REA Group Ltd (ASX: REA), the operator of realestate.com.au, witnessed a dramatic 18% drop in its share price on Friday morning, trading at $150.01 at the time of writing. This significant decline follows the release of the company’s half-year financial results, which fell short of market expectations.
REA Group’s Financial Performance
For the six months ending December 31, REA Group reported a 5% increase in revenue, reaching $916 million. This growth was driven by an 8% increase in Australian revenue, although it was offset by a 31% decline in international revenue. On a like-for-like basis, which excludes acquisitions and divestments, revenue rose by 8% compared to the previous corresponding period, with Australian revenue up by 8% and international revenue remaining flat.
Management highlighted that Australian Residential revenue increased by 7% to $658 million, primarily due to a 14% increase in yield, which was partially offset by a 6% decline in national listings. Additionally, Commercial and New Homes revenue grew by 10% to $121 million, Financial Services revenue saw an 11% increase to $58 million, and other revenue rose by 8% to $35 million.
Despite these increases, group operating expenses also climbed by 3% to $347 million, resulting in a 9% rise in net profit after tax to $341 million. Earnings per share similarly increased by 9% to $2.58, yet these figures did not meet the market’s expectations, contributing to the share price drop.
Performance Metrics and Market Position
REA Group’s performance was bolstered by its stronghold in the Australian market. The company reported an average of 12.7 million monthly visitors during the first half, peaking at a record 13.2 million in November. Notably, 6.4 million of these visitors exclusively used realestate.com.au.
REA Group boasted 146.1 million average monthly visits, which is 105.9 million more than its nearest competitor.
Additional performance metrics included a 20% increase in average monthly buyer enquiries on realestate.com.au, a 38% rise in seller leads, and a 10% increase in active members.
CEO’s Perspective
Commenting on the results, REA Group’s CEO, Cameron McIntyre, emphasized the company’s focus on enhancing consumer experiences and the value of its premium products. McIntyre stated, “Our first-half performance was underpinned by strong double-digit yield growth in our core residential business. Our focus on richer, more immersive consumer experiences supported record audience and strong engagement.”
Looking forward, McIntyre expressed optimism about the company’s ability to drive innovation and growth in the second half of the fiscal year, citing ongoing strength in property market fundamentals.
Future Outlook and Market Reactions
REA Group anticipates residential Buy yield growth of 12% to 14% in FY 2026, although this may be influenced by geographical mix changes throughout the year. The company also expects positive operating jaws, with cost growth remaining lower than revenue growth, particularly in the Australian market.
However, the market’s reaction to the half-year results has been less than favorable, as evidenced by the sharp decline in share price. Analysts suggest that while the company’s growth figures are positive, they were not sufficient to meet the high expectations set by investors, leading to the current sell-off.
As the real estate market continues to evolve, REA Group’s ability to maintain its market leadership and adapt to changing conditions will be crucial. Investors and analysts alike will be closely monitoring the company’s performance in the coming months to assess its strategic direction and potential for recovery.
