REA Group 1H25 Earnings Call Highlights

REA Group's (ASX: REA) first-half FY25 earnings exceeded market expectations for both revenue and net profit. However, a slight miss on dividends and the departure of its CEO put pressure on its share price in early trade on Thursday

1H25 Earnings Summary

• Revenue up 20.3% to $873 million (2.3% beat vs. consensus)

• Expenses up 17.9% to $338 million (0.2% below consensus)

• EBITDA up 22.3% to $521 million (1.2% beat vs. consensus)

• NPAT up 25.8% to $314 million (2.1% beat vs. consensus)

• EPS up 25.9% to 238 cps (2.5% beat vs. consensus)

• DPS up 26.4% to 110 cps (4.2% miss vs. consensus)

Earnings Call Highlights

The below topics have been answered by CEO Owen Wilson and CFO Janelle Hopkins.

CEO retirement: “After more than a decade with REA and having led the group for the past six years, I'm retiring from full time executive roles in the second half of 2025. The financial results we will share shortly demonstrate the excellent shape of our business. I am committed to the business and will ensure a smooth transition to the new leadership.”

Listings growth and forecast: “Nationally, total listings increased 5.5% year-on-year, thereby growth in Sydney and Melbourne. Listings in the September quarter were well above the 2023 and seven-year average.”

State of the real estate market and trends: “The Australian property market remains healthy and reached a more balanced level of supply and demand during the half. Buy demand has been supported by continued immigration, healthy employment levels and the view that interest rates have peaked.”

Buyer and seller activity: “Buy demand, coupled with steady house prices, have given vendors the confidence to bring their properties to market. Nationally, total listings increased 5.5% year-on-year.”

January listings: "January new listings were up 3% year-on-year, with listings growth accelerating in the second half of the month. This was the highest January listing since 2018 indicating a continued high level of seller engagement."

Structural changes to the sector: "We've also seen increased competition in pricing and packaging, which has slowed Housing.com's yield growth during the half."

Cost guidance and cost drivers: “In the half, we are pleased to launch our new innovation hub in India and to centralize our Philippines-based teams with a strategic partner. These capabilities will allow us to scale quickly and create efficiencies across the business.”

Interest rate expectations: “The expectation of at least one interest rate cut in the first half of 2025 will support the health of the market. The recent weaker than expected inflation numbers make an interest rate cut even more likely.”

Technological advancements: “We're currently working through the summer release. This site is underpinned by a major re-platforming delivery, which also sets us up for future enhancements.”

Forecasts: "Our expectation for double digit FY 2025 residential buyer growth remains unchanged. The magnitude of the growth may be impacted if the negative drag from geo-mix continues across the remainder of the year."

Analyst Q&A Highlights

Listings and Structural Trends:

• "I think the structural decline is over and, you know, I don't think that's continuing."

• "If you sort of look at a, you know, a five year, six year average and look at those numbers and do a bit of smoothing out, it's kind of been flat and maybe it's starting to tick up."

• "I think the conditions, as I said earlier, very, very good for both buyers and sellers, which is a great market and I don't see in the short-term what's going to knock that off."

• "We still have to have immigration and at some stage we're going to get the conditions for more construction. Right. We've got a housing shortage. So we're going to play the numbers, something like a 1 million houses short."

• "I think there’s some structural increase in listings over time. Not significant, but I think the structural decline we used to think that as long gone."

Cost base and marketing expense:

• "There’s a phasing from a marketing perspective... more investment weighted to the second half of the year in employee costs."

• "So when you get to the second half this year, we'll see a lower rate of cost growth."

Growth in Australia:

• "Geo mix be a little bit softer in the second quarter versus the first quarter. So that was the key reason for the very, very small decline in yield in Q2 versus Q1."

Capital management strategy:

• "We increased it 26% in our interim dividend this year."

• "If after an extended period of time there wasn't actually any M&A, we would potentially consider something like a special dividend."

Interest rate cuts impact:

• "I think you're seeing them already... it's already impacting the market for the positive."

• "I think we'll be in a downward trajectory on rates for at least all of this calendar year, which is going to be good for the market."

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