Trade Me
Half year results

 

31 December 2015

 

Jon Macdonald CEO
Jonathan Klouwens CFO

Highlights
Total revenue
8.9%

$105.6m

Expenses
18.6%

EBITDA*
4.1%

NPAT
0.3%

Dividend
1.3%

$38.3m

$67.3m

$38.5m

7.8cps

Revenue was up 9% year-on-year to another record - underpinned by strength in Classifieds (up 14% year-on-year) and
our Other segment (up 12% year-on-year). General Items marketplace also returned to revenue growth.
Marketplace gross merchandise sales (GMS) extended its positive momentum.
Trade Me Property demonstrated on-going stability and strength, with good yield and listing growth resulting in revenue
up 21% year-on-year.
Core product improvements yielded operational and financial benefits in Marketplace, Property, Motors and Advertising.
Expense growth declining in line with expectations following reinvestment in the business and headcount growth.
Outlook for H2 is for moderately greater year-on-year EBITDA and NPAT growth compared with the growth rates we have
recorded in the first half. We expect revenue growth in General Items to return and the reduction in our cost growth to
continue, tempered by the flow-through in amortisation to occur from capitalised development costs. The business is
demonstrating good momentum.
* pre associate loss

2

 Revenue: H1 growth of 8.9%
Half year revenue contribution ($m)

Consistent H1 (and full year) revenue
growth ($m)

Box size denotes relative revenue size
General Items segment is Marketplace
Classified segment is Motors, Property and Jobs
Other segment is Advertising, Life Direct and Other

3

 Operational highlights: current and ongoing growth
Property:

Motors:

Marketplace:

Stabilised and delivering strong
revenue growth and premium
uptake

Revenue and earnings growth
from improved sales channel

Gross merchandise sales (GMS)
at growth levels not seen for
five years

Property growth

Motors growth

GMS growth

4

 
a
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Dm
DI

 

Marketplace: GMS and revenue growth
KEY METRICS

MARKETING

Total GMS YoY +5.6%

Successful trials of marketing automation across Marketplace
(and Classifieds). Creates personalised communication and
offers. Very powerful tool to be scaled up in H2

Sold items +3.3% to 6.6m items (New items +8.1%)

Unique buyers increased 2.3% YoY (circa 50,000 buyers)

New goods GMS YoY +8.4%; Used +4.0%

Total take rate decreased to 8.1% - however expected to
increase slightly with the 1 Feb price change
Price change; simplified pricing with flat success fee of 7.9%,
free photos, and better seller experience (small yield increase)

PRODUCT
Shipping – beta release of a new shipping offering (refer image)
Deals and merchandising for sellers (“was/now” promo pricing)
launched in November generating $1.1m GMS in December
from 18k buyers

SUPPLY
Better range and products. Listings +23.2% YoY, driven by new
goods +27.7%
GMS from international suppliers $3m in Dec 2015 (+88% YoY)
Average sale price +2.3% to $61 (higher quality and large items)

GMS excludes Classifieds, commercial radio auctions and vehicles but
includes motors parts & accessories

6

 GMS growth is significant: 5.6% total & 8.4% new goods
GMS growth continues – revenue growth will follow as take rate changes have been made
YoY change

Jan
YoY
perf

12.5%

14%
12%
10%
8%
6%
4%
2%
0%

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
14 14 14 14 14 14 15 15 15 15 15 15 15 15 15 15 15 15 16 16 16

-2%
-4%
-6%

Used GMS

New GMS

Total GMS

-8%

Further volume growth opportunity ahead with simpler pricing, targeted communication and personalisation

GMS excludes Classifieds, commercial radio auctions and vehicles but
includes motors parts & accessories

7

  

GMS by category: how it's changing

. 2010 . 2015

 

Categories

1 Home 8 living 12 Music 8 instruments

2 Sports 13 Health 8 beauty

3 Motors parts 14 Baby gear

4 Business, farming 8 industry 15 Gaming

5 Building 8 renovation 16 Jewellery 8 watches

6 Clothing 8 Fashion 17 Pets 8 animals

7 Electronics 8 photography 18 Books

8 Computers 19 Crafts

9 Mobile phones 20 Travel, events 8 activities

10 Antiques 8 collectables 21 Art

11 Toys 8 models 22 Pottery 8 glass 0 
23 Movies 8W  

trade me 8

Trade Me Group Limited 

Property: listings growth and product improvement
H1 F16 FINANCIALS

Weekly sessions on the iOS Property app

Total revenue +21.3% YoY to $15.7m, directs +6.1% to $4.9m,
agents +29.7% to $10.8m

300,000

Agent For Sale listings +14.2% YoY, agent Rent listings +8.2%

200,000

Agent For Sale yield +16.5% YoY (premium +46.0%)

PRODUCT
Taken a 13% stake in homes.co.nz – property information and
data specialists

