Seek Limited (ASX: SEK) today announced an 18% increase in group revenue as it continues to invest aggressively to fuel future growth.
SEEK is an online employment business that matches job seekers and employers together. It is also used by hiring agencies to build a portfolio of candidates. SEEK operates in a host of countries including Australia, New Zealand and China.
Financial Results
Seek have increased revenue in the 2019 financial year (FY19) by an impressive 18% to $1.54 billion. Due to the company’s priority of investing in future growth opportunities earnings before interest, tax and depreciation and amortisation (EBITDA) was up a more moderate 6% on the previous year. Underlying net profit after tax (NPAT) came in largely flat at $229 million.
The Australia and New Zealand business continued to perform strongly with revenue and EBITDA growth of 7% and 8%, respectively, despite weaker conditions in the second half of FY19. The strong performance is underpinned by its market-leading position with Seek making up approximately 34% of all job placements, around six times more than its nearest competitor.
Revenue from the Asian operations was also up 9% with EBITDA growth of 11% on a constant currency basis. The company’s investment in Chinese online jobs board, Zhaopin, continues to impress recording revenue growth of 34%.
Seek’s online education segment managed to grow revenues by 7% despite regulatory constraints on Australian undergraduate courses. The company said they have made good progress in scaling up several new education partnerships with the likes of Western Sydney University and the Queensland University of Technology.
Management Comments
Commenting on the result Seek’s CEO and co-founder Andrew Bassat said: “Seek is pursuing an aspirational revenue opportunity of circa $5 billion by FY25 and we made strong progress towards this in the last 12 months. Kkey FY19 highlights include good results in Seek ANZ, Seek Asia, Zhaopin and our ESV portfolio (Early Stage Ventures). These results were achieved despite a backdrop of weaker macro conditions and strong competition.”
Mr Bassat was particularly pleased with the performance of the Zhaopin business saying, “Zhaopin delivered record financial results and grew hirer market share. Strong revenue results were achieved in our core and adjacent businesses. Our near-term financial results will be impacted by weak macro conditions, however our focus will remain on investing to build sustainable market leadership in what is expected to be the world’s largest human capital market.”
Dividend & Outlook
Seek’s board declared a final dividend of $0.22 bringing the full year dividend to $0.46. This represents a dividend yield of 2.4% which is pretty good considering the strong prospects for growth over the coming decade.
The outlook for FY20 was mixed with revenue growth expected to be in the range of 15 to 18% whilst net profit is expected to be down around 20% in the range of $145 to $155 million.
Mr Bassat said that whilst volatile economic conditions may impact near term results the company would remain focused on investing to grow long-term shareholder value.
Growth At A Reasonable Price
I think Seek is one of the highest-quality businesses on the ASX. The company consistently generates high returns on equity, is run by a great management team and has a long runway of growth still ahead of it. I think the current share price offers an opportunity for long term investors.
[ls_content_block id=”14945″ para=”paragraphs”]
Disclosure: At the time of publishing, Luke owns shares in Seek.
