REA FY25 -- Top 10 Position -- Showing the strength of incumbency

 REA GROUP FY25 RESULT

Revenues were 1% light and NPAT in line, FH stronger and slowed into 2H. NPAT and EPS up 23% and revenues 15% higher. Australia proves resilient and the slight disappointments came in the overseas businesses and finance.

REA guided to double digit yield growth into fy26 both price and mix. Overall market to remain firm.

The property platform experienced good growth and comprises $1006m of the group $942m ebitda, so it is the driver. REA continues the playbook of adding features, increasing dominance and engagement and pushing through price increases. Numerous extra features are being added. REA highlighted, in the graph below the REA take rate is at 20bp where the whole take is 60-70bp while REA adds all the most value. They believe there is a long runway here and that is the main game.

They are expecting some response from Costar as the takeover of Domain closes. More capex and marketing is budgeted.

Finance should see a cyclical upturn as volumes improve on falling interest rates.

India seeing little headway at the ebitda level and REA expects losses to widen as KYC and compliance slow growth. They remain committed to strengthening their position there. REA appears the online leader.

Cash rec looks fine and balance sheet now in net cash with the sale of Property Guru.

REA remains an extremely profitable business and the ability to profitably deploy spend and add value and increase prices in the domestic market is key. Overseas businesses remain problematic but are small to the overall value. Finance small as well. The competitive environment in Australia will have to be monitored. My base case is that Costar will not make an impression. The incumbent in such a strong position has proven very difficult to dislodge.

Valuation

The assumptions are for double digit growth, 16%pa for the next five hear and a 38X exit multiple. That makes the stock interesting below $200 and a buy at $180.

RESULTS SUMMARY

Owen Wilson   CEO & Executive Director

REA Group has delivered an excellent FY '25 result, underpinned by double-digit yield growth, deepening consumer engagement, and the superior value delivered to our customers.

Turning to the results from core operations for the year. Revenue was $1.67 billion, an increase of 15%, and EBITDA excluding associates, was $969 million, an increase of 18%, and NPAT was $564 million, an increase of 23%.

listings remain broadly in line with a very strong prior year. New national buyer listings remained above the 7-year average, while quarterly growth rates reflected significantly varied comparables.

The more normalized market conditions of FY '25 supported vendor confidence with buy listings up 1% on the prior year and just 1% below FY '18. The first interest rate cuts in 4 years accelerated buyer demand to reach peak levels in the second half. National house prices finished FY '25 at a new peak around 5% higher than a year ago.

More people turn to our leading platform than ever before with a new Ipsos record of 12.7 million people visiting realestate.com.au in April. Our personalized owner experiences helped drive a 55% increase in seller leads and 4.5 million Australian properties are now tracked by their owner on our site.

Customers continue to turn to our premium products to differentiate their listings with Premier+ in residential and Elite Plus in commercial, both achieving record depth penetration. In India, we recently announced the divestment of PropTiger (agent advisory), enabling greater focus on the core housing.com business.

We also announced our exciting investment in Athena Home Loans, and we established our Cyber City innovation hub in India and centralized our support teams in the Philippines. We have a consistent strategy with 3 simple goals: providing personalized property experiences to engage the largest consumer audience, delivering leading products and services to drive superior value to our customers, and leveraging unparalleled data insights as we expand our core business and build next-generation marketplaces.

Supporting our growth strategy, we have continued to acquire new capabilities, taking minority stakes in IMMERSIV, a 3D visualization platform and [indiscernible] an AI-powered search platform based in the U.K.

Realestate.com.au delivered record FY '25 audiences, and we increased our lead over the nearest competitor with 12 million people visiting the platform on average each month. Over half of these visitors use our site only. This means there are more than 6.4 million potential property seekers that can't be reached on our nearest competitor's platform.

Highlighting the strong consumer engagement, our business lead over the nearest competitor has also significantly increased. Our consumer strategy is centered on converting large-scale audience to members, and we are pleased to increase our active membership base by 12%. Our personalized property owner experiences nurture deep engagement and are key to driving quality seller leads. Owner experiences helped generate around half of all seller leads.

In FY '25, we uplifted the inspection experience for both consumers and customers, resulting in a 253% increase in REA inspection registrations in the second half.

Sharing the property journey with others is often a key part of the experience, and our next-gen initiative has supported a 21% year-on-year increase in consumers sharing buy listings. This is a multiyear program of work, which will ultimately shift the listing experience from fixed to dynamic and highly personalized. Our research platform, property.com.au, is the #3 Australian property website with 2.1 million people visiting on average each month. In FY '25, we launched multiple new experiences and features, including the first media partnerships on the platform, our first step towards monetization.

