SEEK Limited Annual Report 2006 SEEK Limited Annual Report 2006
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SEEK Limited ACN 080 075 314 SEEK Limited Annual Report 2006 SEEK Limited SEEK Limited Annual Report 2006 seek.com.au seek.co.nz Corporate Directory Directors Share registers James D Packer Computershare Investor Services Pty Limited Chairman 452 Johnston Street Abbotsford Victoria 3067 Paul M Bassat (03) 9415 4000 Joint Chief Executive Officer Auditor Andrew R Bassat PricewaterhouseCoopers Joint Chief Executive Officer Freshwater Place Christopher J Anderson 2 Southbank Boulevard Southbank Victoria 3006 Colin B Carter Solicitors Neil G Chatfield Arnold Bloch Leibler Robert C G Watson Level 21 333 Collins Street Anthony C Klok Melbourne Victoria 3000 (alternate for James D Packer) Bankers Martin P Dalgleish National Australia Bank (alternate for Christopher J Anderson) Stock exchange listings Secretary SEEK Limited shares are listed on the Ian J McAuliffe Australian Stock Exchange. Notice of annual general meeting (Listing code: SEK) The annual general meeting of SEEK Limited will be held at Website address The Westin Melbourne Hotel www.seek.com.au 205 Collins Street Melbourne Victoria 3000 Time: 3.00pm Date: 31 October 2006 Principal registered office in Australia Level 2 3 Wellington Street St Kilda Victoria 3182 (03) 9510 7200 SEEK has been recognised in each of the last three years as one of the best employers in Australia and New Zealand, in the prestigious Hewitt & Associates survey. Notice of Annual General Meeting Corporate Directory The Annual General Meeting will be held at 01 Financial Overview for 2006 The Westin Melbourne Hotel, 02 Chairman’s Letter 205 Collins Street, Melbourne Victoria 04 Operational Overview for 2006 at 3pm, 31 October 2006. 06 Joint CEO’s Review A formal notice of meeting is enclosed. 15 Financials for 2006 16 Directors’ Report 34 Auditor’s Independence Declaration 35 Corporate Governance Statement 42 Financial Report 96 Directors’ Declaration 97 Independent Audit Report to the Members 98 Shareholder Information IBC Corporate Directory precinct.com.au 67% increase in net profit to $34.1 million Revenue increased by 53% to $106.2 million Employment advertising revenue increased by 50% 66% increase in EBITDA SEEK Learning revenue increased by 82% Final dividend of 4.8 cents per share SEEK Financial Overview for 2006 SEEK Limited Annual Report 2006 Chairman’s Letter I am pleased to report to you on what has been another very exciting and productive year for SEEK – one that has not only delivered strong profit growth but also positioned our business well for future growth. The importance of reinvestment in our business and in our people is something on which we focus an enormous amount of time and energy. We have made very good progress during the year on further strengthening our management team, particularly in the Learning business. In addition Andrew Bassat was appointed Joint CEO of SEEK, to more accurately reflect the reality of the management structure. Our ongoing investment has contributed to the continuing structural shift in employment advertising from print to online. We have continued to target industries and geographic regions where our penetration is lower than our “traditional” markets. Our investment in these markets has been rewarded with very strong growth. It is very exciting to see the increasing sophistication of the SEEK product offering and customer service levels. A major area of investment has been in SEEK Learning where we acquired or formed alliances with four providers of career related learning content during 2006. Subsequent to year end, we acquired 50% of IDP, a company owned by 38 universities and which sources overseas students and brings them to study in Australian universities. We now provide a number of career related training courses via distance education and in classroom settings, sourcing the content from “best of breed” providers. This ensures that we are creating the premier market place for consumers searching for career development opportunities. The enormous potential for leverage between seek.com.au and the Learning business is becoming increasingly evident. Financial Overview Strong growth in our core employment advertising business coupled with our progress in SEEK Learning led to a 67.2% increase in net profit after tax to $34. million. (2005 earnings have all been restated under the new A-IFRS accounting standards.) Group revenue increased by 53% to $06.2 million. Despite heavy investment in positioning our business for substantial future earnings growth, this translated into earnings before interest, depreciation, amortisation and tax (EBITDA) of $49.0 million, an increase of 66.2% over 2005. Our EBITDA margin improved from 42.4% to 46.