REA Group reports revenue growth despite tightening market conditions
REA Group have announced a revenue growth of 13% for the third quarter of the 2019 financial year, despite a drop in listings and an overall tightening in the Australian housing market.
The company, which is owned by News Corp, also reported a 7% growth in revenue over the first three months of 2019, compared to a 6% slump reported by direct competitor Domain.
REA Group report the growth is powered partly by the strength of their residential and developer business, but also the inclusion of their appraisal business Hometrack which wasn’t included in the previous year’s results.
Overall the business reported a Q3 FY19 revenue of $667.8m, up from $592.3m in Q3 FY18. Operating expenses also increased, taking a 9% jump to $263.1m.
EBITDA (earnings before interest, tax, depreciation and amortisation) had also increased 15% to $404.7m.
REA Group CEO Owen Wilson, who has been in the role less than six months, said the business’ ability to make a profit despite the market conditions was a sign of how strong it was.
“We remain focused on supporting our customers who clearly recognise the value we deliver, demonstrated by depth penetration reaching record levels during the quarter.”
“It’s almost a decade since we’ve seen market conditions like these, especially in Sydney where the decline has been the most pronounced. With the Banking Royal Commission now behind us and the Federal election taking place next weekend, we expect less uncertainty surrounding the property market as we enter the new financial year,” said Wilson.
REA Group reported a 9% drop in listings over the first three months of 2019, including declines of 18% in Sydney and 12% in Melbourne. The inclusion of the Hometrack business, which REA acquired in 2018 for $130m, is part of the company’s plan to build other sections of the business to weather the storm of a worsening property market.
The company also reported that the growth in operating expenditure comes in part due to an increase in marketing costs. This was flagged by departing CEO Tracey Fellows as a necessary response to Domain increasing their marketing efforts.
The ASX announcement reported that REA Group is not expecting market conditions to improve in the short term, meaning they are anticipating less growth in Q4. Nationally Australia saw a 22% decline in residential listings across April and this trend is expected to continue.
Owen is doing a great job. Toughest market in a long while.
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