REA Group (ASX: REA) has announced its FY20 first quarter result to investors.
REA Group is the owner of Australia’s most popular real estate portal, realestate.com.au. It owns other property leading sites such as realcommercial.com.au too. It also has stakes in several other international property sites in the US, South East Asia and India.
REA Group’s First Quarter
REA Group said that revenue (after broker commissions) fell by 9% to $202.3 million compared to the first three months of FY19.
The company explained that it was a challenging market because new residential listings and new project commencements were down. National listings were down 15%, with declines in Sydney and Melbourne of 22% and 21% respectively.
However, part of the revenue decline was due to the extended duration of ‘Premiere All’ listings from 45 to 60 days which increased revenue deferral, without that revenue would have only fallen 6% and EBITDA by 9%.
Revenue didn’t fall as much as listing numbers because of a price increase which was implemented from 1 July 2019.
Its operating expenses declined by 2% to $87.4 million, down from $88.8 million but that wasn’t enough to offset the decline in revenue. The reduction was achieved from cost management and efficiencies.
Excluding the share of losses of associates and joint ventures, EBITDA (click here to learn what EBITDA means) fell by 14% to $114.9 million.
This led to free cash flow falling by 20% to $41.8 million.
REA Group CEO Owen Wilson said: “Our performance has shown remarkable resilience given we have been tested by an unprecedented market conditions. Pleasingly, we are seeing the signs of a gradual market recovery.
“We know the buyers are back and it’s only a matter of time before the sellers follow. In September, enquiries for properties for sale on realestate.com.au increased 30% year on year, while auction rates have returned to the levels we are seeing before the market correction.”
Listing volumes were down 15% in October 2019 with declines of 15% and 17% in Sydney and Melbourne.
The company is expecting more favourable listing comparatives in the second half.
"How To Invest" - Free Educational Report
Our founder has put his finishing touches on a free investing course for Rask Media readers. It's entirely free and takes you through our version of Warren Buffett's four sharemarket investing principles, including the exact steps to find, research, analyse and provide valuations of real companies.
The course is entirely free and emailed to you over four days. Hundreds of Aussies have already subscribed to the course and the feedback has been overwhelmingly positive. Click here to take the free course.
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.