Seven Group’s stocks soar

SEVEN Group Holdings shares have surged despite a profit slump as the diversified group gained $540 million from the sale of its WesTrac China business.

The company suffered a 77 per cent fall in net profit to $44.5 million for the year to June, thanks largely to a $245.6 million writedown on its stake in Seven West Media.

However, shares in Seven Group, which is controlled by Kerry Stokes, closed up $1.05, or 8.9 per cent, their highest level since December 2007.

Seven Group chief Ryan Stokes said the company would sell its Chinese Caterpillar heavy machinery business to Lei Shing Hong Machinery, a major Caterpillar dealer in China, for $540 million.

“WesTrac China has been a strong performing business for Seven Group and this is the right time to realise the value of what we have achieved,” Mr Stokes said.

The company plans to reinvest proceeds of the sale into WesTrac Australia. The local WesTrac business benefited from a shift to providing maintenance, parts and services to the mining industry, which has moved from new investment to production.

“The growth in iron ore export volume is no longer driven by large investment in new mines,” Mr Stokes said.

“It requires our customers to make incremental gains in equipment, productivity and performance, with reduced downtime waiting on parts and repairs. We are capturing this opportunity.”

WesTrac’s product support revenue was up 15 per cent on the previous corresponding period, boosted by a 21 per cent increase in sales and 5 per cent growth in parts.

Previous cost-out and capital management strategies, together with its growing parts and services revenue streams, had helped Seven Group lift underlying earnings per share by 20 per cent.

The company’s 23 per cent stake in Beach Energy, bought in March 2016, also supported its bottom line, while Coates Hire lifted revenue 5 per cent.