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Thank you for standing by, and welcome to the REA Group Limited Half Year Results 2022. [Operator Instructions] I'd like to now hand the conference over to Alice Bennett, Executive Manager of Investor Relations. Please go ahead.
Good morning, everybody, and welcome. My name is Alice Bennett, Executive Manager of Investor Relations, and I'd like to thank you for joining REA Group's 2022 half year results presentation. Before we commence, I'd like to acknowledge the traditional owners of the land we are hosting our meeting in Melbourne, the Wurundjeri people of the Kulin Nation, and pay our respects to the elders past and present.Today, you'll hear from REA's CEO, Owen Wilson; and Graham Curtin, REA's General Manager of Group Reporting. Unfortunately, our CFO, Janelle Hopkins has had to attend to a sudden family emergency, and is unable to stay with us this morning. Owen will talk to our overarching financial performance and strategic highlights for the half year. He'll then hand over to Graham to talk to our financial results in more depth. And following this, we'll be happy to take your questions. So with that, I'll hand it to Owen to get us started.
Thanks, Alice. I'd like to welcome everyone this morning and also acknowledge the traditional owners of the land on which we're meeting, and pay my respects to their elders, past and present. REA has delivered an exceptional first half results for FY '22, despite the continued pandemic-related disruptions, which saw our 2 largest markets in lockdown for most of the first quarter.Looking at our results from core operations for the half, revenue was $590 million, an increase of 37%, EBITDA after share of associates was $368 million, an increase of 27%, and NPAT was $226 million, an increase of 31%. Pleasingly, we delivered a strong core EBITDA margin at 62%. The Board has declared an interim dividend of $0.75 per share fully franked, a 27% increase on the prior corresponding period. Combined with our exceptional financial result, REA continue to build on the strong momentum behind our key priorities.As you can see on this slide, a number of significant highlights and milestones were achieved in the half. Our personalized consumer experiences are delivering increased engagement and record seller leads. We delivered significant value to our customers through record buyer inquiry, supported by a record take-up of our depth products. And we made great progress in adjacent markets such as India, Asia and Financial Services. We'll cover these highlights in more detail throughout the presentation.Our growth is underpinned by our consistent strategy, which has 3 key objectives: firstly, delivering the largest audiences and most engaged consumers. You'll see in the coming slides, we achieved new records across almost all dimensions of this objective. Secondly, providing our customers with superior value, again, record seller leads and buyer inquiries, and both of these objectives are underpinned by REA's unparalleled data and insights.REA's momentum alongside our exciting product road map, unique data and insights and strategic investments, creates an excellent platform to drive future growth. I am really proud of our team's commitment throughout yet another COVID-impacted half, which saw us make great progress on our strategic objectives. Today, I'll provide an update on the 5 key areas outlined in this slide, which will deliver our future growth.Moving to the next slide. Core to REA's success are the millions of Australians turning to realestate.com.au each month. Consolidating our position as Australia's #1 address in property, we delivered unmatched audiences, including a record 145.5 million visits in October. On average, 128.8 million visits were received each month throughout the half. That's 3.3x more visits than the nearest competitor. I think the key metric for me is that of the 12.6 million people who visit realestate.com.au each month, 6.7 million of them are exclusive to our site. That means the only way to access this cohort is through realestate.com.au.Our app held its strong position as Australia's #1 property app, with an average of 59 million launches each month, up 16% year-on-year. To put our audience metrics into perspective, realestate.com.au is now one of Australia's leading digital brands with the seventh largest audience in the country. Australians continue to turn to our brand as part of their everyday lives, which reaches almost 60% of the adult population.Moving to our consumer highlights. Our goal is to convert our audience of engaged property seekers into active members. Member profiles allow us to deliver highly personalized consumer experiences. These unique experiences, underpinned by our rich data, helped deliver a 24% year-on-year increase in monthly active members. Through understanding our members, we can connect them with the right content, in the right place, at the right time to drive their property journey forward. We know that members are 3x more likely to complete a high-value action, such as tracking a property.Pleasingly, we saw a 53% year-on-year increase in properties being tracked by owners in the half and an increase of 36% of total people tracking properties. Strong consumer engagement in our data-driven experiences ultimately leads to higher quality seller and landlord prospects for our customers and finance leads for our brokers.Throughout the half, we delivered significantly more connections. Seller leads increased 98% year-on-year and finance leads were up 24% year-on-year. Our integrated suite of products and services connects our customers with Australia's largest audience of buyers, sellers and renters. Our goal is to remain Australia's first choice for digital property advertising solutions while also helping our customers grow their business.The pleasing increase in premiere and depth reflects the superior value we provide to our customers and their vendors. Add-on products also experienced very strong growth with our social product, Audience Maximiser, achieving 105% year-on-year growth. This, of course, also increased the variable costs