Business Analysis of SEEK Limited (ASX: SEK) - Financial Report

This report provides a comprehensive business analysis of SEEK Limited (ASX: SEK), a leading online employment company in Australia and New Zealand, with a significant international presence. The analysis includes a macroeconomic overview, assessing the impact of global and regional economic factors such as GDP, inflation, and interest rates on SEEK's performance. It also evaluates the competitive landscape using Porter's Five Forces, highlighting SEEK's dominant position in the online recruitment industry. Furthermore, the report examines SEEK's business strategies, key success factors, and potential risks, including IT security and changes in international legislation, while also considering the company's sustainability efforts. Finally, the report includes accounting analysis based on a six-step framework. Desklib offers a wide array of solved assignments and past papers for students.

22319 Financial Statement Analysis(Capstone) Assessment 1
BUSINESS
ANALYSIS
OF
SEEK LIMITED
ASX CODE: SEK
1 | P a g e

22319 Financial Statement Analysis(Capstone) Assessment 1
TABLE OF CONTENTS
2 | P a g e

22319 Financial Statement Analysis(Capstone) Assessment 1
Introduction
SEEK is the leading company in online employment industry in Australia and New Zealand. SEEK
operates in online employment, education and volunteer industries. And during the past 12 years, the
company has successfully expanded the business in 14 countries. International markets are becoming
more and more significant for SEEK. The expansion brings SEEK great financial success and some
potential risks. This report evaluates the operation of SEEK, based on 4 main analysis,
macroeconomic analysis, industry analysis, business strategy analysis and accounting analysis. The
report will demonstrate how the 4 analyses would affect the operation of SEEK. Firstly, the report will
highlight 5 economic factors and describe the current global economy that would influence SEEK in
macroeconomic analysis. Secondly, the report will evaluate the level of competition and porter’s
diagram in industry analysis. Then, the report will highlight the success factors and risk factors of
business strategy and evaluate the sustainability of SEEK in business strategy analysis. Lastly, the
report will provide accounting analysis, based on the six-step accounting analysis framework.
Part A: Macroeconomic Analysis
1. Global economy
After the financial crisis in 2007 - 2008 and the Eurozone crisis in 2010 – 2012, the global economy
undertook the tempestuous unstable periods. The world economy was slightly warming during 2012 to
2014 as the figure shown. In 2014 to 2016, the global economic presented a downward trend again due
3 | P a g e

22319 Financial Statement Analysis(Capstone) Assessment 1
to the global commodity price shocks. The Seek Pty Ltd operate in a downturn period through the
large floating exchange rate and unexpected global GDP growth, at 2014 to 2016. At last year, the
growth of world gross product has strengthened, as the fading of the continuous obstruction from those
crises. (United Nations 2018). The growth of the global economic reached the peak from 2011 until
now. As the increasing trend, the labour market has obvious improvement in most of countries.
Although the trend of the growth of world gross product is developed in the right direction, the
imbalance of the world economic cannot be ignored. The stable improvement of the economic from
developed courtiers may occur the overlooking of required emergency aid from the poverty countries.
(Donna & Tariq 2017) In 2017, there are at least 83 million people lived in the starvation that have
70% more compare with 2015. In addition, the weak investment and low productivity caused by the
financial crisis still threaten the long-term potential of global economy. (United Nation, 2018)
2. Regional economies
The Seek limited span across 18 countries, including China, Australian, South East Asia, Brazil, New
Zealand, Mexico and some unallocated countries. In 14 of those countries, the Seek Limited stand
market leading position. The company was incorporated and domicile in Australia, but the proportion
of the sales revenue Australian get is 29.8%, the second position over all the 18 countries (IBIS 2017).
The Seek Limited got around 30.2% of total revenue from China by the ZhaoPin.
The coal transportation was disrupted, and the housing investment was sluggish because of the striking
of the Cyclone Debbie at the end of March 2017 (IMF 2017). The heavy weather lead to the growth of
the economy only increase 2.2% which was lower than the global growth 3.6% and the forecast of 3%
in last year (Kirrily 2017). In addition, according to the bank tighten the loaning standard, and the
government increase tax levy to the oversea investment, the falling in the housing price were obvious
4 | P a g e

