Seek share price: What’s the outlook following interim results?

We examine the company’s operational performance in the first half of FY21, news of the CEO’s departure, the revelation that SEEK is in ‘advance discussions’ to reduce its Zhaopin stake, and the company’s full-year outlook.

SEEK share price drops on interim results

Australia’s premier online jobs platform – SEEK Limited (SEK) – posted a busy set of interim results today and saw its share price bid lower in response.

Overall, the company reported weaker revenue and earnings, though flagged a robust outlook; revealed that Andrew Bassat would step down from his role as Chief Executive Officer, and flagged that the company was mulling a sell-down of its Zhaopin stake.

Investors responded with their feet, SEEK was down 5.21% by noon, to $28.76 per share. At those levels, the stock remains up 41% in the last six months.

Operational Results Breakdown

Overall, SEEK reported declines across the board, revealing lower revenue, earnings (EBITDA) and net profits.

On the top-line, SEEK reported total first half revenues of $819.1 million, representing a 6% decline on a year-over-year basis.

Certain segments in Asia witnessed stronger declines, with SEEK Asian seeing its revenue plunge 27%, while Zhaopin saw its revenue fall 10%. Interestingly though, SEEK's mature Australian and New Zealand businesses saw their revenue decline just 1%, hitting $223.0 million in the half.

Commenting on that resilient performance, the company’s Chief Operational Officer, Ian Narev said:

‘SEEK ANZ delivered a strong result in the context of a COVID-19 recovery. SMEs are leading the recovery and despite the softer macro conditions we saw higher usage of depth products, a strong sign that hirers see value in our solutions.’

From an earnings perspective, SEEK reported declines in a smaller magnitude, with total earnings (EBITDA) falling 1% to $245.9 million. Net profits fell at a more significant rate, dropping 8% during the half to $69.7 million.

CEO Departure

Beyond those operational results, SEEK also announced that its current Chief Executive Officer and Managing Director Andrew Bassat would be stepping down from those roles. Mr Bassat would be succeeded by Ian Narev, who would take up the top spot on July 1, 2021.

Mr Bassat will continue to work closely with the company, assuming the role of Executive Chairman and CEO of SEEK investments.

Zhaopin Sell Down

Maybe the company’s most controversial asset – Zhaopin, a Chinese jobs site – saw the company come under fire from short sellers in late 2021.

Blue Orca, the short seller in question, complained that SEEK was burdened by toxic debt levels, that its valuation was 'mispriced' and that Zhaopin was filled to the brim with fake resumes and users. The market brushed off those claims; while the stock fell initially, it has since rebounded strongly.

But now SEEK is looking to trim its exposure to Zhaopin, revealing, as part of today’s interim results that it is currently engaged in 'advanced discussions with a consortium looking to acquire an ownership interest in Zhaopin.'

The value of the potential transaction has been earmarked in the AUD$2.2 billion range.

‘If the proposed transaction is completed, it is expected that SEEK would reduce its stake to 23.5%. None of the investors will hold a controlling interest,’ the company told investors in its interim report.

Moreover, the company flagged that there was no certainty that these ‘advanced discussions’ would result in a sale.

The Outlook

In an outlook that was described as ‘better than expected’, as part of its interim results SEEK provided the market with a revised FY21 outlook.

Looking at the specifics of this guidance, SEEK updated its full-year revenue expectations to ~$1,700 million, earnings (EBITDA) expectations to $460 million, and reported profit (NPAT) expectations to $100 million. Elsewhere, the company reaffirmed that it expected 'SEEK Investments ESV losses to be in the order of A$55' million.

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