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Trade Me first half profit climbs 16% after reinvestment in business

Thursday 23rd February 2017

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Trade Me lifted first-half profit 16 percent signalling an end to an investment phase for the online marketplace and business, although the result fell just short of analyst expectations. 

Net profit rose to $46.1 million, or 11.61 cents per share, in the six months ended Dec. 31, from $38.5 million, or 9.71 cents, a year earlier, the Wellington-based company said. Revenue gained 9 percent to $114.9 million and earnings before interest, tax, depreciation and amortisation were up 12 percent to $76.1 million, just missing Forsyth Barr analyst Blair Galpin's forecast for operating earnings of $78 million on revenue of $117 million. 

"The return to good profit growth in the first half of this year marks the successful completion of our multi-year investment phase," chairman David Kirk said. "We've strengthened the business and set it up well for further growth."

In 2013 Trade Me embarked on freshening up an offering that was becoming dated while at the same time facing increased competition and the growing importance of mobile technology. It did so by beefing up staff numbers, which were 541 at Dec. 31 from 511 a year earlier, introducing new products, such as its recently announced buyer protection programme, and investing in the likes of peer-to-peer lender Harmoney. 

Trade Me also quit businesses that were "increasingly difficult to justify prioritising time and money", given other opportunities. It sold accommodation aggregator Travelbug and online engine Bookit, with $497,000 of gains from those sales. 

The company affirmed annual guidance for ebitda and operating profit growth rates to exceed the 2016 rates of 4.5 percent and 3.5 percent respectively. 

Chief executive Jon Macdonald said Trade Me was better positioned in the 2018 financial year and beyond. 

"We will continue to invest as needed to further strengthen our trust and relevance with the New Zealand public, and to make the most of the opportunities in front of us," he said. 

Trade Me's general items business boosted earnings 7.8 percent to $26.2 million on a 9.3 percent gain in sales to $35.2 million, while classified ads increased ebitda 12 percent to $40.5 million as revenue rose 9.9 percent to $59.7 million. While property ad revenue rose at a modest 4.5 percent pace, jobs ads revenue gained 23 percent and motoring ads were up 7.5 percent. 

The company's other segment, which includes advertising, dating, insurance and payments, generated a 5.1 percent gain in revenue to $20.1 million for a 19 percent gain in earnings to $8 million. 

Trade Me's share of Harmoney's losses shrank to $413,000 in the half from $1 million a year earlier. The peer-to-peer lender has continued to experience growth, and fellow shareholder Heartland Bank this week said it increased lending through the platform to $62.1 million in the six-month period. 

The company's shares last traded at $5.07 and have gained 21 percent over the past 12 months.

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