22319 Financial Statement Analysis(Capstone) Assessment 1
in Sydney and Melbourne. As the downturn of the housing price, the growth rate of household net
wealth was lower, more people may have a negative equity, against the consumer spending, which
eventually have a negative impact on the economic growth. (Tejvan 2017) On the other hand, the
Wage price index holistic was in a downturn period from 2011 until 2017, but the WPI increase 0.5%
in third quarter 2017 and 2% over the year as the figure shown (RBA 2017). Due to the growth of the
household debt and the decline of the income growth, the household debt-to-income ratio will have a
small rise. (RBA 2017) As the increase of debt to income ratio, the demand of the change a new job
will increase which indicate in the increasing of Seek Limited sales revenue in ANZ employment.
Part B: Industry Analysis
SEEK operations are based in the Online Recruitment Services industry which main purpose to
advertise online job advertisements to the wider public.
Porter’s five forces can be used to give a deeper understanding of SEEK’s position within this industry
and will allow further analysis to be had.
The threat of new entrants to this market is low as there is a high barrier to entry. Although having a
high entry barrier, the industry’s profit margins still attract a great number of competitors to the
market. The high costs of maintaining online databases and the economies of scales needed to provide
advertisers an incentive as very challenging. Many entrants fail to gain any standing within the market
as SEEK’s reputation and expansive reach proves very hard to compete against, as SEEK was one of
the first entrants to this market and has built an established relationship with many firms.
Substitutes to SEEK within this industry are quite limited but slowly growing. As printed media is
slowly fading as the market turns more towards digital advertisements, the rise of other digital
competitors is rising. Different ideas, such as LinkedIn, have provided a challenge to SEEKs
5 | P a g e

22319 Financial Statement Analysis(Capstone) Assessment 1
dominance in the market.
The bargaining power of customers is quite low as there is a high concentration within the market and
thus the customers do not have much variety to the companies they can choose from. Apart from more
niche targeting companies, very few have the reputation and reach that SEEK does.The bargaining
power of suppliers, like that of the customers is very limited. Again, due to the reach and marketing
position of SEEK, suppliers in the market have very little power when dealing with SEEK.
Lastly, industry competition is quite low due to a high concentration in the industry.
SEEKs ‘largest’ competitor would be Adzuna, which is only less than 5% estimated market share
(IBIS World). This shows the dominance of seek within this market.
Competitors have started targeting niche markets to try and gain a foothold in the industry, as the huge
influx of job listings can prove quite difficult to navigate.
Overall SEEK holds a dominant place, nearly a monopoly, within its respective market.
It’s reputation and reach sway many when choosing to find either new jobs or more human resources.
Part C: Business Strategy Analysis
Key success factors
SEEK company has been through a successful year in 2017 both in the financial and strategic area.
The key strategic factors are increasing market share in key target market and reinvestment. In terms
of the financial factor, international transaction contributes 60% of total revenue of $1billion which is
the first time SEEK reached $1 billion in twenty years’ history (SEEK 2017, p.5). Expanding into
international market has given SEEK huge return in the achievement of financial objectives.
6 | P a g e

22319 Financial Statement Analysis(Capstone) Assessment 1
According to annual report 2017, the business strategy includes four phases, Australian and New
Zealand online marketplace commenced in 1997, International online marketplace and education
commenced in 2005, Talent sourcing and placement commenced in 2012 and Human capital
management commenced in 2015. Furthermore, in 2017, SEEK has made a significant organizational
change in order to capture more opportunities in the international market.
Australian and New Zealand online employment marketplace
SEEK attempts to become the leading company in Australia and New Zealand in the employment
7 | P a g e

22319 Financial Statement Analysis(Capstone) Assessment 1
industry. To achieve that, SEEK makes uses of technology and internet that enables SEEK to reduce
cost largely as well as increase the effectiveness and efficiency. SEEK's low cost by using the internet
is a competitive advantage over all competitors. Therefore, SEEK encourages cost leadership and use
the philosophy in day-to-day business. According to the annual report 2017, the monthly visit is over
35 million and the brand awareness is up to 82% that indicates SEEK is the leading company in the
industry. (SEEK 2017, p.1-3)
International Online Employment Marketplace and Education Expansion
SEEK has been expanding the business into other countries over last 12 years. Also, SEEK has been
expanding into the education business.SEEK has been operating the business in 18 countries globally,
with market leadership in 14 countries. (SEEK 2017, p.3).
Talen Sourcing
In the last five years, SEEK has successfully become the market leader in the online employment
marketplace and SEEK still continues to grow and maintain leadership. In terms of talent sourcing
strategy, data is a critical part of SEEK. Therefore, SEEK keeps capturing more data and providing
candidates with more alternatives. The data improves the efficiency and effectiveness of SEEK in
existing business. For example, using more data enables SEEK to reduce a job candidate from about
50 candidates down to 5-10 most relevant candidates in the advertiser center (candidate management
tool), which increases the efficiency both for SEEK and hirers.
Human Capital Management
In Australia and New Zealand, the human capital management industry is full of opportunities. SEEK
has identified some problems in the industry. Sometimes, the cost is high and the efficiency is low. So,
given the capability that SEEK has, SEEK aims to solve the problems. At the same time, SEEK has
8 | P a g e

