Real estate giant REA Group says a slowdown in new housing developments will see the lower ad volumes experienced in its first half extend over coming months.
REA Group, which operates the popular realestate.com.au listings website, reported an underlying profit of $147.3 million for the six months to December 31 and a 21 per cent jump in revenue to $406.8 million.
Revenue was boosted by a strong performance in its core Australian business which was achieved despite lower new dwelling commencements, REA said.
The company also announced a significant boost in its interim dividend to 47 cents a share, fully franked – up 18 per cent on the previous year.
Chief executive Tracey Fellows said total residential listings were lower during the half but listings grew in the key markets of Melbourne and Sydney.
The experience reflects new figures from the Australian Bureau of Statistics on Friday that showed the number of home loan approvals for owner occupiers fell 2.3 per cent in December – a sharper drop than what economists were expecting.
Ms Fellows expects the decline in new project commencements seen during the first half to continue in the second half of the financial year and to impact revenue from the Developer business.
“We are seeing early signs that Melbourne and Sydney have growth in listings, but we are seeing across the country no significant increase in listings, which are the conditions we have seen in the last couple of years.”
“I think we certainly see the decline for the rest of the fiscal year and beginning of next year.”
Ms Fellows blamed government regulation around foreign ownership, the removal of stamp duty sanctions on new properties and the tighter lending requirements from the banks for the decline.
“All of that combined has meant less of those projects are now being kicked off and started,” she said.
Despite the lower new dwelling commencements, REA’s Australian business performed well, with agent numbers up five per cent compared to a year ago.
Australia’s premium advertising products, through which agents pay more to feature prominent listings of a property, grew 21 per cent to $295.6 million thanks to increased yield.
Revenue growth was also driven by the inclusion of REA’s new financial services segment, which includes its recently acquired mortgage broker Smartline, realestate.com.au Home Loans and realestate.com.au Mortgage Brokers.
The sector generated operating income of $13.2 million in its first reporting results.
The News Corp-controlled company’s net profit was lower, down 55 per cent at $132.4 million, from $292.1 million a year ago when the bottom line was boosted by proceeds from the sale of its European operations atHome Group and REA Italia.
Ms Fellows said REA has continued to gain market share from its closest peer Domain, which is currently searching for a new chief executive following the surprise resignation of Antony Catalano in January.
“We are well and truly growing share, but we are never complacent,” she said.
REA shares close $1.46, or 2 per cent, higher at $72.97 on a day the broader market fell almost one per cent in the wake of heavy overnight losses on Wall St.
REA GROUP GETS BOOST FROM AUST DIVISION:
* Underlying profit up 21pct to $147.3m
* Revenue up 21pct to $406.8m
* Fully franked interim dividend of 47cps, up seven cents