Seven : Half Year Results Presenters Notes

For personal use only

22 February 2022

Company Announcements Office

Australian Securities Exchange Limited

20 Bridge Street

SYDNEY NSW 2000

HALF YEAR RESULTS - PRESENTERS' NOTES

Seven Group Holdings Limited (ASX: SVW) attaches the Presenters' Notes for today's FY22 Half

Year Results Presentation.

This release has been authorised to be given to ASX by the Managing Director & CEO of Seven Group Holdings Limited.

For further information, please contact:

Mark Ley

Head of Investor Relations and Communications

M: 0411 139 134

1. [e-mail]

Seven Group Holdings Limited (SGH) is a leading Australian diversified operating and investment group with market leading businesses and investments in industrial services, media and energy. In industrial services, WesTrac Group is the sole authorised Caterpillar dealer in Western Australia, New South Wales and the Australian Capital Territory. WesTrac is one of Caterpillar's top dealers globally (by sales value). SGH owns Coates, Australia's largest nationwide industrial and general equipment hire business. SGH also has a 69.6% shareholding in Boral, a leading building products and construction materials group. In energy, SGH has a 30.0% shareholding in Beach Energy and has interests in oil and gas projects in Australia and the United States. In media, SGH has a 39.19% shareholding in Seven West Media, one of Australia's largest multiple platform media companies, including the Seven Network, 7plus and The West Australian.

Seven Group Holdings Limited | ABN 46 142 003 469

Level 30, 175 Liverpool Street, Sydney NSW 2000 | Postal Address: PO Box 745, Darlinghurst NSW 1300

Telephone [phone]

SGH HY22 Results Presentation

Speaker Notes

22 February 2022

For personal use only

Slide 1 - Ryan Stokes

Opening Slide

Good morning and welcome to the presentation of the Seven Group Holdings results for the six months ended 31 December 2021.

I am Ryan Stokes, Managing Director and CEO.

Joining me today is Richard Richards, Group CFO, who will present the financial results

Slide 2 - Ryan Stokes

HY22 Highlights

Today, we announce a strong result for the half. This is driven by our operating businesses Coates and WesTrac, along with improved returns from Beach and Seven West Media.

In this result we are fully consolidating Boral's financials for the first time as we execute on our strategy to deliver growth and long-term value creation. We have tried to distinguish this and provide clarity on the pro-forma for the group going forward. There is a lot within the result and Richard will talk you through the necessary accounting adjustments.

During the past six months we've been able to gain control of Boral, complete the portfolio realignment with the disposal of US assets and domestic timber and roofing operations, and, following the capital return, repay the Bridge facility established to fund the acquisition.

This is a clear example of how our disciplined approach to capital management combined with our opportunistic ability to realise financial benefits delivers value. There is strong underlying momentum across the sectors we are exposed to in mining production, construction and infrastructure, energy, and media.

In terms of the continuing operating businesses, revenue of $3.96 billion is up 68% on a reported basis and 3.1% on a pro-forma basis.

EBIT of $511 million is up 29% on a reported basis and 6.3% on a pro-forma basis.

The underlying net profit after tax is $302 million, up 22% and the statutory net profit after tax of $1.22 billion is up 236% with our statutory earning per share of 324 cents up 203%.

Across SGH these strong financial results demonstrate both the quality of our businesses and of our people.

In this half we have faced some challenges with government induced construction shutdowns, supply chain pressures, labour constraints, and unique logistic challenges in dealing with the velocity across our businesses.

Our people have worked hard and responded exceptionally to the dynamic environment. I'd like to thank all of them for the commitment to supporting our customers.

For personal use only

Slide 3 - Ryan Stokes

Group Overview - People, Safety & Culture

Ensuring that the 13,500 people working across the Group and our subsidiaries remain safe is our top priority. We continue to invest in safety systems and processes.

We have made good progress over the past five years in reducing the number of incidents across the Group.

Unfortunately, in the last half we have seen an increase in safety incidents, particularly at Coates. During the period Coates launched an intervention to increase the intensity of the safety focus, including a STOP for SAFETY program. These initiatives are beginning to show improving safety results.

We will maintain our focus on these issues and are particularly conscious of the mental health challenges that our people who, like all Australians, have experienced following another year of intermittent lockdowns and border closures.

Skilled and specialist labour shortages have been an ongoing industry thematic. We have been responding by increasing our apprenticeship and trainee programs and flexing our workforce to create additional capacity. Coates have created new roles such as Equipment Maintenance Coordinators to support the more experienced, trade qualified professionals at their sites. Similarly, WesTrac has increased the use of the Trade Upgrade and Train to Task programs.

Slide 4 - Ryan Stokes

Sustainability and Community

We have made good progress on sustainability in the past six months.

We released our first Sustainability Report and set interim targets on our path to our 2040 net zero greenhouse gas emissions commitment for WesTrac and Coates.

