Seek marred by trouble in Latin America

Written on the 15 August 2018 by Paris Faint

Seek marred by trouble in Latin America

Political and economic turmoil in Latin America has blemished Seek's (ASX: SEK) financial year as the company has been forced to write down key assets in the region.

The online job agency today reaffirmed a total impairment charge of $178 million it warned investors about earlier this month, comprised of $119 million against the carrying value of its Brazilian subsidiary Brasil Online and $59 million against its Mexican arm OCC.

As a result, Seek's net profits have dropped sharply from the $340.2 million it recorded in FY17 to just $53.2 million in FY18.

In a statement, the company claims "deterioration in economic and political conditions have impacted financial performance" in Brazil, while political uncertainty, competitive intensity and operational issues have jarred OCC in Mexico.

Seek CEO and co-founder Andrew Bassat remains optimistic regarding the future of the Latin American market despite its poor performance.

"It is unfortunate that we have had to reduce the carrying value of Brasil Online and OCC," says Bassat.

"Performance has been disappointing but we remain committed to these markets. We are hopeful a greater strategic focus, resourcing under the Asia Pacific and Americas structure and an improving economy can over time assist in turning around performance."

Although its profit margin suffered heavily due to overseas write-downs, the group still managed to reach the top end of its revenue guidance range at $1.29 billion representing a growth of 25 per cent.

Group earnings before interest, tax, depreciation and amortisation (EBITDA) also grew from $375.8 million in FY17 to hit $432.8 million in the most recent financial year.

Performance was solid across the company's other divisions including Seek ANZ and Seek Asia, the former delivering total revenue growth of 16 per cent.

"Despite our issues in Latin America, the SEEK Group delivered a strong underlying FY18 result," says Bassat.

"We are pleased to deliver revenue, EBITDA and underlying NPAT results at the top end of our guidance range. We are particularly pleased with the results from SEEK ANZ, Zhaopin and SEEK Asia."

SEK shares are trading steadily at $20.68 at the time of writing (11:06am AEST).

The company has declared a total FY18 dividend of 46 cents per share.

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Author: Paris Faint

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