REA FY24 Earnings Call Highlights

REA Group (ASX: REA) shares are ticking higher after reporting double digit earnings and dividend growth for FY24. However, most of the result fell slightly short of analysts' high expectations.

FY24 Earnings Highlights

• Revenue up 23% to $1.45bn, in-line with $1.45bn consensus

• National listings up 7% year-on-year, this was in-line with Citi expectations but short of Macquarie forecasts of 10% growth

• Operating expenses up 18% to $628m

• Group EBITDA up 27% to $825m

• Net profit after tax up 24% to $461m, below $465m consensus and $470m Macquarie ests (0.8% and 1.9% miss respectively)

• Earnings per share up 24% to 349 cents

• Full-year dividend up 20% to 189 cents per share

Earnings Call Highlights

Listing trends: "Nationally, new listings were up 7% year-on-year and were 5% above the six-year average ... Inquiries returned to growth in FY 2024, up 14% year-on-year and continued to trend higher in the second half." – CEO Owen Wilson

National listing trends: "National new buy listings increased by 7%, with the outperformance of Sydney and Melbourne markets continuing throughout the year. Sydney and Melbourne new listings saw growth of 21% and 22% respectively." – CFO Janelle Hopkins Property market outlook: "The Australian property market strengthened in FY 2024 with interest rate stability supporting market activity. The return of vendor confidence, coupled with strong buyer demand, saw sales volumes increase, while national house prices reached a new peak in June ... When we swing into the second half of this financial year, we could be in a market that is expecting interest rates to be on the way down." – CEO Owen Wilson

Cost drivers: "Core Australian operating costs increased 14%, reflecting a number of key factors. The largest driver was employee costs, impacted by incentives, which were paid out below 100% last year but will be well above 100% this year, given FY 2024 strong performance." – CFO Janelle Hopkins

Earnings outlook: "Residential Buy growth in FY 25 will primarily be driven by an average 10% price rise in our highest penetrated products Premier plus ... EBITDA losses in India are anticipated to be lower in FY 2025 compared to FY 2024." – CFO Janelle Hopkins

Leveraging AI: "Our continued investment in our AI generated personalised home page experience is encouraging consumers to take the next step in their property journey. The home page delivered 7.5 million personalized recommendations ... In June, we added an AI room visualisation feature to our property owner experience powered by Roomvo. The feature enables consumers to digitally change property images and has been used to restyle over 500,000 property images in the first few weeks since launch." – CEO Owen Wilson

Analyst Q&A Highlights

King Hannan (Goldman Sachs) asked about yield outlook into next year: "What we've flagged is that we think that yield growth will be primarily driven by the 10% increase in premier plus up price. Where you will land will really depend on a number of key factors... We do expect it to be marginally negative in FY 2025, just based on the strength we've seen in Melbourne and Sydney this year."

Eric Choi (Barrenjoey) re listing outlook: "The only thing you can do sitting here today in this sort of market is assume flat... We start of July well, the noise around spring is positive... Melbourne City could be flat, might be slightly down, might be slightly up. I think the other capitals have like Melbourne, Sydney and they're already showing signs of now coming strongly up."

Entcho Raykovski (E&P) re inflation drivers: "It's probably fair to say about half of it is inflation related, so obviously salary increases. And then we have the flow through and obviously technology costs associated with suppliers increasing their expectations around, increases there. And then, it's really then going to be the flow through of the additional strategic investments that we're making flowing through into FY25."

Lucy Huang (UBS) re listing trends: "In Q4 as we did say some of the other cities such as Brisbane, which is that third highest yielding cities, start to turn positive, that genomics benefit had started to come down. What it means for the full-year will really just depend on where the rest of the cities listings perform compared to Melbourne and Sydney. Our current expectation is it's likely to be a small negative, a drag into FY24 – FY25."

Roger Samuel (Jefferies) re additional marketing: "So, it's very strong audience numbers, that lead with continue to maintain over our competitors. Are people seeing now marketing campaign at the Olympics, and we're very, very pleased with that. And what that drives is not only audience, but things like people coming and claiming their property, people visiting the owner dashboard, which, as we said in that speaking notes drive accelerates leads to our customers."

This article was generated with the support of AI and reviewed by an editor.