associated with this product. Agency services offers a suite of leading digital products and services designed to help streamline customer workflows. Further value was added to Connect in the half, and engagement with the platform increased 80% in the second quarter. In November, we added market insight to Connect, providing agents with unique supply and demand data to assist with their marketing.Data underpins REA's business. It delivers direct revenue through our PropTrack business and powers our consumer experiences and other products such as a CMA product within the Connect suite of products. The 12.6 million people visiting realestate.com.au each month help provide REA with the most comprehensive data-driven view of the Australian property market. We have many other data opportunities, such as CMA products for brokers and utilizing advanced technology to deliver unique insights to both customers and consumers.Turning to Financial Services. As you can see on this slide, we had a strong half, driven by pleasing ongoing broker recruitment and record submissions and settlements. Graham will talk to these results in more detail later. Good progress was made on the integration of Smartline and Mortgage Choice, which is set to be fully complete by this time next year. During the half, we announced that the combined business will be branded Mortgage Choice. We also launched a comparison experience using Simpology technology and commenced an open banking proof of concept under a new partnership with Frollo.Moving to our global businesses. India is one of the largest growth markets in the world, and our aim is to become the clear #1 in digital real estate in the country. REA India made excellent progress in the market leadership battle. As you can see on the chart on this slide, Housing.com has improved from third position on audience in 2018 to battling for the leadership position. We achieved a 55% year-on-year increase in site visits in the half, with Housing.com finishing on top in December with 14.6 million visits. It's a great achievement, but this rate still has a long way to go.As you can see, the Indian real estate market is back at pre-pandemic levels with both sales and launches recovering strongly in the half. Some degree of uncertainty remains with the emergence of the third COVID wave, but the strong recovery shown here suggests any impact is likely to be temporary.In addition to audience achievements, REA India realized a number of other highlights. The Housing Edge platform now offers 11 owner and tenant services with the launch of legal services during the half. App downloads increased 88% year-on-year and crossed the 10 million download mark in the Google Play Store in November.Housing.com services expanded to include commercial properties in 12 major cities and a hybrid offering in new cities with a combination of on-site sales force, telesales and self-service. REA has an 18% interest in Southeast Asian based PropertyGuru, and I was pleased to join the PG Board late last year. In November, we divested our Hong Kong business resulting in a singular focus on our interest in PropertyGuru.Southeast Asia is one of the fastest-growing regions globally and on its current trajectory is forecast to be one of the world's fourth -- be the world's fourth largest by 2030. As a strategic shareholder, REA will contribute to the next phase of growth for the PG business.As you can see on this slide, the impressive relative engagement market share in Singapore, Malaysia, Vietnam and Thailand places PG in a perfect position to transform these markets. In North America, REA has a 20% interest in Move Inc., which operates realtor.com. The U.S. real estate market has recovered well from the pandemic with existing home sales up 8.5% in 2021 and the median house price for December, up 16% year-on-year. Move has delivered continued excellent growth despite the impacts of the pandemic.During the half, realtor.com continued to consolidate its position as a leading platform, with unique visitor growth outpacing key competitors, Zillow plus Trulia, for 23 months in a row. Alongside our growth agenda is our commitment to creating positive change through responsible business practices. REA recorded several sustainability highlights as we work towards our environmental, social and governance goals. We achieved a 20% reduction in our carbon footprint in Australia. Our overall employee engagement reached an impressive 87%. And we're pleased to join our leading digital peers as a member of the Tech Council of Australia in October.Before I hand over to Graham, I'll make a few comments regarding current market conditions. Australia's property market recovered strongly once COVID restrictions were lifted. Strong demand fueled by strong bank liquidity resulted in a healthy number of properties being offered for sale on realestate.com.au. The reduced days on market and high auction clearance rates was further evidence of the health of the market.As we commence 2022, these conditions are largely the same, despite the speculation about the timing of future interest rate increases. We do expect demand to moderate as the year progresses, bringing a healthy rebalance of the supply-demand equation. That said, buyer activity on realestate.com.au remains very healthy. In a normally quiet month of January, we saw 125 million visits, including an all-time record rent audience.It's important to note that listing growth rates in the second half will reflect the much stronger comparatives from Q3 and Q4 last financial year. We may also see some curveballs in the coming months from COVID and the federal election. But we expect that any impact to the market will be temporary. We have real momentum behind our key growth priorities, and we've invested heavily in our product pipeline and our adjacent businesses. I'm therefore excited to announce we will host REA's first Investor Day this coming May. At that time, you'll hear more detail from our senior executive team about our upcoming growth initiatives, and I'm looking forward to seeing many of you there.I'll now pass to Graham, who will share more detail on our financial results.
