Online employment agency Seek again emphasised the bargain the Fairfax Media group, under former CEO, Fred Hilmer, missed out on when it allowed James Packer to outbid them and pick up a 25% stake a few years ago.
Seek was looking for a cornerstone investor to help push it to bigger and better things, which it has done in the intervening period.
Hilmer and Fairfax claimed that seek was too expensive and they wouldn’t overpay. Fairfax has in fact paid twice over for this strategic blunder that only an academic CEO could make.
Seek’s earnings and share price have gone on to bigger and better things, but it has led the destruction of Fairfax’s dominance of online job classified and display advertising.
Seek is around 27% owned by Consolidated Media Holdings, which is 38% owned by James Packer and his family interests.
It’s why Mr Packer is chairman of Seek and why he was prepared to keep 10% of the company in the abortive attempts by Lachlan Murdoch to takeover Cons Media earlier in the year. Cons Media shareholders were to receive the Seek holding and cash for their shares and Cons Press would have picked up around 10%.
Mr Packer understands the disruptive impact of Seek’s business model on traditional media job advertising, which has seen it tighten its grip on this sector in the strongest jobs market we have seen in 20 years.
That is actually charted each month in the ANZ job ads series, which tells us that the newspaper share of job ads is falling by the month (and more so as the domestic economic slowdown intensifies), while the internet share remains fairly steady at around 250,000-270,000 a month.
The dominance of Seek can be seen in the reported 2008 financial profit, released yesterday.
Full year profit rose 37%, and the company says it’s confident of improving profitability further in the current year.
When Fairfax Media reports later this week, it won’t be reporting a 37% rise of profit, not even after buying the Southern Cross Broadcasting radio stations and Southern Star.
Nor will it be telling the world it expects improved profits this financial year. Most analysts have the media sector down as a big sell or neutral on the worsening outlook for advertising.
Seek reported net profit for the 2008 financial year of $76.3 million, up from $55.5 million in the prior year.
That was down on market consensus of $78.5 million.
Seek shares fell as much as 27 cents, or 5.3%, to $4.82 after the results were released, but then bounced back to end up 14 cents at $5.23 as investors took time to like what was reported.
The company declared a final dividend of 9.9 cents, making total dividends for 2008 of 18.6 cents, up from 7.7 cents and 13.7 cents respectively.
Seek said 2008 revenue jumped 33.1% to $211.488 million, while earnings before income tax, depreciation and amortisation (EBITDA) were 37% higher at $109.8 million.
Seek’s joint chief executive officer, Paul Bassat, said in a statement that the company "remain(s) confident of growing our profitability in the current financial year".
This would be driven, he said, by a continued migration of consumers from seeking jobs in print media to online, Seek’s growing presence in new markets, improved yield and the continued growth of its Learning business".
"Our focus on key drivers of growth remains consistent resulting in continued strong financial results," Mr Bassat said."
"Growth in the Australian and New Zealand employment business has been driven by ongoing migration from print to online, a growing presence in SME, Healthcare, Education and Government markets, improved yield and the introduction of product extensions through Standout & Premium Ads."
Mr Bassat said a record 52% of job seekers now preferred to search for a job online, more than double the preference for newspapers.
"More than 77% of job seekers’ time is now spent on SEEK, and over the past 12 months we have increased job ad volumes by more than our two closest competitors combined."
The company said that "The SEEK online classified advertising business performed extremely well with revenue increasing by 34.7% to $188,815,000 (2007: $140,206,000).
“The strong classified revenue growth is due to growing advertising volumes, which has been underpinned by the continued migration of advertisers from print to the on-line medium and the high demand for candidates in a tight labour market."
SEEK Learning generated revenue of $21,350,000 (2007: $16,785,000). This 27.2% growth has resulted from expansion into new learning content as well as organic growth.
Interest revenue for the period was $1,323,000 (2007: $1,906,000)
