Trade Me posts slower 1H profit growth, says FY earnings will be 'subdued'

Trade Me Group, New Zealand's largest online auction site, posted slower profit growth in the first half of its financial year as increased investment ramped up costs and only one of its core businesses lifted earnings.

The Wellington-based company said net profit rose 1.1% to $38.4 million in the six months ended December 31, slower than the 2% increase in the same period last year, and the 2.7% pace the year earlier. Expenses rose 28% to $32.3 million, outpacing a 13% rise in revenue to $96.9 million.

Trade Me employed an extra 69 people in the past six months, taking its total headcount to 424, as it strives to improve its service to grow future profits.

The company expects to hire a further 62 people in the remainder of the financial year, and says its full-year result will show "elevated" expenses, a "low double-digit" revenue increase and "subdued" growth in earnings before interest, tax, depreciation and amortisation.

"We're continuing to invest in people, product development and marketing, as well as ramping up our sales and account management capability," says Jon Macdonald, Trade Me chief executive.

"We are convinced this is the right approach and believe that investment now will result in stronger market positions and great growth opportunities for Trade Me in the future."

Shares of Trade Me last changed hands at $3.62 and have declined 11% the past year, lagging behind a 17% gain in the NZX 50 benchmark index. The stock is rated a 'hold' according to the consensus of nine analysts compiled by Reuters.

In the company's largest unit, its classified advertising business which generates listing fees from its motors, property and jobs sites, Ebitda increased 14% to $32.8 million as revenue jumped 24% to $47.7 million.

In its general items unit, which generates fees from listings on its online marketplace business, Ebitda was little changed at $24.5 million as revenue slipped 1.5% to $32.1 million. Former Xero chief revenue officer Stuart McLean started as head of the unit last week

For its other businesses, which include advertising, travel, online dating, Pay Now, payment gateway and an online insurance comparison, Ebitda was flat at $7.3 million even as revenue increased 18% to $17.1 million.

Trade Me will pay a first-half dividend of 7.7 cents per share on March 24, compared with 7.6 cps in the year earlier period.

By Tina Morrison