REA Group Delivers Huge Revenue and Profit Growth in Half Year Results

The Australian real estate portal operator REA Group has announced its results for the first six months of its 2021-2022 financial year. The report published earlier today contains some notable gains for the company, highlights of which include:

• Group revenue up 37% to A$590m
• EBITDA (excluding associates) of A$368m and Net profit of A$226m, representing an increase of 27% and 31% respectively
• Revenue from financial services up 250% with the incorporation of REA's A$244m acquisition Mortgage Choice

According to the company's report, the group's strong performance was fuelled in large part by a recovering domestic housing market. REA Group Chief Executive Officer, Owen Wilson commented:

“As anticipated, the removal of COVID restrictions saw a wave of new listings on realestate.com.au, with sellers making up for the time lost in lockdown and taking advantage of the significant buyer demand. Combined with record take up of our premium listing products in Residential and Commercial, we delivered very pleasing revenue growth."

“Our flagship site realestate.com.au continued its position as the number one address in property. In October, a record of 145.5 million visits to realestate.com.au were achieved and the site has grown to be Australia’s seventh largest online brand.”

Despite big gains in terms of revenue and profit, REA Group's EBITDA margin did not see a similar increase. The report cited a 17% increase in core operating costs reflecting reduced operating costs in the prior period "as the Group navigated through COVID uncertainty" as well as "continued investment to deliver strategic initiatives, and higher salaries in a tight labour market".

In addition to running Realestate.com.au domestically, REA Group also has real estate portal interests in India where the group manages the Housing.com and Makaan portals along with brokerage firm PropTiger. Despite Housing.com having grown its audience by a reported 55% to catch up with market leaders 99acres and Magic Bricks and a Pro-forma revenue increase of 125% (A$24m), the business in India is still loss-making (-A$14.8m for HY22).

Elsewhere, REA Group also owns a 20% stake in Move Inc., the parent of Realtor.com which is the #2 real estate portal in the United States. Realtor.com has been pioneering a referral model that screens leads for agents and takes a share of the commission if the lead transacts. This referral model contributed 32% of Move's half-yearly revenue figure of $348m (up 19% y-o-y). Traffic for Realtor.com was also up by 7% as the portal looks to close the gap on Zillow.

Another overseas portal interest of REA Group is the 18% stake the company owns in Southeast Asian real estate market-leader PropertyGuru which is slated to go public via a SPAC merger in the coming months. REA's corporate presentation was bullish on PropertyGuru's outlook citing the company's positions in four growing markets and total addressable market of $8.1 billion. For now though, the venture remains unprofitable with PropertyGuru delivering an equity accounted loss of $4m to REA's core EBITDA over the six month period.

REA Group has been one of the best performing portal company stocks over the last 12 months and its value has largely weathered the recent storm experienced by tech stocks around the world. At the time of writing the stock (ASX:REA) was down -0.4% on the day as the market was seemingly nonplussed by the company's record revenues and profits.