REA (ASX:REA) share price in focus after strong FY 2021 growth

This property listings company was a strong performer in FY 2021…

| More on:
A man looking happy whilst holding up two little wooden houses

Image source: Getty Images

The REA Group Limited (ASX: REA) share price could be on the move today.

This follows the release of its full year results for FY 2021 this morning.

REA share price on watch after strong FY 2021 result

  • Revenue increased 13% to $928 million.
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) up 19% to $565 million. This compares to the market consensus estimate of $560 million.
  • Net profit increased 18% to $318 million.
  • Full year dividend of 131 cents per share, up 19% year on year

What happened in FY21 for REA?

For the 12 months ended 30 June, REA was on form and delivered a 13% increase in revenue and an 19% jump in EBITDA. This was ahead of the consensus estimate, which could bode well for the REA share price today.

REA advised that this reflects excellent cost control and a strong Residential market recovery despite significant first quarter listing declines in Melbourne due to COVID lockdown measures.

This result also includes the acquired Elara business. Excluding the impact of acquisitions, revenue would have been up 11% and net profit would have been even higher and up 24% year on year.

In respect to costs, the company advised that its cost management restricted cost growth to 3% year on year. This increase was driven primarily by increased headcount and volume-related costs and incentives linked to stronger revenue growth, partly offset by lower costs in Asia.

Once again, REA continues to dominate the property listings market in Australia. It advised that 12.6 million people visited each month on average during FY 2021. This led to 121.9 million average monthly visits. This was up 35% year on year and was 3.3 times more than its nearest competitor.

It is also having a lot of success with its app. Average monthly app launches were 55 million in FY 2021, up 49% year on year.

What did management say?

REA Group’s CEO, Owen Wilson, commented: “This has been a defining year for REA, successfully navigating the pandemic to deliver an excellent financial result and emerge an even stronger business.”

“I am very proud of our team’s ability to respond to the changing needs of our customers and consumers during the pandemic, while also accelerating our growth strategy through a number of pivotal investments. Our flagship site delivered stellar results, extending its position as the clear market leader in digital real estate and it is now Australia’s eight largest online brand overall.”

What’s next for REA?

Also potentially giving the REA share price a boost today was its outlook commentary. Although management acknowledges that COVID-19 and lockdowns could impact its performance, it notes that it has bounced back strongly from previous disruptions over the last 18 months. Furthermore, this year its Australian Residential business will benefit from price increases which came into effect from the start of July.

One slightly disappointing (but not unexpected) note was in relation to current trading. July listing volumes fell 3% year on year due to weakness in the Sydney market because of its lockdown.

Looking ahead, once again, REA is targeting positive jaws in FY 2022. This is where revenue growth is stronger than its costs growth, leading to margin expansion. This could mean another year of solid profit growth for REA if all goes to plan.

Mr Wilson concluded: “REA is entering the new financial year with strong momentum, despite ongoing lockdowns. This momentum, coupled with our strategic investments and exciting product roadmap, provides an excellent platform for our continued growth.”

The REA share price is up 50% over the last 12 months.

Should you invest $1,000 in REA right now?

Before you consider REA, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and REA wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results