TV woes hit profit
SGH ditching Chinese machinery operations
SEVEN Group Holdings shares have surged despite a profit slump as the diversified group found new revenue supplying parts to the mining industry and gained $540 million selling its WesTrac China business.
The Kerry Stokes-controlled company suffered a 77 per cent fall in net profit to $44.5 million for 2016/17, due largely to a $245.6 million writedown on its stake in Seven West Media.
However, shares in Seven Group closed at $1.05, or 8.9 per cent, higher yesterday, their highest level since December, 2007.
Seven Group chief executive Ryan Stokes yesterday said the company will 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 SGH and this is the right time to realise the value of what we have achieved,” Mr Stokes said.
The company plans to reinvest the proceeds of the sale into WesTrac Australia. The local WesTrac business benefited from a shift to providing ongoing maintenance, parts and services to the mining industry, which has transitioned from new investment to production.
“The growth in iron ore export volume is no longer driven
by large investment in new mines,” Mr Stokes told an investor briefing.
“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.
The company said previous cost-out and capital management strategies, together with WesTrac’s 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 benefited the group’s bottom line, while Coates Hire lifted revenue 5 per cent.
Seven Group’s bottom line suffered from its share of Seven West Media’s near $1 billion in impairments, although profits from other oneoff arrangements trimmed Seven Group’s total impairments to $169.2 million.