The REA Group Ltd (ASX: REA) shares price is falling on Friday morning.
At the time of writing, the ASX 100 property listings share is down 1.5% to $157.29.
This follows the release of the company's first-quarter update.
ASX 100 share falls on Q1 update
- Revenue up 12% to $341 million
- Operating EBITDA up 13% to $198 million
- Free cash flow up 13% to $64 million
What happened during the quarter?
For the three months ended 30 September, REA reported a 12% increase in revenue over the prior corresponding period to $341 million. This reflects an 11% increase in core Australian revenue, a 25% lift in India revenue, flat media, data, and other revenue, and a decline in financial services revenue.
Management notes that the Australian Residential business had a strong quarter with revenue up 12%. 'Buy' revenue benefitted from the 13% average national price rise, increased Premiere+ penetration, and a positive impact from the geographical mix due to the outperformance of the higher-yielding Sydney and Melbourne markets.
This was partly offset by deferrals, with a stronger end to the quarter resulting in significantly more revenue being deferred from the first quarter to the second quarter. Rent revenue was up year on year, with an 8% average price rise and increased depth penetration partly offset by a 3% decline in rental listings.
As for costs, the ASX 100 share revealed that Australian and Group core operating costs increased 10% respectively during the quarter. This was driven by higher employee, technology, and marketing costs. Excluding the impact of the CampaignAgent acquisition, Australian and Group costs both increased 7%.
This ultimately led to REA's operating EBITDA coming in 13% higher than the prior corresponding period to $198 million. While this is positive, it is run-rating well short of the market's expectations for FY 2024. This could explain why its shares are falling today.
Outlook
Positively, management revealed that the second quarter has started strongly. It advised:
October National residential new Buy listings were up 16% YoY, with Sydney increasing 33% and Melbourne by 32%. As previously flagged, YoY growth rates in Q2 will reflect particularly weak prior period listing volumes. Listings for October were 1% above the 6-year average.
Looking to the full year, management adds:
If this trend continues for the remainder of the financial year, we would anticipate FY24 YoY listings growth of 3-5%. Residential Buy yield growth is anticipated to grow double-digit in FY24, primarily driven by an average national price rise of 13%. We continue to target full year positive operating jaws and low to mid-teens Group operating cost growth for FY24.
