The REA Group Ltd (ASX: REA) share price is under pressure on Thursday.
In morning trade, the property listings company's shares are down 4% to $176.17.
Investors have been X the company's shares after it released its half-year results.
REA share price tumbles on half-year results
For the six months ended 31 December, REA reported:
- Revenue up 18% to $726 million
- Operating expenses up 11% $287 million
- EBITDA (excluding associates) up 22% to $439 million
- Net profit up 22% to $250 million
- Fully franked Interim dividend up 16% to $0.87 per share
What happened during the half?
REA had another strong half, delivering an 18% increase in revenue to $726 million for the period. This was driven by a 17% increase in Australia revenue to $682 million and a 21% lift in India revenue to $44 million.
In respect to its local operations, the company revealed that its flagship realestate.com.au website continues to dominate its market.
Approximately 10.6 million people visited each month on average, with 52% exclusively using realestate.com.au. In addition, it had 126.1 million average monthly visits, with visitors spending 3.0 times longer on realestate.com.au each month on average compared to the nearest competitor.
This helped support listings growth of 4% for the half nationally, with Sydney and Melbourne listings increasing 19% and 18%, respectively.
Failing to hold up the REA share price today was news that the company delivered positive jaws during the half despite the inflationary environment. Positive jaws is the term used to describe revenue growth quicker than costs.
REA's operating expenses were up 11% to $287 million for that half. This increase was driven by remuneration increases, growth in technology costs and higher revenue-related variable costs. Excluding the impact of the CampaignAgent acquisition, group and Australia operating costs increased by only 9%.
This ultimately led to REA's EBITDA and net profit increasing by an impressive 22% during the half, which allowed its board to boost its dividend by 16% to 87 cents per share.
Management commentary
REA Group CEO, Owen Wilson, was rightfully pleased with the half. He commented:
REA has delivered an outstanding result driven by strong yield growth and the benefit of a more normalised listings environment. This resulted in a strong uptake of our premium products as customers sought to leverage our leading audience to maximise their campaigns in the strengthening market. REA India's momentum also continued with price and customer growth and new premium depth products delivering strong revenue growth.
How does this compare to expectations?
Goldman Sachs was pleased with the half, noting that it came in ahead of expectations. It commented:
Sales/EBITDA/NPAT +18%/+23%/+22% vs. pcp to A$726mn/A$426mn/A$250mn, which were +0%/+2%/+2% vs. GSe, with EBITDA +2% vs. Visible Alpha Consensus Data (A$415mn). With Dec-23 listings flat, the 3% deferral drag in the half was greater than expected, but this was offset by stronger Commercial/Developer revenue growth (+11%).
Outlook
Management is feeling positive about the second half but acknowledges that it could be softer.
It advised that Residential Buy yield growth is anticipated to be lower for the second half, because the first half outperformance of Melbourne and Sydney listings is unlikely to continue for the entire period.
In addition, it has lifted its cost guidance for FY 2024. This could be partly why the REA share price is falling today.
The company advised that "group operating cost growth in the mid to high-teens is anticipated in FY24, with positive operating jaws targeted."
Wilson concludes:
We are very pleased with our first half result. The confidence that interest rates are at or very near the peak, should see the healthy market conditions we are enjoying today continue throughout 2024. We will continue to invest in further personalisation and new experiences for our audience, new products that will deliver further value for our customers and the increasing demands of consumers around privacy and data security.
The REA share price remains up over 40% since this time last year.
