The Seek Limited (ASX: SEK) share price went up by as much as 3% today upon an upgrade in guidance. How does this update affect the Seek share price?
SEK share price
Seek reduces stake in Zhaopin
As reported previously, Seek has officially completed its reduction of its holding Zhaopin. Its interest in Zhaopin has gone from 61.1% (undiluted) to 23.5% (fully diluted). Click here to find out more about dilution.
The company expects to receive around $697 million for this sell-down.
The Founder and CEO of Seek, Andrew Bassat advised these proceeds will be returned to shareholders as a dividend.
Operating conditions improve
Seek has upgraded its FY21 guidance due to revenue outperformance driven by its Australian and New Zealand (ANZ) and Asia operations.
Accounting for the improved operating conditions and reduction of its stake in Zhapin from 1 May 2021, Seek has provided the following guidance.
- Revenue to hit $1.59 billion
- Earnings before interest, tax, depreciation and amortisation (EBITDA explained) to be around $480 million
- Statutory net profit after tax of $140 million
Andrew Bassat also noted the outperformance has also been caused by record-high levels of hiring activity across small to medium enterprises.
What now for Seek?
The improved operating conditions are reflective of the strengthening recovery in economic activity as the globe gets a better grip over COVID.
Further, it appears Seek is channelling more energy towards its core operations in light of the reduced stake in Zhaopin.
I think the tailwinds experienced recently will likely continue over the longer term. This combined with Seek re-focusing on its core operations could generate strong value in the future.
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