Trade Me restores revenue growth after two-year dip

Trade Me group has seen three years of investment pay off with its general items marketplace restoring revenue growth after a two-year absence.

The company had a 9.2% revenue uplift to $218 million for the year ended June while its general items marketplace had revenue growth of 3.5% compared to the prior year of $65.7 million. There was a bigger upswing in the second half.

"We've had over the past 15 months a return to growth in activity in that part of the business and in the last half we've restored revenue growth," chief executive John Macdonald says.

That's been pushed by design and functionality changes such as making photos free on all listings which initially dropped overall yield but lifted sales activity. A simplified pricing structure in February then delivered back that yield on higher sales, Mr Macdonald says.

The new Book a Courier service, launched in April to make it easier to buy and sell on the site, reached a milestone of 1000 daily deliveries in July.

The company's net profit after tax fell 6.5% to $74.9 million including a one-off impairment charge of $8.1 million from its online dating business FindSomeone which, along with its Travelbug site, is struggling against international competitors. Underlying profit was up 3.5% to $83 million.

Net profit was lowered by 1% due to accounting for losses from the group's 12.4 % stake in lending platform Harmoney, New Zealand's first peer-to-peer lender. Harmoney reported a $14.2 million loss in the 2016 financial  year, compared to $6.3 million the prior year and Trade Me's share of the loss from continuing operations was $1.6 million, double the amount of the prior year.

Mr Macdonald says the investment is a good fit as the two online platforms have a lot in common and he has confidence in the long-term it will pay off as the new model for the lending industry gains traction.

Three years ago Trade Me was still growing and needed more investment due to the product offer becoming dated, increased competition and the growing importance of mobile. Since then the company has doubled staff numbers to 509, improved its sales team, increased marketing spend to $9.4 million from $2.6 million in 2012, and last month launched its first ever cohesive brand campaign "Life Lives Here" despite already being seen as the country's most influential domestic brand.

"We've been around for 17 years and we're not a new, shiny thing anymore," Mr Macdonald says. "What we're trying to do with this brand campaign, which is part of a bigger piece of work, is to be more cohesive in how we talk about the brand."

The company released a new universal ioS app last month to improve the experience for both iPhone and iPad users and development on a new mobile-responsive design for the overall site is also underway to provide a "more contemporary and consistent experience for users, regardless of device," Macdonald said. Although most users access the site through a variety of devices, in one month recently 28 % of all users did so through mobile only.

Trade Me's classifieds businesses, covering motoring, property, and jobs, was another part of the business that is continuing to show strong growth with revenue up 13.2% to $112.8 million, and Mr Macdonald expects classifieds to follow the same growth path in the next year.

Expenses growth has been hauled back to 17%, compared to 25% the previous year mainly due to a slowing down in hiring new staff, and is forecast to drop to 10% in 2017.

The board has declared a fully imputed final dividend of 9c per share to be paid on September 20.

Mr Macdonald says total revenue is expected to grow at a similar rate in 2017 to this year in percentage terms, mainly through the general items marketplace and classified businesses repaying the increased investment. Profit growth is expected to be higher than this year, as expenses ease.

Trade Me's fledgling insurance business, which offers home, contents, and car insurance, is now in a position where it can be scaled up after a year of putting an offer into the market and fine-tuning it, Mr Macdonald says.

New goods now account for about half of Trade Me's transactions though the average sale price is higher for used goods due to bigger ticket items being sold. But Mr Macdonald expects new goods retailing to continue to grow faster than used goods in 2017 with annual growth in overall online retail spend by kiwis in excess of 10% a year.

(BusinessDesk)