UPDATE: Trade Me annual profit flat   20 Aug 2015

UPDATE: Trade Me annual profit flat as increased expenses curb revenue growth

(Adds analyst estimates, chief executive comment, and updates shares)

By Tina Morrison

Aug. 20 (BusinessDesk) - Trade Me, New Zealand's largest online auction site, posted a 2015 profit largely unchanged from 2014 as increased spending ate into bigger revenues. Earnings will continue on a similar path this year as it invests in new ventures.

Net profit was little changed at $80.2 million, or 20.2 cents per share, in the year ended June 30, from $80.1 million, or 20.2 cents, the year earlier, the Wellington-based company said in a statement. The latest profit is ahead of the $79.2 million expected in a Reuters poll of analysts. Revenue rose 11 percent to $199.7 million, while expenses increased 25 percent to $64.5 million.

The company's shares rose 5.2 percent to $3.26, and have shed 15 percent so far this year.

Trade Me increased its full-time equivalent staff by about a third to 437 over the past year as it invested in product development. Its expenses were also pushed up by increased marketing, and higher costs from the acquisitions of online insurance comparison website LifeDirect, online vehicle information business MotorWeb and online payments processor Paystation. Earnings before interest, tax, depreciation and amortisation increased 4.4 percent to $134.4 million in 2015, and will continue at a similar pace in 2016 as it ramps up investment in new businesses such as Trade Me Insurance, which was launched last week.

"We expect the second half of the year to show considerably stronger financial performance than the first half," said chief executive Jon Macdonald. "There will be greater impact of last year's hires in our cost growth in the first half, plus we have launch costs for Trade Me Insurance in the first half, but better revenue contribution from Trade Me Insurance in the second half."

Macdonald said most of the spending on Trade Me Insurance would be in marketing, with the total amount dependent on how the business progresses over the coming months.

The company would likely continue its historic pattern of one to two small acquisitions a year that could help strengthen the broader company, although they would depend on merit, he said.

"We are interested where there are big, meaningful revenue pools that are still to undergo some kind of structural migration online or some kind of disruption," Macdonald said.

In the company's largest unit, its classified advertising business which generates listing fees from its motors, property and jobs sites, Ebitda increased 9.2 percent to $68.6 million as revenue jumped 16 percent to $99.6 million.

In its general items unit, which generates fees from listings on its online marketplace business, Ebitda slipped 1.9 percent to $49.9 million as revenue declined 2 percent to $63.5 million. The company has released a new homepage with more relevant, data-driven content, a new image-rich search experience and a new listing page.

Macdonald said the unit had turned the corner "after a lot of hard graft", with gross merchandise sales picking up in the second half of the year, after a "subdued" first half. The number of sales increased 2 percent in the three months through June compared with the year earlier period, led by a 5 percent increase in new goods' sales.

"It’s gone from that state of mild decline to, for about six months now, being in positive territory but also on a strengthening trajectory so that’s great from my point of view because there’s good opportunity there in us participating more in online retail," he said. "It is that original business of ours and still our engine room in a lot of respects when it comes to the engagement that we have with the New Zealand public and what we are best known for, and so that going from a position of weakness to a position of strength is very, very encouraging."

For its other businesses, which include advertising, travel, online dating, Pay Now, payments gateway and online insurance comparison, Ebitda increased 11 percent to $16.7 million as revenue jumped 23 percent to $36.6 million.

The company will pay a final dividend of 8.5 cents a share on Sept. 22, up from 8.4 cents a year earlier and taking the total dividend payment for the year to 16.2 cents, up from 16 cents in 2014.

(BusinessDesk)

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