News

REA Group Reports Decline in Annual Profit Amidst Challenging Real Estate Market

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Andrew R. Michaud

• August 11, 2023

SYDNEY - REA Group, an Australian real-estate advertiser listed on the ASX, has announced a 7.5% decrease in its annual profit due to higher interest rates and sluggish property values. The company reported a net profit of A$356.1 million for the 12 months ending June, compared to A$384.8 million the previous year. Despite the decline, revenue saw a modest increase of 2% to reach A$1.18 billion.

Dividend Reduction and Analyst Forecasts

In response to the challenging market conditions, REA Group has slashed its final dividend to A$0.83 per share from A$0.89 per share. This brings the full-year payout to A$1.58 per share. Although the reduction was anticipated by analysts, who predicted a net profit of A$250.6 million and revenue of A$799.3 million, it underscores the impact of the slowdown in real estate activity.

Decline in Australian Property Listings

The Australian property market experienced a significant decrease in listings, with a year-on-year decline of 12%. Higher borrowing costs played a key role in dissuading potential buyers, resulting in lower volumes and transactional activity. In the first month of fiscal 2024, volumes were down by 5%. However, REA Group remains optimistic, noting that first-quarter volumes reflect a strong prior period. It anticipates a more favorable comparison in the December quarter.

Strength and Resilience Demonstrated

Despite the challenging environment, REA Group's Chief Executive Owen Wilson emphasized the strength and resilience of the business. He acknowledged that customers continued to prioritize their premium products, leading platforms, and superior audience. This commitment enabled REA Group to maintain its position despite lower listings in FY 2023.

Real Estate Market Outlook

Data from property analytics firm CoreLogic revealed a 7.9% decline in the average Australian residential property value over the 12 months ending February. However, due to tight supply, the average house price in Australia experienced growth for five consecutive months leading up to July. Analysts widely anticipate a recovery in REA's revenue and profit for fiscal year 2024.

Growth Expectations and Optimism

REA Group forecasts double-digit growth in its residential buy yield for fiscal year 2024. Furthermore, it expects revenue growth to outpace operating cost growth. The company anticipates operating costs in Australia and India to rise by a percentage in the high-single or low-double digits. Notably, revenue from India saw significant growth, increasing by 46% year-on-year to A$79 million.

Note: REA Group is primarily owned by News Corp., which also owns Dow Jones & Co., the publisher of this newswire and The Wall Street Journal.