Seek's long-term investments begin to bear fruit


As a business, Seek encompasses a strong portfolio of employment, education and volunteer businesses across Australia, New Zealand, China, South East Asia, Brazil, Mexico, Africa and Bangladesh. The business offers investors access to the global employment cycle through online marketplaces that facilitate the matching between job seekers and hirers. They have undergone a significant investment phase in past years which has depressed short term earnings, however we believe the program will provide long-term value to shareholders.

Impressive FY21 Results on the Back of Strong Labour Market Rebound

FY21 was another impressive year for Seek as the benefits of product development and ESV investment are now being realised. While the overall group grew Revenues and EBITDA by 21% and 33% respectively - Seek ANZ surged 40% and 46% on the aforementioned criteria, as Australia's labour market defied sceptics and continued to flourish after initial pandemic impacts. The combination of record ad volumes and a higher proportion of customers utilising premium features has allowed Seek to extract higher revenues from existing users due to an inherent labour shortage within the economy. While both Seek Asia & Latin America experienced 2% and 20% retractions on FY20 numbers, we expect the current macro headwinds to abate as heightened vaccination uptake supercharges growth in these emerging markets moving forward.

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Seek Growth Fund to Achieve Strategic Investment Goals

Seek is the largest online jobs classified platform in Australia and has invested heavily in early-stage businesses and technologies involved in the online employment space and educational courses. More recently, a strategic review has been completed which will see the separation of Seek Investments from the parent organisation and instead, establish the Seek Growth Fund, a unit trust which will facilitate a more aggressive investment strategy within the core employment business, of which Seek will initially hold approximately 84.5% of the units.

The fund has been seeded with $1.215 Billion in existing investments, with a further $460 Million committed by a range of investors - $80 Million of which came from the Seek Investments management team. The additional capital will facilitate further independence for Seek Investments, having signed follow on transactions and new investments totalling $200 Million over the past 3 months, whilst simultaneously enabling further cash flows and dividend paying ability to Seek.

Looking Ahead

We remain positive on Seek as the apparent earnings implications resulting from years of product and early-stage venture investments are starting to be realised. With a footprint spanning the globe, solid management team, high demand for skilled employees, and a pipeline of new opportunities offering differentiating characteristics, we believe Seek presents as a compelling investment opportunity within the current market.

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Michael Wayne is the managing director of Medallion Financial Group. With considerable experience in financial markets, Michael provides advice to a range of clients in both domestic and international equities, exchange trade funds (ETFs), managed funds and corporate deal flow.