For clients that have elected the “Blend” option we have purchased Seek (SEK), a global online employment classifieds provider focused on matching jobseekers with employment opportunities, and helping hirers find candidates for advertised roles. It enjoys market leading positions not only in Australia but also in fast growing regions including China, Southeast Asia, Brazil and Mexico. It also operates an education business which helps working adults find and enrol in career related education & training.

In the medium term the company should prove a compelling investment due to the following:

• The core domestic business is a great cash generator and leveraged to an improving economy
• The tangible benefits from past investment and product development highlight the scope for future growth from current investment
• The international businesses offer exposure to high growth countries still at the early stages of the print-to-online migration.
• Successful website integration in Asia is driving scale benefits and increasing margins
• Balance sheet strength provides capacity to re-invest for future growth including via M&A

In the short term increased investment spend on Early Stage Ventures is weighing on both profits and cash flow, while the education business has been severely impacted by regulatory changes with respect to the recognition of VET fees.

The purchase was funded from the sale of Telstra where customer losses continue in the high margin fixed line business, the aggregate costs from new ventures are becoming material as the company looks for new growth drivers and the actual tangible benefits from the unexpected $3bn additional investment over 3 years are unclear.

If you have any queries, please contact your Elston adviser.