SEEK’s local reinvestment pays off as profit, revenue climb

SEEK chief executive Andrew Bassat wants to ramp up its growth in international markets, replicating a seven-year investment strategy in Australia and New Zealand that underpinned record first-half revenue.

SEEK recorded record revenue of $628 million, up 27 per cent on the previous corresponding period as it told investors its full-year profit would be at the upper range of its previous guidance for $225 million and $230 million excluding investments in early stage growth opportunities of between $25 million and $30 million.

It lifted full-year EBITDA guidance to growth of between 14 and 15 per cent.

Mr Bassat told The Australian Financial Review its growth since 2014 showed the online employment group’s strategy was working.

“In the past seven years we’ve made dramatic reinvestments in new technologies and products and it’s led to better operating metrics, revenue and now profit growth,” he said.

“Across Asia and Latin America it will be the same playbook. We’ve started down that path … but hopefully what we’ve seen in Australia will play out in those markets.

“The success of the ANZ business model evolution provides a strategic roadmap for our international businesses. If we execute well, we expect there to be significant upside given the large size of their addressable markets.”

Underlying net profit jumped 21 per cent to $112.1 million. When excluding significant items, profit was flat at $102.7 million. The company declared a 24¢ interim dividend, up 4 per cent and payable on April 13.

On an investor call following its results announcement Mr Bassat shut down a suggestion that its growth could have come predominantly from the cyclical increase in job advertisements in the past few years, saying the business is in a stronger position now to “push forward” with its growth regardless of cycles.

In the last seven years the company has developed a range of new technology features related to job search, employment, education and hiring.

Mr Bassat told the Financial Review while headline employment numbers were good, the level of underemployment and “a degree of nervousness” about jobs had kept wages growth moderate.

He also said a company tax cut was unlikely to result in significant wages growth.

“You could find tax cuts just go straight to shareholders rather than increasing investment,” he said.

Creation of larger operating division

In January, SEEK announced it was creating a larger operating division known as Asia Pacific & Americas (AP&A) , which would bring together its SEEK ANZ, SEEK Asia, Brasil Online and OCC ventures.

Mr Bassat said this was motivated by the strength of its ANZ division and the move would result in innovations being able to be rolled out across its markets more quickly, but was not expected to result in any cost savings.

Revenue from its ANZ business jumped 15 per cent to $196.7 million. Earnings before interest, tax, depreciation and amortisation also rose 15 per cent to $112.2 million for the six months ending December 31.

SEEK’s international division posted revenue growth of 10 per cent and EBITDA jumped 3 per cent.

These figures were slightly hampered by a negative currency conversion and its Brasil Online business continues to face headwinds from challenging macro conditions and its Mexico business (OCC) suffered a moderate hit thanks to a large earthquake in Mexico City that affected hiring sentiment.

The new AP&A division is being led by Michael Ilczynski, while Mr Bassat will take on an executive chairman role. At the same time the company is creating a SEEK Investments division to manage and make startup investments, as well as acquisitions. It will include its Zhaopin and OES ventures and Mr Bassat said this area would occupy his core focus.

“My strength has always been in the growth part of the business where the investments are made. The biggest portion of my time will be spent on growth and imagining what SEEK will look like in five to 10 years,” he said.

SEEK’s shares rose 1.9 per cent to $20.50, giving it a market capitalisation of $7.2 billion.

Source: AFR 19 February 2018