REA Group to surf the property high as profit surges to $384m

REA Group to surf the property high as profit surges to $384m

A rush of new property listings and an expansion into India have combined to boost REA Group’s (ASX: REA) full-year net profit by 19 per cent to $384.8 million in FY22.

REA Group, which runs Australia’s largest property selling platform realestate.com.au, has also declared a record final dividend as the company looks to another strong year ahead despite the headwinds of interest rate increases impacting the sector.

The latest result was built on a 26 per cent increase in group revenue to $1.17 billion, although the bottom line was impacted by one-off costs associated with the consolidation of its REA India and Mortgage Choice acquisitions.

REA India, the subsidiary that acquired a controlling interest in Elara Technologies last year, delivered a 92 per cent boost in revenue to $54 million on a pro forma basis. The division owns India’s Housing.com, PropTiger.com and Makaan.com platforms, with the former maintaining the number one audience share for the last nine months of the full year.

The integration of Mortgage Choice, which was swallowed by REA Group in a $244 million takeover last year, is expected to continue until the third quarter of FY23. However, the buyout has contributed to a 12 per cent increase in revenue for the financial services division to $79 million on a pro forma basis.

Both acquisitions led to core operating costs for REA Group surging by 34 per cent, but these were offset by a 24 per cent increase in revenue from the group’s core Australian residential real estate operations.

“FY22 has been an exceptional year for REA,” says CEO Owen Wilson.

“The record take-up of our premium listings products enabled us to fully capitalise on the buoyant listings environment, and it demonstrates the value we provide to our customers and vendors.

“Key milestones were also achieved in our property data, financial services and Indian businesses, building strong momentum. These markets present great opportunities and the revenue contribution of these businesses is growing rapidly.”

In Australia, REA Group also operates the realcommercial.com.au platform for commercial property and the property analysis business PropTrack.

Revenue for the core Australian operations lifted 23 per cent to $1.116 billion, or 18 per cent excluding Mortgage Choice. The result was boosted by an 11 per cent increase in new listings across its platforms over the year.

Notably, developer revenues were lower, impacted by a 21 per cent slump in project launches for the year – although this comes off a spike in volumes from developers the previous year.

Wilson says realestate.com.au maintains its position of reaching ‘the largest and most engaged audience, with more Australians than ever before engaging with our site when seeking to transact property’.

“Active members are proven to drive the most value for our customers, and our focus on personalisation and consumer experience has significantly accelerated the growth of this group during the year,” he says.

While the Australian property market is expected to ‘moderate’ amid interest rate increases, REA Group is confident in the year ahead.

“REA enters the new financial year in a very strong position with a clear strategy for future growth,” says Wilson.

“While we’re mindful of changing economic conditions, with further interest rate rises expected, Australia’s property market is healthy and supported by strong underlying fundamentals.”

REA is paying a record final dividend of 89c per share for a full-year payout of $1.64 fully franked, up 25 per cent for the year.

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