Now this will make the profit starved News Corp grin – REA Group (REA), its 62% Australian digital property play, has boosted earnings 37% and interim dividend by 38% for the six months to December.
As such it will be owner of the most profitable parts of the News Corp arm of the Murdoch family empire and will be revealed as such in News Corp’s second quarter and half year report on Friday morning, our time.
Thanks to the series of Reserve bank rate cuts since 2011, which have at last sent property activity (especially prices) sharply higher, REA Group (whose core strength is online property classified ads) delivered a 37% boost in net profit to $70.7 million in the half.
That was on a 30% jump in revenue, to $209.4 million.
Retiring CEO Greg Ellis said Australia stood out with the residential ad business posting revenue growth of 34% thanks to a 67% jump to $100 million in what REA calls its premium advertising slots or "listing depth product".
Earnings before interest, tax, depreciation and amortisation rose by 38% to $106.8 million, indicating the company increased profit margins in the half year.
In fact gross profit margins topped the 50% mark in the half year.
REA 1Y – REA surfs the property surge, thanks to RBA rate cuts
"Our first-half performance is the result of taking a long-term view of our business," Mr Ellis said in a statement.
"We saw where the property advertising market was headed and made a deliberate decision to shift our focus from subscriptions to depth products which meet specific market needs.
"This strategy is now delivering excellent growth and returns for our shareholders."
The company declared an interim dividend of 22¢, up 38% from the December half of 2012
REA Group Ltd chairman Hamish McLennan said in yesterday’s statement that the group’s strong first-half results are vindication of the board’s long-term strategy.
"This half-year represents another record result for REA Group and its shareholders," Mr McLennan said.
"As these results clearly show, we have the right long-term strategy in place and the board is confident the group’s talented and capable team will continue to deliver on our strategy.”
But no words of thanks to the RBA for cutting rates to record low which has triggered the property rebound.
REA Group shares hit a 52 week high of $44.03,ending up 5% at $43.78, a great performance on a miserable day.
