Trade Me profit ahead of IPO forecast but shares fall

Trade Me CEO Jon Macdonald
Trade Me NZX performance since IPO (S&P Capital IQ; click to zoom)

UPDATE / 3.45pm: Trade Me shares (NZX:TME) were down 3.53% to $3.83 in the immediate wake of today's earnings announcement before recoverinig to $3.89, or 2.2% down.

Profit rose 8.4% to $75.6 million in the 12 months ended June 30, the Wellington-based company says. Sales increased 13.8% to $142 million. Analysts had expected profit of $70 million on revenue of $146 million.

On a conference call, CEO Jon Macdonald said costs, up 35% against the prior year, would rise faster than revenue but that the company's gross profit margin – once 80% – would "stay safely above 60%".

Mr Macdonald told NBR the increase in costs was due to an extra 60 staff being added over the year, plus the governance and other costs involved with being a public company.

"If anything the result only met expectations – revenue growth looked a fraction lighter than expected," saysMatthew Goodson, portfolio manager at BT Funds Management.

"When you are dealing with a growth story you need strong growth. Some of the outlook comments were also slightly muted."

The revenue drop was down to the behaviour of New Zealand consumers.

Mr Macdonald said Trade Me had been hoping the economy would pick up, "but we'll have to settle for more of the same".

RAW DATA: Trade Me analyst briefing (PDF)


Trade Me, the online auction site spun off by Fairfax Media in December, beat its prospectus forecast for earnings on classified sales growth and the roll out of new smart phone applications.

Profit rose 8.4% to $75.6 million in the 12 months ended June 30, the Wellington-based company says. Sales increased 13.8% to $142 million. Analysts had expected profit of $70 million on revenue of $146 million.

Earnings before interest, tax, depreciation and amortisation increased 11.3% to a record $110.4 million, beating its prospectus forecast by 4.7%.

A "strong performance" of revenue from the sale of general items through the website was led by an 8% increase in trading via mobile phones after the development of smartphone applications across the company's individual businesses.

Trade Me's classified business – motors, property and jobs – beat expectations aftger the acquisition of vehicle listing aggregator AutoBase.

"Our core general items marketplace performed in line with our expectations, with a definite shift in activity towards mobile," chief executive Jon Macdonald says.

"Throughout the year, we've also seen the proportion of fixed price transactions continue to grow as buyers move towards new goods and instant ecommerce experience."

“Growth in mobile, online mobile and the migration of advertising yield online all provide excellent opportunities for Trade Me over the coming years,” he says.

The company’s Treat Me venture “came in below a bullish forecast”. Group buying was “a young and uncertain industry, but one that still has potential”.

Trade Me today announced the acquisition of cloud-based inventory management tool Tradevine. It will provide users with a dashboard to manage sales, inventory and listing.

That follows April's venture with e-commerce software company ChannelAdvisor in a deal that will let retailers from around the world list their products on Trade Me in time for Christmas.

Trade Me shares last traded at $3.79 and have gained about 34% this year. The stock is rated "outperform" based on the consensus of two Reuters analysts.

The online auction site will pay a dividend of 7.8 cents per share in September 25.

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Jon Macdonald is a handsome man!

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He reminds me of Mr. Bean.

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