TME Interim Result: Good profit growth as investment delivers on promises

Thursday, February 23, 2017 8:31 AM

Highlights

• Revenue up 8.8% YoY to $114.9m
• EBITDA[1]up 14.2% YoY to $75.7m
• NPAT up 19.6% YoY to $46.1m; operating NPAT up 16% YoY to $44.7m
• Earnings per share for H1 17 was 11.61 cents, up from 9.71 cents in H1 16
• Fully imputed interim dividend of 8.5 cps to be paid on 21 March 2017
• General Items healthy and strong
• Trade Me Jobs a stand-out in the Classifieds segment
• Outlook for F17 unchanged: year-on-year EBITDA and operating NPAT growth rates in excess of F16

Online marketplace and classified advertising business Trade Me Group Ltd ('Trade Me') released its interim financial results for the six months to 31 December 2016 this morning.

Chairman David Kirk said Trade Me had delivered an 'excellent result' to investors. 'The return to good profit growth in the first half of this year marks the successful completion of our multi-year investment phase. We've strengthened the business and set it up well for further growth, and we're very pleased to have achieved our ambitions from this investment.'

The numbers

CEO Jon Macdonald said Trade Me had delivered record revenue of $114.9m in the first half of F17, up 8.8 per cent on a year ago. Expenses were up just 5 per cent year-on-year, with cost growth down significantly from 19 per cent year-on-year growth in the first half of F16.

Mr Macdonald said that there had been a strong focus on following through on promises made to investors. 'We said we would reinvest in people, product development, marketing and sales in order to build a better business and then deliver growth, and that's what we've done. As well as delivering on our investment, it's pleasing that we've shown our ability to contain costs as forecast too.'

Earnings per share increased to 11.61 cents (up from 9.71 cents a year ago), and a fully imputed interim dividend of 8.5 cents per share will be paid on 21 March.

Performance by segment

Mr Macdonald said he was very pleased to see the General Items marketplace continue to accelerate its revenue growth. 'Revenue in this segment of our business was up 9.3 per cent in the first half of the 2017 financial year, having increased by 7 per cent in the second half of the 2016 financial year. It's as healthy and strong as we've seen it for several years.'

A range of product improvements have been well-received, including the roll-out of a new Buyer Protection programme earlier this month. The Book a Courier service launched in April 2016 continues to grow in popularity, with up to 2,200 packages sent each day.

The Classifieds segment delivered another good result, with revenue up 9.9 per cent year-on-year. Mr Macdonald said there was a contribution from all three businesses, but the employment business was the stand-out. 'Revenue in Trade Me Jobs has continued to perform strongly, and was up by 23.3 per cent year-on-year, off the back of strong sales of premium products and the buoyant New Zealand employment market.'

Mr Macdonald said Trade Me Property reported subdued revenue growth of 4.8 per cent, due to a soft property listings market, but noted there was still good progress. 'We've made some exciting product gains in recent months, with the highlight being automated valuation estimates for residential properties across the country. Off the back of this we have seen 1.6 million records searched via our Property Insights portal.'

Trade Me Motors reported a revenue increase of 7.5 per cent year-on-year. 'We've focused on our business customers with premium revenue from our suite of products for dealers increasing by 28.1 per cent over the past year, and we've also upgraded our DealerBase vehicle management site.'

In the Other category, comprising advertising, dating, insurance and payments businesses, revenue was up 5.1 per cent year-on-year, driven by growth in payments and advertising.

People

As at 31 December 2016 there were 541 staff (514 FTEs) at Trade Me, up slightly from 511 staff (491 FTEs) a year earlier. Mr Macdonald said the small increase reflected the fact that hiring 'had slowed down significantly' after the company's investment phase.

There was one change to the Trade Me board in December 2016, with Auckland-based Simon West appointed, replacing Sam Morgan as an independent director. Simon has extensive experience in retail and technology businesses, and is currently the executive director of Max Fashions.

Outlook

Looking ahead, Mr Macdonald reiterated the guidance for investors. 'There is no change to our previously stated ambition for year-on-year EBITDA and operating NPAT growth rates in excess of F16 for the full financial year.

'Looking to F18 and beyond, we're stronger and better positioned than ever to grow and defend our existing businesses. 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.'