Investor Relations

TME F18 Results: Record revenue and profit, a special dividend and a small investment in Sharesies

Wednesday, August 22, 2018 12:00 AM

Highlights:

  • Revenue of $250.4m, up 6.6% YoY

  • EBITDA of $163.8m, up 6.2% YoY

  • NPAT of $96.6m, up 3.9% YoY1

  • Earnings per share for F18 up 2.4% YoY to 24.33 cents

  • Fully imputed final dividend of 10.5 cps will be paid on 18 September (full year dividend of 19.6 cps)

  • Special dividend of 22.0 cps will also be paid on 18 September

  • Revenue, EBITDA and net profit growth in line with guidance

  • Small investment in Wellington growth company Sharesies as part of our ecosystem strategy

  • Classified businesses continue double-digit revenue growth

Online marketplace and classified advertising business Trade Me Group Ltd (“Trade Me”) released its full year financial results for the 12 months to 30 June 2018 this morning.

Trade Me chairman David Kirk said F18 had seen another record result with net operating profit up 3.9 per cent on last year to $96.6m, while operating EBITDA and revenue were up 6.2 and 6.6 per cent respectively.

“We’re proud to have delivered another record result for our investors. It’s great to see our Classifieds businesses continue to grow strongly this year, and it was pleasing to see solid growth in new goods in our General Items marketplace too.”

Trade Me CEO Jon Macdonald said Trade Me was operating in a competitive environment, but continued to deliver growth and good returns for investors. “We’re well placed to meet the challenges in front of us and continue to grow, and we see a lot of opportunity. We’re also pleased to deliver a result in line with what we forecast at the end of F17 and reiterated in March 2018.”

The numbers

Trade Me’s revenue reached a record $250.4m in F18, up 6.6 per cent on $234.9m in F17. In the second half of F18, revenue grew by 6.4 per cent year-on-year.

Earnings per share increased again to 24.33 cents, up from 23.76 cents last year and a fully imputed final dividend of 10.5 cents per share will be paid on 18 September 2018. In March 2018, Trade Me paid investors an interim dividend of 9.1 cents per share.

Mr Kirk said the board had decided to pay a special dividend of 22.0 cents per share in September too. “We regularly review our capital structure and have determined that the best use of $100m of capital is to pay a special dividend to shareholders. We have consistently accumulated cash and reduced debt since we listed and are now in a position to make a distribution. After the distribution our gearing becomes similar to our Australian peers and we retain plenty of capacity to invest for growth.”

Total expense growth in F18 was 7.1 per cent year-on-year, up slightly on 5.7 per cent growth in F17, but well down on F16 and F15.   

Performance by segment

Mr Macdonald said he was “delighted” to see double-digit growth from Trade Me’s classified businesses. “Trade Me Motors, Trade Me Property and Trade Me Jobs are still growing strongly, with combined revenue growth of 12.3 per cent year-on-year to $141.0m. Their success was largely due to strong growth in depth revenue derived from features and premiums.”

Trade Me’s largest business, Trade Me Motors, was the star performer reporting a 12.7 per cent year-on-year increase in revenue and continues to be the market leader in the automotive category. “The Motors result was underpinned by a 41.0 per cent year-on-year revenue increase from dealer depth products.

“Our employment business, Trade Me Jobs, had another great year with revenue up 14.1 per cent year-on-year. The team have been doing a fantastic job, coupled with a strong New Zealand employment market. They’ve also released Job Profiles this year, aimed at giving recruiters access to passive job hunters.

“We will continue to grow Profiles in F19, and the early signs are very encouraging with over 100,000 profiles live now and good feedback from our recruiter clients.”

Trade Me Property reported revenue growth of 10.2 per cent year-on-year, in a tougher market and led by strong demand for depth products from ‘for sale’ real estate agencies which saw revenue up 38.2 per cent on F17.

“Softness in for sale listings remains a challenge but the Trade Me Property team have done a great job releasing a new Premium Listing depth product which gives agents and vendors greater visibility onsite.

“We expect to see this grow further in F19,” said Mr Macdonald.

He said it was pleasing to see revenue up 1.3 per cent year-on-year in the General Items marketplace. “The focus has been on making buying and selling as easy as possible. For example we released the ‘buy now, pay later’ payment product Afterpay to new goods sellers and buyers in September last year, and it’s now available on over three million listings onsite.

“Early in 2018 we also changed our success fee model for professional sellers to encourage free shipping. Meanwhile our used goods business is concentrating on promotions and smarter pricing to stimulate sales growth.”

In the Other segment, comprising Trade Me’s display advertising, travel, dating, insurance and payments businesses, revenue was down 2.3 per cent year-on-year, mostly due to the sale of some smaller interests at the end of 2017. There was good growth in payments, with revenue up 6.0 per cent year-on-year.

People

The number of staff at Trade Me has grown from 546 (514 FTEs) as at 30 June 2017 to 594 (561 FTEs) as at 30 June 2018.

“We’re proud to have our HQ in Wellington with the majority of our team based in the capital, but our Auckland office has approximately 150 people now. As we signalled last year, our Christchurch team has more than doubled to 28 people and will move into new premises in F19.”

There have been two changes to the Trade Me Executive team, with Chief Product and Technology Officer Mark Rees returning to Xero in mid-August, replaced by Simon Young. “Simon has been with Trade Me for seven years leading large product and development teams, and we’re rapt to be making a strong promotion from within the company. I know he’ll make an excellent addition to our Executive team.

“I’d also like to thank Mark for his contribution in the time he has been with us. Under his watch, we’ve seen great improvements in our data capabilities, product development and infrastructure.”

Mr Macdonald said the other change was his upcoming departure in December after 15 years with Trade Me. “I’ve spent over a decade as the CEO of Trade Me and I felt in June that it was time for me to pass the baton.

“It’s been a pleasure working with so many passionate and talented people. I’m very proud of the business we’ve built together. Trade Me has a long and bright future, with more to do than ever, and now is a good time for someone with fresh eyes and a full tank of gas to take over.”

Governance

There were no changes to the Trade Me board in F18, but Simon West was elected by shareholders at the Annual Shareholder Meeting in November 2017 and David Kirk and Joanna Perry were re-elected.

Investments and divestments

Mr Macdonald said Trade Me was always looking out for opportunities to invest in line with its vision to make life better for Kiwis through online experiences they love.

“We want to keep expanding our Kiwi ecosystem, and we’ll be pursuing opportunities to increase Trade Me’s stickiness and help us keep growing.

“In that spirit, we’re hugely excited today to announce a small investment in Wellington growth company Sharesies. We’ve got to know the team there over the last few months, and think they have enormous potential.

“We like their ambition of giving someone with $5 the same investment opportunities as someone with $500,000, and we think that making investing more consumer-friendly can do great things for New Zealand while opening up big revenue pools. This is also another step in us building out a vibrant New Zealand online ecosystem that ensures our growth in the long term.”

One opportunity that did not work out was a proposed acquisition of Christchurch-based dealer platform, Motorcentral. “We were disappointed the Commerce Commission declined our bid to acquire Motorcentral, with a prolonged ten-month process. However we’ve since signed a commercial agreement with Motorcentral and we’ll work closely with them to provide greater value to our dealer customers.”

Outlook

Mr Macdonald said Trade Me remained a “fantastic business” and that it had been “an honour” to have led the company for the past decade. “Thank you for the support you’ve shown and your faith in us. This company will thrive in the coming years.

“We are well-placed to execute on our strategic priorities - strengthening our core proposition, expanding our offer to extend our existing businesses, and growing a vibrant NZ online ecosystem.

“In F19 we expect total revenue growth of between 5 - 8% over F18.  We also expect operating profit after tax to grow at a similar rate in percentage terms.”  

These expectations are contingent on wider economic conditions, including employer and consumer sentiment, and real estate market volumes.

-ends-

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