In morning trade the SEEK Limited (ASX: SEK) share price is trading lower following the release of its half year results.
The job listings giant's shares are down 4% to $21.50 in early trade.
How did SEEK perform in the first half?
For the six months ended December 31, SEEK overcame challenging conditions in many markets to deliver a 16% increase in revenue over the prior corresponding period to $875.5 million.
The company's EBITDA grew at a slower rate of 4% to $246.4 million. This was due to the company prioritising investment in order to unlock future growth opportunities.
And on the bottom line, SEEK's reported net profit after tax dropped 24% over the prior corresponding period to $75.6 million. Management advised that this reflects its investment bias across its operating businesses and losses in its Early Stage Ventures.
In light of this profit decline, the significant capital it deployed in M&A activities, and increased uncertainty caused by the coronavirus, the SEEK board has elected to cut its dividend.
It will pay out a 13 cents per share fully franked interim dividend, down 46% on the prior corresponding period.
How did its segments perform?
The SEEK ANZ business delivered roughly flat revenue of $224.4 million during the half. Management advised that continued strong growth in depth revenue helped to partially mitigate weak ad volumes. At the end of the period it held a 37% share of the market, which is a lead of ~6x the nearest competitor.
Things were more positive in the SEEK Asia segment, which delivered an 8% increase in revenue to $91.3 million during the half. This was despite its largest market (Hong Kong) facing material economic weakness from the protests.
The LatAm business acted as a slight drag on proceedings. It posted a 2% decline in revenue to $43 million during the first half.
The real driver of revenue growth during the period was the SEEK Investments business. Thanks largely to a 31% jump in Zhaopin revenue to $418.4 million, SEEK Investments reported a 27% lift in revenue to $515.7 million.
Coronavirus update.
Although the impact of the coronavirus on its business has not been material outside China and Hong Kong, management warned that it could still prevent it from achieving its FY 2020 guidance.
SEEK was previously targeting revenue growth of 15% to 18%, EBITDA growth of 8% to 11%, and a reported net profit after tax of $145 million.
It has now warned that due to the coronavirus and higher losses from its Early Stage Ventures, SEEK could fall short of its guidance by $110 million to $120 million for revenue, $40 million to $45 million for EBITDA, and $25 million for reported net profit after tax.
CEO Andrew Bassat explained: "Our near-term results will be impacted by the Coronavirus, softer economic conditions and our investment bias."
"Due to these factors, we are significantly under-earning relative to our true earnings potential. We will continue prudently investing through the cycle as we think the long-term pay-off is significant. Across AP&A and SEEK Investments, we will invest aggressively into high growth initiatives within our market leading businesses," he added.
Before concluding: "Over time we expect China and the rest of the world to return to more normal conditions, and are confident that our long-term strategy and aspirational targets remain intact. In the long-term our strategy and investment bias will grow SEEK's defensibility and profitability."
The aspirational target referred to above is the company's aim of growing its revenue to $5 billion in FY 2025.
