International jobs classifieds business Seek pre-released their full year result this morning ahead of their scheduled full year reporting date on the 15th August. While the numbers were preliminary and unaudited, the market snubbed them and sold the stock off fairly hard, down -8% at time of writing. The current year is tracking along well with underlying numbers kicking along at the top end of company guidance, however the outlook for FY 19 in terms of profit was below market expectations while we also saw a couple of asset write downs which is not a good look when the company is aggressively investing overseas.
In terms of the numbers, it looks like FY18 revenue will be around $1,285B vs consensus at $1,275B, which is good, EBITDA of 432.2M vs 434.4M which is okay, however the outlook for EBITDA and indeed profit for FY19 was well below market expectations. At the mid-point of the company guided range, SEK will do revenue in FY19 of $1.51B which is ahead of market expectations of $1.44B, however (assuming midpoint) EBITDA will be $460m versus current expectations of $483m while profit will be flat on FY18 whereas the market was looking for growth of 19% implying reported NPAT of $243m, however it will likely be nearer to $200m.
Seek (SEK) Chart
Market Matters Take/Outlook
There are a few issues bubbling away under the surface of this update from SEK which is one of Australia’s top growth stocks. The top line revenue is okay, so they’re growing the business which is good on one hand, however the cost of growing the business in other markets has been high. This means that although revenue is growing, the growth in revenue is not dropping down into growth in profits, instead they’re reinvesting in the business for future growth.
That’s fine if they invest well, however today they also wrote down the carrying value of their Brazilian operation (Brasil Online) along with their Mexican business (OCC) by a combined amount of A$178m. So on one hand they say we’re investing for future growth – trust us – and on the other hand they’re saying the value of these businesses have gone backwards and they need to be written down. This leaves a sour taste and when a business is trading on 34x forward earnings, it’s hard to swallow!
SEK has an incredible operation in Australia, a market it dominates however growing overseas in larger markets will continue to cost money. We have no interest in SEK at current levels.
Seek (SEK) Chart
