Trade Me first half profit rises after reinvestment in business

Trade Me lifted first-half profit 16% signalling an end to an investment phase, although the result fell just short of analyst expectations.

Net profit rose to $46.1 million, or 11.61c a share, in the six months ended December, from $38.5 million, or 9.71c, a year earlier.

Revenue gained 9% to $114.9 million and earnings before interest, tax, depreciation and amortisation were up 12% to $76.1 million, just missing Forsyth Barr analyst Blair Galpin's forecast for operating earnings of $78 million on revenue of $117 million.

"The return to good profit growth in the first half of this year marks the successful completion of our multi-year investment phase," chairman David Kirk says.

"We've strengthened the business and set it up well for further growth."

In 2013 Trade Me embarked on freshening up of its business that was becoming dated while at the same time it was facing increased competition and the growing importance of mobile technology.

It did so by beefing up staff numbers, which were 541 at December from 511 a year earlier, introducing new products, such as its recently announced buyer protection programme, and investing in the likes of peer-to-peer lender Harmoney.

Trade Me also quit businesses that were "increasingly difficult to justify prioritising time and money", given other opportunities. It sold accommodation aggregator Travelbug and online engine Bookit, with $497,000 of gains from those sales.

The company affirmed annual guidance for ebitda and operating profit growth rates to exceed the 2016 rates of 4.5% and 3.5% respectively.

Chief executive Jon Macdonald says Trade Me is better positioned in the 2018 financial year and beyond.

"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," he says.

Trade Me's general items business boosted earnings 7.8% to $26.2 million on a 9.3% gain in sales to $35.2 million, while classified ads increased ebitda 12% to $40.5 million as revenue rose 9.9% to $59.7 million.

While property ad revenue rose at a modest 4.5% pace, jobs ads revenue gained 23% and motoring ads were up 7.5%.

The company's other segment, which includes advertising, dating, insurance and payments, generated a 5.1% gain in revenue to $20.1 million for a 19% gain in earnings to $8 million.

Trade Me's share of Harmoney's losses shrank to $413,000 in the half from $1 million a year earlier. The peer-to-peer lender has continued to experience growth, and fellow shareholder Heartland Bank this week said it increased lending through the platform to $62.1 million in the six-month period.

The company's shares last traded at $5.07 and have gained 21% over the past 12 months.

(BusinessDesk)