Profit dips, optimism swells at REA Group

by Madison Utley12 Aug 2019

As forecasted in its third quarter 2019 debrief, REA Group’s full year financial results revealed a notable decrease in profit in its financial services division.

The financial services business delivered revenue of $27m, an 8% reduction on the previous year.

The group attributed the decline to tighter lending conditions and the subdued property market.

The report highlighted that national listings decreased 8% over the year, including declines of 18% in Sydney and 11% in Melbourne.

REA’s financial services business is one of three major divisions for the group. Through offering a white label loan from NAB, REA has crafted a platform for house hunters to potentially secure a property and a loan through their site, realestate.com.au, which has the largest audience of property seekers across all platforms with 1.2m visits each day. 

Over the year, REA “further strengthen[ed] the group’s focus on financial services” through acquiring the remaining minority shares in Smartline for $16m, bringing its ownership to 100%.

Looking ahead, the group expects the decline in mortgage settlements to continue into the first half of FY20, with listings likely to be lower than the same half last year, particularly in Melbourne and Sydney.

Residential listing volumes were down 19% in July 2019 as compared to July 2018, with declines of 31% in Sydney and 29% in Melbourne.

As such, the group is anticipating revenue growth in FY20 to be “heavily skewed” towards the second half.

White the rate of revenue growth is expected to exceed the rate of expense growth for FY20, the group does not expect each quarter to chart consistent progress, given seasonal listing considerations and the timing of expenses over the year.

Despite the challenges of the last year, REA Group CEO Owen Wilson expressed optimism looking into the future.

He said, “A number of factors are now in place to support a market recovery, including lower interest rates and an improved lending environment. Coupled with a very healthy increase in buyer activity, it signals an eventual recovery of listing volumes.

“The strength of REA’s strategy positions the group well to continue to deliver superior value to our customers and consumers.”