REA Group FY20 results unpacked

We examine the highlights from real estate advertising company REA Group’s latest set of full-year results.

REA Group share price rises even as market conditions deteriorate

Real estate advertising company – REA Group (REA) – saw its share price rise on Friday after releasing its full-year results to the market.

Here, the company reported a mild slump across both the top and bottom-line, while noting that the outlook for Australia’s property market remains uncertain due to the coronavirus pandemic.

Despite these headwinds facing the property market, the REA Group share price has outperformed the ASX 200 benchmark year-to-date, rising 5.79% in that period – to finish Friday’s session at $113 per share.

Speaking to how the company has handled the current situation, the Group’s Chief Executive Officer, Owen Wilson today said:

'In these challenging conditions, our products and services are playing an increasingly vital role in supporting our customers and vendors. Ensuring Australia has a well-functioning property sector remains core to our purpose and vital for our country's long-term economic growth.'

Full-year results unpacked

On the top-line, REA Group saw its revenue contract 5% 6% to $820.3 million -- down from revenues of $874.9 million. This result, said management, was driven by a reduction in the 'Residential and Developer businesses.'

In step with those revenue declines, residential listings exhibited weakness across the board, declining 12% on a national level, and 6% and 8%, in Sydney and Melbourne, respectively.

Listings were impacted by two key factors according to the Group, with management attributed H1 FY20 listing weakness to the restrictive lending environment caused by the Hayne Royal Commission. More recently, it was noted that 'The emergence of COVID-19 in mid-March significantly impacted listing in April and May’ though 'As COVID-19 restrictions eased in June, the real estate market responded positively.'

Despite those declines, engagement on REA's flagship website remain strong, with fourth quarter property views up 29% and buyer enquiries up 46% -- on a year-over-year basis.

By comparison, on the bottom-line, REA reported earnings (EBITDA) of $492.1 million (-5%), against profits (NPAT) of $268.9 million (-9%). The company also declared a fully-franked, final dividend of 55.0 cents per share – taking the company’s full-year dividend to 110 cents per share.

Other bits and pieces

From an operational perspective, the Group boasts a strong balance sheet – with a cash position of $223 million and low debt levels. The Group continues to tightly manage costs in response to the coronavirus pandemic, with first quarter operating costs expected to come in between 5-10% lower than the prior corresponding period.

The outlook: Uncertainty set to persist

Looking forward, REA noted that Melbourne-focused government mandated restrictions are likely to weigh on listings during the lockdown period. Such restrictions, said management, ‘coupled with the projected reductions in new development project commencements and listing volume declines in the Commercial and Asia businesses, is likely to cause adverse impacts on revenue in Q1 FY21.'

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