REA Group (ASX:REA) has reported encouraging signs for property enquiries and auction clearance rates, even though they weren't fully reflected in financial results for the first quarter.
The company reported a nine per cent year-on-year drop in revenue to $202.3 million and a 14 per cent decline in EBITDA to $114.9 million.
National listings were down 15 per cent over the three month period with more drastic falls of 22 per cent and 21 per cent for Sydney and Melbourne respectively.
If it weren't for the extension Premiere All listings from 45 to 60 days, the profit drop would have been less pronounced at 9 per cent.
The environment will likely continue to weigh heavily on results for the current half, with REA Group expecting revenue growth will be heavily skewed towards the second half.
"Our performance has shown remarkable resilience given we have been tested by unprecedented market conditions. Pleasingly, we are seeing the signs of a gradual market recovery," says chief executive officer Owen Wilson.
"We know the buyers are back and it's only a matter of time before the sellers follow.
"In September, enquiries for properties for sale on realestate.com.au increased 30 per cent year-onyear, while average auction clearance rates have returned to the levels we were seeing before the market correction, over 80 per cent in Melbourne and Sydney."
Wilson emphasises Australians remain "passionate about property".
"In August, we received a record number of monthly visits to realestate.com.au at 87.5 million and a record number of app launches at 36.2 million," he says.
"Our audience lead also increased compared to the corresponding quarter with over three times more visits than our nearest competitor.
"We anticipate that the more favourable listings comparatives in the second half of FY20 will deliver a stronger revenue outcome. The fundamental strength of our business positions us well to benefit from an eventual market recovery."
The Australian residential revenue result reflects unfavourable market conditions, according to the company. However, this was partially offset by price changes that took effect from 1 July 2019, an improved product mix and continued growth contribution from products such as Audience Maximiser, Property Showcase and Agent Reach.
Commercial and developer revenue declined due to the continued reduction in new project commencements, down 26 per cent for the quarter.
REA Group notes this decline was partially offset by the benefit from extended project profile durations and an increase in commercial depth penetration.
New project commencements are expected to continue to decline for the remainder of the year, driven by funding constraints, a reduction in consumer confidence due to inventory quality and a reduction in foreign investment.
The Asia segment revenue was in line with prior year and was impacted by the ongoing disruption in Hong Kong, where audience lead increased as well as in Malaysia and Indonesia.
On 9 October the Group announced it had entered into a binding agreement to establish a joint venture (JV) with 99.co, the Singapore headquartered digital property marketplace, whereby REA will be the largest shareholder with a 27 per cent stake in the combined entity.
This transaction involves the transfer of the existing businesses of 99.co, iProperty.com.sg and Rumah123.com located in Singapore and Indonesia, and the subject to confirmatory due diligence that is expected for completion in early 2020.
REA Group is majority owned by News Corp with more than a 60 per cent holding.Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
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