Annual Report 2018

Chairman's report

Dear shareholders,

The net operating profit of Trade Me in F18 was $96.6m, a new record for the company and 3.9 per cent ahead of last year. Revenue increased by 6.6 per cent on the previous year. 

At Trade Me there are two major operating segments: our classified businesses and the general items marketplace. Our classified businesses are Trade Me Property, Trade Me Motors and Trade Me Jobs and our Trade Me Marketplace business is comprised of a trading venue for used goods and for new goods.

All of these businesses operate on the same technology platform and can be accessed via the same app, mobile site or website, but to understand Trade Me’s performance in F18 and likely performance in the future, it is necessary to look at the five segments - the three classifieds, used and new goods separately.

Our Classified businesses continue to grow strongly. All three verticals delivered double-digit revenue growth in F18.

Trade Me CEO Jon Macdonald discusses each segment later in this Annual Report, but I want to emphasise the important trends we see in each of them.

Our Classified businesses continue to grow strongly. All three verticals delivered double-digit revenue growth in F18. All of these businesses have some exposure to general market conditions, but are also the continuing beneficiaries of growth in digital classified advertising at the expense of print and other forms. We expect continued strong growth from the Classified group for years to come.

Our used goods marketplace is now mature. We have largely the same number of unique buyers and listers as last year but they are buying fewer used items, and more new. There are many reasons for this, including attractive pricing of new goods by sellers, a decline in the popularity of the auction model and some new competitors. We are working hard to continue to grow our used goods marketplace, but expect growth to remain slow. We may even see some small decline in the revenue from this part of the business in the future.

You will know that late in the year Jon Macdonald, our long-standing CEO, announced his retirement....Not many CEOs preside over a growth in value of NZ$1.2 billion during their tenure.

Our new goods marketplace continues to grow revenue at solid single-digit percentages, but we think we can do better. The team are working hard to improve the buying experience, to bolster additional services such as payments, logistics and credit options and working more closely with retailers on promotion plans. We think there is good upside in our new goods marketplace business if we continue to innovate and improve the experience. We will maintain a close watch on the return of this investment in those iniaitives. 

We achieve very high profit margins and cashflow from all of our businesses.

In addition to our final dividend of 10.5 cents per share, the board had decided to pay a special dividend of 22.0 cents per share in September too. We regularly review our capital structure and have determined that the best use of $100m of capital is to pay a special dividend to shareholders. We have consistently accumulated cash and reduced debt since we listed and are now in a position to make a distribution. After the distribution our gearing becomes similar to our Australian peers and we retain plenty of capacity to invest for growth. 

You will know that late in the year Jon Macdonald, our long-standing CEO, announced his resignation. Jon was one of the first handful of employees at Trade Me back in 2003, and he has been CEO of the company since 2008. Jon took on the role of CEO two years after the company was sold to Fairfax Media for NZ$750m. Your company is now worth around NZ$1.9 billion. Not many CEOs preside over a growth in value of NZ$1.2 billion during their tenure. Jon can feel very proud of his contribution to this company.

I thank Jon very much on your behalf for the wonderful job he has done over a long period of time and wish him all the very best in his next endeavours.

I thank Jon very much on your behalf for the wonderful job he has done over a long period of time and wish him all the very best in his next endeavours. Jon is not leaving until the end of the 2018 calendar year, which gives us good time to search for and find his replacement, and to say goodbye to him at the annual shareholder meeting.

I thank my fellow directors very much for their diligence and insight as Trade Me continues to grow and adapt in a changing environment.

Our meeting is again in Wellington, and this year will be held on Thursday 8 November. My fellow directors and I look forward to seeing you there.

Yours sincerely,

David Kirk
Chairman
Trade Me Group Limited