COVID has caused some gyrations in the labour market but SEEK has been perfectly positioned and prepared to capitalise. The interim result was a banger, particularly for the core ANZ business which is now amply harvesting the fruit of investment in its platform.
We were anticipating some good numbers from SEK but instead got a ripper result as the ANZ business fully delivered. EBITDA in this business leapt 94% to $254.6 million.
Job ad volume growth added 49% to revenue in the half, complemented by a 20% lift in yield (a combination of price, mix and depth) so that ANZ revenue increased by 72% in 1H22.
The yield shift has been driven by a wind back of recruiter discounts and an improved mix of high yield SME listings. SME now accounts for about 39% of volumes.
Depth revenue of $133 million increased 93% compared to last year and now represents 35% of ANZ revenue. This demonstrates that customers are willing to pay more for SEK’s products and services which will in turn push yield growth. This is SEK’s price to value strategy in full flourish.
The rush of new hiring activity in the economy may eventually normalise and pare back the yield growth. But many of the SME customers that have recently advertised for the first time on SEEK are likely to sustain their activity.
SEEK Asia revenue grew 42% in the half in local currency terms with EBITDA growth of 14% held back a little by higher costs. SEK is undertaking a platform unification project costing $123 million over 3 years. We are cautious on the outlook for SEEK Asia but there is still substantial potential here if SEK can execute on its strategy.
Investment view
The strength of the recovery in the Australian economy and its job markets particularly, has provided fertile conditions for SEK’s finely honed platform, products and services. It is gratifying to see many years of investment and innovation deliver a strong result that fully captures the heightened activity in the market. It instils confidence that SEK can continue to grow revenue and yield as it executes on the price to value strategy.
The International investments still have plenty to do before replicating the ANZ success, but progress is steady.
Consensus earnings forecasts have some catching up to do given the increased guidance.
Risks to investment view
Any changes to growth in the job advertising market may affect the earnings outlook for SEK. Job ad volumes can be volatile. SEK might not earn a sufficient return on the investment in its platforms if the strategy cannot be executed well.
Recommendation
We have retained our Buy recommendation.
