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Seven Group share price on watch following FY 2020 earnings release

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The Seven Group Holdings Ltd (ASX: SVW) share price is on close watch today following the release of the company’s full year financial results.  

Seven Group owns a portfolio of investments including industrial services, media and property.

Reasonably solid result in challenging market conditions

Investors will be watching the Seven Group share price today after the company reported total trading revenues of $4.6 billion for the 12 months ending June 30 2020. This was a strong increase of 12% on the prior financial year. The group achieved underlying earnings before interest and tax (UEBIT) of $740 million, a marginal increase of 2% on FY 2019. Underlying net profit after tax (NPAT) came in at $474 million. This was a 3% rise on the prior financial year.

Seven Group ended FY 2020 with a relatively strong balance sheet. Underlying operating cash flow for the company came in at $826 million, a 29% rise on the prior corresponding period.

The group declared a fully franked final dividend of 21 cents per share, the same level as in the previous year.

WesTrac outperforms other Seven Group segments

WesTrac was the standout segment in terms of profitability performance for Seven Group. The WesTrac segment delivered EBIT of $371.0 million, up a very strong 22% on the prior year. Revenue also grew strongly for WesTrac, up by 15%. Demand in the company’s Parts and Service segment remained resilient during the 12 month period. This was supplemented by a continued rise in product sales for the CAT equipment dealer.

Seven Group’s investment holdings in energy, however, saw a sharp decline in profitability (underlying EBIT) of 19% to $126.6 million for FY 2020. Beach Energy Ltd (ASX: BPT) was still able to achieve a robust production result for the 12 month period though, with pro-forma production levels up 2%.

In other segment results, underlying EBIT for Coats Hire declined by 1%. Meanwhile, media investments took a big hit, with EBIT down by 25% due to a particularly challenging fourth quarter from the impacts of COVID-19.

Ryan Stokes, Managing Director and Chief Executive Officer, commented: “Today’s result reflects a strong performance from our operating businesses and the robustness of our diversified model….In particular our Industrial Services portfolio has delivered solid growth with WesTrac executing a standout performance, reflecting the strong demand from customers who remain active in mining production and construction.”

Market outlook

Due to the continuing uncertainty surrounding the global coronavirus pandemic, Seven Group decided not to provide earnings guidance.

Over the medium to long term, the group will continue to focus on mining production and infrastructure investment. In particular, east coast gas demand is is viewed by the group as a key  growth opportunity.

The Seven Group share price closed yesterday at $19.18.

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Motley Fool contributor Phil Harpur 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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