Thanks, Owen, and good morning, everyone. REA has delivered an excellent results for the half with revenue growth across all major lines of business. As we did at the quarter, we've provided both group core results in the ASX release for the first half and growth rates, excluding the REA India and Mortgage Choice acquisitions to give visibility of like-for-like performance.In terms of the headline numbers, revenue for the first half increased 37% year-on-year to $590.4 million. Operating expenses from core operations increased 54% to $224.6 million, and the group delivered EBITDA, including the results from our associates of $368 million, up 27%. Excluding the impact of acquisitions, group revenue increased 25%, costs increased 17%, and EBITDA including associates increased 27%.Our operating EBITDA margin, excluding the impact of acquisitions, increased to 68%, and NPAT from core operations was $225.8 million, up 31%. Following the divestment of the Malaysian, Thailand and Hong Kong operations, we've reassessed our segments to be Australia - Property & Online Advertising, which will now include MyFun, Financial Services, India and our international investments being PropertyGuru and Move.Comparative historical revenue and EBITDA has been restated for the effects of the change in reporting related to MyFun and legacy Asian businesses, and we provide a reconciliation outlining the impact of the Australia - Property & Online Advertising segment in the appendix to the presentation. NPAT from core operations after minority interest was $225.8 million, up 31%. NPAT results from core operations differ slightly from reported statutory NPAT with a number of one-off items excluded. On this slide we provide a summary of the reconciliation between core and statutory results.Turning to our Australia residential business and trends in the market. On this slide, we've set out the quarterly changes in new buy and rent listing volumes. National new buy listings increased 17% year-on-year in the first half, accelerating from Q1 to Q2 as the market normalized post lockdowns. Sydney listings were up 14% in the first half with Melbourne up 43% as it cycled depressed listings in the prior period due to lockdowns.The chart showing rent listings highlights that this market remains challenged. Listings were down 11% during the half, largely impacted by a continuing lack of interstate and international migration and the absence of international students. In terms of business performance, residential revenues increased by an impressive 31% with strong year-on-year growth in buy revenues tempered with a flat rent result. Buy revenue benefited from national listings growth, strong growth in depth, an 8% average price rise from 1 July and continued growth in our audience extension products such as Audience Maximiser. Rent revenue also benefited from a 6% price rise and increased depth penetration and product mix. However, this was offset by the decline in rental listings.As we provide each reporting period, the following slide shows both the penetration and mix of depth listings in the residential business and the success of our premium listing products. There's no scale on this graph, but the relativities between the categories are at scale. The first half saw continued growth in depth and Premiere penetration with improvements across all states. This performance has been the outcome of a very strong sales recontracting effort at the end of FY '21, resulting in record sign up to the new 2-year contract.You can see from this chart the impact that the severe Melbourne lockdown in the first half of FY '21 had on Premiere and overall penetration. There was a clear recovery in the second half of last year as the market reopening accelerated and then a further uplift this half despite Sydney and Melbourne lockdowns in the first quarter. Going forward, we will continue to target growth in both overall depth and Premiere penetration, albeit likely at a slower pace.Turning to Commercial and Developer. Revenues increased by 7%, with pleasing growth in Commercial, partly offset by a flat Developer performance. Commercial revenues benefited from a price rise from 1 July and increased depth penetration with positive momentum in commercial sales listings returning whilst the lease market remains sluggish.The Developer business experienced a negative impact from Melbourne and Sydney lockdowns during the half where project commencements declining by 24%. Developer revenues were flat compared to the prior year with follow-on benefits from the strong launches in FY '21 and extended duration offset by the reduction in the first half project commencements. The Developer market is expected to be relatively flat in FY '22 with BIS Oxford forecasting a 1% year-on-year decline in dwelling commencements.Media, Data and Other revenue grew by 14% during the half. We saw strong growth in data, which increased 23% as PropTrack