100,000

0
Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct
12 12 13 13 13 13 14 14 14 14 15 15 15 15

Free rating valuation and historical sales information released in
mobile first (data provided by homes.co.nz). Delivered very high
usage and engagement levels

AUDIENCE
Holding clear audience share lead on desktop, but experiencing
huge mobile growth. New TME Property app is now ranked
number 1 on total mobile downloads (combined iOS & Android)
Onsite engagement increasing through richer content – video,
floorplans, 3D walkthrough now make up circa 10% of listings

9

 Motors: Strong premium growth
Motors premium revenue growth strong

H1 F16 FINANCIALS
Revenue +9.7% YoY to $28.3m, dealers +28.9%, directs -3.2%,
Motorweb +8.9%

18%

8 0 0 ,0 0 0 .0 0

Premium Penetration
% (RHS)

7 0 0 ,0 0 0 .0 0

Some small dealers migrating from ‘direct’ transactions to dealer
channel (circa 7% listings)
Total listings growth of +5.0% YoY; Dealer numbers (subs) +8.0%

16%
14%
12%

6 0 0 ,0 0 0 .0 0

10%
5 0 0 ,0 0 0 .0 0

8%

$ Revenue

6%

4 0 0 ,0 0 0 .0 0

Dealer premiums +56.0% YoY

4%
3 0 0 ,0 0 0 .0 0

2%
0%

Listing numbers
Unique daily
browsers*

TM Motors

Nearest
competitor

Outperforming
the competition

72,942

29,930

2.4x

167,450

5,950

28.1x

Jan-16

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

Mar-14

Jan-14

Nov-13

Initiatives include consumer vehicle information reports, improved
search and listing attributes for bikes, relaunched social media, and
video products

Sep-13

PRODUCT & MARKETING

Jul-13

2 0 0 ,0 0 0 .0 0

* Nielsen: average daily UBs (excludes mobile)

10

 Jobs: growth in the face of economic headwinds
H1 F16 FINANCIALS

PRODUCT

Pleasing revenue growth +15.4% YoY in the face of a
slowing economy

Feature penetration increased from 13% to 16% due to better
product improvement including branding options

Listings flat; growth in direct listings with slight
contraction via bulk buyers (economy related)

Video options introduced for all listings

Yield growth +15.5% driven by directs +7.1% and bulk
buyers +17.5%

Job application conversion ratio improved from 4.4% to 5.3% YoY
post launch of new listing details page

MARKETING
Successful TGIM (Thank God It’s Monday) campaign –
drove direct listings growth +8.4% during period
‘Application sent/job’ were +14% due to the campaign
(product improvements also drove some of this)
Market share index has remained at circa 90% of the
listings number of our main competitor

11

 Advertising: data’s pivotal role in future growth
PERFORMANCE
Display revenue +8.3% YoY
Desktop impressions continue to decline with the shift to
mobile, but the yield increases are more than offsetting this.
Mobile native ads in place for Android and just released for
iOS
Business Partnership revenue transitioning out of ads (circa
$0.4m YoY) as we bring more partnership products inhouse (e.g. Insurance)

Using data – highly targeted advertising via Personas
We are replacing historical 3rd party data used to enhance
audiences with our own audience personas derived directly
from our 1st party data. These have created new opportunities
for members to receive relevant ads across the site.
70+ Personas (for example ‘Boy Racers’ and ‘Making an
Impression’) are built from demographic and intent filters in
real-time from member information and browser activity.

DATA and PROGRAMMATIC
Data and programmatic underpinning significant increases
in eCPMs – a key competitive advantage. Provides the
platform for market leadership
A new inventory source; started trading data (independently
to banner inventory). Demand is strong but nascent – a
market ramp ahead
Ensured privacy protection for our members via opt out

12

 Financial Services: future growth options

LIFEDIRECT
Revenue growth +22%; EBITDA growth
+119%
Strong consumer proposition
Beginning targeted personalised
marketing

TRADE ME INSURANCE
Embryonic business
Established brand and processes. Brand
awareness (>30%) and consideration
scores (circa 10%) encouraging after
only 3 months of launching
Yet to begin leveraging our competitive
advantage; trials underway

HARMONEY
Harmoney wrote loans of $190m in its first
18 months (greater than expectation)
Sound consumer proposition
January capital raise of $8.5m at $100m
valuation (TME entry was at $42m)
Contributes $1.0m loss to TME (2.6%pts
off NPAT growth)

13

 Financials

 

Summary financial performance: on track results
NZD $000s

H1 F16

H1 F15

General Items

32,183

32,144

39

0.1%

Classifieds

54,298

47,660

6,638

13.9%

Other

19,090

17,095

1,995

11.7%

105,571

96,899

8,672

8.9%

6,561

5,336

1,225

23.0%

Employee benefit expense

16,329

14,533

1,796

12.4%

Web infrastructure expense

2,695

2,019

676

33.5%

Promotion expense

5,622

4,085

1,537

37.6%

Other expenses

7,066

6,295

771

12.2%

Total expenses

38,273

32,268

6,005

18.6%

EBITDA before associates

67,298

64,631

2,667

4.1%

1,045

-

1,045

-

66,253

64,631

1,622

2.5%

9,219

7,435

1,784

24.0%

57,034

57,196

(162)

