MIDAS SHARE TIPS UPDATE: Concrete gains from Somero


MIDAS SHARE TIPS UPDATE: Concrete gains from Somero Enterprises, an expert in flooring

Concrete is the second most widely used substance on Earth, beaten only by water on the global stage. More than 30billion tons of concrete are poured each year, a substantial proportion of which goes into flooring. 

Individual homes and blocks of flats; factories, warehouses and offices; schools, hospitals and Government buildings – they all rely on concrete flooring and those floors need to be flat. 

Somero Enterprises specialises in high-tech machines that help builders flatten concrete smoothly so flooring work is up to scratch and there are no awkward lumps or uneven surfaces. 

Hard work: Somero Enterprises specialises in high-tech machines that help builders flatten concrete smoothly so flooring work is up to scratch

Based in Florida, Somero is a recognised leader in its field, shipping machinery to more than 100 countries worldwide and offering round-the-clock technical support in 65 languages. 

Midas recommended Somero in 2016, when the shares were £1.36. The shares closed at £4.12 last week, after chief executive Jack Cooney unveiled record half-year sales, strong profits and an 11 per cent increase in the dividend. Cooney also expressed confidence about the future, suggesting that demand for Somero’s products remains high, despite slowing economic growth in many parts of the world. 

Cooney and his team are highly focused on rewarding shareholders too, paying out substantial sums each year through ordinary and special dividends. This year, a payout of 43.3 cents (37.75p) is forecast, rising to 48.7 cents in 2023. The company declares its results in dollars, as it is based in the US and makes most of its sales there. However, UK shareholders receive dividends in sterling, an advantage when the US currency is strong, as it is now. 

Somero has thousands of customers, contractors who specialise in the commercial market, where specifications about flooring can be particularly rigorous. The group makes a range of machines, from smaller, less advanced equipment costing around $50,000 to highly complex kit changing hands for up to $500,000. 

Some machines are more suitable for compact spaces, others for huge warehouses or industrial plants. Cooney is constantly updating the range, making existing kit more technically advanced and introducing new variations, such as machines that can be used for multi-storey buildings or even products designed for cowsheds and chicken barns. 

This constant expansion gives Somero access to new customers, while existing firms tend to come back for the latest models, expanding their fleet or trading in old for new. Cooney is making a determined push into new markets too. 

The company has tried to expand into China and other parts of Asia, but flooring specifications are less exacting in many of these countries, so Cooney is now focusing more on developed regions, particularly Europe and Australia, as well as North America. 

The company should also benefit from the persistent shortage of labourers in the construction sector, as its kit dramatically reduces the need for manual workers and delivers more precise results.

Midas verdict: At £4.12, Somero is yielding more than 9 per cent, offering a real income cushion as inflation bites. Shareholders have been well rewarded from this US business over the past six years, but they should retain their stock. New investors might also consider digging into these shares. Analysts believe they are worth more than £8. 

Traded on: AIM Ticker: SOM Contact: somero.com or 001 239 210 6519 

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