Investors didn’t take kindly to the update and news of a move deeper into the Brazil and Asian labour markets yesterday from jobs website group, Seek.
Seek reaffirmed its guidance for full-year underlying net profit of about $195 million, and forecast that earnings should increase in 2016-17.
The company’s trading update came as it revealed it was paying about $104 million for the 49% of Brasil Online – Brazil’s leading online job site – it didn’t already own, and about $78 million to raise its stake in Seek Asia from 80.8% to 86.2%. (News Corp owns the rest).
“We believe continued re-investment will position Seek to continue generating strong returns to shareholders over the medium to long-term,” Seek chief executive Andrew Bassat said in yesterday’s statement.
The 2016 guidance of approximately $195 million net profit, does not include the sale of education business IDP and around $20 invested in early stage ventures. Seek also gave preliminary guidance of $215 million to $220 million profit for the 2017 financial year, before significant items and early stage investment deductions.
"SEEK is very pleased to re-affirm its NPAT guidance for FY16. In the last 12-18 months, we have been particularly pleased with the strategic and financial benefits of our re-investment activities,” Mr Bassat said.
"SEEK’s strong domestic result in H1 FY16 is testament to the benefits of reinvestment. As we look forward to FY17 given SEEK’s strong market position and global platform, we believe continued re-investment will position SEEK to continue generating strong returns to shareholders over the medium to long-term."
SEEK’s international business, which includes investments in Asia, Brazil and Mexico, generated revenue of nearly $300 million in the December half year, a jump of more than 30% year on year.
Seek shares though fell more than 5% to $15.32 as investors figured out that after the extra investment in Brazil and Asia, and significant items, 2017’s profit would be little changed from the estimated $195 million for the year to June 30 (next Thursday).
Investors point out that the Brazilian economy is in the midst of a deep recession and faces enormous economic and political challenges.
But this move to 100% of the country’s biggest jobs website could also be good timing – buying at the bottom when conditions are recessed and demand for labour is weak.
And some investors are worried about Microsoft’s takeover of LinkedIn and whether that poses a challenge to the likes of Seek down the track.
