SEEK improves at home, records $190m impairment after "devastating" impacts in Latin America

SEEK improves at home, records $190m impairment after "devastating" impacts in Latin America

Online job postings giant SEEK (ASX: SEK) has seen improved momentum across its three largest businesses, but green shoots have been offset by the economic impact of COVID-19 in Brazil and Mexico with impairments of $190-230 million.

Weekly billings have been on the rise for SEEK's Australia-NZ business although they are still down 40 per cent year-on-year. It is a similar story for SEEK Asia, although the numbers are down by half.

The group's Zhaopin business in China, which originally served as a bellweather of troubles to come due to the economic fallout from COVID-19 restrictions, has seen a significant improvement in billings since March 2020.

In February Zhaopin's billings were down a whopping 60 per cent year-on-year, but now they are tracking just 10 per cent below this time last year.

But it is in the new epicentre for COVID-19 in Latin America where SEEK's results have been hit the hardest recently. 

The company today recognised an impairment of $130-170 million for its businesses Brasil Online and OCC Mundial (Mexico), while impairments have been lifted by a further $60 million due to problems with four early-stage minority investments.

Brazil is now approaching 1.1 million cases of COVID-19. Mexico's numbers are much lower at around 175,000, although reports on the ground indicate a high degree of underreporting from officials.

The latest official figures show Brazil and Mexico have had close to 1,000 coronavirus-related deaths in the past 24 hours. Brazil and Mexico have populist leaders - Jair Bolsonaro and Andres Manuel Lopez Obrador respectively - from opposing ends of the political spectrum, but both have been dismissive of social distancing measures throughout the crisis.

"In recent weeks, we have begun to see improving momentum across our three largest businesses in SEEK ANZ, SEEK Asia, Zhaopin and the continuation of good results from OES and the ESV portfolio," says SEEK CEO and co-founder Andrew Bassat.

"However, not all businesses have fared as well in these challenging times and we will need to recognise a reduction in the carrying values of Brasil Online, OCC Mundial and four other small investments.

"Whilst our near-term profitability has been impacted by the Virus, our largest businesses remain highly defensible and well placed to capitalise on our large opportunity set. Job creation will be at the core of any economic recovery and SEEK is well placed to play a meaningful role in connecting the most relevant candidates to hirers across our major markets."

Based on the current market situation the group has released a "best estimate" forecast for FY20, with revenue up slightly at $1.575 billion and EBITDA down close to 10 per cent at $410 million.

Updated at 11:12am AEST on 22 June 2020.

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