This morning international online jobs business SEEK Limited (ASX: SEK) reported a profit of $340.2 million on total revenue of $1,053.2 million for the full year ending June 30, 2017. The profit and revenue were down 5% and up 9% respectively over the prior year.
The reported net profit includes a gain of $174.3 million on the sale of an education business, although overall the business delivered a profit decline thanks mainly to greater one-off gains in sales over the prior year.
The group delivered an adjusted net profit in line with prior forecasts of $220.8 million, with costs around investments in early stage ventures backed out.
That represents growth of 11% if you accept management's practice of excluding a $19.3 million loss from the bottom line as the result of investments in early-stage ventures.
The group delivered a total dividend of 44 cents per share up 10% over the prior year, with a final fully franked dividend of 21 cents per share, up 10.5% over the prior corresponding period.
Reinvesting to defend its competitive position
SEEK's management team is focused on heavy reinvestment for long-term growth in order to improve its competitive position and product offerings as it faces rising competition from the likes of social network and jobs website LinkedIn.
The group's eponymous Australian and New Zealand jobs website continues to perform well, with revenue and operating income growth of 14% and 11% respectively, as it continues to reinvest heavily in new technology and products.
Its international businesses are also being invested in aggressively and as a result total operating income declined 3% to $187.6 million on revenue of $629.3 million.
The international businesses now account for around 60% of group sales revenue and half of operating income, with significant leverage to generally fast-growing (but volatile) economies in Latin America and South East Asia.
Its star Zhaopin.com Chinese jobs website has delivered 12 consecutive quarters of 20% revenue growth, but at a significant cost of heavy reinvestment that has delivered flat growth in operating income. SEEK is at advanced stages to take NYSE-listed Zhaopin private, with the support of Chinese private equity partners.
The group also continues to invest in its early stage ventures, including rising star Jora that is a free jobs posting site that now has a presence in 32 countries.
Its reinvented education business including SEEK Learning is also now included in its early stage ventures segment, with multiple higher-education offerings across the globe.
Outlook
Thanks to the heavy reinvestment SEEK is forecasting some impressive revenue growth of 20%-25% over FY 2018, with reported net profit forecast in the range of $220 million to $230 before deducting early stage investments of $25 million to $30 million.
However the positive is that the group noted that included in the FY 2018 profit guidance is an $18 million impact relating to $14 million in depreciation and amortisation costs, alongside $4 million in share-based payments.
Valuation
The stock is down 7.8% to $16.43 in morning trade and I have written multiple times over 2017 how its valuation looked expensive compared to both its adjusted or actual growth rates, although this remains a high-quality business I would prefer to buy it at a cheaper valuation despite the impressive top-line growth forecasts.