(0.3%)

Net finance costs

2,984

3,716

(732)

(19.7%)

Profit before tax

54,050

53,480

570

1.1%

Income tax expense

15,508

15,040

468

3.1%

Net profit

38,542

38,440

102

0.3%

9.71

9.69

0.02

0.2%

7.8

7.7

0.1

1.3%

Total revenue
Cost of sales

Associate losses
EBITDA
Depreciation and amortisation
EBIT

Earnings per share
Dividend (cents per share)

VARIANCE
Revenue growth driven by Classifieds
Rate of expense growth decreasing (18.6%
vs 27.9% in H1 F15)
Equity accounted losses of associates
reduce net profit growth by 2.7%pts
Depreciation and amortisation continues to
increase following growth in capitalised
development
Fair value adjustment from hedges
increases net profit growth by 1.8%pts
Effective tax rate increases due to associate
losses being non-deductible
Fully imputed dividend 7.8cps,
supplementary dividend 1.3765cps,
record date 11 March 2016,
payment date 22 March 2016

15

 Expense growth decreasing in line with guidance
NZD $000s
Cost of Sales

H1 F16 H1 F15

VARIANCE

1.2

6,561

5,336

1,225

23.0%

Employee benefit exp

16,329

14,533

1,796

12.4%

Web infrastructure exp

2,695

2,019

676

33.5%

(+27.9%
YoY)

$32.3 0.6

Promotion expense

5,622

4,085

1,537

37.6%

Other expenses

7,066

6,295

771

12.2%

38,273

32,268

6,005

18.6%

Total

(+18.6%
YoY)

Cause of change in H1 Expenses
$m

1.5

$38.3

0.7

1.5
0.5

$25.2
*

* Includes $300k of people cost

Rate of expense growth is decreasing year-on-year (+18.6% vs +27.9%)
Promotion expense growth driven by Property, LifeDirect and Trade Me Insurance launch advertising
Cost of sales growth (+$1.2m) driven by merchant fees from increased sales using PayNow ($0.3m), growth in MotorWeb data costs as
revenue grows ($0.3m) and a full six months of Paystation costs ($0.2m)
Web infrastructure increase is partially driven by some F15 flow through costs, but largely due to new licenses we have purchased
People costs driven by headcount growth; +53 FTEs in H1 F15 vs +37 FTEs in H1 F16 – growth rates now significantly lower and slowing

16

 Financials: Balance sheet highlights
Strong cash position, with $47m at 31 December 2015. Net debt of $119m
Lots of covenant headroom
Completed the refinancing of our debt facility. Key terms remain the same, except the facility has been split into two equal tranches
maturing in December 2018 and December 2019
Total H1 F16 capex was $11.4m, most of which is capitalised development. Increasing capitalised development is flowing through to
increased amortisation
Full year F16 capex is still on track to be approximately $25m; D&A will be approximately $19m

Depreciation & Amortisation NZD $m F13-H1 F16

Capex NZD $m F13-H1 F16

$15.3m

$26.0m
$12.3m

$20.6m
12.2
$12.2m

0.7

$8.7m
$11.4m

13.5

2.2
5.2

8.4

4.8

5.4

6.4

F13

F14

F15

Core

Cap-dev

9.2
2.2
H1 F16

Acquisitions

5.2

6.2
6.0

3.6
2.8

3.3

3.3

4.1

F13

F14

F15

Cap-dev

2.0
4.8

1.8

Core

$9.2m

2.4
H1 F16

Acquisitions
17

  
 
    

Outlook

1

Outlook
Our H1 results were in line with the outlook we provided at our last results announcement and our AGM.
We expect to deliver moderately greater year-on-year EBITDA and NPAT growth compared with the year-on-year EBITDA
and NPAT growth we recorded in the first half. This is consistent with the intentions we’ve held for investment in the
business, but also ensuring we show a return on that investment.
We expect to see revenue growth in General Items return from the sustained increase in gross sales, coupled with our
recent pricing changes. This is despite the flow through impact of lower year-on-year yield that we have sacrificed for
improved user experience.
Expense growth will continue to slow in percentage terms. Our rate of hiring has decreased, however the year-on-year
impact of those hires is still flowing through. We also expect to spend less on promotions in H2 F16. The amortisation of
capitalised development costs from those hires will continue to increase in H2 F16 and F17.
The business is demonstrating good momentum. We are well positioned to defend and grow our existing core business,
and to convert on new opportunities.

19

 Questions?