Trade Me posts a flat first-half net profit as its marketplace struggles for growth

Gross sales from Trade Me's marketplace is tracking down

Trade Me [NZX:TME] has posted a marginally weaker first-half net profit but describes the result as “solid” as the online market place’s revenue rose 6.8% to a record $122.7 million.

Trade Me’s net profit for the six months ended December eased to $46.07 million from $46.11 million in the same six months a year earlier but the company says the year-earlier result included a one-off profit of $1.4 million and, excluding that, net profit would have been up 3.1%.

“We’re pleased to report record revenue and a result in line with the guidance provided to investors in August and November last year,” chairman David Kirk says.

“The highlight is the stellar result from Trade Me Motors in our classifieds segment.”

The outlook for the full year of growth in both earnings before interest, tax, depreciation and amortisation (ebitda) and net profit is for an increase but less than the 26% net profit increase the company reported last year.

The Trade Me Motors lifted revenue 16% from the year-earlier period and chief executive Jon Macdonald says that was “superb.”

“We’ve seen dealer premium revenue increase by more than 40% year-on-year, complemented by record inventory levels,” Mr Macdonald says.

Total revenue from the classified segment rose 13.8% to $67.9 million but Trade Me’s traditional online marketplace business rose only slightly.

“As we reported in October 2017, the gross merchandise sales trend for used goods tracked down slowly but was once again more than offset by the continued strength in new goods, which was up 5% on last year,” Mr Macdonald says.

Working at it
A lot of work is being done to stimulate stronger growth in the marketplace, he says, with a focus on new goods.

“The Afterpay instalment payment option launched in September 2017 is now available on over 60% of new goods onsite and we’ve completed our first subscription shipping experiment, rolled out ‘Quick List’ functionality in the iOS and Android apps and held two success fee-free weekends,” he says.

That has meant overall listings were up 25% year on year.

Earlier this month the company announced changes to success fees for professional retailers aimed at encouraging larger sellers to provide buyers with “great shipping offers and price certainty.”

Trade Me’s traditional business is under threat from both Amazon and Facebook.

In the classifieds segment, Trade Me Jobs lifted revenue 18.6% while Trade Me Property’s revenue rose 6%.

Mr Macdonald says premium revenue from agents listing properties for sale increased by 25.7%. “We’ve improved our branding for property professionals and now have almost 7000 agents signed up to our OneHub agent portal,” he says.

“We’ve also seen sessions on Trade Me Property increase by 6% year-on-year, underpinned by the launch of rental estimates for 1.2 million properties in November 2017.”

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