Kerry Stokes’ Seven Group Holdings rode the rebound in resources and the surge in infrastructure spending very nicely in the year to the end of June – and so did the shares, yesterday, continuing this year’s long surge higher.
It’s been talked about for years, mentioned for months and then negotiated for almost as long – or so it seems from the numbers of reports to that effect – we are talking about Kerry Stokes’ key company, Seven Group Holdings finally buying the 53% of Coates Hire it didn’t own from Carlyle Group and others for $517 million.
At the beginning of this month, Seven West Media (ASX: SWM) announced its full year financial results which fell short of market expectations. In addition, earnings guidance for the next financial year were also below expectations. In a brutal two-day period following the announcement of its results, Seven West Media’s share price declined by 28 per cent. In dollar terms, more than $400 million was wiped off the value of the company.
The company has showcased the new WesTrac Casula facility and the Coates Hire operation. UBS believes the $10m investment in technology and efficiency is enabling better fleet utilisation and asset maintenance/servicing.
The sale of Westrac China and consolidation of Coates increases the company’s exposure to Australian industrial and resources services, at what Deutsche Bank observes is the early stages of a cyclical upswing.
First half earnings were slightly higher than the broker had forecast. The company continues its expansion into the oil and gas sector, with further additions likely, and the broker believes there could be a potential sell-down of its share in Seven West Media ((SWM)).
The company’s profit warning at the AGM underscores the tough operating conditions for WesTrac, as miners combat falling prices by deferring maintenance spending and cannibalising components. Seven now expects earnings to be down 10-15% in FY15.