Seek Realigns “Growth Aspirations”

Online jobs listing and employment services group sprang a major surprise on investors yesterday by revealing plans to rejig its dividend payout policy that could very well see the company reward shareholders with smaller payments in coming years.

Despite that news, the shares still rose 4.8% to $20.03. Investors obviously don’t like dividends.

Seek signaled that its 2019-20 dividends would likely be lower even though it expected a “broadly similar” net profit result to the one it released on Tuesday.

“In FY20, our intended dividend pay-out ratio will be between 30-50 percent of group cash NPAT,” the company said, adjusting its dividend policy from paying out 50-60% of group cash net profit after tax.

Final dividend for 2018-19 was an unchanged 22 cents a share, making a total for the financial year of an unchanged 46 cents a share.

Seek defended the cut as saying the reduced payout “to better align with our growth aspirations.”

That’s music to the ears of greedy investors who want capital gains rather than income growth from a company like Seek which in its early days was a disruptor and online pioneer and growth hero for many investors.

If the 2018-19 profit is maintained this financial year shareholder returns could dip to around 34 to 36 cents a share.

The company posted a full-year net profit of $180.3 million in the year to June 30, compared with $52.2 million in the previous corresponding period. That’s a bit misleading as the 2017-18 figure was restated to reflect changes in a key accounting standard governing revenue recognition from contracts with customers.

Revenue rose 18% to $1.54 billion.

“These results were achieved despite a backdrop of weaker macro conditions and strong competition,” chief executive Andrew Bassat said in yesterday’s release.

Sales revenue from Seek’s Australian and New Zealand business increased 7.0% to $437.6 million although listings fell 2.0% even though jobs growth was solid for the year to June (up 2.3% according to seasonally adjusted figures from the Australian Bureau of Statistics).

Mr. Bassat said in yesterday’s release that he was cheered by the segment’s “26 percent increase in depth revenue” – earnings from more costly “prominence ads” and Premium Talent Search, a product that lets firms comb through Seek user profiles for job candidates.

“The strong depth result was due to sustained investment in prior years and helped to counter the impact of weak H2 ad volumes”.

The company said it hoped to overcome “easing macro-economic conditions” both in Australia and in China – where Seek’s majority-controlled Zhaopin jobs portal reported $647.9 million in sales revenue for the year to June 30.

“Volatile economic conditions may impact our near term results but this will not impact Seek’s focus on investing to grow long-term shareholder value,” Mr. Bassat added.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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