Turning to customers. Record Premier+ penetration supported excellent yield growth in our core residential business. Powered by NextGen, Premier+ is the most comprehensive and highest performing listing product, delivering 20% more inquiries than a Premier listing and selling 12 days faster on average. As part of our commitment to delivering greater choice and flexibility, we introduced new options for Audience Maximizer in our FY '26 contract rollout. Starting at just $99 an Audience Maximizer add-on complements our core product offering, and customers have recognized this value with penetration more than doubling in the latest round of contracting.

Our highest performance listing solution, Luxe, is proving to have broad market appeal and uptake continues to build traction, demonstrating the significant value offered to customers and their vendors, Luxe generates twice the number of views compared to a Premier+ listing.

The value we provide to a vendor is undeniable and the cost of this is a fraction of the total cost of selling a property, which typically runs at about 2% to 3%, depending on where you are in the country. This slide highlights the rapid growth in national property prices over the last 5 years, alongside the average cost of advertising on REA relative to the property price. While average national property prices have grown by 8% CAGR since FY '20, REA's average take rate has remained relatively steady. And over the last 2 years, it is broadly in line with FY '20.

Our range of subscription support customers to grow their business and is designed with choice and flexibility at the core. They range from the cost-effective basic offering through the Pro. Pro offers the most advanced solution for customers to elevate their brand to prospect and generate leads and to simplify their working day.

Realcommercial.com.au is Australia's #1 place for commercial property. 1.9 million Australians visited the platform on average each month, which is a record 3x more people than the nearest competitor. Our top-tier commercial product, Elite Plus achieved record penetration.

Turning to Financial Services. Improved market conditions throughout the year and strong brand activation supported an increase in submission volumes, which has flowed through to a pleasing increase in settlements. The finance experience on realestate.com.au was enhanced this year with more prominent placement and new features. This uplift supported a 46% increase in realestate.com.au generated broker leads.

Turning to our Indian business. The housing market is strong and digitization continues to accelerate. We have streamlined the business. We have a talented team in place to deliver on our app-first strategy and our new CEO, Praveen Sharma, commenced last month.

Our Indian business delivered strong revenue for the year, primarily driven by the Housing Edge platform. Last month, we entered into a binding agreement with an NSE listed business, Aurum PropTech to divest the PropTiger business in exchange for a 5.5% equity interest Aurum. This move streamlines our Indian operation and will enable an increased focus in our core housing.com business.

We are firmly committed to our app-first strategy as we know this is the future of the Indian property experience. This focus continues to deliver strong results with Housing.com holding the lead in app downloads with a 56% share. We also remain focused on listing quality and information accuracy. Verified listings are a key component of maintaining and nurturing consumer trust and driving audience. New verified listings on Housing.com increased 58% year-on-year.

Our next-gen listing initiative will continue to drive increasing consumer engagement and value for customers. We've completed another successful round of recontracting for FY '26, supporting record adoption and growth in the penetration of our products.

The value of our premium products will continue to underpin our future growth.

Janelle Hopkins   CFO

with the biggest driver of the variance reflecting the sale of the group's investment in Property Group in the first half.

Turning to our Australian residential business and trends in the market. Our residential business had another strong year with revenue growth of 16%, driven by double-digit yield growth and modest listings growth for both buy and rent.

Buy yield continues to be the main driver of our residential performance, up 14% for the year. Yield was driven by a 10% average Premier+ price rise, year-on-year growth in overall depth and Premier+ penetration, growth in add-ons, largely audience maximizer and Luxe and a 1% positive impact from the consolidation of Realtair. This was partly offset by a 1% drag from geo mix.

Rent continues to perform well with year-on-year growth, largely consistent with our buy revenues. Rent revenue benefited from double-digit yield growth driven by an 8% price rise and increased depth and 4% growth in listings. While it's very early days for Luxe, penetration is tracking in line with our expectations, and we continue to see Luxe take-up across properties of all values with properties less than $2 million, making up nearly half of Luxe listings.

Commercial and Developer revenue increased 10% to $218 million. Commercial revenue increased by 16%, driven by an average 12% price rise, increased debt penetration and modestly higher listings. Developer revenues were up 5% from prior year, with the growth from increased project commencements, project profile duration and a price rise from 1 July tempered by more modest growth in display revenue.