% highlighting the operational leverage inherent in our business. The employment advertising business generated revenue of $95.2 million, 50% above that recorded in 2005. The strong employment market coupled with good returns from our investment in our “early stage markets” led to a 3.3% increase in advertising volumes. Non-discretionary operating costs of the business were well controlled. SEEK Learning recorded a 3% increase in EBITDA to $3. million, with revenue increasing by 82% to $. million. Initial contributions from the four new ventures were pleasing. The strong group earnings growth translated into strong cash flow generation. As a result, the net cash balance increased to $68.2 million as at 30 June 2006. The Board has declared a final dividend of 4.8 cents per share, reflecting the policy of paying out approximately 70% of earnings after tax. 2 SEEK Limited Annual Report 2006 Operational Overview In 2006 SEEK continued to drive the transition to online employment advertising from print. Our strategy remained clear and consistent. We marketed our services, reinforced our brand and targeted market segments in which we are under-represented. These are our ‘early stage markets’. We have built specialist sales and customer service teams which focus on particular market segments. As a result, advertising volume growth across our early stage markets was 07%. There is still a long way to go with these markets which include healthcare, government and education and we expect the momentum to be sustained in 2007. We remained a clear market leader in terms of advertising volumes and visitors to our site, with approximately 20% of the Australian workforce visiting our site each month. Board and Corporate Governance The Board is committed to ensuring that SEEK maintains a high level of Corporate Governance with a number of Board Committees and policies in place to facilitate this. Matthew Rockman, one of the three Co-founders of SEEK resigned as an Executive Director during 2006. On behalf of the Board I would like to extend our gratitude to Matthew for his many years of contribution to the development of the SEEK business. We wish him every success in his future endeavours. Outlook While we are not complacent about the competitive nature of the market place, we are confident about SEEK’s ability to maintain its strong leadership position in the online employment advertising market. We anticipate that the structural shift of employment advertising from print to online will continue to drive growth. SEEK’s strategy is clear and consistent. We have strong sales and marketing capabilities. We have built close relationships with job seekers and employers. We have a motivated and committed team of employees who understand the Company’s goals and have incorporated those into their own personal goals for the year. These strengths will enable SEEK to continue to grow our core employment and learning businesses. I would like to take this opportunity to congratulate all of the SEEK team on their achievements in 2006 and, on behalf of the Board, extend our thanks for their ongoing passion and commitment. I look forward to another exciting year of substantial growth for the SEEK business. James Packer Chairman SEEK Limited Annual Report 2006 3 SEEK Operational Overview for 2006 Continued to drive the transition to online employment advertising from print Built specialist sales and customer service teams who focus on particular market segments Advertising volume growth across our early stage markets was 107% 4 SEEK Limited Annual Report 2006 Clear market leader with approximately 20% of the Australian workforce visiting SEEK each month SEEK Limited Annual Report 2006 5 Joint CEO’s Review 2006 has been a terrific year for SEEK. It has been another year of extraordinary growth and development which has been reflected in the growth in our earnings, our market share, the number of job advertisements and the number of job seekers we attracted to our site. This development is also reflected in the level of employee satisfaction and our recognition once again as one of Australia’s best employers. We launched our new advertising campaign – ‘Make Luck Happen’. Not only are we helping our job seekers to make luck happen but this campaign also embodies the spirit of SEEK. We have a strong vision of where we want to be, we aspire to be the best we can be, we invest in our future and we consistently challenge and review our strategic plan and our execution of that plan. We have delivered great profit growth in 2006 but at the same time reinvested heavily in our business. – We have developed SEEK Learning into a substantial business with very strong growth. – We have focused on retaining and developing our most important asset – our people. – We delivered a superior service to our job seekers and our advertisers and consistently expanded our product range. – We continued to drive employment advertising from print to online – We built our platform across different sectors of the market. Looking forward, our goals are very clear. We aim to continue to build the number one employment market place across all attractive market segments and to continue to increase our market share in terms of both advertising volumes and the number of job seekers.