SEEK (ASX:SEK) shares sent 12% lower on FY20 result

SEEK Limited (ASX: SEK) shares are down 12.5% after the employment website released its FY20 result.

SEEK disappoints investors

SEEK said that its financial results have been impacted by weak economic conditions and COVID-19.

Revenue grew 2.6% during the year to $1.58 billion. It was impacted by a weak economy and COVID-19 in the second half of FY20. SEEK’s performance is likely to be heavily influenced by the economy and the jobs market over time.

Reported EBITDA (click here to learn what EBITDA means) fell by 9% to $414.9 million. Excluding ‘significant items’, reported net profit after tax (NPAT) more than halved to $90.3 million. Including significant items, it reported a net loss of $111.7 million.

In FY20 SEEK recognised an impairment charge of $198 million relating to Brasil Online, OCC Mundial and four non-core minority investments.

SEEK ANZ saw revenue decline by 12% and EBITDA dropped 15%. It remains the market leader with a third of placements and it has around five times more than its nearest competitors. SEEK Asia reported a revenue decline of 14% and EBITDA dropped 26%.

Zhaopin, the Chinese employment giant, achieved revenue growth of 12%. OES reported revenue growth of 7% from post-graduate and UK under-graduate courses.

The company said that the focus for SEEK Investments is to invest in emerging leaders that will benefit from long term structural trends.

The company didn’t pay a final FY20 dividend.

SEEK FY21 expectations

It couldn’t provide guidance based on current the current conditions. But it did provide an ‘illustrative scenario’ for FY21 which showed:

Revenue of $1.47 million, which would be down 7%. EBITDA of $330 million, which would be down 20% and reported net profit of $20 million (down almost 80%), which includes its share of losses in investments.

COVID-19 impacts are making it hard for the company to forecast FY21 when the duration of COVID-19 and the recovery is difficult.

SEEK CEO and Co-Founder Andrew Basset said: “Over the long-term, our strategy and overall revenue opportunity remain intact albeit COVID-19 will likely impact the timeframe to achieve our $5 billion revenue aspirations. We are confident in our strategy and growth prospects…

When labour markets return to more normal conditions, we expect to generate a high ROI given our market leadership and track record of generating strong returns from investing in product, technology and data.”

Summary

SEEK is a quality business, but it’s clear that it’s facing tough times. It’s still trading quite highly considering all of the uncertainty. It shouldn’t be a bad ASX growth share over time, but there are others like Bubs (ASX: BUB) that I would much prefer to buy for the 2020s.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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