ASX 200 (XJO) drops, REA Group FY20 result pleases

The ASX 200 (ASX: XJO) is down 0.47% with many of the ASX’s blue chips in the red.

Australia’s share market is down even though jobkeeper’s eligibility has been relaxed across the country. It will add $15 billion to the overall cost. Businesses will only need to show a reduction in earnings over one quarter, rather than multiple quarters and workers will only need to be employed on 1 July 2020 compared to 1 March 2020 before.

REA Group Limited (ASX: REA)

REA Group has announced its FY20 result today.

The property business announced that revenue fell by 6% to $820.3 million. EBITDA (click here to learn what EBITDA means) was down 5% to $492.1 million. Net profit after tax declined 9% to $268.9 million.

In Australia national listings were down 12% for the year. The number of Melbourne listings were down 8% for the year and Sydney listings were down 6% for FY20. However, the number of project commencements were down 27%. Australian residential revenue dropped 4%, lower listing numbers were partially offset by price changes.

During the year the company provided subscription discounts and changes to its listing products to support customers and the broader real estate market because of COVID-19.

Commercial and developer revenue dropped 7% and media, data and other revenue fell 19%. Media, data and other revenue declined by 19%.

The company boasted that realestate.com.au is still the market leader. The number of visits to the site rose by 18% year on year. Over 61% of people exclusively use realestate.com.au when looking for a property. That’s strong brand power.

REA Group revealed that its balance sheet was still strong with low debt levels with a cash balance of $223 million at the end of FY20. It has access to $149 million of undrawn facilities and a $20 million overdraft facility to access if required.

The board declared a final dividend of $0.55 per share, bringing the full year dividend to $1.10 per share, down 7% from last year.

REA Group said that there is still uncertainty. In July, national listings were up 16% with Sydney listings up 47% and Melbourne listings up 13%.

However, the latest COVID-19 restrictions in Melbourne which ban physical property inspections are likely to cause “significant” short term weakness. Projected reductions in new development project commencements and listing volume declines in the commercial and Asia businesses is likely to hurt revenue in the first quarter of FY21.

The REA Group share price is up 2.6%.

Difficult year for Insurance Australia Group Ltd (ASX: IAG)

IAG announced in its FY20 result that its gross written premiums (GWP), the amount of insurance it wrote, increased 1.1% to $12.1 billion. However, the insurance profit dropped 39.5% to $741 million. The reported insurance margin declined by 680 basis points (6.80%) to 10.1% due to higher than expected natural peril events, a strengthening of reserves, professional risks and workers’ compensation areas and credit spread effects.

COVID-19 impacts on the underwriting profit largely offset each other this year. There were lower motor claims in April and May, though landlord insurance and travel insurance somewhat offset this. The company provisioned around $100 million for COVID-19 claim cost impacts.

However, IAG said that the underlying insurance margin only declined by 60 basis points (0.60%) to 16% because of a softer second half owing to higher reinsurance costs, lower interest rates impacting investment income and a poorer performance from the commercial long tail classes in Australia.

Net profit after tax (NPAT) dropped 59.6% to $435 million. During the year the company exited its Indian investment, realising a post-tax profit of $326 million. However, this was partially offset by a customer refund provision of $141 million for the full year, up from $82 million that was recognised in the half year result.

The IAG board decided not to declare a final dividend after its 10 cent per share interim dividend because it actually saw a negative cash profit in the second half of FY20. The half-year dividend alone represented 82.8% of cash earnings. The long term aim is for a payout ratio of 60% to 80% of cash earnings.

The IAG share price is down 1%.

Redbubble Ltd (ASX: RBL) impresses again

The Redbubble share price has soared 12.75% higher after it released a business update showing the revenue growth for July 2020.

July’s marketplace revenue was $49 million, up 132%. That added to a strong final quarter of FY20 as well a good year to the company.

Fourth quarter marketplace revenue was up $122 million, up 107% compared to the prior corresponding period. Total FY20 marketplace revenue was $368 million, an increase of 43%.

Redbubble said that the increasing shift to online shopping resulted in year on year growth across all of its core geographies and product categories. Face masks have contributed $26 million of marketplace revenue from the launch at the end of April until 31 July.

The company expects to release its results on 21 August 2020.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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