The two giants in the listings space have revealed their 2023 half-year financial results.
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Here’s what they had to say:
Revenue for the group rose 5 per cent to $617 million, while earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 2 per cent to $359 million. A 9 per cent in net profit was recorded taking that figure to $205 million.
Revenue growth was underpinned by 3 per cent growth in Australia to $581 million, where REA Group operates realestate.com.au, realcommercial.com.au, PropTrack, and Mortgage Choice.
Residential revenue rose 5 per cent to $425 million. An $11 million increase in buy yield offset a 9 per cent decline in national listings. Rent revenue jumped slightly due to a 5 per cent price rise and growth in depth penetration being partly offset by a 3 per cent drop in listings due to an ongoing lack of supply.
REA Group’s ASX announcement further detailed that “commercial and developer revenue increased 5 per cent to $72 million.” Adding commercial revenue rose with increased depth penetration and 1 July price increases, whereas developer revenues were down off the back of a 4 per cent fall in project launches with “rising input costs, labour shortages, and supply chain issues resulting in developers being less willing to take new projects to market.”
Moreover, REA India performed strongly throughout the period as revenue increased 48 per cent to $36 million with this trend “largely driven by Housing.com’s property advertising business,” according to the announcement.
On the cost front, Australian core operating costs jumped 7 per cent with REA Group explaining this was mainly down to increasing employee costs from wage inflation, continued investment to deliver strategic initiatives, and increased marketing and travel costs.
“The year-on-year growth rate also reflects reduced costs in the prior period due to lockdowns and the deferral of spend due to COVID-19 uncertainty.”
Summarising the results, REA group chief executive officer, Owen Wilson, explained that “the Australian property market was heavily impacted during the first half by unprecedented consecutive interest rate hikes.”
“While underlying demand remained healthy, uncertainty around future interest rate movements caused some sellers to pause and buyers to recalibrate as borrowing capacities fell.”
He believes the group’s performance in the first half of the financial year “underscores the strength of our products and audience.”
As for what the future holds, the impacts of currently enacted interest rate rises are expected to take more time before becoming apparent, though the REA Group explained: “price declines are expected to continue [and] we anticipate stabilisation of the interest rate cycle will improve confidence and encourage increased activity.”
“YOY growth rates for the remainder of the financial year will reflect strong prior period listings volumes, particularly in Q4, while the second half of the calendar year will reflect comparatively weak prior period volumes,” the ASX announcement said.
Further to this, there are expectations that Australian operating costs will decline year-on-year (YOY) with investment in REA India should see EBITDA losses widen in FY23 “resulting in total group operating costs in FY23 increasing high single-digits.”
Mr Wilson stated, “The uncertainty caused by rising interest rates is likely to continue in the coming months but we do expect when interest rates stabilise, we will see increased activity in the property market.”
“The Australian economy is strong; unemployment is low and immigration is increasing. Each of these underpins our property market,” he concluded.
For the first half of the 2022–2023 financial year (FY23), Domain reported a 6 per cent revenue increase from $175.3 million to $186.6 million, expenses of $137.3 million (up 20 per cent on a reported basis), and EBITDA of $49.3 million (down 19 per cent on a reported basis). Net profits of $15.9 million were also reported.
Core digital revenue jumped 8 per cent, while the faction’s EBITDA fell 8 per cent on a reported basis and 14 per cent on an ongoing basis reflecting the challenging market backdrop.
Domain chief executive officer and managing director Jason Pellegrino explained that “residential revenue was slightly lower, with higher controllable yield plus the new social boost fall tier offsetting a 9.5 per cent listings decline.”
Furthermore, the company’s first-half controllable yield of 6 per cent matched the levels experienced during FY20.
Mr Pellegrino detailed how despite testing market conditions, Domain was able to deliver a “38 per cent year-on-year uplift in new and upgraded depth contracts.” Adding, “We are confident in the outlook for depth penetration.”
On the media, developers, and commercial side of the business revenue fell 3 per cent, “a credible performance in the context of the weak market backdrop,” in Mr Pellegrino’s estimation.
Agent solutions revenue rose 173 per cent, while Domain Insights reported a 28 per cent jump in revenue.
He revealed several signs of progress including the Core listings business’ capacity to deliver a 6 per cent higher controllable yield on a like-for-like basis, and the uplift in new and upgraded contracts. Domain Home Loans also recorded a 5 per cent increase in settlements and a 6 per cent increase in submissions.
Moving forward, he revealed optimism towards the market’s long-term prospects due to the “upside from the return of immigration, encouraging auction clearance rates, and the increasing attraction to investors of rising rental yields,” explaining Domain’s priorities remain focused on three key areas: platforms, personalisation, and privacy.
“In platforms, we are modernising our technology to enable greater leverage of our data through AI and machine learning,” he said. “Through greater personalisation, we are looking to create insights that empower consumers and drive deeper engagement to really meet their needs… [while] privacy, appropriate data governance, and cyber security are critical areas for organisations to prioritise in order to provide transparency and build and retain consumer trust.”
Mr Pellegrino concluded that Domain remains ongoingly committed to its ESG initiatives which include addressing and mitigating the company’s material risks, “working on a strategy to achieve long-term carbon neutrality” and maintaining Domain’s “market-leading position in diversity and inclusion, having signed up to a 40:40 vision.”
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