Steady profit for Trade Me, staff to grow
Trade Me expects to take on nearly 100 extra staff this financial year after increasing its headcount by 54 to 333 in the year to June.
The online giant today reported a 1.9 per cent rise in its net profit to $80.1 million and forecast another year of "subdued" earnings growth as higher expenses continued to consume extra revenues from jobs, vehicle and property listings.
Chief executive Jon Macdonald expected the company would return to stronger profit growth in the year starting next July "and beyond".
About two-thirds of the 94 recruits it hopes to hire this year will be in technology roles.
Macdonald said the hiring would be in Auckland, Wellington and Christchurch but would happen only if Trade Me could find suitable candidates and the business performed as expected this year.
"Finding the right people in the New Zealand labour market isn't entirely straightforward."
The improvements Trade Me hoped to deliver through its hiring blitz would be "across the board" and more than just incremental, Macdonald said.
He did not want to spell them all out because it was not in Trade Me's interests to flag them too far in advance.
"In each area of the business we can point to additional utility we can provide that will be genuinely useful to people," he said.
One focus would be continuing to improve the way Trade Me's services worked on smartphones.
For the first time in July, more than half of Trade Me's visits came from apps on mobile devices such as smartphones and tablets, rather than from web browsers on desktop and laptop computers.
Craigs Investment Partners analyst Stephen Ridgewell believed the technology investments Trade Me was making were necessary and said its property business in particular was understaffed and had too few account managers.
But he said Trade Me's capital expenditure forecast for this year was higher than expected, and a year was a while to wait to see whether its profit growth would pick up.
Trade Me's revenues in the year to June climbed 9.7 per cent to $180.1m and it forecast revenues of about $200m this financial year.
But Macdonald said it was a "two-speed business".
Revenue from its core "general items" business, which includes second-hand auctions, slipped 1 per cent to $64.8m.
"The restoration of growth to that business is taking longer than we would like," Macdonald said during a call to analysts.
Revenue from Trade Me's jobs, motors and property classifieds businesses grew 23 per cent to $85.6m.
There was also a 69 per cent rise in the number of policies issued by its online health and life insurance business, LifeDirect, which Trade Me acquired last September.
Trade Me's operating profit rose 4 per cent, and chief financial officer Jonathan Klouwens forecast a similar "subdued" increase this year.
Some of that gain would be eaten up by an extra $1m in interests costs, meaning there would be only a modest increase in net profit, he said.
Trade Me was forced to back down on its attempt to switch real estate agents to a new pay-per-listing fee structure last month after agents began switching their advertisements to rival website realestate.co.nz, which is owned by estate agents.
Trade Me Property nevertheless achieved a 12 per cent increase in revenue, thanks to its higher fees.
Trade Me Motors increased its revenues 29 per cent, though about half of that gain was because of its $19.5m purchase of Motorweb, which sells information and reports about vehicles to finance companies, insurers, car dealers and private buyers in New Zealand and Australia.
Revenue from Trade Me Jobs rose 26.4 per cent.
Its main rival in the online job listings market, Australia's Seek, today reported a 22 per cent increase in its annual revenues to A$756m. Seek did not separately break out its New Zealand results.
Macdonald said the purchase of Motorweb and LifeDirect had proved positive for Trade Me, so more acquisitions were possible.
Trade Me shares were up 0.9 per cent at $3.55 in afternoon trading after initially dipping 2 per cent following the release of the annual result.