Seven Group Holdings backs skilled migration plea as revenue, profit surge with energy, mining and media boost

Seven Group Holdings boss Ryan Stokes has called for an urgent increase in skilled migration as the company revealed robust demand across a range of its companies had boosted earnings. The diversified group reported on Wednesday that annual revenue jumped 65.6 per cent on a reported basis to $8.01 billion, driven by strong earnings through outperformance at WesTrac, Coates Hire, Beach Energy and Seven West Media. The results, for the year ended June 30, also revealed underlying net profit after tax was up 14.4 per cent to $577.3 million. Group underlying EBIT from continuing operations of $987.1m was up 24.6 per cent on a reported basis. Statutory EBIT of $1.04b was up 12.8 per cent. “Today’s result reflects the strength of our diversified group structure, delivering strong earnings growth across the majority of our businesses,” Mr Stokes said. The chief executive said key headwinds through the year included supply chain and inflationary pressures but he said the main theme was labour shortages. “As we are trying to grow to meet demand, that factor is a common issue across nearly all sectors,” Mr Stokes said. “Training apprentices is a core of our operation and it’s something we’ll continue to do — that’s one solution but you need to couple that with skilled migration.” Prime Minister Anthony Albanese’s Government will host a much-anticipated skills summit next week to try and address the labour shortages crippling industries. “We are optimistic there’ll be a positive outcome (from the summit), particularly one that can address skilled migration,” Mr Stokes said. “Our challenge is there just isn’t the workforce, and we need to physically address the size of the workforce. “The previous skilled migration visa was a wonderful entrant into bringing qualified workers into the country. We need to look at that as a key solution. It’s a core part of Australia’s multicultural identity, which we’ve lacked over the last five years.” Seven Group’s suite of assets includes ownership of WesTrac, one of the biggest Caterpillar dealers globally by sales, Coates Hire, building products and construction materials group Boral, and a 30 per cent stake in Beach Energy. It also includes a 40 per cent interest in Seven West Media, publisher of The West Australian. The annual results showed that WesTrac again proved a standout for the group, with revenue increasing 4 per cent to $3.96b, driven by robust customer demand and strength in product support sales. The company outlined that on the back of supply chain disruptions and increasing customer demand, it invested in inventory during fiscal 2022 to support its customers. The short-term impact of that decision was a reduction in cash conversion at WesTrac. “We’ve got a suite of equipment for a volume of activity we haven’t seen before and that activity base is substantial,” Mr Stokes said. Beach Energy grew EBIT by 47.1 per cent, helped by strong realised energy pricing and domestic gas demand. Seven Group’s energy division also includes a 15.5 per cent interest in the Crux natural gas field. “Energy security is going to be a key factor for a while, and groups like Beach and other key energy providers are going to have to invest to meet that ongoing demand,” Mr Stokes said. “There’ll be further transactions in that space … consolidations in the sector will play out, and Beach is well positioned to be active in that. “The key for us is being disciplined. Beach will have a surplus of capital, which gives us some optionality.” Seven Group’s chief financial officer Richard Richards said size and scale would become relevant in the energy space. “To manage the energy transition and to make investments to support decarbonisation of that sector will mean you’re going to need size and scale, and we think M&A will be logical for people to achieve that and actually drive efficiency,” he said. Mr Richards added that feedback from investment and commercial banks was that high quality businesses were still looking at value accretive deal activity. “Prices have certainly changed and become more realistic,” he said. “Generally corporates are probably at the lowest level of leverage in a decade. “The ability of our group to get capital markets to do what we’ve done and manage on the way through highlights the appropriate use of leverage can ultimately be value accretive over time.” The results also showed revenue at Coates grew 6.7 per cent to $1b, with growth in equipment hire across all geographies. “Coates is usually the first type of supply to come on for those big projects … we are starting to see that demand aspect on the infrastructure come through so that’s really encouraging,” Mr Stokes said. Boral reported its results on Tuesday, revealing construction lockdowns and exposure to rising energy costs impacted margins, fuelling a $58m hit to annual earnings. “Boral performance will be a focus for improvement and FY23 will see particular attention on pricing and margin discipline,” Mr Stokes said. Seven West Media continued to deliver growth in 2022. Revenue and EBIT were up 20.3 per cent and 54.9 per cent, respectively. “James (Warburton) and his team have done a great job of the transformation,” Mr Stokes said. “To look at where the business is today to where it was when he took over, he’s done a sensational job. “We have a strong earnings base there and a group disciplined on margin. I don’t think the next stage is about cost, that is somewhat done, it’s about how we continue to be smart and efficient, but ultimately growth. The growth in digital has been a compelling story for the business.” Seven Group said it had strong momentum in the new financial year and it expects to deliver high single to low double-digit group UEBIT growth this financial year. The group’s final dividend was maintained at 23¢ a share, bringing total dividends for the year to 46¢ a share fully franked.