Online auction site lifts profit 5pc in flat economy

Online auction site Trade Me says it's trading according to its prospectus forecasts, despite what it called a "hesitant" recovery happening inside 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 at the figure for the former 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 earlier than expectations, and up 13.2 per cent at the previous year, while expenses were just below expectations.

The corporate 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 corporate was trading largely according to 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 latest Zealand economic conditions doesn't vary wildly from most economic commentators, this means that we're in for a slow and hesitant recovery," Macdonald told a conference call.

Macdonald said the expectancy was that New Zealand would remain a "challenging but passable trading environment" over the subsequent year.

"Despite this, the business is on the right 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 end 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 corporate had shown a capacity to extend its yields to compensate.

In its classified business, Trade Me property enjoyed 23 per cent revenue growth, primarily as a result of price changes and an increased uptake of premium products. On the market and rental volumes were both largely flat.

Trade Me's "motors" section had flat revenue growth of two 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 1st time, and again in December. Display advertising was down on expectations, which the corporate said was as a result of the distraction of Rugby World Cup, and a weak retail environment.

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

There has been also strong growth in mobile iPhone activity, with 300,000 application downloads so far.

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 have been issued at $2.70 eventually December's float, closed down 2c yesterday at $3.14.

- APNZ

By Jamie Gray | Email Jamie