SEEK Limited (ASX: SEK) shares opened higher this morning after the online jobs marketplace warned weak macro-economic conditions in key markets threaten its chances of meeting FY 2020 profit guidance.
For now SEEK still expects to report a net profit between $145 million to $155 million for FY 2020. It also reaffirmed its intention to invest heavily in new businesses and ventures to generate growth over the long term. It has an 'aspirational' target of delivering $5 billion in revenue by FY 2025.
As a result of the intention to reinvest it also flagged that its dividend payout ratio will be lowered to 30%-50% of net profit, compared to the prior payout ratio of 50% – 60% of net profit.
The cash saved is to be reinvested back into the business, but it looks like SEEK's short-term dividends are set to come under pressure.
The group's financial statements are complicated by the number of 'one off' adjustments and constant backing out of early stage venture and other costs that makes it hard to assess how the business is really performing. In fact you could say the accounts see more adjustments than cricketer Steve Smith's box.
More generally SEEK is likely to divide the bulls and bears on whether the heavy reinvestment is a symptom of structurally competitive heat it's feeling from the likes of LinkedIn, or whether it's simply part of the long-term plan for a successful business.
