Leading online real estate marketing company and head of realestate.com REA Group [ASX:REA] warns that consumer sentiment remains low as inflation continues to bite and cost expenditure is rising.
REA’s profits had fallen 9% in the half year, taking net profit down from $262 million to $194 million.
Operating costs went up with inflation pushing employee wages, investments, marketing, and travel expenses even higher.
REA’s stock dropped around 3% early on Friday, not long after sharing their results. Over the past 12 months, it fell just over 13%:
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REA warns of continuing property crisis and listings slump
The company shared precarious revenue, earnings, and other crucial financials in its latest report, covering the half-year ending 31 December, 2022.
In these inflation-rampant times, the group reported revenue had climbed 5% year-on-year, totalling $617 million.
Revenue was underpinned by 3% growth in Australia, thanks to yield growth across its advertising division of setting the challenging market environment, as well as deferred costs in prior periods.
Its EBITDA and other variables slid 2% at $359 million, not including the company’s associates.
Ultimately, net profit had fallen 9% in the half year, totalling $205 million.
The company reported interim dividends of 75 cents a share, which was flat year-on-year, and earnings per share were 15.5 cents, another slump of 9%.
Operating costs in Australia had increased 7% on increasing employee costs, wages, initiative expenses, marketing, and travel costs. This took into account reduced costs compared to lockdowns and deferral of spending that was backlogged due to the pandemic.
Buying revenue was improved by COVID-related deferrals, and an increase of an 11% buy yield offset the 9% decline in national listings.
Residential revenue increased 5%, commercial and developer revenue another 5%, however, media and data revenue categories and financial services declined 14%.
The group reported higher costs in India as the company continues raising its headcount, contributing to a total group operating cost increase of 15%:
Source: REA
REA’s outlook
REA says rapid movement in interest rates are crushing consumer sentiment and having a significant impact on Australian property prices and volumes.
The group says that while this trend may continue while interest rates remain high, once they stablise, it expects to see an increase of acitvity in the property market, especially boosted by a strong Ausatalian economy, increasing immigration, and low unemployment rates.
REA Group’s CEO, Owen Wilson, commented:
‘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 re-calibrate as borrowing capacities fell.
‘Despite these conditions, REA continued to deliver revenue and yield growth during the half. This performance underscores the strength of our products and audience, with customers increasingly relying on our premium products to maximise the impact of their campaigns.’
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Regards,
Mahlia Stewart,
For Money Morning