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REA Group Australia reveals strong growth in their FY21 results

REA Group has announced positive end of financial year results, with their revenue of $928 million up by 13 per cent, and net profit of $318 million up by 18 per cent.

On Friday, REA Group announced financial highlights from FY21’s core operations, including year-over-year (YoY) revenue growth of 13 per cent to $928 million and a 19 per cent increase in earnings before interest, taxes, depreciation, and amortisation (EBITDA) of$565 million. Their net profit increased to $313 million, up 18 per cent.

REA’s revenue growth reflected a strong residential market recovery despite significant first quarter listing declines in Melbourne due to COVID-19 lockdown measures.

Excluding the impact of acquisitions, revenue increased by 11 per cent for the year, EBITDA, increased by 21 per cent and net profit after tax (NPAT) was up 24 per cent.

Strong cost management across the year resulted in core operating cost growth (excluding acquisitions) being contained to just 3 per cent YoY.

REA Group reported the cost growth was driven primarily by increased headcount and volume-related costs and incentives linked to stronger revenue growth, partly offset by lower costs in Asia.

The Board has determined to pay a final dividend of 72 cents per share fully franked.

Together with the interim dividend announced in February, this represents a total dividend of 131 cents per share in respect of the 2021 financial year, a 19 per cent increase on the prior year.

REA Group CEO, Owen Wilson said 2020-21 had been a “defining year” for the group.

“[REA has] successfully navigated the pandemic to deliver an excellent financial result and emerge an even stronger business,” Mr Wilson said.

“I am very proud of our team’s ability to respond to the changing needs of our customers and consumers during the pandemic, while also accelerating our growth strategy through a number of pivotal investments.

“Our flagship site realestate.com.au delivered stellar results, extending its position as the clear market leader in digital real estate and it is now Australia’s eight largest online brand overall.”

Australian results

In Australia, REA Group operates residential and commercial sites, realestate.com.au, realcommercial.com.au and share property website Flatmates.com.au

The group’s revenue increased by 13 per cent to $870 million this year, driven largely by increases in the residential, developer and data businesses.

After a challenging Q1 FY21, impacted by Melbourne COVID-19 lockdowns, REA said the Australian residential property market recovered strongly over the remainder of the year.

Positive buying conditions resulting from fiscal and monetary policy settings have helped fuel housing demand. National listings in FY21 were up 15 per cent YoY, with Melbourne up 11 per cent and Sydney up 25 per cent.

Australian residential revenue increased by 18 per cent, reflecting higher national listings, improved depth and premiere penetration, increased subscription revenues, and continued growth in add-on products.

Realestate.com.au continued to accelerate audience metrics, reaching record numbers during FY21.

Average monthly visits to realestate.com.au topped 121.9 million, outperforming competitors by 3.3 times on average.

“The delivery of highly personalised consumer experiences has underpinned our audience growth, allowing REA to continue to provide our customers with qualified leads to help them grow their businesses,” Mr Wilson said.

“This included a strong 55 per cent YoY increase in buyer inquiries during FY21.”

Commercial and developer revenue increased 5 per cent with developers benefiting from a 17 per cent increase in new project commencements, driven in part by government stimulus, an increase in project profile duration and higher subscriptions.

This was partially offset by a decline in commercial revenues due to the negative impact of COVID-19 on listing volumes. 

Media, data and other revenues were broadly flat YoY. Growth in data and media revenues were offset by a reduction in other revenues.

Financial Services operating revenue increased 9 per cent driven by higher settlements, increased broker recruitment and improved productivity.

This was more than offset by a reduction in partnership revenue as the current NAB agreement performance payments reached maturity in September 2020.

In March 2021, REA Group announced its proposal to acquire 100 per cent of the shares in Mortgage Choice Limited, providing a compelling opportunity to establish a leading mortgage broking business with increased scale.

The acquisition aligns with REA’s financial services strategy by leveraging the group’s digital expertise, high intent property seeker audience and data insights across a larger network.

It also complemented the existing Smartline broker footprint, resulting in greater national broker coverage. The transaction completed on 1 July 2021.

Consideration was $244 million, funded by an increase in REA’s debt facilities.

On 15 June 2021 the group acquired a 34 per cent interest in Simpology, a provider of mortgage application and e-lodgement solutions for the broking and lending industries.

The $15 million consideration for the transaction was funded from the Group’s existing cash reserves. REA holds two seats on Simpology’s Board.

Returns to shareholders and current trading

The Board has determined to pay a final dividend of 72 cents per share fully franked.

Together with the interim dividend, this represents a total dividend of 131 cents per share in respect of the 2021 financial year.

“The pandemic continues to cause market volatility globally and has the potential to impact the REA Group’s performance in FY22,” the report to shareholders noted.

“While recent lockdowns have negatively impacted listings volumes in the affected cities, the experience over the last 12-18 months has shown that markets can recover quickly when restrictions are lifted.

“Despite COVID-19 related volatility, market dynamics remain strong, with strong levels of buyer inquiry underpinned by low interest rates and healthy bank liquidity.”

The Australian residential business will benefit from price increases, which came into effect from 1 July 2021.

Listings volumes in July decreased three per cent YoY. Melbourne listings were up 3 per cent, while Sydney listings were down 22 per cent, impacted by the lockdown.

“REA is entering the new financial year with strong momentum, despite ongoing lockdowns. This momentum, coupled with our strategic investments and exciting product roadmap, provides an excellent platform for our continued growth,” Mr Wilson said.

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