Seek warns on coronavirus impact on full-year profit

Seek has joined the list of ASX-listed companies counting the cost of the coronavirus.

Seek CEO Andrew Bassat. Picture: Aaron Francis

Seek has joined the list of ASX-listed companies counting the cost of the coronavirus, with the online job site warning that its full year 2020 results could be lower than expected.

According to Seek, the impact of coronavirus on its Zhaopin business, which operates in China and Hong Kong, is likely to strip up to $25m from its full year net profit and between $110m and $120m of revenue.

“Our near-term results will be impacted by the coronavirus, softer economic conditions and our investment bias,” Seek co-founder and CEO Andrew Bassat said in a statement.

“It’s impossible to forecast the impact of coronavirus but we have provided a set of assumptions to help assess the negative flow through on our FY20 financial performance.

“Due to these factors, we are significantly under-earning relative to our true earnings potential,” he said.

Seek shares fell 4.5 per cent on the back of the warning but managed to recover during the session to close 1.8 per cent stronger at 22.81.

Mr Bassat said results have been fairly resilient and that he was confident that Seek could ride out the short-term impact of the coronavirus.

“It’s just really hard to forecast how long the outbreak will last but we are trying to be as transparent as we can about it,” he told The Australian.

While Zhaopin’s performance is critical to Seek’s overall numbers, Mr Bassat said he wasn’t overly concerned about the company’s reliance on China.

“It works both ways, if Zhaopin in doing well that’s great for the business but if it doesn’t we work through that.”

But the Zhaopin business would have comprised half of Seek’s FY20 revenue, and the company told the market on Tuesday that the coronavirus outbreak was set to destabilise the full year numbers.

“Short-term forecasting for Zhaopin is extremely challenging given the material uncertainties in predicting the duration and severity of the impact or “shape of the recovery” from the coronavirus.

“Consequently, we cannot reliably update guidance,” it said in documents lodged with the ASX.

The full-year profit warning came as Seek posted a 24 per cent drop in net profit for the first half of fiscal 2020, weighed down by subdued conditions in Australia and Hong Kong. Overall revenue for the period was up 16 per cent to $875m, with reported EBITDA up 4 per cent to $247.4m.

Mr Bassat said Seek was managing to hold the line despite challenges across it entire portfolio.

“Very weak economic conditions in Hong Kong and slow growth across the region significantly impacted our financial results.”

“Despite these factors, we grew depth revenue at 22 per cent and made progress in better integrating ANZ and Asia which will help accelerate SEEK Asia’s long-term growth.”

“In Latin America, financial results were weak in line with expectations. Both businesses continue to face near-term challenges, but remain focused on evolving their offerings to deliver great value for candidates and hirers,” he said.

Seek has announced an interim dividend of 13 cents per share, coming in at the lower end of the range given the significant capital deployed by the company during the half and increased uncertainty caused by coronavirus.