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A telling sign as to how well a listed company is doing, or not doing, can be seen by how early, or late, in their investor presentation pack the key financial metrics are detailed.

SEEK Limited released the presentation slides to accompany their full 2020 financial year results yesterday and it took until slide 9 before the ugly numbers were revealed.

SEEK financial year results (selected metrics)

all figures are AUD millions (rounded)2020201920182017Three year change
SEEK ANZ operating profit$224$264$252$2134.2%
SEEK Investments operating profit$152$127$112$8676.7%
Group EBITDA$415$455$433$37610.4%
Net profit after tax (NPAT)$112 (loss)$180$53$340-133%
Net debt$901$757$573$205439%

Contrast this with the previous year’s presentation slides accompanying their full 2019 financial year results where I only needed to scroll as far as slide 3 to find SEEK’s key financial metrics.

Before I could read the 2020 financial metrics in the slide pack I had to wade through six slides detailing, amongst other things, SEEK’s COVID-19 response, progress made against long term strategic objectives and a full page devoted to visualising SEEK’s total shareholder returns (TSR) outperforming the ASX 200 by a factor of six, over the past 15 years.

No matter how they presented the data, SEEK’s results clearly disappointed the market as their share price was hammered in early trading, tumbling to $18.55 from a previous day’s close of $21.40. The price recovered somewhat to reach $19.61 by the end of the trading day, a drop of 9 per cent on the day.

Although SEEK hasn’t done badly in the greater scheme of the COVID-impacted economy, clearly investors are nervous about the likelihood of a return to more healthy results in the short term.

There have been some spectacular gymnastics for SEEK’s share price across the past twelve months, yet the share price is exactly where it was one year ago when the employment market was booming.

Closing price,
12/08/2020
Closing price,
12/08/2019
12 mth peak
(24/01/2020)
12 mth low
(23/03/2020)
SEEK share price$19.61$19.58$24.09
$11.23

A more than four-fold increase in net debt over the past three years to fund the expansion of existing businesses into new markets and the acquisition of sizeable minority shareholdings in emerging rec tech businesses does not appear to be paying off at a fast enough pace for many SEEK investors.

SEEK Investments have named their three portfolio segments; Online Education (brands include FutureLearn and coursera); HR SaaS (brands include JobAdder and Employment Hero) and labour hire tech platforms (brands include Sidekicker and jobandtalent).

SEEK Investments’ 20 per cent improvement in year-on-year operating profit was in sharp contrast to the 17 per cent decline posted by the longer standing business units, led by SEEK Australian and SEEK Asia.

In one year SEEK’s longer standing businesses (job boards) have gone from being triple the contributor to group operating profit, compared to SEEK Investments, to only double the contributor (see table).

I suspect this slide, on the back of double-digit declines in job board revenue, has led investors to seek calmer waters, away from companies significantly exposed to the unpredictability of local and regional jobs growth.

SEEK’s attempt to placate these investor jitters is seen in their justification for the existing investment strategy (page 28):

  • Priority is to take a long-term approach to capturing market share and building sustainable businesses
  • Our short-term results may be volatile/lumpy as we prioritise making the right strategic decisions ahead of smooth short-term results
  • This approach has delivered SEEK’s largest long-term capital returns

It’s too early to tell how much impact, negative or positive, SEEK’s late-2019 move to dramatically increase prices for recruitment agency clients has had on profitability however SEEK reported “c75% of subscription customers up for renewal have transitioned to new pricing/contract structure.” (page 16)

SEEK reported that Depth Revenue (eg Premium, Standout, Premium Talent Search, etc) was largely the same as the previous year, after being on track for an approximately 20 per cent increase (to just under $130 million) before the COVID shutdowns.

SEEK Chief Executive, Andrew Bassat, has been on the front foot with the financial and industry press since the results have been released. He is, understandably, focused on selling the company’s long term prospects.

However, right at the moment, very few investors appear to be in the mood to hear it.

Related blogs

It’s official – SEEK move to surge pricing

SEEK price rises: you ain’t seen nothing yet

The long game: is it Seek v Google (with agencies collateral damage)?

2 Comments

  1. James on 13/08/2020 at 3:11 pm

    A 25% non-renewal of an established subscription service is a HUGE and shocking decline and of course there’s no info at what level those that did renew renewed at. It’s pretty clear they’ve mistimed their run at ramping up prices and damaged their reputation with regular advertisers in the process.

  2. Paul Hamilton on 14/08/2020 at 10:22 am

    Hi Ross,
    Seek have done very liitle to endear themselves to Recruitment Agencies over the last 12 years. In fact, on all of my client meetings with Agencies over that period, I haven’t heard too many kind words spoken about Seek and how they treat their clients in the Recruitment industry.
    You don’t bite the hand that feeds you and unfortunately Seek don’t seen to understand that.

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