Shares of SEEK Limited (ASX: SEK) have plunged 11.1% today after the online jobs classifieds behemoth reported its full-year results, despite posting a strong lift in revenues that beat the market's estimates.
For the 12 months ended 30 June 2015, the group's sales revenues from continuing operations surged 20% to $858.4 million, beating the average forecast of $853.8 million, according to Yahoo! Finance, while earnings before interest, tax, depreciation and amortisation (EBITDA) rose 15% to $348.9 million.
The market was expecting slower growth in EBITDA compared to revenues after the company issued a profit warning late in June, after it initially guided for "solid growth" in both figures.
Net profit after tax (NPAT) also surged 41% to $315.2 million, although investors may be disappointed with underlying NPAT which grew a more modest 6% to $189.8 million. Notably, the underlying NPAT figure excludes one-off items including the fair value gain on its existing investment in JobStreet Corporation Berhard, which reaped the group $100.3 million, as well as the costs associated with the sale.
The Business
Seek generates the majority of its revenues from its International division, although the bulk of EBITDA is still generated in its Australian and New Zealand (ANZ) market.
Revenues grew 9.3% in Australia, predominantly thanks to a strong performance from its 'Core Employment' segment. Sales revenue from 'SEEK Learning' actually declined during the period due to issues related to an IT systems upgrade undertaken by TAFE NSW, high withdrawal rates and tougher competition.
While EBITDA for the ANZ division fell roughly 3.3% to $184.4 million; internationally EBITDA grew 45.2% with revenues also surging 30.4%. This was bolstered by a strong performance from Zhaopin in China as well as SEEK Asia which the company believes will benefit greatly from the completed transaction of JobStreet, which has now been integrated with Seek Asia's existing business JobsDB.
The Outlook
Although Seek International's growth was impressive during the period, investors were likely disappointed with the company's outlook for FY16 which could explain today's heavy fall. Indeed, Seek's shares aren't cheap and there has been plenty of growth priced into the stock.
That being the case, the company expects revenues to grow between 15% and 18% — well below last year's 20% figure – while it expects EBITDA to grow between 5% and 8%. Again, that is well below the EBITDA growth reported for FY15, while it also reflects thinning margins (that is, the amount per dollar of revenue the company gets to keep after accounting for operating expenses).
Although Seek certainly isn't a risk-free investment, it does have strong growth prospects in the years ahead, and investors could look to take advantage of its sharp drop. Indeed, the stock is now trading at a near 18-month low price at $12.25 and could be worth a closer look for long-term investors.
