REA Group Limited revenue soars 20%: What you need to know

Credit: Steve Webel

Shares of REA Group Limited (ASX: REA) will be in focus on the market today following the announcement of its third-quarter results this morning.

For the nine-month period ended 31 March 2016, REA Group reported core results , which is a reporting method which excludes a number of items from official statutory results. Crucially, the core results exclude transaction costs and revaluation gains associated with the company’s takeover of iProperty Group.

Accordingly, for the nine-month period, revenue growth was up 20% over the prior year at $461 million, while segment-level operating profit was 25% higher at $263 million. 

Free cash flow came in at $146 million, up 50%.

The company attributed the stronger results to the ongoing success of product strategy. However, operating expenses rose 21% for the quarter, reflecting increased marketing spend and strategic initiatives.

“It has been another strong quarter for REA Group,” REA Group CEO, Tracey Fellows, said.

“ continues to outperform any other property site in the country with more than twice the visits on our main and mobile sites.”

“We continued to deliver great consumer innovation – introducing a new tool allowing property owners to “claim” their property.”

REA Group also provided an update on its iProperty acquisition. It said the results of the growing technology business were fully consolidated into the larger group as of 1 February 2016.

“The iProperty transaction completed on schedule in February and our global footprint now spans four continents,” Ms Fellows said. “We’ve proven the depth of our leadership talent and skills with the successful first steps of integrating IPP into the business.”

Foolish takeaway

REA Group continues to to build on its outstanding success over time and appears to have many strings it can pull for growth. However, it’s important investors consider the risks of investing in any business before buying, especially technology businesses like REA Group.

For example, while REA says it is the far-out leader in the local property market, investors should closely monitor the success of Fairfax Media Limited’s (ASX: FXJ) Domain group and remember no stock is a buy at any price.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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