Investments in Athena, other businesses to continue strong FY24 growth
Despite its failed attempt to buy Rightmove, the UK’s largest property platform, Australian real estate giant REA Group is forging ahead with its plans for diversified growth, focusing on its recent acquisitions of digital platforms and its investment in Athena Home Loans.
ASX-listed REA Group, which is majority owned by Rupert Murdoch’s News Corp and includes mortgage broker franchise network Mortgage Choice and property data firm PropTrack, held its annual general meeting on Tuesday, October 9.
Group chair Hamish McLennan (pictured above left) and CEO Owen Wilson (pictured above right) addressed the AGM, with McLennan providing an overview of REA Group’s FY24 highlights and Wilson talking about the Group’s performance and current market conditions.
McLennan spoke about REA Group’s recent withdrawal of its offer to acquire Rightmove.
The offer was made on Sept. 27, valuing Rightmove at 775 pence per share, a 45% premium on its 12-month and 24-month average share prices. However, Rightmove's board showed minimal engagement, forcing REA Group to pull out in accordance with the regulations.
“REA Group’s approach to Rightmove’s board was driven by a clear strategic rationale and the opportunity to create a global and diversified digital property company,” McLennan told the AGM.
“We strongly believed that the proposed combination would have delivered significant shareholder value for both REA and Rightmove shareholders.”
McLennan said while the outcome was disappointing, it was critical that REA Group kept its longstanding and disciplined approach to capital management, and mergers and acquisitions.
“We will not overpay and in this case, the lack of engagement from the Rightmove board, despite the benefits of our offer, prevented us from having constructive discussions on prices and making a firm offer.
“REA has now drawn a clear line under this transaction and moved on.”
REA Group enjoys excellent FY24 results
The company’s full-year results included increased revenue growth – up 23% to $1.453 billion, a 24% rise in net profit to $461 million and a 27% leap in EBITDA, excluding associates, to $825m.
Dividends per share were up 20% year on year, enabling the REA Group board to declare total dividends of $1.89 per share for FY24.
McLennan said there had been significant growth in revenue and earnings since first listing on the ASX 25 years ago, which meant the business was “incredibly resilient”, delivering consistent growth and strong shareholder returns.
“An investment of just $1,000 in REA in 1999 would now be worth more than $550,000.”
Acquisitions, partnerships drive growth
McLennan said REA Group’s strong growth was built on a “clear strategy to extend in both our core business and adjacent markets”.
This included the acquisitions of two innovative Australian digital businesses – property vendor funding solutions firm CampaignAgent and end-to-end property sales platform Realtair. REA Group had first invested in these businesses in 2021 and 2020 respectively but had bought the remaining stakes during FY24.
In September, REA Group announced it would be acquiring a 19.9% stake in digital lender Athena Home Loans.
“This reinforces our commitment to providing homebuyers with greater choice and a seamless consumer experience when finding and financing a property,” McLennan said.
The group’s business model had changed over time – it featured more than just its market-leading website realestate.com.au, which is the number one online address for property in Australia.
By investing in technology, new platforms, staff talent and marketing it had grown to be digital leader in property, featuring 16 brands and businesses across three continents, including REA India, McLennan said.
He also spoke about REA Group divesting its 17.2% stake in PropertyGuru to affiliates of EQT for US$189m ($m), with the transaction expected to close in Q2 or 3 in FY25.
Mortgage Choice white label proves popular
Wilson, speaking about the group’s operational performance during the financial year, said its higher margin white label loans proved popular with borrowers.
“Mortgage Choice, powered by Athena, achieved $1.2 billion in settlements and our digital offering achieved its first settlement in Q4,” said Wilson.
“As Hamish mentioned, we were excited to announce an investment in Athena Home Loans and we look forward to building on the success of our Mortgage Choice Freedom products.”
Investment in AI
Owen said being a digital business, innovation technology had always been front and centre at REA Group.
He said the group had ramped up its investment in emerging technologies and further enhanced AI capabilities, including bringing in new AI-powered products to boost real estate agent productivity and listing performance.
“Personalisation has been core to our consumer strategy for close to a decade,” said Wilson.
“Our AI-generated personalised homepage experience delivers 7.5 million personalised recommendations to consumers every day. This deep personalisation supports Australians at every stage of their property journey.”
Other highlights
REA Group’s property data business, PropTrack, enjoyed double digit revenue growth, said Wilson. It also supported many of the Group’s unique customer and consumer products and solutions.
“PropTrack’s suite of propensity models represent a substantial opportunity for our customers.”
New features, tools and media integrations had also strengthened property research website property.com.au, with one in five buyers using the site when deciding whether to buy a property, reaching more than 2 million Aussies.
Property market update
Owen said the Australian property market remained healthy, as it was backed by high employment, immigration levels, stable interest rates and strong buyer demand.
“Despite lapping very strong comparables, the favourable listing conditions of FY24 have continued into the first quarter. National listings for Q1 were 7% higher than the prior corresponding period, and listings reached their highest volume for the month of September since 2015.”
Wilson said high listing volumes over the last year were mainly due to the strength in the Sydney and Melbourne markets.
“This continued in Q1, with Sydney listings up 11% year-on-year and Melbourne listings up 9%. Smaller capital city markets have also shown strength with higher first quarter listings in Brisbane, Adelaide and Perth.”
Wilson said despite rising property stock levels, properties continued to sell “which indicates demand for housing remains robust”.
“With more stock on the market buyers now have a lot more choice, and this should result in the moderation of house price growth.”
