REA Group Grows Revenue 5% in HY1 Thanks to Australian Depth Penetration, Continues to Invest in Building Indian Market Leader

The Australian real estate portal operator REA Group has released a report on its activities for the first half of the Australian financial year 2023. Highlights of the company's operations for the six months ended 31st of December 2022 include:

• Company-wide revenue increased by 5% to A$617m.
• Australian revenue was up 5% but Financial Services revenue dropped 14% year-on-year.
• EBITDA (excluding associates) was down 2% at A$359m while Net profit was down 9% at A$205m.
• EPS of 155 cents was down 9% year-on-year.

Despite a challenging domestic market which saw listings volumes drop 9% on the comparison period (-17% and -13% in the lucrative Sydney and Melbourne markets respectively), the company's flagship Realestate.com.au managed to grow revenue by 5% on HY1 22.

The growth was attributed to increased depth penetration of the portal's Premiere+ product and the appreciating prices of homes coming to market. Meanwhile, despite listings volumes falling 3%, rental revenues rose slightly on the back of a 5% rise in prices while commercial and developer revenue grew 5% to stand at A$72m for the period.

Aside from its main portal activities REA's Australian operations were more of a mixed bag with revenue in its 'Media Data and Other' segment flat at A$49m while its much invested-in Financial Services segment saw revenue fall 14% to A$35m. The company insists that the integration of Mortgage Choice (the brokerage it bought for A$244m in 2021) is continuing smoothly and that the drop in revenue can be attributed to slowing market activity.

Commenting on performance in a tricky market, REA Group Chief Executive Officer, Owen Wilson said:

“The Australian property market was heavily impacted during the first half by unprecedented consecutive interest rate hikes. While underlying demand remained healthy, uncertainty around future interest rate movements caused some sellers to pause and buyers to re calibrate as borrowing capacities fell.

“Despite these conditions, REA continued to deliver revenue and yield growth during the half. This performance underscores the strength of our products and audience, with customers increasingly relying on our premium products to maximise the impact of their campaigns.”

REA Group's Indian operations saw revenue increase 48% to A$36.5m on the back of continued investment. Housing.com saw its traffic grow 36% compared to the comparison period as it consolidated its leadership position in the market and also enjoyed growth in its Housing Edge business which offers BNPL products, adjacent services and a premium subscription product.

The investment in creating an Indian market leader has come at a cost as the venture remains unprofitable with EBITDA losses increasing 53% year-on-year for the period as REA India incurred A$23m EBITDA losses in HY1.

Along with the deferral of spending due to covid uncertainty in the comparison period, investment in the Indian business contributed to a 15% increase in company operating costs and a decline in profit margins.

In terms of investments in portals elsewhere in the world, the Southeast Asian market leader PropertyGuru contributed an equity-accounted loss of A$2m across the period. REA Group holds a 17.5% stake in the portal operator which is expected to report on its progress on the 1st of March.

REA Group also owns a 20% stake in Realtor.com parent Move Inc. Move contributed an equity-accounted loss of A$7m, down from an A$8m gain in the corresponding period. Along with rival Zillow Move Inc has been heavily impacted by the downturn in the U.S. housing market. Talks are ongoing between REA and Move Inc's majority shareholder News Corp and U.S. real estate specialist around a mooted $3 billion takeover deal.