What: New Zealand's largest online listings and auction company, Trade Me Group Ltd (ASX: TME), on Wednesday released its earnings report for the 6 months to December 31 2014. At the time of writing, Trade Me shares were 1.4% higher versus a 0.3% rise in the S&P/ASX 200 Index (INDEXASX: XJO).
So What: Trade Me reported a 13% jump in revenue to $96.9 million, but only a 1% rise in net profit to $38.4 million. Before the announcement, the average analyst forecast was for full-year net profit after tax of $80.8 million, while some analysts have predicted as low as $72 million.
Investors were immediately drawn to the small improvement in net profit compared to revenues. Trade Me's management team noted that investment had increased to position the group for future growth, resulting in a 28% rise in expenses to $32.3 million.
CEO Jon Macdonald said: "We're continuing to invest in people, product development and marketing, as well as ramping up our sales and account management capability… We are convinced this is the right approach and believe that investment now will result in stronger market positions and great growth opportunities for Trade Me in the future."
What Now: Investors seemed satisfied with the result, pushing the share price up immediately after the results were released. Trade Me has a near monopoly in the New Zealand online classifieds market, eclipsing even eBay in the country. The website allows users to buy and sell goods like property or cars, book holidays, or even find a partner using its dating service.
The investment in a further 69 staff, taking the total number to 424, will result in meaningfully higher full-year expenses versus a low-double digit revenue increase.
Trade Me announced a 0.1 cent per share dividend increase to 7.7 cents per share. This was in line with the lower estimates of analysts and correlates to a dividend yield of 4.4% at 0% franking.
