Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


Seek falls as covid does a job on hiring

Lex Hall  |  12 Aug 2020Text size  Decrease  Increase  |  
Email to Friend

Australia’s largest online job ad website Seek has moved into fair value territory after posting a sharp fall in full-year profit.

Seek (ASX: SEK) fell 9.6 per cent in trading on Wednesday after posting a full-year net loss of $111.7 million—a sharp fall compared with last year's profit of $180.3 million.

The share price fall means the company, which has a narrow moat, or ten-year competitive advantage, is fairly valued, according to the $20.50 fair value estimate of Morningstar analyst Gareth James.

Revenue rose by 2.6 per cent to $1.58 billion, up from $1.1 billion in the previous corresponding period.

However, this was marred by $138 million writedown in the value of its businesses in Brazil and Mexico, with chief executive Andrew Bassat citing the "devastating impact of covid-19" in the regions.

"Our businesses in Brazil and Mexico have been facing challenges for some time and this has been exacerbated by the devastating impact of covid-19,” Bassat said on Wednesday.

The company will not pay a final dividend but said it would do so again "once economic conditions improve".

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Seek also booked an impairment charge of $60 million against four "non-core minority early stage investments".

Seek share price 1YR

Source: Morningstar Premium

Morningstar’s James had predicted the impairment in the Brazilian and Mexican business but said it was of minor concern.

“We’re not particularly concerned about the noncash impairments of the Brazilian, Mexican, and early stage businesses," James said in a note from 22 June.

“These businesses represent around 5 per cent of our valuation and the impairments are likely impacted by the tough near-term operating environment, which we don’t expect to continue into the long term.

“Seek’s balance sheet remains in good shape and the covenant limit increase is a positive sign.”

The company said that tightening restrictions had had an immediate impact on economic activity and hiring intentions.

Australia's jobless rate rose to 7.4 per cent in June, up from 7.1 per cent in May, despite the economy adding 210,800 new jobs as covid-19 restrictions eased before Victoria's second lockdown.

It was the biggest monthly rally since records were kept, but the unemployment rate is now at its highest since November 1998 because the participation rate—the proportion of working-age people actively looking for jobs—has risen to 64 per cent from 62.7 per cent.

Seek expects job ads will gradually recover throughout fiscal 2021 but remain below the peaks of fiscal 2020.

In its Asia unit, it expects job ad volumes to remain weak throughout the first half of 2021 before gradually recovering in the second half.

This article is part of Morningstar's Reporting Season 2020 coverage. The calendar will be updated daily to connect you with our equity analysts' take on the financial results.

is senior editor for Morningstar Australia

© 2022 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend