Revenue slows as Trade Me eyes future growth

Trade Me says execution on plans to reinvest in the business is going well, with the company continuing to “invest assertively” in the second half of the year.

Releasing its half-year financial results for the six months to 31 December 2013 this morning, Chairman David Kirk told investors the future is bright for the online marketplace.

“As we signalled at our F13 results and reiterated at our shareholder meeting in October, we’ve embarked on a period of reinvestment which will impact short-term earnings growth but ensure the company’s long-term growth and success,” he says.

“We are convinced this is the right approach for Trade Me and we believe investment now will result in stronger market positions and greater growth opportunities in the future.”

In January 2014, more than half of all visits to Trade Me came from mobile devices with CEO Jon Macdonald saying the strong growth of mobile was expected to continue apace.

We’ve put an enormous amount of work into making Trade Me a great experience across tablets and smartphones,” he says.

“We’re very happy with the progress we’ve made, but there’s still a lot to be done and we’ll continue to build our set of mobile products through 2014.

“Major eCommerce trends such as growth in mobile, the migration of advertising revenue to online and the continued growth in online retail are all in our favour.

“We expect stronger profit growth over the course of F15 as we roll out new products, phase in yield improvements in the Classifieds, and increase activity in our General Items marketplace.”

Classifieds…

Macdonald claims the Classifieds businesses had also performed well over the period, with revenue growth of 17% compared to the first half of F13. Trade Me Motors had been strengthened with the acquisition of MotorWeb, while Trade Me Jobs continued to gain market share against its main rival, Seek.

“We’re under way with a major change to how Trade Me Property charges real estate agents – this is disruptive, but we believe it is in the best interests of vendors, buyers, Trade Me and the real estate industry in the long term,” he adds.

Macdonald says sales in Trade Me’s General Items marketplace remained flat. “Our efforts to restore growth in this part of our business continue and we’re optimistic about reviving growth here – but we do need to be patient and perseverant,” he adds.

In the Other segment, revenue was up 2% year-on-year.

“However if we exclude the Treat Me divestment and the LifeDirect acquisition, revenue in this segment grew 10% compared to a year ago,” Macdonald adds.

Treat Me was divested in April 2013, while LifeDirect has been a revenue contributor since October 2013.

Expenses

Macdonald also reports that Trade Me’s expenses were up 19% year-on-year. “This is a hefty increase in costs, but it’s necessary for us to properly convert on the opportunities in front of us and position the business for the longer term,” he adds.

The main contributors to the increase were people costs and marketing. Including acquisitions, Trade Me’s headcount is now approximately 350 people, up from 300 people six months ago.

Acquisitions

The acquisition of LifeDirect, an online aggregator of life and health insurance, was finalised in September 2013.

Macdonald says the business had performed well and that Trade Me “continued to be excited” about its prospects.

“The model of providing consumers with a single venue to compare insurance products easily and efficiently is sound, and fits well with Trade Me’s core purpose,” he adds. “We can help LifeDirect grow.”

In December 2013 Trade Me acquired MotorWeb, an online business that packages and sells motor vehicle information and reports to finance companies, insurers, car dealers and the general public.

“MotorWeb is an excellent fit for us, given its great reputation and strong expertise in vehicle data,” Macdonald adds.

“There’s a lot of potential around broadening and deepening the products we provide for buyers and sellers of motor vehicles.”