benefited from new contracts and increased valuation volumes. Media was up 15% with growth across both developer display and programmatic. And Other revenues, which is largely flatmates.com.au, declined year-on-year, continuing to be impacted by COVID-related border restrictions.Financial Services revenue was $41 million, which represents growth of 24% year-on-year on a pro forma basis, assuming REA owned Mortgage Choice in the prior period. We've seen a strong 39% increase in settlements benefiting from continued growth in our broker network and increased productivity against the backdrop of a buoyant housing market. This has been partly offset by higher broker payout ratios, which have risen due to higher settlement outcomes.REA India has delivered an impressive performance during the half, with pro forma revenue growth of 125% to $24 million. As the chart on the left-hand side shows, revenue was driven by strong growth in Housing.com's property advertising business, which saw audience growth of 55% year-on-year, taking share and outperforming competitors.Revenue has also benefited from growth in our adjacency products on the Housing Edge platform, particularly Rent Pay. These products come with an associated COGS such as payment gateway costs, resulting in them being lower margin, but importantly, supporting cross-sell and customer retention.As we flagged previously, REA India has continued to invest for future growth, which has resulted in an EBITDA loss of $15 million for the half. This investment reflects higher headcount to deliver strategic initiatives, combined with substantial remuneration uplifts as India is experiencing even tougher labor market competition than Australia. And the business has also increased brand spend to support audience awareness. During the year, we continued to increase our shareholding from 60.7% to 67.9% at December, with News Corp holding the minority interest.Moving to our strategic investments. Total associate contributions were $2.3 million in the first half, down from $5.6 million in the prior year. This mainly consisted of our U.S. business, Move, as well as new investments in PropertyGuru, Simpology, realtor and Campaign Agent, which were not in the prior period. Move's equity accounted contribution declined marginally to $8 million. Move delivered 19% year-on-year revenue growth for the half, driven by both the traditional lead generation product, which benefited from increased yield and the referral model, which is driven by higher home prices and referral fees.Overall, lead volumes were down 14% in the half, including down 9% in the second quarter, driven by tough prior year comparables. Move saw higher employee and marketing costs as the business continue to reinvest to drive their core businesses and expand into adjacencies. For more information on Move, please refer to the News Corp results presentation.In Southeast Asia, REA holds an 18% stake in PropertyGuru, which contributed an equity accounted loss of $4 million for the -- in the first half to the group EBITDA. PropertyGuru's planned New York Stock Exchange listing is expected to complete in Q3 FY '22. And upon listing, our holding is expected to be 15.8%. We also expect to incur a number of one-off transaction-related costs and gains with the listing, which will be reflected in our second half reported results.On the next slide is our core operating jaws. Our jaws remained open for the half, excluding acquisitions. The 17% cost growth in the first half is reflective of a number of key factors. In the prior period, we had a materially lower spend as we slowed investment in new initiatives and deferred pay rises due to COVID uncertainty. In the current period, we had higher employee costs reflecting the impact of 2 pay rises in January and July's pay increase, plus the impact of ramping of investment throughout calendar year '21 as the market stabilized, and we've confidence to grow our headcount to drive a number of new initiatives.The other key driver was COGS attached to this growth in add-on products such as Audience Maximiser, which more than doubled and accounted for around 4% of the 17% cost growth. Whilst this product increases the cost base, it's a high-margin product that positively contributes to our strong EBITDA. Importantly, as highlighted in the chart on the right-hand side, while operating costs, excluding acquisitions, were up 17% in the half, they were up just 1% on the pre-COVID first half FY '20 cost base. As we've highlighted, the group continues to invest to support ongoing growth with investment focused on a number of new products and experiences across multiple business lines.During the half, we increased the pace of our investment program as market conditions continue to improve. Depreciation and amortization is expected to increase in FY '22 as a result of the Mortgage Choice and India acquisitions. The D&A is expected to increase from $83 million in FY '21 to between $88 million and $92 million in FY '22.Turning to our cash position, we ended the half with a strong closing cash position of $195 million. The group delivered operating cash flows of $213 million, which is the addition of the first 4 bars on this graph. And during the half, we refinanced our debt facilities with a new facility of $600 million where repayment states split over 2024 and 2025. At 31 December, $414 million has been drawn, enabling headroom to finance strategic portfolio opportunities as they may arise.Finally, on current trading. New listing volumes in January were up 14% year-on-year, with Melbourne increasing 5% and Sydney up 19%. Year-on-year growth rates are expected to slow in the second half relative to the first half as we cycled very strong prior period listing volumes, particularly in the fourth quarter. We also highlight the potential for other factors such as the federal election and regulatory measures to slow house price inflation, which may negatively impact listing volumes.The group is targeting full-year positive operating jaws, excluding the impact of the REA India and Mortgage Choice acquisitions. Operating cost growth, excluding acquisitions, is expected to slow from 17% in the first half to high single-digit growth in the second half, reflecting a more normalized prior period comparative and continued investment in growth initiatives.The group expects full year operating cost growth of low double digits, up from high single digits previously anticipated, largely reflecting an increase in revenue-related variable costs. Lastly, in terms of equity-accounted contributions, we expect positive full year contributions from Move to be offset by losses from other new associates as they invest for future growth.I'll stop here. Operator, if we can please now open the lines for questions.
[Operator Instructions] Your first question comes from Tom Beadle from UBS.
Great results. Just a first question on listing volumes. I mean I know you're cautious about the volumes in the second half and January was obviously strong. But just could you talk to any of the forward indicators that you're seeing in your data around listing volumes that just might help us think about the near term? Just a second one, probably an easy one. Just can you talk to the impact of deferrals on your second quarter revenue?And then just finally, just on REA Connect. Obviously, the trial periods have begun to end now. So could you talk about what the conversion rates of paying subscriptions has been and just what the feedback has been from agents?
Thanks, Tom. I'll take 1 and 3, and I'll let Graham talk to deferral. Listing volumes, as you saw in January, were strong. January is not typically a busy month for the property market. And you can see a sort of divergence between Sydney and Melbourne on those growth rates. I think the Melbourne agents took a longer break after an incredibly busy November and December following the lockdowns. I think the second half is going to be a tale of 2 quarters.If you think about what's coming, anecdotally, February and March is looking strong. Agents are back, they seem busy. And every agent I talk to says they've got a pretty good order book of pending listings. But then as we cycle into Q4, we've got 2 things that are going to impact it. Firstly, the Easter and Anzac Day period. For 4 days annual leave, you get about 11 days off, I think half the country is going to be on holiday, and I don't expect anyone is going to want to try and sell a property during those couple of weeks. And then in May, we do, do have, obviously, the federal election. And we know every single federal election campaign results in subdued listings.And in Q4, we're cycling against incredibly strong comparatives. So I think you're going to see quite divergent growth rates in Q3 and Q4. I think Q3 feels like it's going to be positive, and Q4 is highly likely to be negative if you -- but only temporarily. Any impact from that sort of Easter and Anzac Day shutdown and the federal election will be temporary, and it will be recovered in due course.In terms of Connect. The Connect sign-on has exceeded our expectations. We're way ahead of plan. In fact, we had to slowdown the rollout in the second quarter because of onboarding, it takes time to onboard and we just didn't have enough people to do the onboarding. The feedback from customers using it is very, very positive. And so as those free periods start to run off, we will start to see revenue generated. As I said before though, it will be a while before this becomes meaningful. We need strong uptake. We need the people to stay on once the free periods are over. But early signs are very good.
And lastly, Tom, just on deferral in the second quarter, it was a positive contribution, but not material, a small contribution but positive.
Your next question comes from Kane Hannan from Goldman Sachs.
