Somero Enterprises Reports Profit Decline in 2024 Final Results
Why we think this is bad
The 2024 final results for Somero Enterprises reveal a concerning trend of declining profitability and margins. Despite a strong finish to the year and the successful launch of new products, the company faced significant headwinds. Revenue decreased by 9.5% to $109.2m, while adjusted EBITDA fell by 24.1% to $27.7m. The adjusted EBITDA margin contracted from 30% to 25%, indicating increased pressure on profitability. Cash flow from operations also declined by 27.9%. While the company maintains a strong balance sheet with no debt, the overall financial performance suggests challenges in maintaining growth and profitability in a difficult market environment. The outlook for 2025, while anticipating moderate growth, is tempered by expectations of continued challenging market conditions and planned investments that may further impact margins. Customer concentration risk appears to be present, with three customers representing 19% of total accounts receivable, potentially exposing the company to significant impact if these key customers reduce their spending.
Key Points
- Revenue decreased by 9.5% to $109.2m (2023: $120.7m)
- Adjusted EBITDA fell 24.1% to $27.7m (2023: $36.5m)
- Adjusted EBITDA margin contracted to 25% (2023: 30%)
- Profit before tax decreased 28.3% to $23.8m (2023: $33.2m)
- Diluted adjusted net income per share down 28.3% to $0.33 (2023: $0.47)
- Cash flow from operations declined 27.9% to $17.6m (2023: $24.4m)
- Net cash position of $29.5m, down from $33.3m in 2023
- New products launched in 2024 contributed approximately $7.6m in revenue
- North American sales declined 7.0% to $82.2m
- European sales relatively stable at $14.6m (2023: $15.1m)
- Australian revenue declined 33.6% to $6.6m
- Rest of World revenue fell 21% to $5.8m
- Customer concentration risk: three customers represent 19% of total accounts receivable
- Final 2024 ordinary dividend of 8.89 US cents per share declared
- Additional supplemental dividend of 4.09 US cents per share announced
- Management expects moderate growth in revenues and EBITDA for 2025
- Full availability of $25.0m credit facility maintained
Summary
Somero Enterprises, a global leader in concrete leveling equipment, reported its 2024 final results, revealing a 9.5% decrease in revenue to $109.2m and a 24.1% decline in adjusted EBITDA to $27.7m. The company faced challenging market conditions, particularly in North America and Australia, which led to project delays and reduced demand for large Boomed screeds. Despite these headwinds, Somero saw improved trading in H2 and successfully launched three new products that contributed approximately $7.6m in revenue. The company maintained a strong balance sheet with $29.5m in net cash and no debt, with full availability of its $25.0m credit facility. However, there's a notable customer concentration risk, with three customers representing 19% of total accounts receivable. Looking ahead to 2025, management expects moderate growth in revenues and EBITDA, but acknowledges ongoing challenges in the market. The company plans to continue investing in new product development and customer-facing resources to drive long-term growth, which may impact short-term profitability.