Profits surge at Trade Me
CEO says investment paying off
Trade Me, New Zealand’s largest online auction site, posted a 26 per cent jump in annual profit as it reaped the benefits from its earlier spending on staff, product development, marketing and sales. However it warned earnings growth will slow in the coming year as it ramps up investment.
Net profit rose to $94.4m in the 12 months ended June 30, from $74.9m a year earlier. Revenue increased 7.7 per cent to $234.9m.
The latest profit includes $342,000 of losses from the company’s stake in l ending platform Harmoney, compared with $1.6m of losses booked the year earlier.
The latest year also includes a $1.4m gain related to the sale of Trade Me’s accommodation website Travelbug and online booking engine Bookit, and the release of an earn out provision related to its purchase of LifeDirect, while the year earlier profit included an $8.1m writedown for its online dating business FindSomeone.
Trade Me is coming out of several years of tepid earnings growth after it ramped up spending to reinvest in its business, with expenses increasing just 5.7 per cent in the latest year, down from an 18 per cent pace in 2016 and a 26 per cent pace in 2015.
Chief executive Jon Macdonald said the multi-year period of accelerated reinvestment in people, product development, marketing, and sales, had set the company up for success over the medium to long term.
The investment paid off in the latest year with earnings before interest, tax, depreciation and amortisation (ebitda) up 11 per cent to $155.7m and net operating profit up 12 per cent to $93m. However, Macdonald warned that the pace of growth would not be sustained this year as the company ramps up investment.
“Looking ahead to F18, we expect total revenue growth similar to that reported in F17, however a soft property listing market means there is some downside risk,” Macdonald said. “With our targeted investment plans, we intend to invest at a rate slightly above revenue growth in F18, but we still expect to deliver year-on-year ebitda and operating NPAT growth in F18 . . . ” In the latest year, Trade Me increased its staff numbers to 543 from 509, and yesterday signalled plans to expand its team in Christchurch with the aim to hire about 30 tech staff over coming months.
Trade Me’s general marketplace business lifted ebitda 7.2 per cent to $52.1m as revenue advanced 7.2 per cent to $70.4m, more than double the 3.5 per cent revenue growth a year earlier. Macdonald said the unit had benefited from the introduction of buyer and seller protection and the company was focused on making t rading easier with product enhancements such as Afterpay and its ‘book a courier’ service.
Its classified business, which includes motoring, property and jobs, boosted ebitda 15 per cent to $86.8m, while revenue lifted 11pc to $125.5m.
Macdonald noted jobs was the best performer, boosting revenue 25 per cent, motors lifted 8.2pc and property 7.3pc. The shares closed down 32c, or 6.6 per cent, at $4.52.