Trade Me posted record revenue as the company approaches a new phase in its history that will likely see it once again fall into offshore ownership.

The company posted a revenue result of $132.2m in the first half of 2019, up 7.3 per cent on last year.

Net profit fell to $44.4m in the six months ended December 31, from $46.4m a year earlier. Stripping out one-off transaction costs associated with the pending takeover, operating earnings were up 8.1 per cent to $50.2m.

Classified revenue was the standout, rising 12.9 per cent to $77.1m.

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Net debt increased $161m with $65m of cash on hand, driven up by the 22 cents per share (or $100m) special dividend paid in September 2018 which was funded via bank debt.

The half-year result arrives as a $2.56 billion buyout by UK private equity outfit Apax Partners is under way, which should see the auction site delist from the NZX mid-year, subject to Overseas Investment Office approval.

There are two elements of intrigue around the deal, neither of which is likely to be resolved today.

One is the concern, raised by Craigs Investment Partners analyst Stephen Ridgewell, that Apax will effectively pocket the full-year dividend.

The sale agreement gives the English company the power to veto the full-year profit payout.

Ridgewell's message to Trade Me shareholders: the $2.56b Apax offer isn't as good as it seems, because the UK bidder will likely either nix the full-year dividend or deduct it from the purchase price.

Trade Me chairman David Kirk said a dividend would have been beneficial to some shareholders but caused tax complications for others. Photo / File.
Trade Me chairman David Kirk said a dividend would have been beneficial to some shareholders but caused tax complications for others. Photo / File.

Today, Trade Me said it would pay no half-year dividend, with chairman David Kirk citing negative tax consequences for some shareholders. Forsyth Barr analyst Matt Henry had forecast a dividend of 10 cents per share, which would have been up from 9.1 cents a year earlier. Post-result, Henry told the Herald, "Under the scheme of arrangement with Apax any dividend would lower the $6.45 price payable, so shareholders are largely indifferent if they are paid today or down the track."

The other intrigue is the rumour that Trade Me met with Nine-owned Fairfax in December over a possible merger between Trade Me and the Australian publisher's New Zealand division, now known as Stuff.

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An account by the Fairfax-owned AFR says Apax was kept in the loop and is pushing discussions along over a possible Trade Me-Stuff hookup.

Nine bought Fairfax last year in an A$1.6 billion deal. The media group has been open about its plan to sell a number of Fairfax assets by June, including Stuff. But it has not named any suitors.

One competition lawyer, who did not want to be named, said a Trade Me-Stuff deal could run into a number of the same issues as the attempted merger between Herald publisher NZME and Stuff, which was blocked by the Commerce Commission, then courts in subsequent appeals.

The commission argued a NZME-Stuff tie-up would have a negative effect on journalism (the pair countered it was necessary to meet global threats and strengthen reporting). That could put a Trade Me-Stuff deal in the firing line if reports are correct that probable Trade Me owner Apax is only interested in Stuff's digital assets and could shutter or sell the group's newspapers such as Sunday Star Times, The Dominion Post and Waikato Times.

A rival narrative has TVNZ in line to buy Stuff, something the state broadcaster's CEO has refused to rule out.

If a Trade Me-Stuff deal does eventuate, it will be something of a back-to-the-future scenario. Fairfax bought the auction site from founder Sam Morgan in 2006 for $700m. The Australian publisher, in turn, floated Trade Me in late 2011 at a $1.07b valuation.

Hot and not areas in Trade Me's markeplace and digital classifed segments during the first-half. Image / Trade Me investor presentation.
Hot and not areas in Trade Me's markeplace and digital classifed segments during the first-half. Image / Trade Me investor presentation.

Trade Me shareholders are likely to receive a notice of a special meeting next month, where they will vote on whether to approve the deal. The notice will include an independent adviser's report assessing the deal and will outline the board's rationale for supporting the scheme.

Shares last traded at $6.37, a discount to the takeover offer, and have jumped from $5.10 before the overseas interest emerged in November.

A scheme of arrangement has a lower bar to get shareholders over the line, requiring 75 per cent support and at least half the company's votes cast, as opposed to the 90 per cent acceptance threshold needed in a formal takeover to enforce mop-up provisions. The High Court and the Overseas Investment Office also need to approve the transaction.

The Wellington-based company spent $5.8m on the upcoming transaction and an unsuccessful rival bid from private equity firm Hellman & Friedman, which knocked Trade Me's bottom line. That included $3m transaction fee for Goldman Sachs Australia, Trade Me's financial adviser, which stands to get another $7m on the implementation of the Apax deal.

Kirk said this morning that the deal was "progressing to plan".

Jon Macdonald (pictured) became Trade Me's second chief executive a decade ago following the departure of founder Sam Morgan. He will depart once the takeover process wraps up. Photo / Supplied.
Jon Macdonald (pictured) became Trade Me's second chief executive a decade ago following the departure of founder Sam Morgan. He will depart once the takeover process wraps up. Photo / Supplied.

Trade Me chief executive Jon Macdonald affirmed full-year earnings guidance for revenue and operating profit growth of 5-8 per cent, implying revenue of $262.9m-$270.4m and profit of $101.4m-$104.3m.

Macdonald announced his intention to resign in June last year, but the company did not find a replacement in the following months. In December, Macdonald said he would stay on until the sale process wrapped up.

With reporting by BusinessDesk