Kerry Stokes’ main company, the Perth-based diversified media, mining equipment and energy group, Seven Group Holdings (SVW) has produced a return to earnings after the write-downs of last year (especially at Seven West Media), but this doesn’t presage an upturn in performance in the 2016-17 year.
While it believes trading conditions will stabilise this year, its 41% stake in Seven West Media will see it buffeted by that company’s surprise earnings reduction forecast of 15% to 20% made on Tuesday.
And even though the company has a large share portfolio worth more than $600 million that won’t supply earnings growth this year if the trend in dividend payouts is any guide, and nor will the core business of heavy equipment and machinery sales and service for Caterpillar in North Eastern China or much of Australia (especially WA).
SGH reported a net profit of $196.8 million for the year to June 30 after last year’s loss of $360.3 million. Annual underlying earnings before costs and tax fell 4% to $302.8 million, but was ahead of guidance for a fall of 10%. Revenue rose 2% to $2.84 billion.
CEO Ryan Stokes said in the statement to the ASX the underlying earnings result reflected, in part, the stabilisation of market conditions, as well as cost cutting efforts amid tough competition.
The result was also helped by benefits from Seven’s restructuring programs over the past three years, Mr Stokes said.
"The momentum of change continues across our businesses to meet the challenges of varied market conditions and ensure that we remain a valued partner to our customers through productivity improvements, investment in technology and increased agility and responsiveness," Mr Stokes said.
Seven expects underlying earnings before interest and tax for the current financial year to be in line with last year’s.
"Overall, we are cautiously confident that conditions will stabilise and anticipate that underlying EBIT in FY17 will be in line with the (2016) year," Mr Stokes said.
“Seven’s businesses continue to generate strong cash flows which, together with the strength of its balance sheet, provide opportunities to enhance shareholder value through new business development and its broad-based capital management program," Mr Stokes said.
Seven also announced it would further broaden its ongoing share buyback program to include up to 10% of the TELYS4 convertible preference shares.
The company declared a final dividend of 20c a share, in line with last year. That took the full year payment to a steady 40 cents a share.
