Seven Group’s Ryan Stokes pushes against hard virus lockdown
Seven Group chief Ryan Stokes has cautioned the federal government against adopting a tougher coronavirus lockdown.
Seven Group chief executive Ryan Stokes has cautioned the federal government against adopting a tougher coronavirus lockdown amid concern the nation would face an even deeper financial hit and slower economic recovery.
The industrial services, energy and media conglomerate controlled and chaired by his billionaire father, Kerry Stokes, withdrew earnings guidance for 2020 after its media arm was hit by falling advertising from COVID-19 while an oil price rout lowered energy earnings.
While revenue at its WesTrac and Coates Hire businesses continues to perform well, Seven Group’s CEO is wary of potential stage-four COVID-19 restrictions that would further roil already fragile economic conditions.
“Once we’re through this, restarting or stimulating the economy will be a massive undertaking. So I think the quicker we’re through and allow business to get back to normal, I think there will need to be a really strong focus on how to stimulate activity and encourage business back,” Mr Stokes told The Australian.
“The biggest cost through all of this is going to be on small businesses that effectively are either directly impacted by needing to stop activity or indirectly just given they’ve got less customers. As time goes on, that will hurt more and more. So the quicker we can show we’re flattening the curve and the quicker we can start to relax some of the restrictions the better for the economy because that affects everybody.”
Mr Stokes drew a distinction between the global financial crisis and COVID-19 fallout, but said he was closely watching the actions of lenders and capital markets more broadly given the fast-changing financial landscape.
“I think it’s different to the GFC because this is government-enforced,” he said. “So it’s shutdowns of part of the economy compared with an unwind of financial structures.
“The big challenge at the moment is capital, which is more of a surprise and it’s an area we are watching closely as to whether banks and financial institutions are able to still provide liquidity to the economy that’s required. In our guidance release we stated our capital position because that’s the one thing our investors have been inquiring on. Everyone is fixated on that issue and it highlights the broader concern that is out there.”
Seven Group has $803m of undrawn facilities and cash with $430m committed and the next substantial refinancing due in 18 months. The company also retains a $300m “crisis liquidity buffer” to ensure the company has headroom to keep operating through any government-mandated actions.
New Zealand has already moved to a stage-four lockdown and Victorian Premier Daniel Andrews has suggested it could also loom as an option for the state depending on the spread of the virus. The federal government had struck the right balance so far and should not follow New Zealand’s measures based on current circumstances, Mr Stokes said.
“The measures here in Australia have been more pragmatic in looking to provide social distancing rather than a broader shutdown where it’s inconclusive that it actually works,” he said.
“I think government has been quite remarkable in their co-ordination between federal and state working on this as close in lockstep as possible.”
Seven West Media, 40 per cent-owned by Seven Group, ditched its annual earnings guidance on March 24 blaming the escalating fallout from the coronavirus, including a “material fall” in advertising and cancellation of sports events.
Seven Group, which previously guided for high single-digit growth for the 2020 financial year on the prior year, also faces a hit from the oil price rout via its 30 per cent stake in Beach Energy, which cut its annual earnings guidance by 8 per cent this year.
Despite the economic slowdown, WesTrac’s year-to-date revenue is up 15 per cent on the prior period and 5 per cent on budget. Coates Hire’s revenue so far this year is up 3 per cent on the prior period, but down 1 per cent on budget with events revenue curtailed.
Seven Group owns a diverse range of Kerry Stokes’s interests, including the controlling Seven West Media stake and Caterpillar dealerships in NSW, Western Australia and the ACT.
The company confirmed it would pay an interim dividend of 21c a share on April 20.
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