REA Group Delivers Solid 2020 Results Despite Covid

Edmund Keith

August 6, 2020

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REA Group, the Australian News Corp majority-owned company that owns and operates market-leading portal realestate.com.au, has announced its financial results for the year ended 30th of June 2020. Although the company faced some significant headwinds in the form of Covid-19 as well as unfavourable market conditions for part of the year in its Australian and Hong Kong markets, the results show a resilient company whose position at the top has been entrenched over the year. Highlights of today’s results include:

  • Revenue of $820 million, down 6%.

  • EBITDA of $492 million, down 5%

  • Net profit of $268 million, down 9%

  • Full-year dividend 110 cents per share, down 7%

  • Operating costs of $328 million, down 9%

In Australia, where REA Group runs leading portals in the residential sector as well as in the commercial and flat-sharing sectors, the group has solidified its market dominance. Despite the group’s Australian residential revenue declining 4% over the course of the year, its main property portal extended its lead over rival Domain.com.au according to REA Group CEO Owen Wilson.

“Pleasingly, our flagship site realestate.com.au extended its leadership position in FY205. Each month, 60% of Australia’s adult population is visiting our site, with a new record of almost 12 million people in May,” said Mr Wilson

Media and data revenue was perhaps the segment of the business which suffered most in 2020 with year on year revenue down 19%. In today’s press release, this is largely attributed to a stagnant new development market in the country with developers representing the largest group of display advertisement purchasers.

REA Group also operates businesses overseas including the iproperty franchise of portals in South East Asia which enjoys market-leadership in Malaysia. The group’s Asian business accounted for $47.9 million in revenue and $8.9 million in EBITDA. REA Group made some significant investments in the Asian property portal market over the course of the financial year with investments in Indian firm Elara tech which operates challenger portals Housing.com and Makaan.com as well as in 99.co which runs portals in Singapore and Indonesia. Commenting on the group’s Asian performance, Wilson said:

“While the Malaysia business maintained its leadership position and delivered audience growth, the Hong Kong business has been hit by the unavoidable impacts of prolonged unrest and COVID-19. Despite the difficult trading conditions we are currently experiencing in Asia we remain confident that our investment across the region will deliver long term growth to our shareholders,”

 

As well as interests in Asia, REA Group maintains a 20% share in Move Inc which runs US challenger portal Realtor.com. Here the revenue loss was 2% (down to $473 million). Realtor has been trying to transition its business from a simple lead generation model to one of referral.

As for operations efficiency in the financial year, REA Group has been able to enact significant cost reductions of 9% over the year and an impressive 21% in the fourth quarter. The company sees choppy waters ahead with parts of Australia still in lockdown, and has decided to suspend price increases for its agents and today said it “will only implement price changes if a sustained residential market recovery is evident.”

Commenting on the outlook for REA Group in the future Owen Wilson said:

“The property market has shown great resilience, bouncing back from the lows of COVID-19, however, the extent of this recovery is still dependent on the efforts to contain the virus and the outlook for the underlying economy. We have a strong balance sheet, a talented workforce and a loyal audience which will see us emerge an even stronger business once more normal conditions return,”

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Simon Baker is the Founder and Executive Chairman of Online Marketplaces and Property Portal Watch. Involved with property portals for 15 years, he’s a well-recognized expert and industry consultant.
As former CEO/MD of the REA Group for 8 years, Simon led the group to its current market-leading position. When he joined REA Group in 2001, it had $4m in revenues, $6m in losses and an $8m market cap.
By 2008, the company presided over $155m in revenues, $35m in EBITDA and enjoyed a peak market cap of $1b. Simon is currently Chairman of the Mitula Group and Real Estate Investar and a serial portal founder and, investor.