a company, what it does and why to invest, they will go elsewhere. If you see management, please tell them ! The difference that companies like H2Glenfern, Heartwood Partners and Oakhall Advisers make when they help companies to communicate to investors is noticeable is both the results and shareprice.

Overall the…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way

Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


Do you like this Post?
Yes
No
10 thumbs up
0 thumbs down
Share this post with friends



Somero Enterprises, Inc. is a manufacturer of laser-guided equipment. The Company's equipment automates the process of spreading and leveling volumes of concrete for commercial flooring and other horizontal surfaces, such as paved parking lots in North America. The Company's products include S-22E, S-15R, S-15M, STS-11M, S-840, S-485, CopperHead XD 3.0, Mini Screed C, PowerRake 3.0, 3-D Profiler and SiteShape. Its Somero Floor Levelness System monitors Laser Screed performance, operator performance and reports alert percentages of issues. The Somero SiteShape System allows for grade shaping automatically using users' motor grader, dozer or other grading machine. The Somero 3-D Profiler System allows automatic paving of contoured sites using a Somero Laser Screed equipment. The CopperHead XD machine encounters applications, such as chaired rebar, low slump and poor subgrades. The Somero eXtreme Platform (SXP) allows users use their Laser Screed equipment. more »

LSE Price
365p
Change
 
Mkt Cap (£m)
205.6
P/E (fwd)
11.4
Yield (fwd)
5.4



  Is LON:SOM fundamentally strong or weak? Find out More »


16 Posts on this Thread show/hide all

doug2500 18th Jul '17 1 of 16

You're quite right about the website - I was trying to find the last annual report (to check how big a part of the business Europe was) and I couldn't find it.

Still, it's ticking along nicely.

| Link | Share
iwright7 19th Jul '17 2 of 16

Vegpatch,

Nice analysis of the US position and the reason for H1 caution. The SOM metrics that stand out to me are the Quality score of 100 and the PER of just 13.1. These too don't tally and based on an optimistic H2 outlook I topped up again yesterday. Ian

| Link | Share
VegPatch 19th Jul '17 3 of 16

Careful on the Quality score Ian, this business can be very cyclical. Sales and margins cratered in 08 and 09. They are currently riding high but it wasn't always thus. I share your general sentiments though.

| Link | Share | 1 reply
timarr 19th Jul '17 4 of 16
1

Worth remembering that the collapse in 08/09 wasn't entirely due to the environment. Their VC owners loaded them with debt before launching on AIM so that when the recession hit they weren't in any position to respond. Management did a remarkable job just keeping them going. In a future recession I'd expect them to be hit hard, but not to see the business itself under any kind of threat.

Which is not to disagree with the comments on cyclicality.

timarr

| Link | Share
Dean brooks 19th Jul '17 5 of 16

To be fair they did a video interview and explained the wet weather.

| Link | Share
VegPatch 19th Jul '17 6 of 16

I missed that. Thanks for pointing it out. I will have a look. It also doesn't explain why the bad weather wasn't more prominently explained in the RNS.

Re cyclicality
Have a look at my post from March 2015. It explains the margin movements in the last downturn.
http://www.stockopedia.com/content/somero-good-portents-from-ashteads-q3s-and-only-on-a-pe-of-10x-growing-topline-40-93646/ (shares were only 113p !)
Sales fell massively in 2007, gross margins fell from 55% to 48%
EBIT Margins fell to negative 8% in 2008 and 2009 (they were negative 65% in 2007 but I must assume there were exceptionals in this number?!!)
Ok this was the biggest downturn in decades, but if you are a contractor and business is drying up, you just don't buy a spanking new laser guided screed machine. So I guess I am saying there will be drops in turnover again, just don't fall in love with a share because it's quality now.

| Link | Share
iwright7 19th Jul '17 7 of 16
1

In reply to post #200495

Vegpatch,

I agree about not falling in love and in fact I am quite detached having top sliced 60% of my Somero Enterprises Inc (LON:SOM) holding as part of a Sell in May and Go Away strategy.

But I do take note of +ve updates and the combination this with of a overall Q score of 100 and a cheap price is just too good to miss. For any of you who doubt the Q score approach the more conventional Somero Enterprises Inc (LON:SOM) return numbers are fantastic too: (ROCE = 43% , ROE = 33%, ROA = 25%, ROIC = 44%, CROIC = 74%).

