SEEK share price on watch after COVID-19 profit hit

The SEEK Limited (ASX: SEK) share price could be on the move on Wednesday after the release of the job listings company’s full year results.

How did SEEK perform in FY 2020?

It has been a difficult year for SEEK due to the coronavirus pandemic and its negative impact on listing volumes.

For the 12 months ended 30 June 2020, SEEK delivered a 2.6% increase in revenue to $1,577.4 million. This growth was driven entirely by its SEEK Investments segment, which includes the China-based Zhaopin business. It posted a 15% increase in segment revenue to $947.8 million, which offset an 11% decline in AP&A revenue to $629.6 million. The AP&A segment includes the SEEK ANZ business, which recorded a 12% decline in revenue to $387.2 million in FY 2020.

SEEK’s reported earnings before interest, tax, depreciation, and amortisation (EBITDA) came in at $414.9 million, down 9% from $455 million in FY 2019. On this occasion, a 20% increase in SEEK Investments EBITDA to $151.7 million, wasn’t enough to offset a 17% decline in AP&A EBITDA to $295 million.

On the bottom line, SEEK’s reported net profit after tax (excluding significant items) was down 51% to $90.3 million. Those significant items relate to impairment charges of $198.4 million and funding related costs of $3.6 million. Including these significant items, SEEK recorded a net loss after tax of $111.7 million.

In light of this loss and current economic conditions, no final dividend was declared. Once economic conditions improve, management intends to resume the payment of dividends.

Outlook.

SEEK’s CEO and Co-Founder, Andrew Bassat, is cautious on the near term, but remains very positive on SEEK’s long term prospects.

He said: “The current macro outlook is highly uncertain. Our near-term profits will be impacted by COVID-19 but our focus is on executing and investing for the long-term. We are confident our investment and long-term focus is the right approach as SEEK’s revenue opportunity remains large and under-penetrated. If we invest and execute well, we can take advantage on improving conditions in the near-term but also a much larger longer-term revenue opportunity.”

Due to uncertain market conditions, SEEK is not providing any guidance, but has given investors an idea of what FY 2021 might look like.

This is based on a number of assumptions such as ANZ and Asia job ad volumes recovering during FY 2021 but remaining below FY 2020 peaks. It also assumes gradual improvements in online billings for the Zhaopin business in the first half, before growing in the second half.

Based on this, SEEK has suggested FY 2021 could see revenue of ~$1,470 million, EBITDA of ~$330 million, and a reported net profit after tax of ~$20 million. This represents declines of 6.8%, 20.5%, and 77.85%, respectively, on FY 2020’s result.

Mr Bassat commented: “SEEK’s short-term results will be negatively impacted by the challenges of COVID-19. Over the longterm, our strategy and overall revenue opportunity remain intact albeit COVID-19 will likely impact the timeframe to achieve our A$5b revenue aspirations. We are confident in our strategy and growth prospects, and as a result we will continue to invest across ANZ, Asia, Zhaopin, OES and ESVs.”

“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. The near-term will continue to pose challenges, but we will remain agile to take advantage of new growth opportunities as they arise. If we invest and execute well, we expect SEEK to emerge a stronger and better business from this challenging period,” he concluded.

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Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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