Trade Me’s profits slow
Motor vehicle advertising on Trade Me increased by 29 per cent as it posted slower profit growth and projects subdued earnings due to reinvestments in its business.
Its profits rose to $80.1 million, or 20.2 cents a share, in the 12 months to June 30, from $78.6m, or 19.84 cents, a year earlier. Revenue increased 9.7 per cent to $180.1m while expenses jumped 26 per cent to $51.4m.
The latest year’s 1.9 per cent increase in profits lags behinds 2013’s four per cent gain and 8.4 per cent in the previous year.
Trade Me expects revenue to increase in the low double-digits on top of substantial expense growth as it adds more staff, faces higher costs and spends more on promotion to position the company for longer term expansion.
Jon Macdonald, chief executive, says: “We expect to grow revenue and earnings before interest, tax, depreciation and amortisation [EBITDA] over the coming year. But our focus will be on improving products, strengthening our sales and account management, and ensuring stronger growth in the medium to long term.”
The company is working on improving the functionality and design across its general marketplace, enhancing its mobile offering and increasing its online retail offering by bringing new overseas retailers onto the site.
Trade Me’s classified advertising unit increased EBITDA by 12 per cent to $62.9m as total revenue rose by 23 per cent. Motor vehicle advertising increased 29 per cent, property advertising revenue gained 12 per cent, and job adverts went up by 26 per cent. Earnings for its other businesses – which include advertising, travel, holiday houses, online dating, Pay Now and online insurance comparisons – slipped by 3.5 per cent to $15m as revenue increased by 2.8 per cent.
The company expects to add 96 new employees this year after taking on an extra 54 last year, 26 of whom were in technology roles. That would take total staff numbers to 429 by the end of the 2015 financial year from 333 in 2014.
Employee expenses rose 16 per cent in the past year to $24.6m, while the web infrastructure expenses rose by 5.3 per cent to $3.2m and promotional costs jumped 168 per cent to $7.4m.
Trade Me will pay a final dividend of 8.4 cents a share on September 23, taking the annual dividend to 16 cents, compared with 15.8 cents last year.
Its shares slipped by 1.1 per cent to $3.48, taking their decline so far this year to 13 per cent.
