This morning SEEK Limited (ASX: SEK) reported its half-year results for the period ending December 31 2018. Below is a summary of the results with comparisons to the prior corresponding half year.
- Total sales revenue of $757.2m, up 21%
- Statutory net profit of $99.3m, down 5%
- EBITDA (operating income) of $238.5m, up 6%
- Total of $21.3m invested in early stage ventures (ESV), compared to $11.1m (restated)
- Underlying net profit of $123.8m, up 6% when backing out ESV costs
- Interim dividend flat at 24 cents per share
- Net debt up $87m to $660m
- Now expects to invest $40m to $45m in ESVs over fiscal 2019
- Now expects fiscal 2019 reported net profit to be "slightly down" on fiscal 2018
The SEEK share price opened 3.1% higher to $17.88 as investors breath a sigh of relief that SEEK's ANZ business delivered a stronger-than-expected first half with revenue growth of 11% to $221.7 million translating into 13% EBITDA growth to $137.5 million.
However, a lot of the focus for SEEK investors will remain on the growth of its Chinese doppelgänger Zhaopin (61% owned) that grew revenue 39% to $319 million on a constant currency (CC) basis with EBITDA up 13% on a CC basis.
While it's still apparent that much of the strong revenue growth is coming about via heavy investment the double-digit EBITDA growth for Zhaopin is actually an improvement on prior efforts and auspicious for SEEK bulls.
Zhaopin alone is now valued above $1.5 billion according to SEEK relying on independent analysts and this looks reasonable given the numbers.
SEEK bears will argue that the business's revenue growth is just at the expense of ballooning costs with seemingly little return on investments from the ESVs as yet and a forecast for net profit to actually fall in 2019.
I hedged my bets by selling shares in November 2018 at higher prices, but retaining a position on the basis that SEEK's long-term approach could yet pay off given the strong top-line growth.
Debt is another factor for investors to consider, while SEEK has not done a great job in the past in explaining what it means by its opportunity in the "human capital management space".
In today's update though it appears to have reined back on that to better explain its ESV investments, which is a positive in my view.
Overall, I'd rate the stock a hold but given I own SEEK, it's fair to say I regard it as one of the better businesses on the local market.
Probably the only better consumer-facing internet business is REA Group Limited (ASX: REA), while Carsales.Com Ltd (ASX: CAR) I am not so keen on.