In terms of how we support our customers, Caterpillar, has been leading the way in developing zero emission equipment solutions. They have partnered with global mining customers to collaborate on solutions to their requirements.

We've made progress with the Reconciliation Action Plans at Coates and commencing at WesTrac. Coates has also launched its corporate giving program during the half.

Slide 5 - Ryan Stokes

Group Overview - Earnings

In terms of our earnings, we've continued to deliver strong results in a six-month period that involved construction shutdowns, supply chain disruption, industrial action impacting ports, and labour constraints.

The Boral consolidation has caused additional complexity in our financial results so we have attempted to increase transparency as much as possible.

I'll refer to the results from our underlying continuing operations in this slide.

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The EBIT is $511 million which is up 29% on a reported basis. If we compare to a pro-forma Boral result, the EBIT is up 6.3%

Boral was the most impacted by the construction shutdowns during the past six months. They have specifically referenced a $33m Covid impact in their results announcement last week. This explains their EBIT (ex-property) decline of 23% from $100 million to $78 million

Our WesTrac business delivered EBIT of $210 million which was slightly behind the prior corresponding period but well ahead of the previous six months. We remain confident of the outlook for WesTrac

Coates EBIT of $119 million is up 14%. We have seen strong revenue growth, EBIT margin expansion, and time utilisation tracking toward target.

The contributions from Energy and Media segments are both very strong, up 87% and 33% respectively.

Slide 6 - Ryan Stokes

Group Overview - Results

In terms of the statutory net profit after tax, the $1.22 billion is up 236% reflecting a number of significant items. These include the $757 million from the revaluation of the Boral equity accounted interest and a $76 million impairment reversal on the Seven West Media holding.

The statutory net profit after tax also includes $131 million profit from discontinued operations.

The underlying Net Profit After Tax from continuing operations of $302 million is up 22%.

We have retained our interim dividend at 23 cents per share fully franked and remain committed to our approach of maintaining and growing our dividends over time.

Slide 8 - Ryan Stokes

WesTrac Highlights

Turning specifically to our businesses and WesTrac is benefitting from strong customer demand across mining and construction.

In mining, commodity prices remain elevated and production activity has increased which we expect will drive positive momentum in 2022 and beyond. WesTrac has also achieved good growth in construction equipment sales, driven by additional infrastructure investment in New South Wales and Western Australia.

Trading revenue from capital sales and product support has continued to grow despite the impact of supply chain disruption.

The supply chain issues are a global challenge that relates to the significant increase in demand. Caterpillar noted earlier this month, that their backlog orders have more than doubled to $8.9 billion. WesTrac has been impacted with machines, both construction and mining, on order increasing from 300 at June to 640 at 31 December.

There are also longer lead times for orders due to shipping delays. Shipping timeframes and port disruptions such as industrial action have presented challenges in moving machines and parts at the traditional velocity. These issues mean that we are seeing delays of months in getting machines to

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our customers. There are similar challenges on the parts supply where the number of parts on the critical shortage list has grown.

WesTrac has adapted to the challenges that the supply chain disruption has created. As a result, we've been increasing our inventory to ensure that we can continue to support our customers as effectively as possible.

Our inventory has grown by $179 million during the half and we've also seen a significant increase machines and parts in transit, resulting in lower cash flow.

These higher inventory levels are expected to reduce back to more normal levels during 2022 as extra capacity becomes available in facilities, shipping, transport, and labour where we hope to revert to more traditional timeframes for delivery.

Labour pressures remain a focus, particularly in WA where demand is strongest and the border has limited the access for skilled trades' people. We continue to invest in training and looking at solutions to manage this issue.

Slide 9 - Ryan Stokes

WesTrac Financials

Revenue growth of 4% was impacted by the supply chain disruption but remained positive based on the strong customer demand.

Capital sales are up 3% and Product Support Sales up 4.3%.

The EBIT margin is down on the prior corresponding period but that reflects the parts price reduction on 1 January 2021.

Cash conversion was impacted by the decision to build working capital to support customer activity and the disruption to the shipping logistics impacting the timing to get new machines delivered to customers. Customer activity remains strong.

All this means that we are confident on the outlook for the WesTrac business despite the challenges from supply chain disruptions.

Slide 10 - Ryan Stokes

Coates Highlights

Coates is the largest equipment rental services company in Australia with an original fleet cost of $1.8 billion. It is the major provider of end-to-end solutions in large scale activity such as temporary works engineering, and industrial shutdowns. And, at the other end of the market, it has also progressed the partnership with Bunnings which is increasing penetration into the trades segment.

Coates is delivering solid growth as the infrastructure activity begins to ramp up. Given the nature of its products, Coates is traditionally one of the first on-site in the early stages of construction and infrastructure activity. This increasing customer demand is another indicator of the infrastructure pipeline coming through.

Pleasingly the Coates margin expansion is also demonstrating operating leverage and the value of the focus on operational efficiencies and customer centric approach.

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