This morning online property portal REA Group Limited (ASX: REA) posted its profit report for the full year ended June 30, 2017. Below is a summary of the results with comparisons to prior corresponding periods.
- Statutory net profit of $206.3 million, down 12%
- Adjusted net profit of $228.3 million, up 12%
- EBITDA (operating income) of $380.9 million, up 16% on prior year
- EBITDA margin of 57%
- Total revenue of $671.2 million, up 16% on prior year
- Full year earnings per share of $1.73
- Final dividend of 51 cents per share, full year 91cps, up 12%
- Took a non-cash impairment of $182.8 million on Asian business over H2 17
- Closing cash balance of $358.5 million
- Outlook for operating expense growth to exceed revenue growth in some quarters of FY 18
This is another solid result of double-digit growth from REA Group, despite a year of soft property listings across its core Australian market. The performance of the local realestate.com.au website again the highlight of the result with listing depth revenue up 18% to $481.8 million.
However, the group's Asian business under the iProperty umbrella is struggling and it has already written off $181.5 million of its total investment around $750 million in buying the iProperty Group. I would not be surprised if there are more write downs to come given the eye-watering multiples of EBITDA and sales, REA Group's management agreed to pay for the iProperty business.
Outlook
This remains a high-quality business, but the stock could come under selling pressure today as it trades on a big valuation and the underlying growth rates alone may not be sufficient to justify the valuation.
Moreover, the group's outlook statement warned of a continued slowdown in new residential construction dwellings in Australia. It also appeared to suggest that expense growth may exceed revenue growth over some quarters in FY 18 in a statement that could send investors to the exits this morning.
