The company failed to meet market expectations with the share market initially reponding negatively to the announcement with shares dropping nearly 10% to AUD 47.79 only to recover to AUD 49.36 (down 3.6% on the day).
REA Group CEO Tracey Fellows said: “Our results show strong revenue performance with 20% growth in the first half. The commitment to providing exceptional value for our customers and consumers has driven this success. They are the reason we are the number one property portal in Australia.
“Our audience continues to grow as we innovate and deliver even better experiences for consumers. These products are resonating with consumers, delivering our Australian sites over 42 million visits a month on average. This means that we are able to provide our customers with the largest audience of property seekers in the country.
“Our International growth has accelerated as we prepare to acquire iProperty Group in Asia. We now have all approvals in place and look forward to completing the acquisition in the coming weeks.”
Financial results from core operations for the half year ended 31 December 2015 include:
In Australia, the REA Group operates the leading residential and commercial property sites, realestate.com.au and realcommerical.com.au. Australian revenue grew by 22% to $289.4 million in the first half, while agent numbers increased by 7% on the prior corresponding period.
The success of our Premiere All product (where customers commit to using our top tier product for all of their listings) helped deliver a 24% increase in revenue in the Residential business, despite the real estate industry reporting flat listing volumes. There was a 33% increase in listing depth revenue to $251.6 million, while subscription revenue decreased 34% to $21.4 million, in line with the Group’s focus on reducing fixed costs for agents.
Media and developer revenue increased by 24%, primarily driven by the strong take up of our developer products, particularly Project Profiles, which provides an exceptional way to present large developments to prospective buyers.
Our commercial business recorded 8% revenue growth. Improved sales of commercial depth products were partially offset by a decline in for-sale listings in the half year.
Strong Australian growth reflects our ever-growing, highly engaged audience. Independent metrics demonstrate realestate.com.au has the largest and most engaged audience of property seekers in Australia:
Our European operations include Italian property site casa.it, Luxembourg’s atHome.lu and atOffice.lu, and property sites in regions of France and Germany, immoRegion.fr and atHome.de.
The European business delivered revenue growth of 13% (7% in local currency) to $25.1 million (€16.4 million in local currency) on the prior half year, led by increased take up of listing depth products. The EBITDA of $4.2 million was lower than the corresponding half year as a result of the investment in new regions in France and investment in marketing initiatives in Italy.
Average monthly visits to our combined European sites increased by 10% to 11.2 million8 . The combined European sites grew agent numbers by 14% and increased listing volumes by 20%.
In Asia we operate the myfun.com site and have a strategic investment in iProperty Group Limited (iProperty), the clear market leader in Malaysia, Thailand, the Hong Kong region and Indonesia.
myfun.com supports the Australian listing business by showcasing Australian residential property listings to Chinese buyers and delivering leads to agents. Launched in 2014, myfun.com attracted average monthly visits of 81 thousand during the half year.
On 2 November 2015, REA Group announced its intention to acquire the remaining shares in iProperty (REA Group already owns 22.7% of iProperty) for $4.00 per share, to be executed by way of a scheme arrangement. iProperty shareholders were also able to elect to receive $1.20 cash, as well as 0.7 shares in a company which will provide indirect exposure to iProperty for a period of 2 years post-closing. iProperty shareholders approved the scheme on 28 January 2016 and final court approval was obtained on 2 February 2016. As a result, we expect the transaction to complete in mid-February 2016. In total, 18.7% of iProperty shareholders elected to receive the mixed consideration. As a result, REA Group will own 86.9% of iProperty on completion for cash consideration of $482.2 million.
The investment in iProperty has been accounted for as an associate in the half year results and will be consolidated from 1 February 2016. REA Group will primarily fund the acquisition from new debt facilities totalling $480 million, with the remainder from existing cash reserves. Transaction costs between $7 million and $8 million will be incurred when the acquisition is finalised, the majority to be incurred in the second half.
iProperty has previously announced that it expects full year revenue for calendar year 2015 of $32.0 million, which is up 47% on 2014, and EBITDA of $2.5 million compared to a loss of $0.4 million in the previous year.
North American Operations
In the United States we have a 20% holding in Move, Inc. operator of realtor.com, a leading real estate portal. Since our investment in November 2014, new branding and improved marketing has positioned realtor.com as the number two property portal in the United States, the world’s largest real estate market. Average monthly unique users increased 42% on the prior corresponding period to 42.5 million and revenue has grown 33%13 . Our share of losses for the period was $4.6 million (primarily related to amortisation of acquired intangibles).