Just 3 for me, please. Just firstly, Commercial and Developer. Just interested in your thoughts around whether the decline in project launches through the first half is going to impact that business in the second half? Secondly, India, obviously, great improvement in the site visits. But just wondering what that looks like if we were a factor in the mobile app usage, or how we should be thinking about the level of investment in that business as well going forward?And then finally, just looking a bit further out, maybe one for the Investor Day, but just trying to think about the earnings in FY '23, given you're probably going to have what's going to be a very tough listings comp for the year overall. You're obviously going to have about 6% price rise, but then it's going to be the second year of your Premiere All contracts so maybe the depth uplift isn't as much as you've seen this year. So those are just interested if you talk about the drivers of incremental growth in FY '23 to offset any sort of listings normalization? Cheers.
Thanks, Kane. Look, Commercial, as we said, was a tale of kind of sale versus lease. Sale was looking very good in that market, at least was quite subdued, as you would expect, office demand is quite low at the moment with people working from home. The retail sector is very, very mixed. But we do expect that to recover in second half. Developer, the launches, if you look at the BIS Oxford forecast, they're saying down 1% after down 24%. So it implies a better second half.Talking to customers in the Developer segment, they do have a good pipeline. So they are quite buoyant. We don't monetize until they bring them to market though. So their pipeline includes getting planning, getting funding, but as soon as they're ready to launch, that's when we monetize. So it feels like it's going to be a better second half than first half in terms of launches. And if the government opens up immigration, foreign students, et cetera, that all underpins a better Developer market.In India, you saw that we had an 88% increase in app downloads in the Google Play Store. So the mobile side of the business is going incredibly well as well. We don't put that sort of traffic in because we don't have our competitors as well. So it's hard to give a market comparative. But we're very confident that our mobile offering is going in very well.In terms of investment, you would have seen in our results that we invested heavily. We have decided we want to be #1 in India, and it's still -- there's no clear winner. We've made great progress, I think, but we're going to continue to invest until we're the clear #1. That's our primary objective in India because we think the prize is enormous. So we will see further investment in India going forward.In terms of FY '23, well, that feels like a long way away, but it's not. There will be a few -- there are a few factors at play there. One is we're starting to get some traction from some of the newer products, both the ones that are in market at the moment, but also some that aren't in market at the moment, and we can't talk about for commercial reasons. You will -- listings will be interesting. So don't forget, in Q1, we're cycling over 2 lockdowns in Melbourne and Sydney. So we're going to get some very lumpy growth rates across the various quarters as we cycle over COVID and non-COVID. So Q1 and 2Q in FY '23 will be very, very different because of that.We've got our price increase. I think we'll see very good contributions from India Financial Services and data. And so there will be quite a few drivers of growth. But obviously, we don't give any guidance at this stage.
Your next question comes from Lucy Huang from Bank of America.
I just have 3 as well. So firstly, in relation to India Housing.com, just following on from Kane's question around the investment. Are we expecting a similar cost base that we've seen in the first half to continue into the second half given reinvestment is going to continue?And then secondly, just interested in some of your lead metrics that you've released. The seller leads up 98% year-on-year and finance leads up 24%. Just wondering if you can give us some color on the conversion rates for both. So how many have actually been converted successfully?And then just thirdly, I guess, in relation to depth uptake has continued to step up, and just wondering whether this could continue to trend upwards moving into the second half, particularly given that we do have a federal election and potential impacts there?
Thanks, Lucy. I'll take the first one on and maybe pass for you to take 2 and 3. In terms of India and level of investment, look, we have said that we're continuing to invest, and the level of investment will be at least the same for the first half. We've made it pretty clear, as Owen said before, we're -- the aim is to get to #1. So we will continue to invest in the second half.
In terms of the seller leads, the conversion rate is very good. I think, arguably, it's the best seller leads that our agents get in the market. We've talked before, it's around about the low 30s in terms of conversion to listing. Finance leads, it's harder to track because some borrowers are leads and they're not quite borrowing ready. And so our brokers have to help them understand how much they can borrow and therefore, find a suitable property. So it's a longer -- some of those are longer conversions. And so it's harder to track. So I can't give you an accurate number on that because some take 6, some take 12 months to absolutely convert to a loan.In terms of depth, I think you'll see more of the same. The uptake in our depth offering at the end of FY '21 was very, very strong. And that rate of growth will continue. I don't see any impact on the rate of depth or the depth penetration from the election. If listings are down because of the election, it will be down across all levels. So I don't think the election will have any impact on that depth rate.
