Online auction site lifts profit 5pc in flat economy

Photo / APN

Online auction site Trade Me says it is trading in line with its prospectus forecasts, despite what it called a "hesitant" recovery taking place in the New Zealand economy.

Trade Me, which listed last December, said its first-half net profit came to $36.4 million, up 5 per cent on the figure for the previous corresponding period.

Its earnings before interest, tax, depreciation and amortisation came to $52 million, which was $1 million over its prospectus forecast. Revenue was slightly ahead of expectations, and up 13.2 per cent on the previous year, while expenses were slightly below expectations.

The company has forecast that its full-year earnings before interest and tax (ebit) this year will rise to $99.6 million and to $104.4 million next year.

Trade Me posted ebit of $93.5 million for the June 2011 year.

Chief executive Jon Macdonald said the company was trading largely in line with its prospectus forecasts, despite a flat economy that continued to be dogged by worries about Europe's sovereign debt crisis and delays in rebuilding activity in Christchurch after last year's major earthquake.

"Our assessment of New Zealand economic conditions does not vary wildly from most economic commentators, which means that we are in for a slow and hesitant recovery," Macdonald told a conference call.

Macdonald said the expectation was that New Zealand would remain a "challenging but passable trading environment" over the next 12 months.

"Despite this, the business is on track to deliver good revenue growth, and our earnings and dividend guidance remain unchanged from prospectus time."

Shane Solly, portfolio manager at Mint Asset Management, said the result was within expectations and it showed that Trade Me's core general business was holding up well.

One sharemarket analyst said volumes across Trade Me's business lines were flat, but that the company had shown a capacity to increase its yields to compensate.

In its classified business, Trade Me property enjoyed 23 per cent revenue growth, primarily due to price changes and an increased uptake of premium products. For sale and rental volumes were both largely flat.

Trade Me's "motors" section had flat revenue growth of 2 per cent, which was partly offset by a late yield increase from November price changes.

In other highlights, Trade Me said 500,000 new items were sold in November for the first time, and again in December. Display advertising was down on expectations, which the company said was due to the distraction of Rugby World Cup, and a weak retail environment.

Treat Me, the Trade Me offshoot aimed at providing customers with deals at restaurants, cinemas and other entertainment venues, continued to grow strongly.

There was also strong growth in mobile iPhone activity, with 300,000 application downloads to date.

Trade Me's initial public offer last year raised $363.5 million for its majority (66 per cent) owner, Australia's Fairfax Media.

Trade Me shares, which were issued at $2.70 at last December's float, closed down 2c yesterday at $3.14.