Annual Report 2017

Business Update

The year to 30 June 2017 has been another one of excellent progress for Trade Me. We are very pleased to deliver another strong result to our 8,827 shareholders, and we’re proud this is consistent with our guidance to you over the year.

As we noted at our interim announcement in February, we completed a successful multi-year period of accelerated reinvestment in people, product development, marketing and sales to set Trade Me up for success over the medium to long term.

The company is going well. We have delivered revenue and profit growth to our investors, and have demonstrated our continued ability to keep costs within our forecasts.

The numbers

In F17, Trade Me’s revenue continued to grow strongly to a new record of $234.9m, up 7.7 per cent on F17’s $218.0m. In the second half of F17, revenue grew by 6.7 per cent year-on-year.

Across F17, we’ve also seen the rate of our expense growth (including cost of sales) continue to decline. Expenses grew by just 5.7 per cent year-on-year, down significantly on the 17.8 and 25.5 per cent growth in F16 and F15 respectively. We have been careful to target our investment in line with our strategy.

Our EBITDA for F17 was $155.7m, up 10.8 per cent year-on-year, a solid improvement on last year’s year-on-year growth of 4.5 per cent. Excluding the losses from our stake in peer-to-peer lending start-up Harmoney, EBITDA was up 9.8 per cent year-on-year (compared with 5.1 per cent YoY in F16).

Trade Me’s net operating profit after tax was up 12.0 per cent year-on-year to $93.0m, well ahead of last year’s net operating profit of $83.0m (which in turn was up 3.5 per cent on F15). The investment we’ve made over the past few years has begun to come to fruition.

Earnings per share for F17 was 23.76 cents, up from 18.87 cents a year ago. A fully imputed final dividend of 10.0 cents per share will be paid on 19 September 2017. This follows on from the fully imputed interim dividend of 8.5 cents per share paid on 21 March 2017.

Operating performance

We’re rapt to see sustained growth in the General Items marketplace business.

We’re rapt to see sustained growth in the General Items marketplace business. Revenue was up 7.1 per cent year-on year.

Revenue was up 7.1 per cent year-on-year, following on from revenue growth of 3.5 per cent between F15 and F16.

Over the year we’ve introduced Buyer Protection and Seller Protection, both of which are aimed at enhancing trust in trading onsite. We’ve also been focused on making buying and selling easier. For example, we’ve started suggesting categories and start prices to sellers when they list, and recently completed an integration with a company called Magento to make it easier for sellers using their products to pipe their listings onto Trade Me.

Our ‘Book a courier’ service is going from strength-to-strength and has recently surpassed 500,000 bookings. We’re excited about the imminent arrival of Afterpay onsite, an interest-free deferred payment product that has been very popular in its home base of Australia.

Our 'Book a courier' service is going from strength-to-strength and has recently surpassed 500,000 bookings.

The Classifieds continued to enjoy success. Overall revenue across the three businesses was up 11.3 per cent year-on-year to $125.5m, with stronger growth in the second half of the financial year. We maintained a focus on generating premium revenue and improving the value our products provide to our customers.

The Classifieds continued to enjoy success. Overall revenue across the three businesses was up 11.3 per cent year-on-year to $125.5m, with stronger growth in the second half of the financial year. We maintained a focus on generating premium revenue and improving the value our products provide to our customers.

Trade Me Jobs has continued to perform strongly with revenue increasing by 25.0 per cent year-on-year. The team has been doing an excellent job, bolstered by the tailwinds of the strong New Zealand employment market, and a big effort improving our Apple (iOS) and Android mobile apps. The revenue lift was driven by 58.5 per cent year-on-year growth in premium products.

Trade Me Motors, the market leader and our largest classified vertical, reported a revenue increase of 8.2 per cent year-on-year. Strong dealer premium revenue growth has continued across F17, up 26.8 per cent year-on-year. This has been driven by a strong sales effort, new premium products and some price changes to increase yield and volume. MotorWeb has also been doing well in Australia.

Trade Me Property reported revenue growth of 7.3 per cent year-on-year. ‘For sale’ listing volumes remain challenging, in a tight property market. Revenue derived from premium products sold to our agency clients was up 32.4 per cent year-on-year, helped by the launch of our new Premium carousel. Property Insights, our tool that provides free property information for more than 1.6m New Zealand residential properties, has proven very popular. More recently we have launched an agent directory, showcasing agents’ talents and providing vendors with a tailored agent recommendation.

In the Other category comprising our advertising, travel, dating, insurance and payments businesses, revenue was down 1.4 per cent year-on-year. However we saw revenue in our Payments business (comprising Paystation and Pay Now) increase by 18.5 per cent year-on-year. 

Investments and divestments

We continue to look for opportunities to invest and divest in line with our strategy.

We sold our accommodation website Travelbug (launched in 2007) and online booking engine BookIt (acquired in 2010) to a Hamilton company in December 2016. We found it increasingly difficult to justify prioritising time and money for these businesses given the other opportunities we have across Trade Me.

In July 2017 we announced our intention to acquire Christchurch-based Limelight Software, the operator of the cloud-based automotive dealer management platform Motorcentral. The Motorcentral platform includes inventory management, customer relationship management, advertising plug-ins and website functions. We are very excited about prospects for this business, and eagerly awaiting clearance from the Commerce Commission.

We closed down our escrow payment service SafeTrader in July 2017, 18 years after it was released. With ecommerce moving into the mainstream, and the introduction of Buyer Protection, Ping and Pay Now, the need for this service has diminished.

Brand

We are proud of our strong, trusted, well-known and much-loved brand. We were recently named in the top 10 most influential domestic New Zealand brands by Ipsos for the third consecutive year, and the ninth most loved NZ brand in research from Colmar Brunton in September 2016.

Over the past two years we have done a lot of work to better understand how Trade Me is perceived. We want to develop our brand, make it more consistent, and make sure we’re protecting and nurturing it as best we can.

Part of that work manifested in a new, refreshed Trade Me logo in July 2016, kicking off a wider visual refresh. Later that month we launched an advertising campaign highlighting Trade Me’s role as an inextricable part of life for New Zealanders.

We again led the way with our annual transparency report released in July 2017, disclosing how we deal with requests from Government agencies for Trade Me members’ data. To date, no other local Kiwi company has produced a transparency report.

People

The number of staff at Trade Me has grown from 509 (487 FTEs) as at 31 July 2016 to 543 (512 FTEs) as at 31 July 2017. The majority of staff are still based in our Wellington headquarters, but we now have more than 150 people in Auckland. We have big hiring plans for the South Island, and will be strengthening our presence in Christchurch considerably over the course of F18.

In April 2017, we announced Annie Brown would be joining our Exec team as our first Chief People Officer, joining us from BNZ where she was Director of People & Communications. Annie started at Trade Me in June.

We also announced several changes to the Exec team in July 2017, based on our strategic priorities, and to assist with our continued growth:

  • Alan Clark (Head of Trade Me Motors) and Jeremy Wade (Head of Trade Me Jobs) joined the Executive team, reflecting the scale and importance of these classifieds’ businesses;
  • Trent Mankelow was appointed as our inaugural Chief Customer Officer, moving into the new role having been Trade Me’s Chief Product Officer since October 2014; and
  • In September 2017 Mark Rees will start with us as our new Chief Product and Technology Officer. His role will be to deliver on tech and product priorities, bringing together our product development, data and technology platforms. Our current General Manager of Platform and Operations, Dave Wasley, is in an acting role until September.

Dave will be moving on from Trade Me later in the year, along with our Head of Commercial Jimmy McGee. Both have been fantastic contributors to Trade Me, and have been here for more than a decade apiece. I would like to thank both Dave and Jimmy for their huge and meaningful parts in shaping this company.