REA share price falls as FY21 revenues hit $928 million

We look at the highlights from REA Group’s full-year results, released to the market on Friday, 6 August.

REA Group – Australia’s largest property advertising company – has been nothing if not consistent.

Double-digit growth

On Friday, the company handed down its full-year FY21 results to the market, reporting double digit growth across the top and bottom-lines.

Looking at those results, the company reported full-year revenues of $928 million, implying a year-on-year increase of 13%.

Management said this was driven by Australia's 'strong Residential market recovery despite first quarter listing declines in Melbourne due to COVID lockdown measures.'

The company also reported only minor costs growth, with operational costs – on an ex-acquisition basis – growing just 3% year-on-year. Cost increases came as a result of new hires as well as 'volume-related costs and incentives' linked to the company's double-digit revenue growth.

On the earnings side and on an ex-acquisition basis, growth was also good. Operating earnings (EBITDA) came in at $556 million (+17% YoY), while an EBITA margin of 60% was maintained. Profits (NPAT) grew even faster, rising 24% to come in at $318 million.

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Dividends rise

Off the back of that earnings growth, REA’s Board has said it will pay a final dividend of 72 cents per share. That takes REA's FY21 dividends to 131 cents per share, equal to a 19% increase on the dividends the company paid out to shareholders in FY20.

Management commented optimistically on these results, with REA Group’s CEO – Owen Wilson – describing FY21 as a defining year for the company and saying:

'This has been a defining year for REA, successfully navigating the pandemic to deliver an excellent financial result and emerge an even stronger business.’

'I am very proud of our teams ability to responding to the changing needs of our customers and consumers during the pandemic, while also accelerating our growth strategy through a number of pivotal investments.'

Despite that upbeat attitude – with both Sydney and Victoria facing new lockdown measures – concerns among the market will likely be pointed towards renewed listing growth weakness.

To that end management did flag that listing volumes had been impacted by lockdown measures in the early parts of FY22, while nonetheless saying that 'the experience over the last 12-18 months has shown that markets can recover quickly when restrictions are lifted' and that ‘market dynamics remain strong.’

REA share price

Taken together, the market responded negatively to today’s full-year release: within the first half-hour of trade the stock was down 2.83% to $162.54 per share. At those price levels REA Group has an implied market capitalisation of $21.46 billion and trades on a FY21 earnings multiple of around 67x.

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