Energy and Industrial Services Push Seven Group Higher
In its first-half report, the industrial services and energy sectors outperformed other aspects of Seven Group Holdings’ businesses. The diversified group, which owns Coates Hire, SGH Energy, WesTrac, Seven West Media and a part of Beach Energy has reported a 26 per cent drop in statutory net profits to that of $38.9 million. Specifically, its performance was weighed down by a $104 million impairment in its Bivins energy assets and a $112.7 million impairment of Seven West Media.
Nevertheless, the group’s chief executive Ryan Stokes was of the view that the robust first half was attributed to the company’s operational focus and strategic capital investments within the energy and industrial services. Seven Group Holdings declared a fully franked dividend of 21 cents per security, similar to that of the previous period.
More recently, Caterpillar dealer WesTrac has implemented a new way to sell used, repaired as-new parts through its Mining & FlexiParts Services. In doing so, the company hopes that the new business will provide more economical parts and machinery to the sector. Moving forward, FlexiParts will become a separate entity whose emphasis surrounds sourcing and selling parts to its consumers from all over the globe.
As a result of the current macroeconomic condition, the group’s media business, Seven West Media, finds itself in a troubled situation. This is due to the suspension of productions as a result of the coronavirus pandemic. To worsen matters, Seven West Media is also the latest media firm who has withdrawn financial guidance. Other companies who have done so include Prime Media, ooh!media as well as Nine.
Presently, Seven West Media is unable to provide meaningful guidance for the rest of the year but has assured investors that the company will remain focused on implementing its key priorities outlined in its interim financial results. These include the efforts to drive down debt levels ahead of its maturities in November 2021 and 2022 while working to transform the overall structure.
On a positive note, the country’s most prominent investors believe that there will soon be opportunities to purchase media companies, following the current collapse in share prices across the sector. Specifically, Wilson Asset Management chairman and founder, Geoff Wilson said should media companies tide through this challenging period, revenue, profits and share prices of the sector are likely to rebound.
However, the companies that will emerge stronger will be the firms equipped with strong balance sheets, low debt levels due to the high fixed cost of the media business. Thus, Seven Group Holdings might foresee a turnaround shortly as it trades on a decent P/E ratio of 19.8 - above its market average of 14.9. Additionally, with low debt in the last year, it is possible to regard the P/E ratio as a forward indicator of the optimism surrounding its future earnings.
By Caroline Wong
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