Seek shares dive following earnings slowdown warning
Written on the 6 August 2018 by David Simmons
Shares in online jobs site Seek (ASX: SEK) have dipped on Monday following an announcement regarding the potential slowdown of earnings over the coming financial year.
The company has flagged a substantial slowdown in earnings and revenue growth in 2018/19, resulting in Seek shares plummeting nearly 10 per cent on Monday afternoon.
The company has also announced a $178 million impairment charge against its operations in Brazil and Mexico for FY18, saying the deteriorating political and economic conditions in the region are impacting performance.
Chief executive Andrew Bassat says the performance of the group's Mexican and Brazilian operations is "disappointing".
"Performance has been disappointing but we remain committed to these markets," says Bassat.
"A turnaround of Brasil Online and (Mexico) will require more time and better economic conditions."
"The likely short-term outcome is that financial performance will be worse before an expected sustained improvement."
Seek has forecast earnings, before interest, tax, depreciation and amortisation growth of between five to eight per cent for the year ending June 30, 2019 , compared with expected earnings growth of about 15 per cent for 2017/18, at the top end of its guidance range.
Revenue is expected to be up between 16 to 20 per cent for 2018/19, compared with revenue growth of about 24 per cent for 2017/18.
The company said the gap between revenue and earnings growth was a result of the high level of investment - an 80 per cent lift in operating expenditure - that will go into its businesses in China, Australia-New Zealand and Asia.
Seek says its reported profit after tax, including investment costs, for 2018-19 is expected to remain "broadly similar" to the $230 million tipped for 2017-18.
Mr Bassat said a turnaround of its operations in Brazil and Mexico will take more time and better economic conditions.
Seek will also record a non-cash gain of $36 million on its investment in Chinese career and professional social network, Maimai.
Shares in Seek are down 9.24 per cent to $19.90 per share at 3.24pm AEST.
Business News Australia
Author: David Simmons