Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Seven Group Holdings Ltd (ASX:SVW, Financial) reported a 10% revenue growth to AUD 10.6 billion, driven by strong customer activity.
- EBITDA increased by 14% to AUD 1.9 billion, and EBIT rose by 20% to AUD 1.4 billion, showcasing strong operational performance.
- Group NPAT surged by 30% to AUD 850 million, indicating robust profitability.
- Significant earnings growth at West Trac and Boral, with EBIT growth of 25% and 61% respectively.
- The company declared a final ordinary dividend of 30 cents per share, bringing total dividends for the year to 53 cents per share, fully franked.
Negative Points
- Operating cash flows decreased by 32% to AUD 808 million, primarily due to a significant working capital investment at Westrack.
- Statutory NPAT fell by 23% to AUD 164 million, mainly due to impairments at Beach Energy and 7 West Media.
- Equity accounting contributions to EBIT from energy and media businesses declined by 13% and 58% respectively.
- Net debt to EBITDA ratio increased to 2.2 times, reflecting higher leverage post-Boral acquisition.
- The television advertising market weakness and cost growth negatively impacted Seven West Media's performance, with EBITDA down 33%.
Q & A Highlights
Q: Can you talk us through your assumptions around productivity gains and underlying demand for Boral and Coates?
A: We expect market conditions to provide a broadly favorable outlook, particularly in regions like the West and North. Our focus is on unlocking further efficiency through the Coates network and programmatic M&A. For Boral, we see positive market dynamics and a continuation of operating leverage, with margin targets stepping up significantly in FY25. - Richard Richards, CFO
Q: Do you have a leverage target for the end of FY25?
A: We expect leverage to come down to around 2.1 times, assuming no major transactions. This will be supported by strong operating cash flow and pulling back some of the working capital investment at Westrack. - Ryan Stokes, CEO
Q: What drove the lower effective tax rate in FY24, and should we expect higher rates in the near term?
A: The lower tax rate was due to a higher proportion of earnings at the group level and fully franked dividends from Boral. We expect the effective tax rate to increase to around 26-27% next year. - Ryan Stokes, CEO
Q: How should we think about Boral's margins heading into FY25?
A: We see potential beyond the current EBIT margin, aiming for mid-teen margins over time. The focus will be on cost control, price leadership, and operational efficiency. Investments in heavy mobile equipment and quarries will underpin future growth. - Richard Richards, CFO
Q: Are you experiencing any supply shortfalls for large diesel engines at Westrack?
A: While there were issues earlier in the year, Caterpillar has improved the supply chain significantly. We don't expect this to be a constraint for growth in FY25. - Richard Richards, CFO
Q: Should we expect revenue to be down in the first half before rebounding in the second half for Boral and Coates?
A: We expect demand to remain relatively stable throughout the year, with potential growth in the second half as residential dwelling supplies increase. - Richard Richards, CFO
Q: What are your pricing expectations for Boral and Coates in this inflationary environment?
A: We aim to maintain pricing discipline to cover inflationary costs. The focus will be on operational efficiencies rather than relying solely on price increases. - Richard Richards, CFO
Q: Are there any plans to expand Boral's footprint in Western Australia?
A: Yes, we see opportunities for both organic and inorganic growth in WA. We will remain disciplined in our approach to any potential acquisitions. - Richard Richards, CFO
Q: Can you elaborate on the adjacent growth opportunities for Boral, particularly in recycling and property?
A: We see significant potential in recycling and leveraging Boral's asset position. The partnership with Logos for property development is part of our strategy to exploit long-term growth opportunities. - Richard Richards, CFO
Q: How is the aging of the fleet at Westrack impacting the parts business?
A: The average age of the fleet has slightly increased, reflecting different investment histories between regions. This aging fleet supports a robust parts and rebuild business, which is integral to our maintenance strategy. - Richard Richards, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
