Seven Group Holdings shares were stronger at noon after the diversified investments company forecast buoyant full year earnings.
Seven Group chief executive Peter Gammell on Wednesday flagged the company was on track to boost full year earnings despite its first half net profit falling 57.8 per cent.
The result was affected by writedowns on Seven’s media assets. However on an underlying basis, which excluded writedowns, total group first half net profit rose 33 per cent to $169.3 million. The underlying result was aided by the mining boom and came in ahead of market expectations. It compared with the statutory reported net profit of $52.14 million for the period.
At 1200 AEDT, Seven was up 30 cents, or 3.46 per cent, at $8.96.
Mr Gammell said the first half result was led by the strong performance of its WesTrac earth moving and mining equipment business.
He also flagged a hefty lift in full year net profit.
“Assuming current market conditions and growth continue, the company anticipates group underlying full year net profit after tax (excluding significant items) will be up 20 to 30 per cent compared to the 2011 full year result,” Mr Gammell said in a statement.
Seven Group reported net profit after tax and before significant items of $248.3 million for the 2010/11 financial year.
WesTrac, the Caterpillar dealership in Western Australia, NSW/ACT and parts of China, reported a 67 per cent increase in earnings before interest and tax (EBIT).
“The company’s growth in Australia is being driven primarily by expansion in coal and iron ore mining – with a 30 per cent growth in product sales to $898.7 million,” Seven said.
Mr Gammell said WesTrac had continued to trade strongly, particularly in Australia.
“At present, we continue to be confident that the year should be another good year for growth, both for Australia and China, although the growth for China will be less strong than in previous years,” Mr Gammell said.
WesTrac’s China business, although affected by exchange rate movements, reported a 12 per cent increase in EBIT to $12.3 million, Seven said.
Seven said it booked an impairment charge of $161.8 million in the value of its investment in Seven West Media – which houses its Seven network and West Australian newspaper assets – and a further $5.8 million charge on other investments.
The company said the writedown in Seven West reflected its prevailing share price at December 31, 2011.
“The share price of Seven West Media has recovered significantly since 31 December, and should it remain at these levels, the majority of the impairment is likely to reverse in the second half,” Seven said.
Seven Group declared a fully franked interim dividend of 18 cents a share.
