11/09/2008
Back in May Somero, the US company whose technology enables large concrete floors to be made perfectly level, warned of slowing sales in its domestic market due to clients’ macroeconomic worries.
Half-year results show that, to cushion this blow, Somero's international business has been gaining ground and now provides more than half of revenues.
Chief executive Jack Cooney explained that as the company's overseas markets were still early in their growth phase, they were ‘not affected’ by the US slowdown during this period.
‘Had we not been in the international market it would have been much different – as it is, revenues are only down slightly and margins are maintained.’
However, the vulnerability of the US business remains a worry for investors, as a drop-off in domestic demand for its large-line machines, which are used to level off huge concrete floors in warehouses and Ikea-style outlets, hit numbers for the six months to June.
Group revenues, of which 51.6% came from non-US contracts, shrunk 10% to $31m and pre-tax profits fell 31% to $3.1m.
On the plus side, Cooney states that ‘large line has been a tad better since’ and he has executed a number of measures to cut costs, extracting $300,000 of savings in the first half and expecting reductions of $2.5m over a normal full year.
Cash generation remains robust and the company was able to pay down net debt by $2.1m to $9m and will pay a dividend of 3c a share. House broker Collins Stewart foresees 10p of earnings per share for the full year.
Looking forward, two new products will be introduced in the fourth quarter and Cooney says first moves into the Middle East and China have produced a ‘very positive response’.
This increasing international presence makes Somero a less risky bet and trading on a p/e of less than 4 the shares deserve a re-rating.
| Market cap: | £12.13m |
| PE Forecast: | 3.8 |
| Share price: | 39p |
| AIM | £3.89m |
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| Other company articles: |
| 11/09/2008 |
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