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Listings slump leads to REA Group profit drop

A 12 per cent decline in national listings is one of the key factors behind REA Group posting a nine per cent drop in net profit in the year ended June 30.

Revealing their full financial results for the 2022-2023 financial year on Friday, the group noted that while revenue increased one per cent to $1,183 million, EBITDA, excluding associates, decreased three per cent to $651 million and net profit fell nine per cent to $372 million.

Reported net profit declined seven per cent to $356 million.

Nationally, residential listings fell 12 per cent, with Sydney listings dropping 18 per cent annually, while Melbourne’s fell 15 per cent.

The group’s revenue growth was underpinned by the strong performance of REA India, with revenue up 46 per cent year-on-year. 

Australian revenue dropped one per cent, with yield growth across the group’s advertising products being more than offset by the challenging market and very strong prior year comparatives.

“Our year-on-year performance reflects the comparatively very strong listings environment in 2022,” REA Group Chief Executive Officer Owen Wilson said.

“Despite the significantly lower listings in FY23, REA Group’s result demonstrates the strength and resilience of our business as customers continued to prioritise our premium products, leading platforms, and superior audience. 

“Our Indian business continued to deliver exceptional revenue growth and extended its leadership position as the No.1 property portal by audience in the Indian market.” 

The REA Group Board has determined to pay a final dividend of 83 cents per share fully franked. 

Together with the interim dividend announced in February, this represents a total dividend of 158 cents per share in respect of the 2023 financial year, down four per cent on the prior year.

Australia

In Australia, REA Group operates realestate.com.au and realcommercial.com.au, data and insights business, PropTrack, and mortgage broking business, Mortgage Choice. 

Core Australian revenue of $1,104 million was down one per cent in FY23.

Residential revenue decreased one per cent to $805 million. 

Buy revenue declined, with an 11 per cent increase in buy yield more than offset by the 12 per cent decrease in national listings. 

Rent revenue increased with a fiver per cent average price rise and growth in depth penetration, partly offset by a one per cent decline in listings due to a continuing lack of supply. 

Commercial and developer revenue increased four per cent to $142 million. 

Commercial revenue growth was driven by increased depth penetration and price rise.

Developer revenues were down modestly on the prior year, with an 18 per cent decline in project commencements partly offset by a price rise for Project Profiles from September 1. 

Media, data and other revenue was flat at $97 million. 

Financial Services operating revenue decreased 13 per cent year-on-year to $69 million, with slowing market activity resulting in a 13 per cent reduction in settlements. 

Despite the challenging environment, recruitment was strong with 183 new brokers added during the year. 

Net revenue declined by eight per cent to $61 million, negatively impacted by an $8 million valuation adjustment to expected future trail commission due to faster loan run-off rates in a high refinance market and a higher discount rate.

Realestate.com.au maintains leadership in Australian market

Mr Wilson said the group’s flagship site, realestate.com.au, maintained its leadership position in FY23.

“The size and quality of our audience provides REA customers with unrivalled value, and we further strengthened this proposition in FY23 with strong growth in the number of active members,” he said.

“The delivery of more personalised experiences is central to this growth and is rapidly increasingly the depth and frequency of audience engagement. 

“This demonstrates both the growing value consumers are placing on access to high quality information, and the underlying strength of demand in the property market.”

Key realestate.com.au highlights include:

  • 12.1 million people visited each month on average; or 61 per cent of Australia’s adult
    population
  • 120.6 million average monthly visits, 3.3 times more visits than the nearest competitor
    each month on average
  • 2.7 million average daily visitors, 3.6 times more visits than the nearest competitor each
    month on average
  • 18 per cent increase in active members
  • 51 per cent YoY increase in active property owner tracks
  • 2 million average monthly buyer enquiries.

CampaignAgent

In July, REA Group moved to 100 per cent ownership of CampaignAgent for cash consideration of $39 million, following the group’s initial acquisition of 27 per cent of the business in 2021. 

The vendor paid advertising and home preparation finance platform will be consolidated from July 2023. The acquisition is expected to be broadly EBITDA and EPS neutral in FY24.

India

REA India recorded revenue of $79m, which was up 46 per cent year-on-year. 

Revenue growth was driven by Housing.com’s property advertising business, which benefited from upselling customers to higher yielding premium products and increased customer growth. 

Revenue was also driven by growth in products on the Housing Edge platform, which has an associated cost of goods sold. 

Continued focus on search engine optimisation, improved mobile experience and targeted marketing has driven audience growth of 28 per cent on the previous financial year. 

Equity accounted investments

The group has a 20 per cent investment in Move, Inc. which operates realtor.com®, a leading property portal in North America. 

Move revenue dropped 15 per cent in FY23, impacted by the current challenging macroeconomic environment in the US which has led to a 29 per cent decline in leads and lower transaction volumes . 

This was partly offset by lower employee and discretionary costs, resulting in an equity accounted loss of $6 million, down from a $14 million gain in the prior period. 

REA Group also holds a 17.3 per cent stake in PropertyGuru Group Limited, which operates leading property sites in Singapore, Vietnam, Malaysia and Thailand, and is listed on the NYSE. 

PropertyGuru contributed an equity accounted loss of $3 million in FY23, an improvement from the $6 million loss in the prior period, with strong marketplace revenue growth in all of its key markets. 

Losses from the group’s Australian investments increased to $7 million from $5 million in the prior period, reflecting accelerated investment for future growth by Realtair and Simpology.

Total contributions from equity accounted investments declined from a $3 million gain in the prior period to a $16 million loss in FY23. 

Balance sheet strength

The group has a $600 million syndicated debt facility with two tranches, of $400 million and $200 million, which mature in September 2024 and September 2025 respectively. 

As at 30 June 2023, the Group’s total drawn debt was $319 million following repayment of $95 million in December 2022, with a cash balance of $260 million. 

External debt will increase by $62 million upon the consolidation of CampaignAgent’s existing debt from July 2023. 

The outlook

Mr Wilson said seller confidence continues to be impacted by interest rate uncertainty, and a lack of supply of property inventory to both buy and rent. 

However, demand remains strong, with the Australian residential property market experiencing healthy auction clearance rates and property prices returning to growth in 2023. 

Underlying fundamentals are positive, with continued near-record low unemployment, higher wages growth and increasing migration, which should further add to housing demand. 

July national residential new buy listings were down five per cent year-on-year, with Sydney and Melbourne listings both increasing nine per cent. 

Year-on-year growth rates in Q1 will reflect strong prior period listings volumes, with prior year volumes weaker in Q2. 

Residential buy yield growth is anticipated to grow double-digit in FY24, primarily driven by an average national price rise of 13 per cent. 

“The fundamentals of the Australian property market remain healthy,” Mr Wilson said.

“We are continuing to see strong demand and a return to price growth, and this is converting to a more attractive market for sellers. 

“We believe stabilisation of interest rates is within sight and expect this will lead to an increase in market activity.

“In this environment, REA Group is well positioned for growth. 

“We are focused on delivering products that provide the greatest value to customers and enhance the experience of our audience, and we see significant opportunities in the year ahead.”

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.

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