22319 Financial Statement Analysis(Capstone) Assessment 1
invested in making new products and services, such as Ximble and Workana.
Key risks factors
As discussed in macroeconomic analysis, from 2014 the global economy has been experiencing
downwards trend. From the financial perspective, SEEK could be affected by the decreasing of the
global economy. And the floating exchange rate could influence the international market of SEEK. On
the other hand, SEEK’s business strategy has some risks factors as well. In the Australian and New
Zealand online employment marketplace strategy, SEEK is faced with risks that are from new entrants
in the industry and existing competitors who try to take more market share, such as Gumtree and My
career, as SEEK’s business strategy is to maintain the market leader in Australian and New Zealand
market.
IT Security
The potential failure of IT security could have a significant influence on SEEK’s all strategies. SEEK’s
operation is mostly operated online. So, it makes IT security one of the biggest risks. Unexpected
disaster or event, like hacker attack, could leak the privacy of candidates and hirers, which could lead
to loss of customers and damage to SEEK’s reputation.
Change of Legislation in International Market
SEEK is operating in 14 countries as mentioned in the business strategy. Change of policy and
legislation is beyond SEEK's control. It is a principal risk that SEEK needs to consider in the
international online employment marketplace strategy.
Sustainability
SEEK has devoted time and money to keep sustainable development. The company does not only
focus on making the successful financial result but also, contributing to the society. SEEK Volunteer,
9 | P a g e

22319 Financial Statement Analysis(Capstone) Assessment 1
as one of the most significant participants in returning to society, provides internal employees
opportunity to volunteer in the society. And every dollar donated by employees can be matched by
Small Change Workplace Giving program. In terms of the environment, SEEK has created SEEK
Green Sustainability program to achieve the environment-friendly purpose. Apart from that, SEEK has
several strategies to be sustainable.
Employee engagement
SEEK continues to keep high employee engagement which can build employees ‘confidence and
make them feel respected, which in return could improve the work efficiency and effectiveness. In
2017, SEEK has been recognized as the best employer by Aon Hewitt in Australia and New Zealand
for the high employee engagement.
Learning and Development
In 2017, SEEK has initiated a program called Coaching for SEEK success which custom-designed
learning program for leaders is.(SEEK 2017, p.11) It aims at making leaders more skilled and
confident to lead the team and teach the team. The more skilled leaders would corporate the team well
and provide better training to its employees that enables the teams to work more wisely and efficiently.
Also, learning development would keep employees with up-to-date skills and trigger innovation.
Equal opportunity
SEEK operates business all over the world. Therefore, it brings SEEK a large number of employees
with the different background, like language, age, religion. SEEK respects and values the diversity of
employees which provides the company with more potential to succeed in the future. The company
policy promotes that every employee from any workplace is given the equal opportunity. The equal
opportunity forms parts of the company culture.
10 | P a g e

22319 Financial Statement Analysis(Capstone) Assessment 1
SEEK Hackathon
During the financial year 2017, SEEK has successfully held two Hackathon events. The Hackathon
event is to gather employees to share ideas which can be possibly made into prototypes, which helps
SEEK innovate. It is a great opportunity for SEEK to find some future products that could meet the
future's needs of the society, because, the customers'needs are changing constantly. It increases the
sustainability for SEEK in the aspect of future needs. At the same time, SEEK Hackathon increases the
employee engagement in some way.
Gender balance
In the financial year 2017, the Female at SEEK Thrive(FAST) was introduced. It aims to be aware of
any career development barriers that could exist for female employees and eliminate them. It would
increase employee’s satisfaction and higher employee satisfaction attracts more skilled potential
employees from the society which leads to sustainability for SEEK in the aspect of future employees.
11 | P a g e

22319 Financial Statement Analysis(Capstone) Assessment 1
Part D: Accounting Analysis
The accounting analysis of a business entity is carried out for measuring, recognizing,
presenting and disclosing the information presented in the financial statements. The
evaluation is carried out for facilitating the decision-making of the end-users through
assessing the liquidity, stability and profitability position of a business entity (Wahlen,
Baginski and Bradshaw, 2017). The evaluation of the financial information of a business
entity through its financial statements helps in estimating its future performance and
facilitating managers and investors to undertake important decisions (Deegan, 2013). The
accounting analysis of Seek Limited will enable in evaluating its accounting system and
therefore developing an in-depth understanding of the accounting policies and procedures. It
consists of the following six steps:
Step 1 & Step 2: Identification of Key Accounting Policies & Assessing the Accounting
Flexibility
The first two steps in the accounting analysis aim at analyzing the accounting policy of
the company and the underlying flexibility in its accounting system. The accounting
flexibility refers to the ability of the company to change its accounting policies and
procedures as per the business needs and requirements (Macve, 2015). It can be analyzed by
assessing the accounting methods used for carrying out the financial transactions of a business
entity:
 Revenue Recognition: The Group recognizes the revenue stream at the fair value of
the consideration to be received and is measured in the financial statements as net of
sales taxes such as GST and VAT. The revenue is only recognized when it can be
measured appropriately and it is expected that there will be the realization of future
economic benefits to the entity (Penman, 2011). The accounting policy adopted by the
company is as per the AASB 118 standard and there is less accounting flexibility in
this accounting policy as the company recognizes revenue by standard accounting
practices (Seek Limited Annual Report, 2017).
12 | P a g e