Things are slowing down at what was once one of China's most reliable online growth stories. 51job (JOBS), the Chinese provider of Internet-based recruitment services, posted weaker-than-expected quarterly results after Monday's market close.
Revenue climbed just 5%, to $73.9 million, for the first quarter when pitted against the prior year's period. That was well short of the 9% top-line advance that analysts were targeting.
Several years ago 51job was growing faster than its performance seemed to suggest. It was deliberately scaling back from the print business where it would provide weekly inserts of local job listings to regional Chinese newspapers. 51job's online recruitment services -- and all of the juicier margins that come with digital delivery over hand-staining ink listings -- were the real driver, growing at a much faster rate than overall reported revenue growth.
Times have changed. Online recruitment services now account for the lion's share of 51job's business -- accounting for $50 million or more than two-thirds of 51job's revenue -- but it's growing slower than 51job itself. Online recruitment services only rose 3% since the first three months of 2014, as an 11% increase in unique employers was held back by a 7% reduction in the average amount that they spent through 51jobs to fill up their job openings.
The speedster at 51job these days is the other human resource services that it provides, posting a 14% year-over-year spurt to hit $23.5 million, or nearly a third of the overall revenue.
To be fair, 51job and other Chinese companies have had to deal with a 6% VAT policy change that kicked in back in June of last year. That has been holding revenue back, and we should have fairer comparisons by the time we get to the third quarter of this year and everything is on a oranges-to-oranges or VAT-to-VAT basis. However, the analysts that were holding out for $76.6 million in revenue already had the entire second half of 2014 to gauge the impact that the VAT policy change. The company still fell short of expectations, and the news doesn't get any better on the bottom line with 51job's earnings of $0.33 a share missing Wall Street's target of $0.36 a share.
The near-term outlook isn't any more encouraging, with 51job targeting $77.4 million to $80.7 million in revenue for the second quarter. The midpoint of that range implies that year-over-year top-line growth will accelerate to 11%, but even the high end is woefully short of the $84.3 million analysts were forecasting.
The stock moved lower in after-hours trading, and understandably so. 51job didn't get the job done this time around. However, given the steady nature of online recruiting and the government's desire to keep the economy humming by making it easier for employers and employees to get matched up, it probably remains one of the safer dot-com darlings in China. It will just have more to prove when it comes back with its second-quarter financials in three months.
