Zhaopin, the China-based recruitment vertical, shined in Seek‘s full year results, delivering revenue and earnings growth despite the continued uncertainty of the pandemic. But the company booked another impairment charge against its LatAm businesses.
Group revenue at Australia-based Seek increased 3% to A$1.6 billion ($1.1 billion U.S.), driven by revenue growth at Zhaopin, its online education business and early-stage ventures portfolio. EBITDA (earnings before interest, taxes, depreciation and amortization) declined 9% to A$414.9 million ($295.4 million U.S.).
Net profits after tax plunged 51% to A$90.3 million ($64.3 million U.S.). No full-year dividend will be paid, in order to preserve working capital.
“When labor markets return to more normal conditions, we expect to generate a high return on investment, given our market leadership and track record of generating strong returns from investing in product, technology and data,” CEO Andrew Bassat said in an earnings call.
Zhaopin proved most resilient, growing revenue by 16% to A$749.6 million, due to growth in adjacent services. EBITDA increased 25% to A$123.7 million.
Bassat said Zhaopin’s performance indicates that it will enjoy a “robust recovery” when conditions in China return to normal. “Our long-term focus remains on supporting Zhaopin to grow its market share in a large, but competitive, human capital market,” he said.
OES, the company’s online education business, also performed well, lifting revenue 7% to A$136.6 million. Bassat attributed the result to an acceleration in the shift to online learning during the pandemic.
Likewise, the company’s early-stage ventures portfolio, which include businesses such as Sidekicker, an on-demand staffing platform, and the Latin American gig site Workana, grew revenue 18% to A$61.6 million.
“Our ESV portfolio quickly adapted to the new environment and delivered strong operational growth and financial results,” Bassat said. “These results have increased our conviction in our portfolio and the key themes of online education, HR SaaS and contingent labour.”
Elsewhere, the results were grim. The Asia-Pacific and America’s division saw revenue decline 20%, driven by a near-total collapse in job ads in Australia and Asia during the height of the pandemic in the second-half of FY20. However, the company said the new pricing structure introduced to the Australian market last year had a 75% adoption rate among clients.
In Asia, Hong Kong was the largest driver of revenue declines, due to the combined impact of Covid-19 and ongoing political unrest. Anthony Porto, a senior analyst at Morgans Financial, said in a note to clients that margin expansion in the region will likely be muted in the near-term, due to necessary ongoing investment.
“July volumes were down around 40% in the Asian markets, and this has continued in early August,” Porto said.
In LatAm, where revenue slipped 14% to A$77.5 million, the company booked a A$138 million non-cash impairment charge against OCC Mundial in Mexico and Catho in Brazil, and A$60 million against four non-core minority investments.
Bassat said that while the pandemic had exacerbated the challenges in Brazil and Mexico, the company remains committed to the region.
“It is unfortunate that we have had to recognize an impairment against these businesses,” he said. “The focus remains on evolving their product and service offerings to deliver more value to candidates and hirers.”
The company expects trading conditions will remain challenging for the duration of the pandemic, adding that when movement restrictions are tightened “we see an immediate impact on economic activity and hiring intentions.”
In guidance for fiscal 2021, the company expects billings to decline 30% to 40% at Seek ANZ and Seek Asia respectively, and by 5% at Zhaopin. The company is forecasting revenue of around A$1.5 billion and EBITDA of A$330 million.
“The near-term will continue to pose challenges, but we will remain agile to take advantage of new growth opportunities as they arise,” Bassat said.