Billionaire Kerry Stokes’ cashed-up Seven Group has shrugged off a forecast 30-40 per cent fall in full year profit, declaring it is chasing growth and takeovers.
The media, industrial services and investment group’s half year underlying net profit slumped 44 per cent to $131.8 million, due mainly to a sharp fall in mining equipment sales out of its WesTrac earthmoving equipment business.
It has also forecast underlying operating profit for the full year will fall 30 to 40 per cent.
The company’s shares shed 16 cents, or two per cent, to $8.01.
However chief executive Don Voelte said he planned to use the tough environment and Seven’s strong balance sheet to steal business from peers in the struggling mining service industry and make possible acquisitions.
Seven’s reported net profit increased 2.8 per cent to $263.9 million, but that was a $133 million accounting gain from the reversal of a past impairment on its Seven West Media assets.
After two years of record revenue the company is now cutting costs, axing more than 1,750 jobs.
It has reduced net debt by $106 million in six months to $608 million and removed $84 million in annual costs at WesTrac.
It has nearly $2.5 billion in liquidity available in cash, debt and an investment portfolio.
“I am confident we are well placed to take advantage of an upturn and opportunities of interest,” Mr Voelte said in a teleconference.
“We would like another WesTrac type operation dealership from Caterpillar … we feel like we have good expertise in media and industrial services and a few other areas we would be willing to look at: health, agricultural services.
“A lot of companies that came into being in the boom period are in a bit of trouble and overcapitalised … we are taking the opportunity to be hard driven, get costs right with a superior product at the expense of others.”
One example was Western Australian-based mining services company Forge Group, which retrenched 1,300 workers this month and went into administration.
Mr Voelte said despite the mining downturn, the resources companies would eventually have to start replacing machinery or seek maintenance and service work from WesTrac as their fleets aged.
“On the east coast and west coast, Australian miners are still mining, pushing ore out and pushing metal minerals and they need equipment to do that.”
Morningstar analyst Ross Macmillan said the investment research firm believed mining services would continue to struggle for the next two years, but Seven had anticipated that by lowering debt and selling assets.
“They are one of the few companies we could see doing acquisitions over the next 2-3 years in that (mining and media) area if any of their competitors or peers face financial stress,” he told AAP.
