Investors unhappy with Trade Me result
Trade Me shares have slumped on disappointing profit growth.
A major marketing push has so far failed to persuade mums and dads to buy and sell more on Trade Me.
The company reported a modest 2 per cent rise in net profit to $38 million for the second half of 2013 as it "reinvested" in the business. Revenues rose 7 per cent to $85.7m while expenses jumped 19 per cent.
Trade Me upped its marketing spend from $1.3m to $3.2m in the second half of 2013 as it turned to television advertising to "remind" New Zealanders about the value of its marketplace.
But the company said revenue from "general items" traded through Trade Me fell 1.6 per cent to $32.6m compared with the same period in 2012. Without an accounting change the figure would have risen 1 per cent, though still not beating inflation.
The total value of general items sold through Trade Me rose 0.4 per cent.
Chief executive Jon Macdonald said Trade Me was optimistic about reviving growth in its core marketplace "but we do need to be patient and perseverant".
Trade Me's classifieds business fared better, posting a 19 per cent revenue rise to $38.6m as more businesses and consumers turned to the site to advertise jobs, property and cars.
But analysts have warned there is some uncertainty hanging over its property-listings business, after it began phasing-in changes to its fee structure in November.
Macdonald acknowledged the fee changes had been "disruptive" but said Trade Me believed they were in the best long-term interests of the company, buyers, sellers and the real estate industry.
The company is switching from charging real estate offices a flat-rate fee for all their listings to charging $159 plus GST per property.
The changes, which would increase Trade Me's margins, have prompted 18 real estate offices to withdraw their listings. They and other agents have suggested they may divert more listings to rival property site realestate.co.nz.
Chairman David Kirk said the company would continue to "invest assertively" for the remainder of the year.
Macdonald said there had been a "hefty increase in costs", but that had been necessary to position the business for the longer term and to accommodate a shift in the way people were accessing Trade Me. More than half of visits to the site were now from mobile devices such as smartphones and tablet computers, he said.
Staff numbers had risen by 50 to 350 over the six-month period.
Trade Me's interim results commentary made no mention of its drive to persuade major brands to sell new goods through its website. In 2012 it had presented that as perhaps its largest single growth opportunity.
Macdonald said Trade Me expected stronger profit growth over its 2015 financial year as it rolled out new services, improved margins in its classifieds businesses, and increased activity in its general items marketplace.
The company will pay a 7.6 cent-per-share dividend on March 25.
Trade Me's shares fell 8.6 per cent to an 18-month low of $3.70 this morning, well off the highs of more than $5 they achieved during May last year. By midafternoon, the shares had recovered slightly to be down 25c, or 6.2 per cent.