Seek (ASX:SEK) was always likely to report a weak result for 2023-24, with the company getting in early and flagging write-downs and losses from investments in Asia. So the 10 per cent drop on Tuesday after the lower figures emerged seems to have been an overreaction.
But it was the grim outlook for the current financial year of no change in revenues and lower earnings forecast that seems to have kicked the chocks away and sent the shares lower.
And a lower dividend didn’t ease the pain either.
Seek warned on 27 July that it would take a $141 million loss on the value of its 23.5 per cent of Chinese jobs listing website, Zhaopin, and earlier had warned of a loss of $15 to $35 million on the sale of assets in Latin America and guidance in the interim result for the full year was weaker and lower than expected.
So news of the 6 per cent slide in revenue from continuing operations to $1.084 billion shouldn’t have been all that surprising, or the 33 per cent slump in adjusted net profit and the statutory after tax loss.
But it was the tone of the commentary and the outlook for 2024-25 that sent investors scurrying for the sidelines. The shares fell to a day’s low of $19.61, almost a new 52-week high and then struggled back to climb back over $20 and down 9 per cent in mid afternoon.
The slide in full year revenue reflected the weak jobs ad market – employment growth generally remains fairly strong but vacancies have fallen, according to data from the Australian Bureau of Statistics and measures of new employment opportunities compiled by Seek and the ANZ have both slumped this year.
Seek’s statutory loss of $59.9 million was not unexpected after the $119.8 million impairment of its stake in Zhaopin.
That saw the Seek board cut its total dividends by 25.5 per cent to 35 cents per share. This comprises a 19 cents per share interim dividend and a final dividend of 16 cents per share. Both are fully franked and it’s the lowest payout since 2020.
That would have been enough to jolt the share price, but the real damage was done by the gloomy outlook for 2024-25.
Seek is expecting no real growth in revenue with a forecast range of $1.02 billion to $1.14 billion. This compares to $1.08 billion in the year to June.
The company set its EBITDA guidance at between $430 million to $500 million and its adjusted net profit after tax is expected at between $130 million to $180 million.
That means net earnings could be down a very negative 27 per cent or up a tiny 1.5 per cent from 2023-24.
CEO, Ian Narev had a gloomy explanation for the negative outlook, telling the ASX in the report:
“For FY2025, economists are forecasting weaker macroeconomic conditions in most of our markets. Based on our historical experience of similar conditions, we have assumed that paid ad volumes in ANZ will continue to decline throughout FY2025.
“For Asia, we have seen early signs that the slowdown is moderating and we expect a partial recovery in the second half. As we benefit from continued yield growth, we expect to maintain revenue at levels similar to the prior year.”
Against that flat revenue outlook, Narev said the company “will keep total expenditure for FY2025 at the same level as last year, meaning that EBITDA should also be largely in line with last year. “
“This is enabled in part by the non-recurrence of Platform Unification spend. Should revenue be higher or lower than our base case assumption, total expenditure will vary accordingly.
“We will moderate discretionary expenditure within certain limits if conditions weaken, or increase strategic investment if conditions allow. This flexible approach is enabled by the foundations we now have in place, and will be continued into the future.”
So basically the country’s biggest jobs market is hunkering down to survive what it thinks will be a miserable year. That explains the share price slide on Tuesday (and for most of 2024 to date).
