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

 

Houses (& Tobacco) Lead Inflation: CPI Up 0.3% In March Quarter

The consumers price index (CPI) rose 0.3 percent in the March 2014 quarter, Statistics New Zealand said today. Higher tobacco and housing prices were partly countered by seasonally cheaper international air fares, vegetables, and package holidays. More>>

ALSO:

Notoriously Reliable Predictions: Budget To Show Rise In Full-Time Income To 2018: English

This year’s Budget will forecast wage increases through to 2018 amounting to a $10,500 a year increase in average full time earnings over six years to $62,200 a year, says Finance Minister Bill English in a speech urging voters not to “put all of this at risk” by changing the government. More>>

ALSO:

Prices Up, Volume Down: March NZ House Sales Drop 10% As Loan Curbs Bite

New Zealand house sales dropped 10 percent in March from a year earlier as the Reserve Bank’s restrictions on low-equity mortgages continue to weigh on sales of cheaper property. More>>

ALSO:

Scoop Business: Chorus To Appeal Copper Pricing Judgment

Chorus will appeal a High Court ruling upholding the Commerce Commission’s determination setting the regulated prices on the telecommunications network operator’s copper lines. More>>

ALSO:

Earlier:

Cars: Precautionary Recalls Announced For Toyota Vehicles

Toyota advises that a number of its New Zealand vehicles are affected by a series of precautionary global recalls. Toyota New Zealand General Manager Customer Services Spencer Morris stressed that the recalls are precautionary. More>>

ALSO:

'Gardening Club': Air Freight Cartel Nets Almost $12 Million In Penalties

The High Court in Auckland has today ordered Swiss company Kuehne + Nagel International AG to pay a penalty of $3.1 million plus costs for breaches of the Commerce Act. Kuehne + Nagel’s penalty brings the total penalties ordered in this case to $11.95 million ... More>>

ALSO:

Crown Accounts: Revenue Below Projections

Core Crown tax revenue has increased by $1.9 billion (or 5.0%) compared to the same time last year. However this was $1.1 billion less than expected and is reflected across most tax types, continuing the pattern of recent months. More>>

ALSO:

Efficiency: Businesses And Households To Save From New Energy Plans

Minister of Energy and Resources Simon Bridges today announced three energy efficiency initiatives to improve business productivity, save money and reduce carbon emissions. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news