Shares in digital real estate business REA Group plunged by nearly 9 per cent, despite the company delivering a strong full-year earnings result.
REA, which is the operator of the country’s No.1 property website realestate.com.au, reported net profit growth of 36 per cent to $149.8 million for the year ended June 30. But this was not enough to impress the market, as the company’s share price fell by 8.7 per cent to $42.78.
“My focus is on the things I can control,” REA interim chief executive Peter Tonagh said. “We can keep our focus on building long term and sustainable growth within the business. What the market does, I don’t know even know how to react to it to be honest. The market is what it is.”
Commonwealth Bank analyst Alice Bennett said that while the full-year result was impressive, REA’s shares were priced to over-deliver, given they often traded at above 40 times earnings.
“The result was more or less in line with consensus and the company’s shares are priced for perfection,” she said. “It’s a pretty savage reaction.”
CBA had forecast underlying net profit of $149 million for 2013-14 and revenue of $438 million.
News Corp owns 61.6 per cent of REA, which competes with Fairfax Media’s Domain.
REA grew its revenue from depth listing products by 69 per cent to $220 million. Depth products cost more money and highlight and enhance listings, among other things.
It was the company’s first result without former chief Greg Ellis at the helm. REA said his replacement, Tracey Fellows, would start on August 20, while Mr Tonagh will return to the role of non-executive director of the board. New chief financial officer Owen Wilson will commence in September.
“We’ve delivered that outcome (the profit earnings result) through a transition of management,” Mr Tonagh said.
“I think it demonstrates the level of alignment and level of commitment that staff have to the business.”