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.
