More bad news from the business empire of Kerry stokes – a week ago it was Seven West Media (SWM) shocking investors at its annual meeting with the news of a cut in its first half profit estimate of up to 10% because of a downturn in ad revenue growth.
Yesterday it was Mr Stokes’ master company, Seven Group Holdings (SVW), which whacked investor sentiment with another earnings downgrade, gloomy talk about the outllook and another 100 job cuts, to go with the more than 1,000 jobs already hacked out of the business in the past year.
As a result Seven Group shares fell 9.2% to $5.90, after touching $5.87 in late trading, which is the lowest the shares have been since 2010.
Seven West Media shares were unchanged at $1.70, around 20c above its 52 week low of $1.51.
Seeing Mr Stokes controls 69% of the Seven Group’s shares, that fall has hurt him as much as the slide in the value of Seven West Media since 2011 – from a market value of $4.1 billion at the time of the merger with West Australian Newspapers, and around $1.68 billion yesterday.
Yesterday’s annual meeting of Seven Group Holdings in Sydney was told of the new round of job cuts at its mining services and equipment business WesTrac was cutting at least another 100 jobs because of the continuing slide in commodity prices, led by coal and iron ore.
Like so many other companies (for example, Orica yesterday, which is cutting 700 jobs in the next year), WesTrac’s revenues and profits have been badly damaged by cost cutting by big mining companies in response to weaker prices for iron ore, gold and thermal coal.
Seven Group chief financial officer Richard Richards told the AGM that a "triple digit" reduction would be made to WesTrac’s full time workforce.
Seven Group cut the equivalent of 1,400 full-time jobs across its industrial divisions in 2013-14 financial year, including 863 at its WesTrac Australia division. Seven Group and Westrac also operates in northeastern China where the mining industry, especially coal and iron ore, is also under enormous pressure.
“In response to such challenging conditions, WesTrac Australia is taking immediate action now and in the coming months to continue to implement significant cost reductions and modification of work processes that will drive the financial results sized to the industry environment," Mr Richards said.
Seven Group cut its forecast for the 2014-15 financial year, to a fall of between 10% and 15% from the previous year’s underlying earnings of $374 million, with the fall concentrated in the first (current) half of the financial year.
The new forecast compares to the forecast at the time of the profit release in August of a profit that was flat to unchanged on 2013-14’s level.
"We caution that we have a more limited visibility than we would have liked to have at this point and further deteriorations in commodity prices could challenge this revised forecast,” Mr Richards said.
Meanwhile shareholders at yesterday’s meeting delivered a first strike against the company’s remuneration report, which included a package worth $5.5 million for chief executive Don Voelte in his first year.
More than 32% of votes went against the pay structure at the company’s annual general meeting in Sydney. A vote of more than 25% against next year’s executive pay would give shareholders the power to vote on a board spill.
Kerry Stokes, who owns 69% of Seven Group, is unable to vote on executive pay, but can vote if there’s a board spill.
