Shares in Seven Group Holdings have risen almost six per cent after the media and earthmoving-machinery company said strong activity in the resources sector was likely to continue.
Seven Group more than doubled its full-year profit, although chief executive Peter Gammell was cautious about China’s growth and Australia’s fragile media industry.
“The current level of activity in the mining and resources sector is going to continue for some time,” Mr Gammell told a briefing on Tuesday.
“We do, however, remain very cautious regarding trading conditions in China and obviously the outlook for media markets over the next six months is soft.”
Activity in the resources sector should lead to a strong first half of the 2012/13 financial year for the industrial services businesses, which also include Coates Hire, he said.
Seven Group posted a net profit of $165.9 million in the year to June 30, up from $70.4 million in the previous 12 months.
Its $4.46 billion of revenue was up 41 per cent from $3.16 billion in the previous year.
Seven Group shares were 45 cents, or 5.9 per cent, higher at $8.05.
The group’s industrial services businesses, which includes WesTrac, all posted profit growth.
Customers such as Fortescue Metals Group and Rio Tinto were still increasing production and BHP Billiton’s iron ore mines were expanding, Mr Gammell said.
“So we’ve got that ahead of us.”
However, he said commodities prices had probably not reached a bottom in China.
Seven Group, chaired by Kerry Stokes, owns the WesTrac Australia heavy machinery business, which operates as a Caterpillar dealership in NSW/ACT, Western Australia and parts of China.
It also has a 32.5 per cent stake in Seven West Media, owner of the Seven television network and The West Australian newspaper.
Profit in the 2012/13 financial year would affected by any changes in the market value of Seven Group’s investment in Seven West Media.
Seven Group’s net profit in the year to June was affected by a $483.5 million writedown on the value of its investment in Seven West Media, reflecting the media company’s lower share price.
The group did not provide guidance for fiscal 2013.
Mr Gammell said the group was exploring all alternatives in relation to its holding in Consolidated Media, including increasing its stake.
Seven Group is waiting for the corporate regulator to decide whether it can make a bid for all of Consolidated Media.
He said it was hard to consider selling the asset to News Corporation without a formal offer.
Fat Prophets senior analyst Greg Fraser said he did not read too much into the share price rise amid weak volumes.
“The headline numbers were pretty strong, but it comes down to how investors are valuing the individual parts of the business,” Mr Fraser said.
The shares were probably trading at a discount.
“They had a strong year with the Westrac business, thanks largely to the resources boom and the acquisition of the Bucyrus (mining equipment) business, but on the other hand they had the holding in Seven West Media and that’s cost them a significant amount.”
