The REA Group Ltd (ASX: REA) share price is on the move on Friday following the release of the company’s FY 2023 results.
At the time of writing, the property listings company’s shares are up 1% to $159.89.
REA share price higher on FY 2023 results
- Revenue up 1% to $1,183 million
- Operating expenses up 7% to $532 million
- Earnings before interest, tax, depreciation and amortisation (EBITDA) down 3% to $651 million
- Net profit down 9% to $372 million
- Earnings per share down 9% to $2.82
- FY 2023 dividend down 4% to $1.58 per share
What happened during the year?
For the 12 months ended 30 June, REA reported a 1% increase in revenue to $1,183 million.
This was driven by the strong performance of REA India, with revenue up 46% year on year. Australian revenue declined by 1%, with yield growth across advertising products being more than offset by the challenging market. The latter saw national listings fall 12% in FY 2023.
Supporting its Australian revenue was its leadership position. A total of 12.1 million people visited each month on average during FY 2023, which represents 61% of Australia’s adult population. Furthermore, there were 120.6 million average monthly visits, which is 3.3 times more visits than the nearest competitor each month on average.
REA’s operating costs increased by 7% to $532 million. While Australian operating costs growth was restricted to 1% thanks to the tight management of employee costs and lower marketing spend, its Indian operation was not as tightly controlled. It reported higher costs from continued investment in people, increased marketing, and growth in revenue-related costs.
This ultimately led to the company posting a 3% decline in EBITDA to $651 million and a 9% reduction in net profit to $372 million.
In light of this profit decline, the REA board cut its FY 2023 fully franked dividend by 4% to 158 cents per share. This includes an 83 cents per share final dividend.
How does this compare to expectations?
While its performance might not be much to write home about, it has come in a touch ahead of what the market was expecting.
Goldman Sachs was expecting REA to report revenue of $1,182 million, EBITDA of $636 million, and a net profit of $367 million. Whereas the market was looking for EBITDA of $633 million.
This earnings beat could be boosting the REA share price today.
Market-beating returns
The housing market may not have been on fire over the last 12 months, but the REA share price certainly has. As you can see on the chart below, it is now up 20% since this time last year.
Management commentary
REA CEO Owen Wilson was pleased with the company’s performance in a difficult market. He said:
Our year-on-year performance reflects the comparatively very strong listings environment in 2022.
Despite the significantly lower listings in FY23, REA Group’s result demonstrates the strength and resilience of our business as customers continued to prioritise our premium products, leading platforms, and superior audience.
Our Indian business continued to deliver exceptional revenue growth and extended its leadership position as the No.1 property portal by audience in the Indian market.
Outlook
Wilson appears optimistic about the future and believes the company is well-positioned for growth.
The company is also doing its bit with costs and is targeting positive operating jaws (revenue growing quicker than costs) for the group. That’s despite management expecting operating cost growth for both Australia and India in the high single-digits to low double-digits. This reflects employee cost increases and technology cost inflation.
Mr Wilson commented:
The fundamentals of the Australian property market remain healthy. We are continuing to see strong demand and a return to price growth, and this is converting to a more attractive market for sellers. We believe stabilization of interest rates is within sight and expect this will lead to an increase in market activity.
In this environment, REA Group is well positioned for growth. We are focused on delivering products that provide the greatest value to customers and enhance the experience of our audience, and we see significant opportunities in the year ahead.