Your next question comes from Eric Choi from Barrenjoey.
It's Eric. Just 3 for me as well. First one, can I just start with the cost. It feels like nominally, we're expecting costs to be about $10 million to $15 million higher than you previously thought. And you've called out these are revenue-related costs. So I'm just wondering if you can give us a sense of what the margin profile is on these? And if not, maybe if you could tell us if it's sort of like sales commission type costs, is it audience maximize the COGS? Is it in the Finance Segment? Just any sort of steer.Second question on depth. If we do the standard resi growth rate less listings, less price, you sort of get this balancing item for depth mix and new products of 8%. I'm just wondering how much of this was being driven by the geographic mix because Sydney and Melbourne were punching above the national average. So I guess as we moved into January and the National and Sydney, Melbourne listings growth rates have sort of come together, has that geo mix tailwind slowed as well.And then last question, maybe the easiest or hardest one. Owen, you sort of said, I think, positive 3Q, negative 4Q, you net that all together, what's your best guess? Do you think we can still get a positive listings growth number in second half '22?
Thanks, Eric. I'll take the depth and the COGS, so #1 and #2, and pass to Owen for #3. In terms of COGS, look, the increase, as you said, we've gone from and the high single-digit to low double-digit cost guidance. It is -- the increase is predominantly revenue related, which a large portion of that is COGS. The other factors in there is incentives and some other salary increases as well. But as I said, a large portion is COGS, and that is predominantly related to products like Audience Maximiser, as you said. There is quite a high margin on that product and so it does benefit our EBITDA. And the margin isn't quite as high as the core residential business, but it is a very healthy margin on that.In terms of depth and the geo mix that you mentioned, that geo mix hasn't had as much of an impact as it had in previous quarters and results announcements. So that started to temper a bit in terms of that volatility around geo mix. And the benefit from depth that we're seeing, as Owen said, is the recontracting effort from the fourth quarter coming through as well as the market dynamics.
I'll take the listings question. As you said, it is very hard to predict, Eric. The way I look at it is that the conditions in the market are still incredibly good. We're seeing very strong levels of inquiring demand on our site. And I don't see that going away. The bank has still got a lot of liquidity, to answer. So there's a lot of lending there available to sort of anyone who qualifies.And then if you think about the other drivers long term of listings, you've got interest rates. Well, we're still at historic levels. And even if there is a rate increase in the second half of this calendar year, we're still going to be very, very low levels historically. And then if you believe the unemployment forecast might have a 3 in front of it by the end of the year. Again, another strong indicator for consumer confidence, which is also a sort of influence on listings.So in terms of the half, I think we'll see listings brought forward to avoid that kind of holiday, election period. And so Q3 will be strong, and Q4 could be negative. I think net-net, the underlying trend is for positive, and therefore, you could see a positive result for that total half. But it would be small, I think.
Your next question comes from Darren Leung from Macquarie.
Just 1 for me, and I know you touched on it previously before, but just on the Media revenue side. Obviously, you mentioned that Developer pipeline is looking quite strong. But I think most participants in the market and the industry are sort of expecting Developer commencements and completions to sort of come off over the next 12 to 24 months. Does that have an impact on your Media, Advertising and Display business as well?
Yes, it does. So we monetize Developer in 2 ways through project profiles, which goes in the Developer segment and Media, Display & Advertising, which goes in the Media segment. And so any reduction in launches obviously has a negative impact of that. But as you saw in the half when we were down 24%, we were still flat on revenue. So what -- we tend to get a counter balance in the project profiles are sold for longer and duration keeps going out. We monetize monthly on that. So that's a good thing.And Display & Advertising from Developer was actually very healthy in the half despite lower launches because they need to advertise more to move their stock. So BIS Oxford is the best lens we've got on the market. They're saying we were minus 24% in the half and minus 1% for the full year, which implies a better second half. And then longer term, there are so many influences on how many projects come to market, including population growth, immigration, et cetera. But we've shown in the past that in weak Developer markets, we still managed to do pretty well on revenue.
Your next question comes from Entcho Raykovski from Credit Suisse.
