SEEK profit jumps 81 per cent on record job advertisements in Australia, New Zealand but shares fall after guidance

Australia’s biggest job search company has unveiled a big jump in profits on the back of record job ads but warned of material risk to forecasts, causing share price to fall.

Seek saw volume growth in job ads across all segments.

The chief executive of Australia’s biggest job search company SEEK, Ian Narev, says the company might need to upwardly revise targets set last year of doubling revenue by 2026 after smashing its profits and revenue growth out of the park in 2022.

Mr Narev said growth has been so strong since setting that target last year, that the company is considering either an upgrade or bringing the date forward.

“Our concern is that this target may not be an aspiration target anymore,” Mr Narev told The Australian. “We are coming off a really high growth year.”

However in a call with analysts Mr Narev said his guidance for the current financial year of NPAT of between $250m to $270m, and revenue of between $1.25bn to $1.3bn was for a best-case scenario and contains material risk.

SEEK shares dropped as much as 7.6 per cent on the news before regaining some ground.

“SEEK’s sell off was driven by the market‘s interpretation of the earning call where the balance of risk was skewed to the downside,” said Barrenjoey’s trading desk.

The company has benefited from an overheated jobs market in Australian, New Zealand, and Asia as economies rebound post Covid-19 lockdowns.

SEEK net profit after tax, excluding significant items, jumped 81 per cent to $245.5m for the year ended June 30, 2022, on the back of record job advertisements in Australia and New Zealand. Revenue rose 47 per cent compared with the previous corresponding period to $1.117bn.

The company saw volume growth in job ads across all segments for the year ended June 30, with corporate volumes up 50 per cent to now account for 28 per cent of job ads, and SME advertising jumping 43 per cent to now account for 40 per cent of the total market.

Trades and services, as well as health care, and IT remained the biggest advertisers, while the most growth during the year came from administration and office support, retail and consumer products, hospitality and tourism.

Mr Narev said SEEK had been able to capitalise on significant investments to make it easier for businesses and individuals to place different styles of advertising.

“It’s a lot easier to place ads than it used to be three to four years ago,” he said. “The friction of choosing between classic ads and premium ads has eased.”

Across Australian and New Zealand high levels of hiring activity resulted in record job ad volumes of 325k in March 2022 and Mr Narev said even though these numbers declined in June and July they were still up on the previous year.

“A strong FY22 result, however whilst FY23 guidance is above current consensus sales/EBITDA estimates it has significant caveats attached. These include no material change from current job ad volume levels – something to be monitored closely moving into FY23,” said Ord Minnett in an early research note.

The employment ad giant has been benefiting from Australia’s jobs crisis, with unemployment at a 48-year low of 3.5 per cent and workforce participation is at an all time high of 66.8 per cent.

Across the country many businesses are struggling to meet demand because they have been unable to fill either white or blue collar jobs.

Next month, Canberra will host a jobs and skills summit where union and industry leaders will be asked to negotiate a deal on how to plug labour shortages, amid calls to balance higher migration levels with increased skills and training investment.

One question is whether annual migration intake should increase to between 180,000 and 200,000. Even if a higher number is agreed, the federal government is struggling to process visa applications due to its own staff shortages and illness.

SEEK’s turnaround from reporting a loss at the peak of the Covid-19 pandemic has been rapid, returning to profit in last year and then accelerating its growth this year.

Earnings before interest tax and amortisation in the full year 2022 rose 53 per cent to $509m for full year 2022.

SEEK’s NPAT including significant items dropped 78 per cent after it sold most of its shares in Beijing-based Zhaopin for $697m. The company still holds about 23 per cent of the Chinese employment company.

“In all our Asia Pacific markets, ongoing economic recovery drove high demand for labour, which in turn led to strong job ad volumes and increased depth adoption,” Mr Narev said.

“Our markets continue to be highly competitive. However, SEEK maintained its market leadership positions, with stable placement metrics throughout Asia Pacific.”

The company announced a fully franked final dividend of 21c per share, taking the total dividends to 44c per share.