REA’s Underlying Profit Grows Despite Slower Ad Volumes

REA Group, publisher of listings website realestate.com.au, has announced its first-half net profit fell 55 per cent compared to the prior corresponding period, while underlying revenue – which eliminates one-off items like gains on asset sales – rose 21 per cent to $406.8 million.

REA says that a slowdown in new housing developments will see lower ad volumes it experienced in the half extend over the next few months. While total residential listings were marginally down during the half, listings grew in the key markets of Melbourne and Sydney.

The company also reported earnings (EBITDA) lifting by 21 per cent to $242.8 million. REA directors declared an interim dividend of 47 cents per share, up from 40 cents in the prior corresponding year.

Tracey Fellows, REA’s chief executive expects the decline in new project commencements seen during the first half to continue in the second half of the financial year and to impact revenue from the Developer business.

"We are seeing early signs that Melbourne and Sydney have growth in listings, but we are seeing across the country no significant increase in listings, which are the conditions we have seen in the last couple of years."

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"I think we certainly see the decline for the rest of the fiscal year and beginning of next year."

She blamed government regulation around foreign ownership, the removal of stamp duty incentives on new properties and the tighter lending requirements from the banks for the decline.

"All of that combined has meant less of those projects are now being kicked off and started," she said.

REA shares closed $1.46, or 2 per cent, higher at $72.97.

CoreLogic has reported Australia’s residential market softening with data showing prices fell by 0.3 per cent nationally between October and December with weakness in Sydney impacting the results.

Embattled McGrath chief executive John McGrath resigned as an REA director in January after more than 18 years on the board.