If the fear mongering headlines highlighting just how unreachable a first home is for millennials without outside assistance, the half year financials released by real estate company REA Group (ASX: REA) highlight the crazy demand for housing in 2021 which was hardly impacted by the absence of live auctions.
For the Half Year ended 31 December 2021, REA reported $590 million in revenue which represented a 37% increase on the previous corresponding period, which delivered $226 million net profit after tax – a 27% increase.
Increased profit was attributed to the buoyant housing market which was large volumes of listings on the Company’s flagship realestate.com.au website as sellers took advantage of the inflated housing market, driven by low interest rates.
“REA Group delivered an exceptional first half result as the business continued to successfully navigate the impacts of the global pandemic,” said REA Group CEO, Owen Wilson.
“As anticipated, the removal of COVID restrictions saw a wave of new listings on realestate.com.au, with sellers making up for the time lost in lockdown and taking advantage of the significant buyer demand. Combined with record take up of our premium listing products in Residential and Commercial, we delivered very pleasing revenue growth.”
During the reporting period, REA set a new record in monthly visits when realestate.com.au had 145.5 million visits in the month of October 2021, elevating the site to become Australia’s seventh largest online brand.
Australian property and online advertising remain the primary revenue stream for REA, contributing $525 million revenue but the Company is starting to see movement in its diversified businesses.
Since acquiring financial services company Mortgage Choice in July 2021, integration of their services into the REA tech stack is still continuing while it generated $51m in revenue, a 24% increase on the previous year. This was driven by growth in its broker network which also benefited from the housing market boom that resulted in loan originations. REA expects the integrations to be completed within the next 12 months which will give users access to Mortgage Choice financing services within their realestate.com.au website rather than clicking out to external lenders.
Additional growth is being witnessed by REA’s property listings business in India – housing.com which generated $24 million, a 125% increase on the previous year.
Having emerged as the dominant leader in the Australian real estate tech space, further international expansion is on the agenda for REA via its 20% stake in Move, operators of realtor.com – one of the largest property portals in North America, and 18% stakes in SouthEast Asia property company PropertyGuru.
“As a strategic shareholder, REA is excited to be part of the next phase of growth for the PropertyGuru business. The strong network of brands creates a competitive advantage and positions PropertyGuru perfectly to transform these markets,” said Wilson.
These international expansion opportunities will likely play a major role in the growth of REA whose market leadership position in Australia is near its ceiling.
Going forward, Wilson admits that the housing market will slow when interest rates inevitably rise, likely to slow sales revenue across many REA services.
“REA Group has emerged from another disruptive year in excellent shape, and we expect the favourable market conditions to continue into 2022,” said Wilson.
“While COVID and the federal election may throw some curveballs, the effect on our market should be temporary. We are excited about new products scheduled to enter the market this year as well as the excellent progress we have made with our adjacent businesses.”
With $226 million in net profit after tax, REA Group has issued an interim dividend of 75 cents per share, a 27% increase on the Company’s previous interim dividend.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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