Seven Group Holdings Maintains Positive Outlook
Operating and Investment group, Seven Group Holdings has today, released a trading update. Specifically, its diversified position across the energy, media, investment, and industrial sectors has inevitably exposed the firm to risks. Foremost, Seven’s exposure to the energy sector is two-fold. The group has a 100 per cent ownership over SGH Energy as well as a 28.5 per cent ownership in Beach Energy. More broadly speaking, the broader macroeconomic conditions are not entirely favourable for Beach Energy. However, as a leading gas producer in the East Coast, Beach Energy remains well-positioned to overcome upcoming headwinds.
This is because it has limited spot price exposure where 97 per cent of East Coast gas sales are anticipated to be sold under contract in the next financial year. Additionally, Beach Energy maintains a healthy balance sheet with ample liquidity of $530 million available as at the end of March 2020. In terms of SGH Energy, the group’s 15 per cent ownership in the Crux development project remains feasible as the site plays a crucial role in assisting Shell’s Prelude project.
Within the media industry, Seven West Media has not been spared from the aftermath of the pandemic. Specifically, revenue from free-to-air advertising plummeted 30 per cent in the month of April, translating to a 9.3 per cent dip in year-to-date performance. Yet, the $40 million sale of Pacific Magazines, as well as the $87 million cost savings arising from the revised AFL contract, are expected to help cushion the blow.
On a more positive note, Seven’s exposure to the industrial sectors has revealed a more promising picture. This is because a large proportion of WesTrac and CoatesHire customers belong in essential industries. Therefore, activity levels have remained robust. More broadly speaking, the pandemic had not only had a minimal impact on WesTrac. It has also allowed the division to emerge stronger. This is evident in its May’s year-to-date revenue surging 15 per cent, relative to the previous corresponding period. Additionally, demand for parts and service remains high as major customers resort to stockpiling crucial spares.
While CoatesHire has witnessed minimal softness due to the cancellation of social events such as the Royal Easter Show, the division’s year-to-date revenue is up 2 per cent relative to the previous corresponding period. Nevertheless, the sector is expected to experience a quick rebound as the nation is in the midst of rolling out major transport infrastructure initiatives, and CoatesHire is expected to land key contracts.
Yet, Seven Group has not provided a revised guidance since it was withdrawn in April 2020. This is due to the uncertainty in the broader macroeconomic conditions. Nevertheless, the firm’s outlook remains positive as it continues to have a healthy balance sheet. As at the end of May, Seven Group had $616 million in available liquidity - $380 million in undrawn facilities and the remaining in cash.
By Caroline Wong
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