TME half-year results

TME half-year results: Record revenue underpinned by Classifieds strength

Highlights
• Revenue of $122.7m and up 6.8% YoY
• EBITDA of $79.0m and up 5.7% YoY*
• NPAT of $46.1m and up 3.1% YoY*
• Earnings per share of 11.6 cents
• Fully imputed interim dividend of 9.1 cps to be paid on 20 March 2018
• Classifieds performance strong, with Trade Me Motors the stand-out
• Outlook for F18 unchanged: year-on-year EBITDA and operating NPAT growth, but at a lower rate than in F17 due to targeted investment

Online marketplace and classified advertising business Trade Me Group Ltd (“Trade Me”) released its interim financial results for the six months to 31 December 2017 this morning.

Chairman David Kirk said Trade Me had delivered a “solid result” to investors. “We’re pleased to report record revenue and a result in line with the guidance provided to investors in August and November last year. The highlight is the stellar result from Trade Me Motors in our Classifieds segment.”

The numbers

CEO Jon Macdonald said Trade Me had delivered record revenue of $122.7m in the first half of F17, up 6.8 per cent on a year ago. Total expenses, including cost of sales, were up 9.2 per cent year-on-year. Excluding cost of sales, expenses were up 5.9 per cent and Mr Macdonald said this was the targeted investment signalled six months ago.

Earnings per share was 11.6 cents, and a fully imputed interim dividend of 9.1 cents per share (up from 8.5 cents per share last year) will be paid on 20 March 2018.

Performance by segment

There was continued success for the Classifieds segment, delivering another excellent result with revenue up 13.8 per cent year-on-year to $67.9m, and an acceleration in growth on last year. All three businesses increased revenue, after a continued focus on generating premium revenue and improving their products. The three classified businesses now contribute 55 per cent of Trade Me’s revenue.

Mr Macdonald said Trade Me Motors, the largest of the classified verticals, reported a “superb result”, headlined by a revenue increase of 16.0 per cent year-on-year. “We’ve seen dealer premium revenue increase by more than 40 per cent year-on-year, complemented by record inventory levels.”

Trade Me Jobs continued its run of excellent financial performance, with revenue increasing by 18.6 per cent year-on-year. “The revenue increase was driven by premium uptake and a series of product releases, including the introduction of promoted listings back in July and the recent roll-out of candidate profiles,” Mr Macdonald said.

Trade Me Property reported revenue growth of 6.0 per cent in a soft listings market. Mr Macdonald said the premium revenue from agents listing properties for sale on the site increased by 25.7 per cent year-on-year. “We’ve improved our branding for property professionals and now have almost 7000 agents signed up to our OneHub agent portal. We’ve also seen sessions on Trade Me Property increase by 6 per cent year-on-year, underpinned by the launch of rental estimates for 1.2 million properties in November 2017.”

Mr Macdonald said revenue in the General Items marketplace business was up slightly year-on-year. “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 5.0 per cent on last year.”

He said a lot of work was being done to stimulate stronger growth in the marketplace, with a focus on new goods. “The Afterpay instalment payment option launched in September 2017 is now available on over 60 per cent of new goods onsite, 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.”

Earlier this month, Trade Me announced changes to success fees for professional retailers, aimed at encouraging larger sellers to provide buyers with great shipping offers and price certainty. Mr Macdonald said overall listings were up 25 per cent year-on-year, driven by increased selection of new items.

In the Other category, the payments and advertising businesses both started F18 strongly, with revenue up 8 per cent and 7 per cent respectively.

People

There were several changes to the Trade Me Executive team in July 2017, following on from Annie Brown joining as the company’s first Chief People Officer in June. These changes saw Alan Clark (Head of Trade Me Motors) and Jeremy Wade (Head of Trade Me Jobs) join the Executive team, reflecting the scale and importance of these businesses.

Trent Mankelow was appointed as Trade Me’s inaugural Chief Customer Officer, having been Chief Product Officer since October 2014. And in September, Mark Rees joined the Executive team in a new Chief Product and Technology Officer role.

At Board level, Simon West was elected as an independent director at the Trade Me shareholder meeting in November 2017, having been appointed to the board in December 2016. Chairman David Kirk was also re-elected, along with director Joanna Perry.

Outlook

Looking ahead, Mr Macdonald reiterated the guidance for investors. “The first half of the F18 financial year has broadly tracked to our expectations. We reiterate our November 2017 guidance that we expect total revenue growth in F18 to be similar to that reported in F17, however the soft property listing market means there is some continued uncertainty.

“We’ll continue to invest at a rate slightly above revenue growth in F18 and we expect to deliver year-on-year EBITDA and operating NPAT growth in F18, albeit at lower growth rates than F17 due to this higher level of investment.

“Trade Me is a great business. We’re well-placed to convert on the opportunities in front of us and keep growing – both in our core businesses and through extending into new things. We’ll continue to work hard to capture these opportunities.”


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