Sluggish labour market: Seek takes a hit

Company News

by Glenn Dyer

Shares of the online employment giant, Seek (ASX:SEK), took a dive of 10% during early trading as investors swiftly expressed disapproval of its interim results reflecting the repercussions of a sluggish labour market.

However, as Tuesday's session unfolded, the initial loss mitigated to around 4% as investors and analysts revisited the report's intricacies, finding it not as dire as initially perceived.

Despite the optimistic full-year guidance given at the annual meeting in November, the weak performance prompted a downgrade.

The interim dividend plummeted by 21% to 19 cents per share, signaling the downturn, alongside a 20% decline in paid job advertisements in Australia and New Zealand over the six months up to December.

Consequently, revenue saw a 5% dip to $596.8 million, resulting in an 11% decrease in EBITDA to $253 million. Adjusted net profit from continuing operations took a more significant hit, dropping by 24% to $107.5 million.

While operating expenses remained relatively steady, Seek opted to protect its margin by reducing prices in response to the revenue decline.

The primary impact was felt in the company's core Australian and New Zealand business, which experienced a 10% revenue decrease (attributed to the 20% decline in paid job ads) to $412 million. Despite management's efforts to mitigate this impact through price reductions and encouraging customers to utilize other services, the bottom line was significantly affected.

On the other hand, revenue in Asia saw a 2% increase to $123 million, but this growth was overshadowed by the struggles in the Australian and New Zealand markets.

Consequently, Seek's management revised down its guidance for June 30. Initially forecasted at the November AGM with revenue between $1.18 billion and $1.26 billion and adjusted NPAT ranging from $220 million to $260 million, these figures were adjusted on Tuesday to $1.15 billion to $1.21 billion in revenue (3.3% lower at the midpoint) and adjusted NPAT between $190 million and $220 million (14.6% lower at the midpoint).

This adjustment indicates the company anticipates a better performance in the six months leading to June, with the 24% interim net after-tax profit slump expected to improve to a 14.6% decline. A crucial aspect of this improvement will be the reduction in costs, projected at $670 million for the current year, down from $679.2 million in 2022-23.

While seemingly minor, every cost-saving measure is significant when revenue is under pressure.

Seek shares soared to a 52-week high in January at $26.98; however, yesterday's prices hovering around $25.60 indicate a clear misjudgment by the optimists.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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