Seven Group share price on watch after 60% increase in underlying profit

The Seven Group Holdings Limited (ASX: SVW) share price is on watch this morning after the company posted a statutory net profit after tax (NPAT) of $60.3 million, down 64% on prior corresponding period, despite strong underlying numbers.

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The Seven Group Holdings Ltd (ASX: SVW) share price will be on watch this morning after the company posted a statutory net profit after tax (NPAT) of $60.3 million, down 64% on prior corresponding period, despite strong underlying numbers.

What were the main half-year earnings points?

On an underlying basis, revenue from ordinary activities increased 45% to $2.03 billion from continuing operations while NPAT from continuing operations (excluding significant items) was up 61% to $256.8 million. Earnings per share (EPS) was hammered in the latest results, falling from 52 cents per share in 1H18 to just 18 cps in the current period.

Positively for shareholders though, management has maintained its interim dividend at 21 cents per share (cps) which is franked to 100%. The company also reported net tangible asset backing per ordinary share of $3.70, up from $2.00 per share in 1H18.

Management stated that the pivots within the group’s industrial services and energy businesses have delivered for the group in the half, which saw underlying Group EBIT rise 68% to $375 million in the half. This includes the group’s Seven Group which continues to benefit from its majority (~70%) stake in Beach Energy Ltd (ASX: BPT) through its wholly-owned subsidiary which has seen the group benefit from high electricity prices and wholesale volumes.

The balance sheet remains robust for the group, with total assets up marginally to $6.18 billion in the latest results, with net assets also increasing slightly to $2.88 billion.

Seven Group’s cash flow profile is also strong with the company reporting net operating cash flows of $231.9 million, despite cash and cash equivalents falling 80% to $76.7 million in 1H19.

Foolish takeaway

The Seven Group share price is up 23% year-to-date and despite some headwinds, most notably the impairment of its Seven West Media Ltd (ASX: SWM) equity holding, the underlying results look strong.

I wouldn’t be surprised to see Beach Energy report a strong result in line with other major energy players such as AGL Energy Ltd (ASX: AGL) and management has reaffirmed its FY19 EBIT guidance to be approximately 25% above FY18 underlying EBIT on a continuing operations basis.

However, if you’re bearish on energy and industrials then I would suggest you check out these top growth shares that have been tipped as market beaters.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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