Australia-based REA Group has reported strong ongoing growth for the 07/08 financial year with revenues rising by 45 percent to $132 million and EBITDA up by 56 percent to $31 million. Through continued overseas acquisitions and internal growth the business now has over twenty two thousand paying real estate agencies on its books.
That’s the good news. Closer inspection of the results shows that only Australia and Luxembourg provided profitable results. Australia remains the dominant contributor, delivering 78 percent of all revenues and $53 million in EBITDA.
The big drain continues to be the U.K., where the business spends around $1.50 for every dollar it sells. While REA claims to have moved into No. 2 position in this highly competitive (and very depressed) market, the low price of ads makes profit a somewhat distant hope. The company certainly isn’t giving up, investing heavily in advertising and promotion.
With a penetration in Australia of some 95 percent of estate agents it might seem that growth opportunities are limited. Not so, says REA, with solid increases in premium products and sales of associated products such as office solutions.
Financial analysts were disappointed that no dividend had been included (again), but REA says it will use its cash reserves, along with a line of credit to chase further acquisitions. In fact it currently has ten such opportunities in its sights and has a team focused on this side of the business.
The departure of CEO Simon Baker was treated at the earnings call as a somewhat natural event, with the acting CEO suggesting a replacement would be announced quite shortly.
