Kerry Stokes’ Seven Group will conduct a new share buy back and cut more jobs after first half profit dived 74 per cent.
Shares in Seven Group, which owns heavy machinery business WesTrac and Coates Hire, gained almost 10 per cent on Wednesday.
The shares shot up despite profit falling because of weaker mining activity and a writedown in the value of its stake in Seven West Media.
Chief executive Don Voelte said dozens more job losses were likely this year as the group’s WesTrac business worked hand in glove with mining clients who were reducing operating costs.
“Every one of them are under pressure and we’re working hard on a total mining solution with them to improve their efficiency and how we can improve the cost for them and us,” Mr Voelte told reporters.
Mr Voelte said the commodities downturn had forced coal, iron ore and oil and gas producers to review their businesses and Seven was looking to maximise returns in a difficult environment.
“It’s almost a day to day proposition,” he said.
“It would be unfair for me to say there won’t be tens of people going along the way in possibly all of our businesses.”
Seven Group will begin buying back 17.7 million shares, or 5.97 per cent of its issued capital, from March 12 after the stock recently hit a near seven-year low.
The buy back took into account the current share price compared to the board’s view of the company’s value and was consistent with the group’s ongoing capital management strategy, Seven Group said.
The company made a net profit of $68.5 million in the six months to December, which included a $196 million impairment on the value of its 35 per cent stake in Seven West Media.
Seven Group also warned full year pre-tax earnings are likely to drop by 10 to 15 per cent from the previous year, reiterating its previous guidance.
The group recently acquired Nexus Energy and plans to spend $12 million drilling wells at its Bivins Ranch property in the US.
Morningstar analyst Tim Mann said the share buy back had been positive for the stock which usually traded at a discount.
“Seven Group are taking advantage of what has been a soft period over the last six months, particularly in terms of WesTrac,” Mr Mann said.
He said WesTrac accounted for 40 to 45 per cent of group earnings and remained under pressure.
“The environment is going to remain pretty tough for mining services companies for two to three years but WesTrac is a market leader and they’ve just got to take more costs out.”
Shares in Seven Group were up 58 cents, or 9.3 per cent, at $6.76 at 1455 AEDT.
SEVEN GROUP HIT BY MINING AND MEDIA DOWNTURN
* Net profit of $68.5m, down 74 pct from $264.7m in 2013/14
* Revenue of $1.4b, down 11 pct from $1.58b
* Interim dividend of 20 cents per share, unchanged