Trade Me warns of slowdown

Trade Me, New Zealand’s largest online auction site, posted a small increase in profit for 2013 and warned earnings growth would remain tepid in the coming year as it reinvests in its business. Resource-2

Trade Me profit rose four per cent to $NZ78.6 million ($A70.33 million) in the year ended June 30, slower than the 8.4 per cent pace a year earlier, the Wellington-based company said.

Revenue rose 15 per cent to $NZ164.1m as classified advertising sales surged 29 per cent while fees from sales of general items rose five per cent.

Profit was just above First NZ Capital’s estimate of $NZ77.6m.

“We expect to grow top line revenue and bottom line earnings but these will reflect slower growth than we’ve recorded this year while we focus on reinvestment in the business,” said CEO Jon Macdonald.

Trade Me, which has attracted about two thirds of New Zealand’s population to its online marketplace, is adding to its core auctions business to drive future growth.

The company said it has agreed to buy online insurance comparison business LifeDirect, adding to its purchase of inventory management company Tradevine and holiday rental accommodation website Holiday Homes in the past year.

Trade Me, which was spun out of Fairfax Media in 2011 in an initial public offering, said profit growth slowed reflecting higher interest costs following its IPO and because of a $NZ3.3m one-time gain the year earlier. Finance costs increased 78 per cent to $NZ7.2m in 2013.

Earnings growth was likely to slow further in 2014 as the company invests in improving the performance of its general items auction unit, develops products and marketing for its classifieds section and looks to new business opportunities and revenue lines, Trade Me said.

Some 40 per cent of all visits to Trade Me are from mobile devices and the company is developing technology applications to meet the demand, the company said.

“Growth in mobile, new products in the classifieds, the migration of advertising yield online, the long-term opportunity in online retail and forays into new businesses all provide sizeable opportunities for Trade me over the coming years,” Macdonald said.

The shares last traded at $NZ4.70 and have gained 19 per cent this year.

BusinessDesk

You have 7 articles remaining. Unlock 15 free articles a month, it’s free.