The REA Group (realestate.com.au Ltd)

The REA Group (ASX:REA – realestate.com.au Ltd and is subsidiaries) is the leading owners and operator of property portal sites globally.   While based in Australia, the REA Group runs 20 portal sites in 10 countries as well as 8 print publications and 4 software products.

Financials

The REA Group is listed on the Australian stock exchange.  It currently has a market capitalisation of A$540m although it is thinly traded.

As at the December half year results, the business had delivered the following results:

On the 4 August 2008, the Board indicated that the FY 2008 full year revenues would be between $152m and $156m and that the EBITDA would be between $35m and $37m.

The business operates off a 30 June financial year.

History

The REA Group started life as Netwide Solutions.  In 1995, Marty Howell and Karl Sabljak started Netwide Solutions in a garage in Doncaster, Melbourne, Australia.  During the early years, the business experiments with multiple business models including being a web developer, an ISP, and a web hosting company.  In 1996 the secured the realestate.com.au domain name and launched a website, initially called Virtual Realty and subsequently realestate.com.au.  In 1997 they merged with a local software provide called Property Seeker and the business moved operations to Surrey Hills in Melbourne.  Joel Tipping was the CEO.

In 1998 Macquarie Bank took a 51% interest in the business by injecting some much needed working capital.  Kevin Jamison was installed as CEO and the business then focused most of its efforts on the residential real estate market.  In October 1999, the business floated on the Australian stock exchange as realestate.com.au Ltd and raised $7m.  Following listing, the business ramped operations and by April 2000, had 60 staff.  However, the increase in expenses was not matched by an equivalent increase in revenues and the business quickly chewed through the $7m raised on listing.  By August 2000, the business was running out of money and was surviving off a convertible note from Macquarie Bank.  Nigel Purves had taken over as CEO.

In October 2000, realestate.com.au Ltd approached News Corporation (through its Australian operations – News Limited) for an investment in the business.  Simon Baker and Warren Bright negotiated the deal for News Limited to invest in realestate.com.au and in February 2001, the deal was completed and News Limited acquired 44% of realestate.com.au for A$2.25m in cash and A$8m in advertising.  In early 2001, Simon Baker joined realestate.com.au as the COO and by August 2001 had replaced Nigel Purves as CEO.   In FY 2001, the business delivered A$4m in revenues and A$6 in losses.

The next 24 months was spent turning around the business from loss making to break even.  Firstly there was the disposal of non-core assets including the ISP business, the web hosting business and an investment in realenz.co.nz.   The business then focused operations on the core business of selling advertising subscriptions to Australian real estate offices.  This focus allowed the business to pull away from the other players in the Australian market and establish a strong lead.  By February 2003, the business had become profitable.  In June 2004, realestate.com.au purchased the number 3 player property.com.au for $9m. 

Once the business had been turned around, the next focus was on accelerating growth in the Australian market.  Between late 2003 and late 2005, the business rapidly expanded operations in Australia with offices in each state, increased the size of the sales force, built out more products and services to sell to Australian real estate agents and improved the quality and recognition of the brand throughout the Australian market.  The result was the by mid 2005, over 75% of Australian real estate offices were using realestate.com.au. 

The Board and Management decided in 2005 that it as time to grow the business into other markets.  The first step was to launch a website in New Zealand (www.allrealestate.co.nz) and then in late 2005, propertyfinder.com was acquired in the UK for GBP15m.  This as the launch of the business onto the global stage.  Following this, there were a string of acquisitions including casa.it in Italy, the atHome Group in Luxembourg, London Property News in the UK, Squarefoot Group in Hong Kong, Propertyfinder.ae in Dubai, Hotproperty in the UK and UK Propertyshop also in the UK.  During this period, the REA Group was also strengthening its offerings in Australia and acquired Hubonline and Clarke Computers as well as making an investment into Home Guru – a lead generation business in Australia.

For the FY 2008 financial year, the business delivered $155m+ in revenues, $30m+ in EBITDA profit, had over 700 staff, operations in 11 countries (including a development team in India), had a market capitalisation of > A$500m.

In August 2008, Simon Baker left the REA Group.  Currently the CFO, Georg Chmiel is acting CEO.

Scope of Operations

Residential Property Portal Sites

• Australia
  • realestate.com.au (See Article)
  • property.com.au
  • homeguru.com.au (65% owned)
• United Kingdom (50% owned)
  • Propertyfinder.com
  • UKPropertyshop.co.uk
  • HotProperty.co.uk
• Italy (70% owned)
  • casa.it
• United Arab Emirates (51% owned)
  • propertyfinder.ae
• Hong Kong
  • Squarefoot.com.hk
• Luxembourg
  • athome.lu
• France
  • athomealsace.fr
  • athomelorraine.fr
• Belgium
  • athome.be
• Germany
  • athome.de
• Rest of the World
  • allglobalpropertes.com

Commercial Real Estate Sites

• Australia
  • realcommercial.com.au
• New Zealand
  • realcommercial.co.nz
• Luxembourg
  • atoffice.lu

Holiday Rental Sites

• Australia
  • realholidays.com.au

Print Publications

• United Kingdom
  • London Property News (4 publications)
  • Hot Property Publications (2 publications)
• Hong Kong
  • Squarefoot
  • Inside Discovery Bay

Software Products

• Australia
  • Web Development Services
  • HubOnline
  • Clarke Computer
• Belgium
  • Altowin

 

Key Management

Georg Chmiel – CFO and Acting CEO

Shaun Di Gregorio – GM Emerging Business Group

Andy Sheats – GM Business Development

Jamie Pride – GM Australia

Gillian Kent – GM United Kingdom

TBD – GM Italy

Patrick Kersten – Greater Luxembourg Region Manager

Michael Lahyani – Gulf Region Manager

Damian Medhurst - Rest of the World Manger

Ownership

The REA Group is listed on the Australian stock exchange as realestate.com.au Limited (ASX:REA)

It is 58% owned by News Corporation through its subsidiary News Limited in Australia.

Analyst Coverage

The REA Group is covered by the following analysts:

• EL&C Baillieu – Ivor Rees
• CCZ Securities – Roger Coleman
• Deutsche Bank – Tim Plumbe

Links

www.rea-group.com

1. REA Group Shuts UK Print Mags

   The REA Group Limited has issued a statement to the ASX announcing that it will close its UK print operations at the end of this month. ...

2. REA Group Directs Traffic to realestate.co.nz

   Having decided to close down most of its New Zealand operations, the REA Group has now entered a marketing arrangement to drive traffic to former competitor, realestate.co.nz....

3. REA Group Loses Another Top Manager

   Shaun Di Gregorio, the General Manager for International Business, has made the shock announcement that he is leaving the REA Group after 7 ½ years. The announcement was made to all staff at the REA Group’s global conference at a resort on the Sunshine Coast....

4. REA Group Changes Name

   At the most recent Annual General Meeting last week on Wednesday 26 November, the REA Group shareholders voted upon two name changes for the company....

5. News Corp Increases Stake in REA Group

   News Limited, the Australian subsidiary of News Corp, has increased its stake in realestate.com.au Ltd to 60.7%. ...