For some odd reason shares in online employment services group Seek rose yesterday, despite the company warning of a possible dip in full-year earnings because it was stepping up investment in early-stage ventures.
The shares rose 9% to a day’s high of $18.97 at one stage before easing to end the day still up more than 8% at $18.77.
That was an odd move for investors because they normally punish companies that downgrade earnings, especially when the cause is higher investment – which for many in the market is a ‘no no’.
Seek CEO Andrew Bassat however, said in yesterday’s statement that these investments will deliver long-term returns despite lowering this year’s profits and investors seemed happy with that assurance.
SEEK said this early stage investment will total between $40 million and $45 million for the year ending June 30, compared with previous guidance of between $35 million and $40 million.
While earnings will be down a touch, the company reaffirmed its revenue guidance of growth between 16% and 20% and a 6% to 8% rise in EBITDA for the year to June.
That’s what reassured investors yesterday.
The company will pay an unchanged interim dividend of 24 cents a share, which perhaps indicates there is a degree of uncertainty about the second half.
Because of the stepped-up investment Seek trimmed its profit guidance for 2018-19 to slightly below what it achieved in the last financial year, $229.5 million,
Interim net profit fell nearly 5% to $99.3 million on a 21% jump in revenue for $757.2 million, while earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 6% to $238.5 million.
