Seek was another company yesterday to withdraw its earnings guidance and postpone the payment of dividends because of the COVID-19 pandemic.
Analysts have been waiting for Seek to join the growing list of companies to take this course of action – indeed some analysts have wondered if Seek might be looking for a quick equity raising to top up its cash reserves.
The driver was the impact of the virus on employment which saw Seek’s billings to fall by 60% in two weeks.
Seek told the ASX that the COVID-19 pandemic was having a “material economic impact in all markets” on all of Seek’s businesses and that it could no longer reliably provide guidance.
Revenue for its core Australia and New Zealand business slumped 40% in the week ending March 22 and was down 60% the following week.
Billings for China-based subsidiary Zhaopin were 60% lower than forecast in February but improved in March.
As a result, the interim dividend of 13 cent will now be paid on July 23 and analysts speculate that such will be the slump this quarter, that this payout will be the only payment to shareholders for 2019-20 and possibly for part of 2020-21.
“Deferring the dividend was a decision that we did not make lightly. The level of uncertainty arising from the virus has prompted us to take a prudent approach to managing our cash flow and balance sheet,” CEO Andrew Bassat said in the statement to the ASX.
Seek also said in Monday’s statement that it had not breached existing debt covenants and would draw more money from its debt facilities to manage needs.
Seek has also reduced costs and is removing obligations for its customers. Customers on existing 12-month contracts have been relieved of minimum monthly spend obligations until the end of May, while expiry dates on pre-purchased packages have been extended.
“When the pandemic subsides, as it will, job creation will be at the core of economic recovery. This aligns directly with Seek’s purpose and we are determined to ensure we have the capabilities to facilitate the economic recovery process in all of our markets,” Mr. Bassat said.
“The near-term economic challenges will impact SEEK’s short-term profitability. They will delay, but not fundamentally change our long-term aspirations. Our focus remains on executing against our existing long-term growth strategies and developing new employment and education solutions to meet the needs of our customers in the months and years ahead.”
At its annual general meeting, last August Seek forecasted guidance for the 2020 full year of 15%-18% revenue growth and an increase of 8%-11% percent in earnings before interest, tax, depreciation, and amortisation (EBITDA). Mr. Bassat said in February when the interim results were released that the coronavirus and softer economic conditions meant Seek was not reaching its earnings potential.
Seek shares rose 1% to $14.29.
Meanwhile struggling real estate company, McGrath is another to cut costs in the face of the pressures being generated by the COVID-19 virus.
As part of the cuts, CEO Geoff Lucas take a 40% pay cut while some temporary company offices will close for a while to reduce operating expenses.
Agents from these offices have been redeployed to neighbouring offices, there is an immediate end of all discretionary expenditure and non-essential spend, a minimisation of capital expenditure and a hiring freeze.
Mr. Lucas and the board of directors will take a 40% in remuneration for May, June and July 2020. There will also be a 30% cut in all salaries above $70,000 a year for staff employed by McGrath Limited for May, June and July 2020.
Mr. Lucas said for the last seven days, “we achieved an auction clearance rate of 31 percent across our network as many clients chose to transfer scheduled auctions to private treaty”.
“Notwithstanding this, our teams this week sold 190 homes valued at over $185 million,” Mr. Lucas said.
“Our balance sheet is in a strong position with about $10 million in cash, no debt and the benefit of the announced cost-saving initiatives.”
MEA shares fell 2.7% to at 17.5 cents.