Financial services revenue increased 10% to $81 million. Volume accelerated throughout the year, with settlements growth increasing from 6% in the first half to 14% in the second half. EBITDA growth for Financial Services increased an impressive 24%, and the full year EBITDA margin increased 400 basis points to 29%.

REA India delivered 25% revenue growth. this was largely driven by revenue from adjacent services on housing edge, which increased 72% due to increased customer acquisition and usage and a price rise. Additional controls that we introduced progressively in the second half had the anticipated effect of slowing volumes and Housing Edge revenues declined 15% year-on-year in Q4. We would expect a reduction in volumes and revenues to continue into FY '26.

Housing.com revenue was up 7%, with customer growth from stronger events and improved monetization in Tier 2 cities. However, we've also seen increased competition in pricing and packaging over the course of the year, which has impacted Housing.com's yields.

PropTiger revenues declined by 17% to $14 million and was broadly EBITDA breakeven.

Looking into FY '26, we expect EBITDA losses to widen, although remain below FY '23 peak losses, reflecting our expectation for the Q4 decline in Housing Edge volumes and revenues to continue into FY '26.

Moving to our strategic investments. Total losses from equity accounted investments for the year was $26 million, in line with the prior year. Move's revenue was up 1%.

Losses from other associates increased to $7 million from $5 million in the prior period, reflecting the new investment in Athena Home Loans, and increased investment in Arealytics.

Over the last 5 years, REA has consistently invested to drive better consumer experiences and deliver more value to customers with Australian CapEx increasing from $73 million in FY '20 to $126 million in FY '25, a compound growth of over 14% per annum. In FY '25, this investment was focused on a number of new products and experiences across all lines of business.

CapEx to revenue was 8% in FY '25, and we anticipate a rate within our 7% to 9% target range in FY '26. FY '26 depreciation and amortization is expected to be in the range of $143 million to $152 million.

Turning to our cash position. We ended the year with a strong closing cash balance of $429 million. The group delivered operating cash flows of $675 million. This, along with 278 net proceeds from the sale of PropertyGuru

Finally, on the FY '26 outlook. We expect national residential listing volumes to be broadly in line with last year's healthy market.

The group continues to target double-digit residential buy yield growth, including a 7% national average Premier+ price rise. We note that consistent with prior years, geo mix can be a positive or negative swing factor to our yield outcome. We're targeting positive operating jaws and anticipate high single-digit group operating cost growth, excluding PropTiger. This will be driven by continued strategic investment and COGS related to strong growth in Audience Maximizer. EBITDA losses in India will be impacted by lower expected Housing Edge revenues and associates losses are expected to modestly improve compared to the prior year.

Q&A 

Guidance strong yield

A bit to unpack there. Look, in terms of the current year and why we've guided to double digit, it is because we are confident. We've got a 7% price rise that's embedded. We know we've got increased depth penetration. I talked about in the recontracting, we've over doubled and I say over the penetration in Audience Maximizer. Luxe is getting great traction. And we expect the penetration of Luxe to continue to tick up.

And then when you go out to '27 again, our long-term guidance hasn't changed. And we've always priced to value. We know we've got more value to deliver to customers and consumers. And therefore, we feel we're entitled to price accordingly. Also, we will continue our guidance positive jaws. It's what we always target.

Just a reminder, we talk about yield growth, not price. So again, it can be made up of multiple things (mix). If you think about Luxe, we've talked about Luxe, substantially higher price point, but it's super early days. And you can see it's just a very thin line on that penetration chart. We see that will give us long-term runway for yield growth into multiple years.

 

India

In India, the #1, I don't think that's just web. We can't measure app audiences in India. We are very confident that on the things we can measure, such as sessions and downloads, we are the clear #1 in app in India. And unfortunately, like we do in Australia, we can't combine app audience and web audience. So we're deliberately focused and unapologetically focused on app because that will be the future. We are hopeful at some stage in the coming years, we'll be able to measure independently app audience of us and the competitors to prove that we're ahead.

And in terms of losses, what you're going to see there is primarily the Housing Edge product coming down. We've put some more controls in place to just derisk people who are using that, make sure we've got KYC in place, those sorts of things. It creates a bit of friction. It will deliberately bring down [indiscernible] but it still remains a healthy profitable revenue flow. And so we like it, but we expect that just to come down a bit in volume. Long term, though, our focus hasn't changed. We want to be #1 in India.

