08/04/2020 - 12:01

SGH cites strong finances but withdraws earnings forecast

08/04/2020 - 12:01

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Seven Group Holdings has withdrawn its market guidance on the back of falling advertising revenue and declining oil prices, on the same day that Seven West Media criticised a report it was entertaining a prospective sale of West Australian Newspapers Holdings.

SGH cites strong finances but withdraws earnings forecast
Seven West Media has criticised but not explicitly denied reports it is looking to sell West Australian Newspaper Holdings. Photo: Gabriel Oliveira

Seven Group Holdings has withdrawn its market guidance on the back of falling advertising revenue and declining oil prices, on the same day that Seven West Media criticised a report it was entertaining a prospective sale of West Australian Newspapers Holdings.

In an announcement to the ASX this morning, SGH said it was in a strong financial position, confirming it had access to $803 million in credit and $430 million in committed funding, as well as a further $300 million of crisis liquidity.

The group further stated that a substantial refinancing was not due for another 18 months and that the duration of its current debt was 3.5 years, and confirmed it would pay a dividend of $0.21 per share on April 20 as had been previously announced.

Commenting on the announcement, chief executive and managing director Ryan Stokes said many of the group’s subsidiaries, including WesTrac and Coates Hire, had so far been largely unaffected by the COVID-19 pandemic, citing a year-to-date revenue increase for the two companies of 15 per cent and 3 per cent, respectively.

WesTrac’s relatively stable position was evident today when it announced it would hire an additional 250 workers for mechanical and electrical roles based in Western Australia.

“Both businesses continue to provide essential services to support the resources and construction industries, and state governments, to ensure that our support of critical services continue,” Mr Stokes said.

Despite that optimism, he said it was prudent for SGH to withdraw its current market guidance, given the impact declining advertising revenue and oil prices has had on Seven West Media and Beach Energy, respectively.

Both companies have already independently adjusted their earnings forecasts.

“Like most Australian businesses SGH will be impacted by the consequences of the significant escalation of the measures taken by the government to slow the rate of COVID-19 infection,” Mr Stokes said.

SGH’s announcement came on the same day that SWM responded to reporting in The Australian Financial Review that the media conglomerate was in talks with interested parties seeking to buy WANH, publisher of The West Australian.

SGH is a major shareholder in SWM.

While the article noted that SWM was not looking to sell WANH, it did note interest from prospective buyers had come at the same time as the conglomerate had sought to finalise the sale of its other publishing business, Pacific Magazines, to Bauer Media.

SWM confirmed that it would continue with the sale of Pacific Magazines, following the opening of legal proceedings on Tuesday to compel the German-based publisher to follow through on the $40 million acquisition.

That deal is expected to be completed on Thursday.

The report mentioned comments made by chief executive James Warburton in February that suggested he would consider further asset sales to pay down debt, but noted that the COVID-19 pandemic had halted those plans for the foreseeable future.

In a statement released to the ASX this morning, SWM said the AFR's report was incorrect in referring to out-of-date figures from before it withdrew its market guidance, and that the company continues to act in compliance with the ASX’s disclosure obligations.

SWM finished trading today at $0.06 a share, marking a consistent decline for the company since it traded at $1 a share in September 2018.

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