Trade Me returns to profit, but heavy debt load weighs

Trade Me chief executive Anders Skoe.

Trade Me has had a comeback result for its 2023 financial year after a 2022 loss and heavy red ink and staff cuts during the peak of the pandemic.

The online marketplace – these days owned by private equity firm Apax, registered in low-tax Guernsey – made a $4.7 million net profit for the 12 months to June 30 versus a $2.3m net loss in FY2022.

Earnings before interest, tax, fair value and foreign exchange movements were $33.6m from a year ago loss of $2.6m.

Revenue increased from $327.0m to $337.8m.

The uptick came from classified ads (for cars, houses, and jobs), where revenue increased from $225.6m to $247.3m.

Marketplace revenue - which includes used items, an area where Trade Me faces emerging competition from Facebook Marketplace, and growing concerns from consumers about scams on both platforms - dropped from $89.7m to $81.4m.

A total of $5.4m was paid in income tax vs last year’s $73,000, with $5.6m in non-expiring tax losses carried forward.

The debt load then and now

In 2018, Trade Me made a net profit of $96.6m and EBITDA of $164.4m on revenue of $250.4m. Debt stood at $135.6m.

Apax bought Trade Me in early 2019, paying $2.56 billion to take the ASX-listed firm private, leveraging the deal with debt that was added to the Sam Morgan-founded company’s books. The following year’s accounts revealed interest-bearing debt totalling $1.1b.

It was steady in FY2021 but in the FY2022 accounts, interest-bearing debt jumped to $1.61b as $393.4m went to a related-party loan.

For FY2023, interest-bearing debt was $1.62b.

Finance costs increased from $125.8m in FY2022 to $151.9m.

A rumour that Apax planned to return Trade Me to the ASX in 2022 with a $3b float came to nothing.

In March this year, the Herald heard from two separate sources that the European owner was weighing options, including a trade sale, a sale to another private equity player or a full or partial ASX or dual ASX-NZX listing in 2024.

The results also noted that Trade Me bought 51 per cent of Auto Grab in June this year for an undisclosed sum, expanding its market data business. Auto Grab tracks used car pricing and uses algorithms to predict future pricing trends.

The results also noted Trade Me’s 13.46 per cent stake in Sharesies, bought for $4m in 2018.

“Significant influence is held over Sharesies through the Group [Trade Me having the ability to appoint a member to the Sharesies board of directors]. However, at this time the Group has not exercised this right.”

Trade Me declined to comment.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.