Investors treated the shares of Seek, the jobs group, nicely yesterday despite the company signaling a big round of asset impairments, an after-tax loss and casting doubt on the final dividend for the 2019-20 financial year.
Seek’s financial house cleaning is all linked to the impact of COVID-19 on its businesses here and offshore where markets such as China have been battered, and now Brazil and Mexico.
Seek says it expects to recognise a net loss for the year to June 30 (next Tuesday) writing down the value of its investments in Brazil and Mexico by another $190 million to $230 million, just two years after taking a $178 million impairment on the employment websites.
The shares rose half a percent to $21.81.
Seek yesterday said the coronavirus “has had a devastating economic impact across Brazil and Mexico” that is having a negative impact on cash flows for its businesses there – and it continues to devastate Brazil especially with cases and deaths showing no signs of easing.
The company said it would recognise an aggregate impairment in the range of $130 million to $170 million in its Brasil Online and OCC Mundial businesses in the two countries.
The company said it would also recognise a $60 million impairment against four early-stage minority investments “that operate outside our core themes”.
In 2018, Seek said it would book a $119 million impairment on its Brazil business and a $59 million on its Mexican one.
As a result of the write-downs Seek now expects to recognise a $20 million loss in FY20, but they would not have any material impact on its debt covenants.
The loss compares to the $180 million for 2018-19 and the original forecast for 2019-20 of a range of $145 million to $155 million.
The company has obtained a temporary increase in those covenants from its bankers through to June 30, 2021 (ie the new financial year).
EBITDA (earnings before interest tax depreciation and amortisation and before the impairments will be around $410 million for the current year on revenue of around $1.575 million, Seek told the ASX yesterday. Revenue last financial year totalled $1.537 million while EBITDA was $455 million in 2018-19.
“No decision has been made on our full-year dividend but expects SEEK to remain prudent in managing its balance sheet,” the company cautioned yesterday. seek paid a final of 22 cents a share for 2018-19.
Seek said it that it was seeing a pick-up in business in its Australia, New Zealand, and Asia listings since May, after they collapsed in late March and were off 65% to 70% in April.
They are now down 40% to 50%, compared to a year ago, Seek said.