 

Property website

And we are making great ground on the #2 with that site. So at the moment, it has been a research site. We have been using it as a test site for certain things. Again, we have plans going forward and how we might monetize that and differentiate the experience. It gives us great optionality to have an audience like that. A reminder that the stats are quite compelling in the number of actual buyers, people are actively buying who go to that site. So it's a high-intent audience on property.com.au because it's a research site. And that increase in audience is with very limited marketing. And if we start to market that brand, it will take off because it's such a great site. So I'll leave it there, but it does create an exciting optionality for us, and there are plans in place.

Costar in Domain

Look, we've known that domain change in ownership was coming -- we've known for a long time. I think you've heard me say we presented to our Board in the middle of last year around CoStar coming to the Australian market. We know their playbook. We know what they've done in the U.S. We know what they've done in the U.K. You can assume that our cost guidance absolutely has factored in their entry to the market and everything we think they might do, including a significant increase in marketing. So that's already factored into the cost guidance that we've given.

ACCC

This is not about prices. I mean putting your prices up, it's not illegal in Australia. And I remind everyone that all customers have got choice. This is not a compulsory purchase. You can purchase any level of product, any level of subscription and that's the fact. I'll reiterate my comments that with this review underway, we remain confident on our guidance to double digit. We price to value, and we're going to continue to do that. In terms of the details of the matter, look, I can't talk to the details. I don't think we're going to hear anything for a very long time.

Take rate

Look, again, it varies across the country. You took at average. We talk about sort of 0.8% to 1%, a little bit lower than that in some places, it's lower. So even at bigger number, even at sort of 60, 75 basis points as a percentage of the marketing schedule, that means we're pretty low. So on either of those measures, people talk about the runway in our business, that 20 basis points and sort of the 60, 75, 80 basis points on the marketing schedule means we've got a long runway. And particularly given we provide most of the value when you're selling in-house.

Yield

Look, we've guided to double digit. It's a lower price than the prior year, but we're confident that the other impacts to yield will be good. As I said, Amax penetration has more than doubled. Now a lot of customers have taken that lower entry Amax level at the $99. But again, it's still good penetration. And it shows that customers do value the product. Luxe penetration, as it will be slow burn, but we expect that to slowly uptick across the course of the year. Now whether we do any specials in the market at any point in the year, that's to be seen. So -- and then across all levels, we've seen small upticks in total depth as well. So it all adds up to that confidence in that double-digit yield. I won't give any more guidance than that because then there's other factors that we just can't predict like geo mix.

Lux penetration

On Luxe, the stat I mentioned that you get double the views on Luxe than you do on a Premier listing. So it's very compelling. Now it is an expensive product. It's about 90% more expensive than a Premier, but I think the performance and the proof points we've now got will back up that penetration increase. And you're right. The great thing about this because of the way it's priced, obviously, by the pricing the zones is that it stacks up at almost any price point, and it is being bought right across the spectrum. This is not a high-end expensive luxury product. It's for every type of list. If you want your property to stand out in your suburb, you buy Luxe because you are going to get double those views. So it's becoming a more compelling sell in the living room for an agent, and that's why we're pretty confident that penetration will tick up. But it will be a slow burn. It's expensive and there can be some pushback on that, but at the moment, those who are using it, I'm really pleased with the performance.

Operator  

Yield

So when we talk about the 14% yield, you're right, there was the 1% drag for geo mix, but there was also a 1% uplift from the combination of [indiscernible]. so 14% is the right growth rate when you take out those one-offs. And that is the 10% plus the increase in depth.

Now as you can see on the penetration chart, we will see less benefit from just general depth uptick, but we all see more benefit from some of the add-on products. Again, I don't want to get drawn into overall size, but we're confident around that double-digit yield noting the fact that there has been that strong take-up in Audience Maximizer. As Owen said, though, some of it is at that lower price point. So whilst it's been good penetration, the overall yield impact whilst positive, might not be quite as high as the overall penetration impact. But still, we're very confident in that double-digit yield target.

Commercial and developer

Commercial and Developer. So developer hasn't had a price rise for this year. Commercial was put through 7% increase in price for commercial for next -- this FY '26, and we are confident in the runway we've got around developer with the benefit, we've got the flow through of the price rise from developer continuing to flow through as that occurs throughout the year as contracts get rolled over. But also, we've now seen 3 quarters of overall project commencements in developer being positive. So I think the momentum is starting to turn. And we have seen duration continue to hold in this environment. So we are optimistic about the developer runway for growth into '26.