Online job advertiser Seek has taken a big hit as businesses stop recruiting. Photo / file
Online job advertiser Seek has taken a big hit as businesses stop recruiting. Photo / file
COMMENT:
By any measure, SEEK's latest full-year earnings could be described as disastrous.
It's hardly surprising that the global jobs and training portal's underlying profit fell by over 50 per cent to A$90 million ($98.5m) in the year to June.
And there is worse to come the company says, forecastingits profit for the current 2021 year will come in at just A$20m.
Of course, none of this is the fault of SEEK or its chief executive Andrew Bassat – companies around the world are cutting back on spending on training and certainly not hiring new staff.
In such circumstances, investors might expect the company to slash costs to save as much of its profit as it possibly can.
But Bassat, renowned as a long-term thinker who is happy to ignore the market noise, is doing no such thing. He has a five-year plan to lift SEEK's annual revenue to A$5 billion by the 2025 financial year, up from $1.4b in 2018.
He has essentially given up on the current year's profit and instead is looking forward to 2022 and 2023.
And why not? What else could he do?
If he, for instance, made staff redundant or put them on four-day weeks with a 20 per cent pay cut, he might have saved a few million, but it wouldn't have achieved much – maybe a A$30 million profit this year instead of A$20 million, still a pretty terrible result. It might have provided a little support to the share price, but at what cost?
"Our mindset is, what does our business look like when the pandemic ends, not what do our short-term numbers look like?" he said after the results.
Bassat added that SEEK's investment in staff and customer support means it could emerge "stronger than we would have been if the pandemic hadn't occurred".
What this means is that when the pandemic has passed, whenever that is, SEEK will be well-positioned to take advantage of the likely upswing in hiring and training. And it will be poised to take market share from competitors who have cut back and will scramble to return their businesses to full operational health.
SEEK's readiness to take a small bit of extra pain now will pay off many times in the coming years.
Of course, SEEK isn't the only company to have had its earnings smashed by the COVID-19 pandemic. Oil producers, companies reliant on the travel industry — such as Crown Resorts, Flight Centre and Qantas — and, to a lesser extent the big banks, have all taken a hit.
But amid the gloom are some companies well-positioned to take advantage of the lifestyle changes the pandemic and resulting lockdowns have caused. Some have an attractive online offering for the stay-at-homers, but there's also the matter of selling the right product or service, and that comes down to luck.
JB Hi-Fi has done well out of more people buying TVs and home entertainment systems during lockdowns. Photo / file
The stand out among them was electronics retailer JB Hi-Fi. Instead of spending money going out to restaurants or on holidays, we have stayed at home – and it seems many of us have used the savings to treat ourselves to a new TV or sound system.
On top of the money they've saved by not leaving home, many Australians are flush with cash thanks to government stimulus payments such as one-off rules allowing people to withdraw up to A$20,000 from their retirement savings accounts.
Sales at JB Hi-FI jumped more than 30 per cent in the June quarter and a staggering 44 per cent in July. The company's shares have more than doubled from their pandemic in March to climb about A$51 last week.
Online-only retailer Kogan also benefitted, with its full-year net profit doubling to A$28.6 million for similar reasons. Founder Ruslan Kogan said many people shopped online for the first time in their lives and the pandemic has sped up the adoption of online shopping by four or five years.
Wesfarmers also did well, as people flocked to Bunnings to stock up on the hardware needed to finally get started on that DIY project that they'd been putting off for years. Likewise, its Officeworks chain benefitted as workers set up home offices, buying up desks, lamps, chairs, computers, printers and stationery.
Other results are more surprising.
On the face of it, we might have expected funeral home operator Invocare to do ok out of the pandemic. Although the pandemic hasn't led to a huge number of extra deaths, people are of course still dying and still need funerals.
But it seems that during the most stringent restrictions in March and April in Australia, and in the stage four lockdowns in New Zealand, there had been a sharp increase in families bypassing the funeral and choosing a direct-to-cremation approach, with the resulting revenue hit.
Invocare's earnings before interest and tax from funerals dropped 44 per cent to A$20.2 million in the first six months of calendar 2020.
