Trade Me shares dip after earnings on 'muted' outlook

Wednesday 22nd August 2012

Shares of Trade Me, the online auction site spun off by Fairfax Media in December, dropped after its inaugural results as a listed company showed annual sales growth lagged behind estimates and it gave "muted" comments about the outlook for trading.

The stock fell 2.5 percent to $3.87, declining from the highest level in more than two months after the Wellington-based company said full-year profit rose 8.4 percent to $75.6 million and sales gained 13.8 percent to $142 million. Analysts had expected profit of $70 million on revenue of $146 million.

In the short term, the New Zealand economy would remain "fragile" though Trade Me is "confident about the prospects of our business and its foundations" in the longer term, chief executive Jon Macdonald said. The shares have climbed 33 percent from their NZX debut in December.

"If anything the result only met expectations - revenue growth looked a fraction lighter than expected," said Matthew Goodson, portfolio manager at BT Funds Management. "When you are dealing with a growth story you need strong growth - some of the outlook comments were also slightly muted."

Shares of Fairfax Media, the Australian group which still owns 51 percent of Trade Me, fell 1.7 percent to 56.5 Australian cents on the ASX and has shed 22 percent this year. The media company sold down its holding while loading the subsidiary up with debt to help support its less profitable publishing assets.

The online auction site will pay a dividend of 7.8 cents per share in Sept. 25.

Trade Me's prospectus forecasts revenue of $78.9 million for the six months ending Dec. 31, generating profit in the half of $34.8 million and the company says it remains "committed to delivering" on those forecasts.

Sales in the year just reported reflected a "strong performance" in revenue from the sale of general items through the website, led by an 8 percent increase in trading via mobile phones after the development of smartphone applications across the company's individual businesses, the company said today.

"We will continue to invest a bit in this area," Macdonald said on a conference call. "We think it's an investment well spent - we have seen android activity pick up after the release of our app." Trade Me is also looking at mobile advertising with a pack for the iPad, he said.

The company's classified business - motors, property and jobs beat its guidance following the acquisition of vehicle listing aggregator AutoBase.

Separately today, Trade Me announced the acquisition of cloud-based inventory management tool Tradevine. It will provide users with a dashboard to manage sales, inventory and listing. That follows April's venture with e-commerce software company ChannelAdvisor in a deal that will let retailers from around the world list their products on Trade Me in time for Christmas.

"We see it as another piece of the puzzle to provide an effective marketplace," Macdonald said. "It will help overall new good growth."

The company's Treat Me venture came about $1 million below an already bullish forecast, he said. Group buying was "a young and uncertain industry, but one that still has potential."

BusinessDesk.co.nz

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