REA Group profits rise amid strong resi market

ASX-listed REA Group, the digital advertising business specialising in property which operates realestate.com.au, has announced its results for the year ended 30 June 2021.  

According to the group, it saw a 13 per cent increase in year-on-year revenue growth (to $928 million), and an 18 per cent rise in net profit (of $318 million).

When excluding the impact of acquisitions (such as the recent Mortgage Choice acquisition and Simpology stakeholding), revenue increased by 11 per cent for the year (bolstered by increased subscription revenues and growth in add-on products), with net profit after tax 24 per cent.

According to the group, the growth reflected a “strong residential market recovery despite significant first quarter listing declines in Melbourne due to COVID lockdown measures”.  

This led to higher national listings, with record visits to the listings site amid strong appetite from buyers.

The results also reflected growth in its financial services revenue.

The operating revenue of the financial services business – which now comprises both Mortgage Choice and Smartline in its soon-to-be-renamed combined broking business – increased 9 per cent, driven by “higher settlements, increased broker recruitment and improved productivity”. 

The financial results show that:

• broker submissions (excluding Mortgage Choice) increased 31 per cent (attributed to the “strength of broker-customer relationships”);
• broker settlements increased 23 per cent in the year (which it said was “supported by productivity improvements and buoyant housing market”); and 
• mortgage leads coming from realestate.com.au increased 46 per cent.

The group has outlined that it aims to build its “next-generation financial services marketplace” this coming year as its enhances the digital experience through realestate.com.au and Simpology technology, and the broker experience by scaling coverage, increasing the digital enablement of brokers, and driving conversion through lead triage support models.

Speaking of the financial results, REA Group CEO Owen Wilson commented: “This has been a defining year for REA, successfully navigating the pandemic to deliver an excellent financial result and emerge an even stronger business. 

“I am very proud of our team’s ability to respond to the changing needs of our customers and consumers during the pandemic, while also accelerating our growth strategy through a number of pivotal investments. 

“Our flagship site realestate.com.au delivered stellar results, extending its position as the clear market leader in digital real estate, and it is now Australia’s eight largest online brand overall.”

Looking forward, the group suggested that while market volatility as a result of COVID-19 lockdowns will continue in FY22, “experience over the last 12-18 months has shown that markets can recover quickly when restrictions are lifted”.

“Despite COVID-related volatility, market dynamics remain strong, with strong levels of buyer enquiry underpinned by low interest rates and healthy bank liquidity,” it said, adding that its Australian residential business will benefit from its price increases, which came into effect from 1 July 2021. 

“REA is entering the new financial year with strong momentum, despite ongoing lockdowns. This momentum, coupled with our strategic investments and exciting product roadmap, provides an excellent platform for our continued growth,” concluded Mr Wilson. 

The REA board has determined to pay a final dividend of 72 cents per share fully franked on 16 September. 

Together with the interim dividend, this represents a total dividend of 131 cents per share in respect of the 2021 financial year.  

The FY22 group results will also include the consolidation of Mortgage Choice and the results of other recent acquisitions and the divestments.

The Mortgage Choice acquisition was funded through a bridge facility with NAB for $520 million. While this bridge facility matures in July 2022, the group said it is expecting to replace this with a new syndicated facility in Q1 FY22.

[Related: REA acquires interest in mortgage lodgement platform]