SEEK downgrades profit outlook

Online advertising group SEEK has downgraded its forecast for profit growth to zero, as joint chief executive Andrew Bassat warns the downturn is hurting the group.

Online advertising group SEEK has downgraded its forecast for profit growth to zero, as joint chief executive Andrew Bassat warns the downturn is hurting the group.

“The first quarter is in line with expectations, but the last six weeks have been a bit tougher – just in the economy generally – and have taken everyone by surprise,” Bassat said at the group’s annual general meeting yesterday.

Joint chief executive Paul Bassat says the company is realistic about the economic turmoil.

“Whilst we are not talking about a dreadful environment, it’s much tougher. Our expectation is for our profitability to be flat,” he says.

“It is going to be tougher for the online sector. If you want to be anywhere, and while online is the place to be, we shouldn’t kid ourselves that anyone is immune.”

SEEK now forecasts earnings before interest and tax for 2009 to be equivalent to the $109.8 million seen in the 2008 year.

Net profit after tax, which last year saw a 37.4% rise to $762 million, is now forecast to be flat – excluding the group’s holdings of Chinese job ads site Zhaopin.

Andrew Bassat said at the group’s AGM that Zhaopin would be a major source of growth, but the weaker Australian dollar will hurt earnings. “The online employment market in China is currently estimated to be $165 million and forecast to reach $400 million by 2011.”

Shares in SEEK closed at $3.49 yesterday, down 41 cents or 10.5%.

The online advertising sector has also taken a big hit in recent months, with ABN Amro predicting the sector’s growth, from 20.7% in 2007-08, to fall to 5.7% in 2008-09.

But Paul says SEEK will “continue to do exactly the same things”.

“At the end of the day, the way we’ve run the business is the way we think we should continue.”

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