Looking forward to the H1 results and further update on 6th September. Ian

| Link | Share
Ramridge 19th Jul '17 8 of 16
3

Vegpatch -
This is a quality stock and well done to those who have been riding it for a while.
As a momentum investor, I am not sure about its future SP trajectory.
- The SP has been on a downward path since mid-April.
- The recent trading update concluded that the results for the full year are expected to be in line.
- Sales growth and eps growth are showing a downward trend from current year to forecast year +1 to forecast  Year +2 , as follows
sales growth 13% 6.7% 4%
eps growth 23% 9.6% 6.4%

The share has a lot of pluses, but unfortunately for a momentum investor this is not a good picture.


| Link | Share | 2 replies
iwright7 19th Jul '17 9 of 16
1

In reply to post #200527

Ramridge,

The broker forecasts for +1 and +2 look very low. I suspect these will prove to be too far conservative and leave room for upgrades by the broker and the company. We have had Earnings Surprises from Somero Enterprises Inc (LON:SOM) in the past. More upside risk I believe.

| Link | Share
simoan 19th Jul '17 10 of 16
1

In reply to post #200527

This is a quality stock and well done to those who have been riding it for a while.
As a momentum investor, I am not sure about its future SP trajectory. 

What kind of investor is sure about the future trajectory of any share price? Whatever method you use to value shares and make investment decisions, to believe you can predict the future based on what you know today... that way madness lies. The problem with adhering to any single rigidly enforced approach to investing is that it will keep you out of as many good companies as it prevents you investing in bad companies - that's life! 

Somero Enterprises Inc (LON:SOM) is my biggest holding and one of the reasons for that will not show up in the StockReport or in a share price chart. It's the quality of the management and the whole company ethic, how it interacts  with and supports its customers. It seems a very simple thing to replicate, but really it's not. Of course, this won't count for much were the US to go into a recession but there's absolutely no sign of that whatsoever. 

All the best, Si


| Link | Share | 2 replies
Ramridge 19th Jul '17 11 of 16

In reply to post #200555

Si - calm down, dear. I never implied or said that I can predict the future.
We all as investors make value judgements. Why are you holding these shares? Because you have made a value judgement that the SP will be higher over the medium term.
Well, I am looking at it from my perspective and simply saying that over my time horizon and risk appetite, I disagree.

That's fine. It takes 2+ people to make a market.

| Link | Share | 1 reply
iwright7 19th Jul '17 12 of 16
1

In reply to post #200555

It's the quality of the management and the whole company ethic, how it interacts with and supports its customers. It seems a very simple thing to replicate, but really it's not.

I couldn't agree more with this sentiment and SOM is known for its superb training and 24/7 service. What does show in the Stocko figures are the exceptional return numbers which are impossible without tip top management and a strong MOAT around the business. 

| Link | Share
simoan 19th Jul '17 13 of 16
2

In reply to post #200563

Si - calm down, dear.

I'm not sure I understand why you feel I need to calm down? I am perfectly calm, relaxed and in a really good mood. Obviously I don't know what you read in my words that made you think I was in some way agitated, but take it from me I'm not. However, it's not the first time you've replied in this way to my posts... perhaps it is just my writing style and I should stop posting?

All the best, Si

| Link | Share | 1 reply
VegPatch 19th Jul '17 14 of 16
4

One of the best things about Stockopedia is the mostly good natured and respectful posting. Investors (rather than traders) try and help each other out.

Go to ADVFN and if one person advises another to calm down (think Harry Enfield in taches https://www.youtube.com/watch?v=STIvNjWobzA) people go ballistic. There are some proper muppets on there. Echo chamber...more like holding a 1 trillion amp ACDC concert in a snails shell with all the exits blocked!

Long live respectful and divergent views.

| Link | Share | 1 reply
matylda 19th Jul '17 15 of 16
2

In reply to post #200579

Agreed - Let's keep it level headed and allow Bull and Bear views here - Without the nonsense.

Blog: Briefed Up
| Link | Share
Richard Goodwin 20th Jul '17 16 of 16
2

In reply to post #200571

Please don't!

| Link | Share

Please subscribe to submit a comment



 Are LON:SOM's fundamentals sound as an investment? Find out More »





Stock Picking Tutorial Centre



Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis