Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Trade Me earnings outlook revised down 4% for 2014,2015

Trade Me earnings outlook revised down 4% for 2014, 2015 after first half disappoints

By Tina Morrison

Feb. 25 (BusinessDesk) – Trade Me Group’s forecast earnings have been revised down by about 4 percent for each of the next two years after New Zealand’s largest auction site posted lower-than-expected first half profit as expenses increased at a faster pace than revenue and it warned future growth would be “subdued”.

Analysts polled by Reuters have pulled back their expectations for 2014 net profit by an average 4.1 percent and for 2015 profit by 4.3 percent after Trade Me last week posted first-half profit growth of 1.7 percent to $38 million, missing expectations.

Trade Me has branched out from its core online auction web site started by computer consultant Sam Morgan in 1999 to also provide advertising for jobs, holiday accommodation and dating, and information on vehicles and insurance as it seeks to capitalise on its status as the nation’s most visited web site and sell more products.

The company last week warned expenses will continue to accelerate at a faster pace in the second half of its financial year while revenue will grow only modestly as it adds more staff to bolster its service, spends more on marketing to attract users and tries to bring in more fees from selling new goods and raising prices for property listings. Profit growth should improve over the course of its 2015 year as it benefits from new products, higher fees and increased activity, it said.

Some analysts are betting the current spending in pursuit of growth could see the company post its first drop in annual profit since listing in 2012.

Trade Me’s annual profit could fall to $78.3 million this year, from $78.6 million last year, according to the latest assessment from brokerage Credit Suisse following first half earnings. The broking house, which rates the stock “underperform”, expects Trade Me to grow profits in 2015 by 9.3 percent to $85.6 million.

“The next six to 12 months will likely remain a period of heavy investment for Trade Me as it attempts to reverse a decline in the rate of revenue growth,” Credit Suisse said in a note. “We expect acceleration in cost growth from 19 percent in 1H14 to 39 percent in 2H14 as Trade me increases investment in staff, marketing and content.”

Revenue in Trade Me’s General Items unit, the company’s largest, declined 1.6 percent to $32.6 million in the first half, lagging 7.5 percent growth in the previous corresponding period and strong growth over the last five years, Credit Suisse said.

“New initiatives in General Items could arrest decline rather than accelerate growth,” Credit Suisse said. “We remain cautious on the level of investment in new goods and whether this will produce reasonable returns.”

Investors such as Mark Warminger at Milford Asset Management now rate the company as a mature business with low growth prospects, and say the stock is expensive. At current prices, Trade Me is trading at about 19 times its expected earnings when it should be priced around 14 times earnings, he said.

Chairman David Kirk said the company has embarked on a period of reinvestment which will impact short-term earnings growth but ensure the company’s long-term growth. Kirk disclosed today that he has been buying the stock following the first half earnings announcement, adding 25,000 shares to take his total holding to 157,625 shares.

Shares in Trade Me recently advanced 2.7 percent to $4.14.

The mean forecast of analysts polled by Reuters is for 2014 profit of $82.3 million and 2015 profit of $91.4 million.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Company Results: Air NZ Rides The Tourism Boom With Record Full-Year Earnings

Air New Zealand has ridden the tourism boom and staved off increased competition to deliver the best full-year earnings in its 76-year history. More>>

ALSO:

New PGP: Sheep Milk Industry Gets $12.6M Crown Funding

The Sheep - Horizon Three programme aims to develop "a market driven, end-to-end value chain generating annual revenues of between $200 million and $700 million by 2030," according to a joint statement. More>>

ALSO:

Half Full: Fonterra Raises Forecast Milk Price

Fonterra Co-operative Group Limited today increased its 2016/17 forecast Farmgate Milk Price by 50 cents to $4.75 per kgMS. When combined with the forecast earnings per share range for the 2017 financial year of 50 to 60 cents, the total payout available to farmers in the current season is forecast to be $5.25 to $5.35 before retentions. More>>

ALSO:

Keep Digging: Seabed Ironsands Miner TransTasman Tries Again

The first company to attempt to gain a resource consent to mine ironsands from the ocean floor in New Zealand's Exclusive Economic Zone has lodged a new application containing fresh scientific and other evidence it hopes will persuade regulators after their initial application was turned down in 2014. More>>

Wool Pulled: Duvets Sold As ‘Premium Alpaca’ Mostly Sheep’s Wool

Rotorua business Budge Collection Limited (Budge) and sole director, Sun Dong Kim, were convicted and fined a total of $71,250 in Auckland District Court after each pleading guilty to four charges of misrepresenting how much alpaca fibre was in their duvets. More>>

Reserve Bank: Labour Calls For Monetary Policy To Expand Goals

Labour's comments follow a speech today by RBNZ governor Graeme Wheeler in which Wheeler sought to answer critics who variously say he should stop lowering interest rates, lower them faster, or that inflation-targeting should no longer be the primary goal of the central bank's activities. More>>

ALSO:

BSA Extension And Sunday Morning Ads: Digital Convergence Bill Captures Online Content

Broadcasting Minister Amy Adams has today announced the Government’s plans to update the Broadcasting Act to better reflect today’s converged market... The Government considered four areas as part of its review into content regulation: classification requirements, advertising restrictions, election programming and contestable funding. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news