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SEEK (ASX:SEK) share price jumps 7% to record high on trading update

The SEEK Limited (ASX:SEK) share price jumped 7% to a record high on Tuesday morning. Here’s why its shares are racing higher…
The post SEEK (ASX:SEK) share price jumps 7% to record high on trading update appeared first on The Motley Fool Australia. –

rising asx share price represented by happy woman dancing excitedly

The SEEK Limited (ASX: SEK) share price has been on form on Tuesday.

In morning trade, the job listings giant’s shares jumped 7% to a record high of $32.91.

At the time of writing, the SEEK share price has eased back, but remains 3% higher at $31.62.

Why is the SEEK share price charging higher?

The catalyst for the strong rise by the SEEK share price today was the release of a market update this morning.

That update provided investors with details relating to its Zhaopin divestment, its dividend, and its guidance for FY 2021.

In respect to the former, SEEK announced that all conditions precedent to completion of the Zhaopin transaction have been satisfied. As a result, it will now reduce its holding in Zhaopin from 61.1% to 23.5%.

Approximately A$500 million of the total anticipated gross proceeds of A$697 million were received in April.

Dividend update

The SEEK board has decided to return some of the funds raised from the Zhaopin transaction to shareholders.

According to the release, it has determined to pay a dividend of 20 cents per share with a record date of 11 May and a payment date of 24 May.

Post receipt of funds from the transaction and including payment of the dividend, SEEK notes that it is operating well within its original pre-existing borrower group covenant limits. This has enabled it to end its temporary arrangement which allowed an increase in key covenant limits through to 30 June 2021.

FY 2021 guidance

Management notes that its results for the nine months ended 31 March and its outlook for the remainder of the year are ahead of previous expectations.

This has been driven by the outperformance of its SEEK ANZ (primarily SMEs) and SEEK Asia businesses.

As a result, it now expects FY 2021 revenue to be in the order of $1,740 million and EBITDA to be ~$510 million. This compares to previous guidance of $1,700 million and $510 million, respectively.

On the bottom line, reported net profit after tax is expected to be in the order of $150 million, up from $100 million previously.

SEEK’s Founder and CEO, Andrew Bassat, said: “Completion of the Zhaopin transaction and receipt of funds is an important milestone. A portion of the Zhaopin proceeds will be returned to shareholders as a dividend, which reflects our confidence in SEEK’s outlook and ongoing cash generation. Post the dividend, SEEK will still have significant balance sheet flexibility for ongoing re-investment and future dividends.”

“We are pleased to upgrade our FY21 guidance. Our willingness to invest through the cycle has meant our key businesses, in particular SEEK ANZ and SEEK Asia are now capitalising on improving macro conditions. Of note, SEEK ANZ continues to benefit from record high levels of SME hiring activity and increasing usage of our depth products. We look forward to providing another update at SEEK’s full year results in August,” he concluded.

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Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post SEEK (ASX:SEK) share price jumps 7% to record high on trading update appeared first on The Motley Fool Australia.

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