REA on a tear as value hits $10bn

The Weekend Australian - - BUSINESS - DAR­REN DAVID­SON PROP­ERTY

REA Group’s mar­ket value has hit $10 bil­lion for the first time af­ter News Corp’s dig­i­tal real es­tate busi­ness de­liv­ered a strong lift in first-quar­ter earn­ings.

Shares in REA have now jumped 56 per cent over the past 12 months, and 316 per cent in five years on the back of a mar­ketlead­ing po­si­tion in on­line clas­si­fied ad­ver­tis­ing.

The stock closed up 1.72 per cent at $76.17 af­ter REA re­ported a 24 per cent in­crease in earn­ings to $107 mil­lion for the three months to Septem­ber 30, 2017.

The op­er­a­tor of realestate.com.au said to­tal rev­enue climbed 21 per cent higher to $190m, driven by strong res­i­den­tial growth and the in­clu­sion of fi­nan­cial ser­vices rev­enue from Au­gust 1.

Tracey Fel­lows, chief ex­ec­u­tive of REA, told The Week­end Aus­tralian the strong re­sult was un­der­pinned by a “tail­wind from pos­i­tive list­ings” in the key mar­kets of Mel­bourne and Syd­ney, “price in­creases” and the “suc­cess of the Pre­miere All prod­uct”, where cus­tomers com­mit to us­ing the firm’s top-tier prod­uct for all of their list­ings.

Hamish McLen­nan, chair­man of REA, hailed the re­sults as “an in­cred­i­ble mile­stone”, and made ref­er­ence to the com­pany’s jour­ney from a strug­gling Mel­bourne start-up to a tech-driven multi­na­tional. “We should not lose sight of Lach­lan’s (Mur­doch, co-chair­man, News Corp) pre­scient in­vest­ment, made all those years ago,” Mr McLen­nan said.

When REA Group was fac­ing col­lapse a year af­ter float­ing in 2000, Mr Mur­doch in­vested in the firm and lever­aged the pub­lisher’s news­pa­pers to help it grow and pros­per.

Mr McLen­nan added: “I’m re­ally happy with the way it’s go­ing. It’s the best man­age­ment team we’ve ever had. Tracey is an out­stand­ing leader and the man­age­ment team is first class.

“We will con­tinue to in­no­vate as an Aus­tralian tech­nol­ogy leader and sup­port our agent part­ners. Robert Thom­son (CEO, News Corp) has been a great sup­porter of our global am­bi­tions.”

The re­sult comes as Fair­fax Me­dia pre­pares to par­tially spin off its prized real es­tate as­set, Do­main, which is REA’s main com­peti­tor for res­i­den­tial list­ings in Aus­tralia.

Ms Fel­lows said: “I’m pleased that they are go­ing to have the same kind of trans­parency that we have.”

Op­er­at­ing ex­penses at REA in­creased 17 per cent to $81m for the first quar­ter, up from $69m in the year-ago quar­ter.

The com­pany reaf­firmed its full-year rev­enue guid­ance for its fi­nan­cial ser­vices busi­ness to be­tween $26m and $30m.

Tracey Fel­lows

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