Trade Me hit by extra costs

Trade Me produced a weak result for the six months ended December, with increased costs the main reason for the disappointing figures, Craigs Investment Partners broker Chris Timms said yesterday.

The Trade Me Group reported an operating profit of $60.4 million for the period, up 2.1% on the previous corresponding period.

A range of consensus forecasts had the operating profit up around $63 million.

Mr Timms said although revenue was up 6.6% to $85.7 million, costs rose 19.1% to $25.2 million, ahead of expectations.

The reported profit was up 1.7% at $38 million.

The group was spending more money on its property offering, countering the move by some real estate companies to take their listings from Trade Me on to the industry's website and spending on alternative advertising. Also, the group had hired more people.

''Trade Me has had a good run lately but there are a couple of things going on, like the battle with real estate agents. The increase in spending is recognised in this period but the benefits will not appear until some period in the future,'' he said.

The group declared a dividend of 7.6 cents per share.

Trade Me chairman David Kirk said execution of the plans to reinvest in the business had gone well and the group would continue to ''invest assertively'' in the second half of the year.

As signalled at the full-year 2013 results, the group had embarked on a period of reinvestment that would affect short-term earnings growth but ensure the company's long-term growth and success.

''We are convinced this is the right approach for Trade Me and we believe investment now will result in stronger market positions and greater growth opportunities in the future,'' he said.

Forsyth Barr broker Suzanne Kinnaird said she expected a ''fairly messy'' and public disagreement, with Trade Me Property and Realestate.co.nz both increasing advertising.

''Longer term, we expect an arrangement to be made around property services. New goods still needs to prove itself but we believe there is the opportunity for Trade Me to generate more revenue from general items through its enhancements under development.''

Longer term, Trade Me could work through the period of reduced growth. However, the next 12 months were likely to be difficult with reduced cost revenue and increasing investment in the platform and other areas of operating costs, Ms Kinnaird said.

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