Google media deal a solid foundation: Seven
Seven Group revenue lifts to $2.4bn with increased infrastructure spending boosting its CoatesHire and WesTrac businesses.
Kerry Stokes’s Seven Group says new infrastructure and mining projects have boosted its Caterpillar equipment and hire businesses, while its media arm is on a more solid footing following its deal with Google.
Seven Group chief executive Ryan Stokes said the company’s wholly owned Coates Hire and WesTrac, one of the largest Caterpillar dealerships in the world, was benefiting from new mining production and stimulus measures to encourage infrastructure.
“The long-term trend remains strong given growing customer demand for parts, components and service,” Mr Stokes said. WesTrac had helped commission new machinery fleets for BHP and Rio Tinto in the period, as major new mining projects got off the ground.
The conglomerate, which is also the biggest shareholder in Seven West Media, said underlying net profit fell 3 per cent to $247m in the first half, while underlying operating cashflow climbed 14 per cent to $367m. Trading revenue rose 4 per cent to $2.4bn.
Mr Stokes said the company had increased its exposure to the country’s pipeline of infrastructure activity during the first half with an investment in materials giant Boral.
Coates Hire and WesTrac had helped offset challenging conditions for the company’s energy portfolio including Beach, which had been affected by lower oil prices.
The company will pay a fully franked final dividend of 23c a share, up 10 per cent.
Seven Group shares fell 0.95 per cent to $22.89.
Mr Stokes said major infrastructure projects such as the Western Sydney Airport, Inland Rail and WestConnex had put the economy on a solid footing coming out of COVID-19. “The economic outlook is robust and the government has been nimble in its various stimulus measures,” Mr Stokes said.
“The opportunity with these larger infrastructure projects is to create long-term efficiencies for the economy. Every state in Australia has road or rail projects in the pipeline to which governments have committed. Badgerys Creek Creek for example is the biggest earthmoving project in the southern hemisphere.”
Mr Stokes said Seven West Media had delivered a strong improvement in performance and significant progress on its transformation strategy. SWM, which owns the Seven Network and The West Australian newspaper, had reduced debt, helped by a strong rebound in advertising markets in the last three months of 2020.
SWM, which earlier this week reported a first-half net profit, from a loss a year earlier, has announced a long-term partnership with Google to provide news content. The deal, which could be worth more than $30m a year to the media company, comes as other news organisations including New Corp sealed licensing deal with Google.
Mr Stokes declined to provide financial details of the arrangement, but said it laid the ground for a working model for the mainstream media. “It is recognition by Google of the value of quality journalism,” he said. “We are particularly pleased about the focus on local journalism.”
Seven West owns regional and suburban newspapers in Western Australia.
Mr Stokes said the group’s operating businesses and investments were well placed to capture opportunities in their respective markets. “Industrial demand and activity are robust and growth is expected in 2021,” he said.
The company is now reportedly eyeing a push into renewable energy generation, pitching a $650m pumped hydro scheme to the WA government.
It is understood the $8bn conglomerate made the offer to the state government before Christmas, offering to convert a disused coalmine in Collie into a 400-megawatt pumped hydro plant capable of feeding power into the state’s energy grid.
