The REA Group Limited (ASX: REA) share price has taken a dive this morning, falling over 8% as the Group withdrew its FY20 guidance. REA Group cited the rapidly escalating impact of COVID-19 for the move.
According to REA Group, it is not possible to predict the impact of the current environment on listing volumes and therefore, the potential impact on the company's financial performance.
In early February, REA Group outlined continued signs of a property market recovery including a gradual recovery in national listings led by Sydney and Melbourne. This trend has continued to date with Australian residential listing volumes for the March month to date strongly positive for both Melbourne and Sydney and also up at a national level.
Over the past few weeks, however, the impact of COVID-19 has rapidly escalated with Governments around the world introducing a series of measures to slow the spread of the virus. Given the exceptional circumstances REA Group is now operating under, it is currently assessing the potential impact on its FY20 financial performance and has withdrawn its previous outlook.
REA Group is the latest company in a growing roster of ASX shares that have withdrawn or downgraded guidance due to the impacts of coronavirus.
Response to COVID-19
REA Group is seeking to help customers through these unprecedented conditions by introducing tangible measures. These include the ability to re-list or re-upgrade listings for free. It is also delaying the timing of contracted price changes in its Residential business, which were previously due on 1 July, until further notice. The duration of these measures will continue to be assessed based on market conditions and further developments with the coronavirus.
REA Group emphasised that it is well equipped to operate in the current challenging environment and has continuity measures in place. The company has a healthy balance sheet, low debt levels, and the capacity to increase debt facilities as necessary.
In more positive news, the Group reported realestate.com.au received new audience records of 93 million visits and app launches of 38.4 million in February. The real estate market had been recovering strongly prior to the coronavirus outbreak with buyer activity on realestate.com.au up 30% during the first half.
REA's first-half results
Cost management and efficiency initiatives put in place during the real estate market downturn resulted in a 4% reduction in REA Group's total operating expenses during the first half. Nonetheless, declines in new residential listing volumes and new project commencements weighed on revenue, which was down 6% to $440.3 million.
National residential listings declined 14% in 1HFY20, including declines of 17% in Sydney and 16% in Melbourne. New project commencements declined 30% over the half. This resulted in a 13% fall in net profit from core operations for REA Group, which fell to $152.9 million.
