Another disappointing end of year result for Seek. Market commentators seem to place this company in the same elevated ranks as CAR and REA, but after holding since 2015 my patience has finally been exhausted. The dividends have been paltry and the capital growth has been anaemic. I have scratched out an annual return of 6.35% which is well below the 10% threshold I set for my investments. I don't know why I gave them so much rope for so long, nor why I mistakenly topped up my holding in April 2023, at $24. From my notes at the time I can see that I wasn't really committed to this move:

On the upside:

+ I have underinvested in this company compared to the others in my portfolio

+ SEK is generally regarded as a quality company

+ Revenue is still growing healthily at 15%+ in ANZ and close to 30% in Asia

On the downside:

- There is close to $1bn of debt. I'm not sure why on the one hand the company invests in various other companies via its growth fund, and pays a dividend, yet borrows money as well

- The accounts are complicated because of the Growth Fund and I can't claim to fully understand them

- There is significant Capex ($18m) still required through FY24 for unification of its platform, which will likely depress the share price

- The generally negative macro environment at the moment isn't exactly suggesting that recruitment demand is going to be strong in the short term

Revenue has now been in decline for 2 years, and management guidance seems to suggest more of the same next year:

" Based on our historical experience of similar conditions, we have assumed that paid ad volumes in ANZ will continue to decline throughout FY2025. For Asia, we have seen early signs that the slowdown is moderating and we expect a partial recovery in the second half. As we benefit from continued yield growth, we expect to maintain revenue at levels similar to the prior year."

The financial media seems more interested in the - $210m revaluation of the venture capital fund that is 84% owned by SEK, but this was never my reason for investing, and I much prefer Bailador as an outlet for my foray into venture capital investing. The core employment marketplace business appears to me to be in long term decline, with the company having pulled out of Brazil after 10 years, with the Asia business showing a 1% decline in revenue, and with a $120m impairment of the carrying value of SEEK’s 23.5% equity investment in Zhaopin, suggesting a lack of success penetrating the Chinese market.

The writing was on the wall when I topped up my investment in 2023 - looking back it would have been far more sensible to sell my entire holding at that time. We live and learn.

No longer a holder.

16/05/22

Goldman - SELL, target price $26.60

Appears to be a good set of results from SEEK - However coming off a low base with COVID for the last couple of years.

FY22-Half-Year-Results-Presentation.PDF

Increased dividend.

I hold in RL

Just a note to say that I prefer using Indeed over Seek to find workers.

I am a low spending customer, I don't know if it would be different for high spending customers.

A few years ago Seek operated more of a fixed fee model - not sure if it's the same now, whereas Indeed used more of a google bidding model.

A stalwart, but it is hard to make sense of the valuation at these levels, especially with the organisational restructures, divestment of the Zhaopin interest, and management movements announced recently. The accounting is messy and complicated too as a result of these changes.

I retain a core holding, but have been taking profits on the edges.

A lot to take in in this one, any thoughts?

Seek to Transfer A$1.22 Billion of Assets to Growth Fund

11/08/2021  9:05AM

By Stuart Condie

SYDNEY--Seek Ltd. will transfer the bulk of its investments to a new independent fund in a move that the online employment marketplace said should increase capital access for its early stage ventures.

The ASX-listed firm said it would transfer assets independently valued at 1.22 billion (US$896.7 million) to the Seek Growth Fund, which will be led by former chief executive Andrew Bassat. The assets comprise Seek's holdings in Online Education Services and 14 early stage ventures.

The fund plans to raise another A$460 million to fund future investments, Seek said. Seek will invest A$200 million and the fund will target the remainder from other investors.

Seek said it expects to own about 85% of the fund after the capital raise. The fund will operate independently and collect fees for managing Seek assets including its stake in Chinese jobs portal Zhaopin.

Disc: I hold in real portfolio

Seek's full year results were pretty nasty. They were always going to be.

Group revenue was up just 3%, with 2nd half billings down 65% at the nadir.

EBITDA was down 9%, which translated to a 51% fall in NPAT (excluding significant items) due to a big increase in depreciation and amortisation.

The market reaction led to a 9% drop in share price (at time of writing), presumably due to some very cautious messaging from management. 

CEO Andrew Bassat said "The current Macro outlook is highly uncertain. Our near term profits will be impacted by COVID-19..."

I've always rated management and regard them as one of the best teams on the ASX. A frank and direct assesement is welcome, and preferable to a bunch of spin and unreasonable near term forecasts that would hardly be better than a thumb suck.

These guys have always been very long term focused, and I don't think the business is in any structural trouble. It'll likely take a couple of years before the business fully recovers, but in 5 and 10 years i anticipate this to be a bigger and better business, continuing to hold leading positions in its chosen markets.

That being said, even after today's price drop, shares are only 15% from record highs and trading on a P/E of 76 and a P/S of 4.4. Too rich for me

Results presentation is here