REA declares record dividend but expects property market to continue to moderate

REA Group (ASX: REA) expects the Australian residential property market to continue to moderate as interest rates rise but remain supported by ‘strong underlying fundamentals’ including record low unemployment and high household savings.

FY22 earnings at a glance:

• Revenue of $1.17bn, up 26%

• EBITDA of $674m, up 19%

• EBITDA margin of 57%, down 3 percentage points

• Net profit of $408m, up 25%

• Full year dividend of 164 cents per share, up 25%

• Closing cash position of $248m compared to $169m a year ago

REA will pay a final dividend of 89 cents a share, the biggest dividend on record for the company and 23.6% ahead of its previous final dividend of 72 cents a share. The stock will go ex-dividend on Thursday, 25 August.

The profit figure was slightly below Bloomberg estimates of $412m. 

FY22: From strength-to-strength

REA continued to flex its dominant position in the Australian market, which accounts for approximately 95% of Group revenues. The flagship realestate.com.au site averaged 124.1m monthly visits, with a record 145.5m visits in October 2021.

Residential revenues rose 24% to $776m, benefiting from an 11% increase in national new listings growth and an 8% average national rise in housing prices.

Still, listings growth was on a rather weak trend on a quarter-on-quarter basis, peaking at 22% in the second quarter and growing just 2% in the fourth quarter. 

REA’s India business also delivered an ‘impressive performance’ with revenue growth of 92% to $54m, driven largely by Housing.com’s property advertising business. 

As at 30 June 2022, the Group had a cash balance of $248m and free cash flow generation of $394m, up 55% compared to last year. Morgans was expecting a free cash flow figure of “over $300m”. 

Outlook 

“REA enters the new financial year in a very strong position with a clear strategy for future growth. While we’re mindful of changing economic conditions, with further interest rate rises expected, Australia’s property market is healthy and supported by strong underlying fundamentals,” said CEO Owen Wilson. 

July National residential new listings were up 7% year-on-year but reflects Sydney and Melbourne lockdowns in the prior period. 

REA was light on FY23 guidance, saying it will target full year positive operating jaws for Australia - where revenues rise faster than costs.

Source: TradingView