Earlier this week SEEK Limited released its full-year results for the 2021 year, ending 30 June.
The headline group results were:
- Revenue up 5% (in constant currency) to $1.59 billion
- Operating profit up 18% (in cc) to $473 million
- Net profit after tax (before extraordinary items( rose 58% from $89 million to $141 million)
- Group reported net debt dropped 30.7% to $623 million although Borrower Group net debt was $863 million
Comment: Given the contrast between the national economic prospects at the beginning of July last year, SEEK has done well to recover their revenue, on the back of surging ad volumes, and improve operating profit due to higher margin products and contracts.
Placement data was:
- SEEK (in Australia) accounts for 29.8% of placements (down from 34.3% in 2019;
- 28% offline methods eg referrals etc (33% in 2019);
- 7% social networks, eg Facebook (no 2019 data reported),
- 9% professional networks, eg Linkedin, (4.5% in 2019);
- 8% aggregators (5.5% in 2019)
- 1% online classifieds (3.7% in 2019)
- Strongest ad growth (per sector across ANZ) was from Community Services & Development; followed by Hospitality & Tourism and Trades & Services.
Comment: SEEK’s share of total Australian placements has declined a total of 13 per cent since 2019 (4.5 percentage points). Professional networks have increased their share of placements by 50 per cent. Unsurprisingly, given the shortage of skills, direct hiring via referrals and word of mouth has declined 15 per cent (five percentage points). Agency share-of-placements was not provided (data from 2018 would suggest that this recruitment agency share is around 15%).
Ad volumes by customer category (comparing FY 2021 to FY 2019):
- SMEs up 40% since 2019 (accounting for 39% of ad volumes compared to a 2019 ad volume of 25%)
- Recruiter (agency segment) accounted for 27% of ad volume in 2021, compared to 46% of 2019 ad volume; a total decline of around 41%.
Comment: SEEK’s new ‘dynamic pricing’ model and removal of traditional agency discounts, leading to price rises (per ad) of 50%-100%, has seen agencies respond by halving their ad volumes (as I predicted at the time). SEEK flagged this new pricing model at a May 2019 investor presentation and have weathered the inevitable large decline in ad demand from agencies to validate (to investors and themselves) that they would still come out ahead, financially (although suffering some reputational collateral damage along the way).
Twelve months ago SEEK shares were trading at $20.36. Yesterday they closed at $31.65, after reaching a high of $33.47 on 23 June 2021 (and dropping as low as $29.27 on 30 July).
It would seem that investors are prepared to sit tight for now and see if new CEO, Ian Narev can build on the platform created by Andrew Basset and Basset can weave his magic as the Executive Chairman of SEEK Investments.