Trade Me profit growth slows in 2014, forecasts 'subdued' earnings for 2015
By Tina Morrison
Aug. 20 (BusinessDesk) - Trade Me Group, New Zealand's largest online auction site, posted slower profit growth for 2014 and warned earnings would remain "subdued" in the coming year as it reinvests in its business.
Trade Me profit rose to $80.1 million, or 20.2 cents a share, in the 12 months to June 30, from $78.6 million, or 19.84 cents, a year earlier, the Wellington-based company said in a statement. Revenue increased 9.7 percent to $180.1 million while expenses jumped 26 percent to $51.4 million.
Profit growth has slowed since the company was spun out of Fairfax Media in 2011 in an initial public offering. The latest year's 1.9 percent increase in profit lags 2013's 4 percent gain and an 8.4 percent pace in 2012. The company today forecast another year of "subdued" earnings growth with revenue forecast to increase at low double-digits and another year of "significant investment" as expenses rise from adding more staff and it spends more on promotion to position the business for longer term expansion.
"We expect to grow revenue and earnings before interest, tax, depreciation and amortisation over the coming year but our focus will be on improving the products we offer, strengthening our sales and account management and ensuring stronger growth in the medium to long term," chief executive Jon Macdonald said.
Trade Me posted a 4 percent increase in annual Ebitda to $128.7 million, ahead of the $125.8 million mean analyst estimate compiled by Reuters. The company is forecast to increase Ebitda by 3.9 percent to $133.7 million in the 2015 financial year, according to the Reuters estimates compiled before today's announcement.
In Trade Me's general items auction business, revenue declined 1.1 percent to $64.8 million as the company struggled to grow its general marketplace. Its classified advertising unit increased revenue 23 percent to $85.6 million as property advertising revenue increased 12 percent, motor vehicle advertising increased 29 percent and job advertisements advanced 26 percent. The acquisition of Treat Me and LifeDirect helped increase 'other' revenue by 2.8 percent to $29.7 million.
Trade Me will pay a final dividend of 8.4 cents a share on Sept. 23, taking the annual dividend to 16 cents, compared with 15.8 cents last year.
The company's shares last traded at $3.52, and have declined 13 percent so far this year, lagging an 8 percent gain in the benchmark NZX 50 Index. The stock is rated an average 'hold' according to analysts polled by Reuters.