Trade Me affirms guidance for 2016 sales growth of about 11%, earnings growth about 4.4%

Wednesday 14th October 2015

Trade Me, New Zealand's largest online auction site, affirmed the guidance it gave with its full-year result in August, for sales and earnings growth to be broadly similar in 2016.

Revenue rose 11 percent to about $200 million in the year ended June 30, while earnings before interest, tax, depreciation and amortisation increased 4.4 percent to $134.4 million. Expenses would rise at a slower pace than the 26 percent increase to $64.5 million in 2015, when it had costs related to the acquisition of MotoWeb, LifeDirect, Paystation and peer-to-peer lender Harmoney, hired more workers and spent more on promotions.

Trade me is trying to leverage the popularity of its auction site, which has kept eBay on the sidelines in New Zealand in contrast to Australia, by pushing more new products and services at its audience. The platform returned to growth in the fourth quarter, with a 2 percent increase in its general items business but a 5 percent rise for new goods, "which is the real target of our investment," chairman David Kirk told shareholders at their annual meeting. "This momentum has continued in the first quarter of 2016."

Trade Me's commercial services - Trade Me Property, Trade Me Motors and Trade Me Jobs - lifted revenue by 16 percent last year "and continued to deliver the growth at high margins," he said.

Notes for chief executive Jon Macdonald's presentation showed how Trade Me's offering is evolving. In 2015, just 32 percent of revenue came from its marketplace, compared to 40 percent from motors and property. Jobs generated about 10 percent of total sales, while advertising and its LifeDirect insurance comparison service, accounted for 11 percent.

There was "lots of opportunity," Macdonald said, according to the presentations, "including improved search algorithms, personalisation, automated marketing, merchandising and shipping offers."

"We expect the second half of the year to show considerably stronger financial performance than the first half," he said.

Trade Me shares fell 0.3 percent to $3.70 and have gained 3.4 percent in the past 12 months, while the NZX 50 Index rose 11.3 percent. The stock is rated a 'hold' based on the consensus of nine analyst recommendations compiled by Reuters.

BusinessDesk.co.nz

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