Trade Me affirms guidance for 2016 sales growth

See also: Trade Me tells shareholders the revival of its traditional business continues

Trade Me [NZX: TME] has reiterated the guidance it gave with its full-year result in August, for sales and earnings growth to be broadly similar in 2016.

Revenue rose 11% to about $200 million in the year ended June 30, while earnings before interest, tax, depreciation and amortisation increased 4.4% to $134.4 million.

The company says expenses will rise at a slower pace than the 26% increase to $64.5 million in 2015. These expenses were related to the acquisition of MotoWeb, LifeDirect, Paystation and peer-to-peer lender Harmoney, the hiring of more staff and further spending on promotions.

Trade Me is trying to leverage the popularity of its auction site, which has kept eBay on the sidelines in New Zealand in contrast to Australia, by pushing more new products and services at its audience.

The platform returned to growth in the fourth quarter, with a 2% increase in its general items business and a 5% rise for new goods, "which is the real target of our investment," chairman David Kirk told shareholders at Trade Me’s annual meeting. "This momentum has continued in the first quarter of 2016."

Trade Me's commercial services - Trade Me Property, Trade Me Motors and Trade Me Jobs - lifted revenue by 16% last year "and continued to deliver the growth at high margins," he says.

Chief executive Jon Macdonald says Trade Me's business is evolving. In 2015, just 32% of revenue came from its marketplace, compared to 40% from motors and property. Jobs generated about 10% of total sales, while advertising and its LifeDirect insurance comparison service, accounted for 11%.

There was "lots of opportunity," Macdonald says, "including improved search algorithms, personalisation, automated marketing, merchandising and shipping offers."

"We expect the second half of the year to show considerably stronger financial performance than the first half"

Trade Me shares fell 0.3% to $3.70 and have gained 3.4% in the past 12 months, while the NZX 50 Index rose 11.3%.

The stock is rated a 'hold' based on the consensus of nine analyst recommendations compiled by Reuters.

(BusinessDesk)