So my first question is on costs. Obviously, you've got the change the full year cost guidance. You've called out some of those revenue-related costs. But I'm specifically interested in whether there's been any impact from a tighter labor market? And perhaps in answering that question, can you talk about the labor market more broadly and the impact that's having on filling roles. Anecdotally, a lot of open positions right now, including REA. So I'm also just interested in whether that's allowing you to pursue all of the growth projects that you want to do right now? That's the first one.Secondly, just from a rentals perspective, what are the dynamics that you might need to see to change for a return to growth? It seems to have been some more persistent declines more recently. And is that likely in the second half? And final one, a pretty boring one, but it looks like you've lowered some of your D&A forecast for FY '22? If you can just talk to the factors behind this.
Thanks, Entcho. I'll take the labor market and rentals, and I'll ask Graham to cover the D&A question. It is a tight labor market. You only got to pick up any newspaper to see that in a world where we really don't have any ability to bring talent into the country through immigration, the labor market has got quite tight. You couple that with kind of every business having growth initiatives like ours and a lot of kind of non-digital businesses having to build their digital offering in a world where they've been working from home. So it makes it quite tight. So we are seeing pressure on wages. And when we hire, we tend to see hiring at high levels for each role.We do have vacant roles. We always have vacant roles. We've grown our headcount considerably in the half to fuel our initiatives. And we have a great employment brand. We were rated as the Fourth Best Place to Work in the country. And so we've got people queuing up to join REA. We had 180 new starters in the half. And we also have a fantastic facility offshore through a supplier to have variable contractors. So we can dial that up and down as we like. We did dial it up in the half to compensate as well. So the tight labor market is not affecting our growth initiatives, but it will have an upwards pressure on that sort of salary rate for our staff.And in terms of rentals, I think we'll have a better year this year. The things that were driving it down were students, foreign students being able to come in. We need the borders open, not just the international borders but the state borders. I mean, people couldn't move between states and having to stay put basically. And so as movement around the country and internationally opens up, I suspect the revenue -- sorry, the rental market will recover this year.
And in terms of D&A, look, a small adjustment, we finalized the purchase price allocation on the acquisitions. So there's small changes there. And then obviously bringing the 2 businesses together, Smartline and Mortgage Choice and some decisions we may make around the assets. So branding and intangibles have flown in terms of the useful lives of some of those assets as well, which has just caused a slight change as well.
Your next question comes from Siraj Ahmed from Citi.
I'll ask 3 questions, and I'll just ask the first one. Just Owen, any update on the seller leads or agent match project. On that, Connect seems to be going quite well, but the seller leads seems to be pushed out?
Yes. Look, on seller leads, we've always said what we wanted to do first was built to market. And I think you'll see from the numbers that consumers are now realizing that realestate.com.au is a great place to both research the market and the agents in the market but also connect with those agents. And so we've changed the consumer behavior in the way we wanted. We also wanted our customers to value those leads, and they do. As I said, we have a very strong conversion of those leads. So it puts us in a really good position to bring our product to market. But obviously, our customers will hear about that first, and it's not far away.
Got it. And second thing, on the Financial Services business, pretty strong result. It seems like the broker numbers for your -- the core business before Mortgage Choice has gone down. Just keen to hear what's happened there? And the payout ratio increasing, is that a permanent step change? Or is that just because of settlement volumes?
So the payout ratio is due to settlement volumes, really strong volumes. We have tiering of rates that we pay. And when you get really strong volumes in particular months, you do get a slightly higher pay. So it's a great position to be in. It means that brokers are writing almost as much as they physically can. In terms of numbers, and I don't -- we haven't had a backward step in broker numbers.
Got it. I might have gotten it wrong. Last thing, just on -- looking into FY '23, and I know it's looking ahead. So you gave your revenue expectations, right? Given the wage pressures and the fact that you're continuing to invest. How do you think about the settings, right? Is it still that it should be positive jaws? Or would you need to invest irrespective of the environment?
We always have an ambition to have positive jaws. And you've seen that through kind of good use for our revenue and the value when we had COVID that we adjust our cost base up and down accordingly. We do that in several ways. As I said, we've got a large number of contractors who work on our initiatives, and we can dial that up and down at a moment's notice. And so we have the ability to manage our cost. We invest when revenue is growing strongly, and we can pull it back if we have to. So we're guiding to positive jaws for the foreseeable future.
[Operator Instructions] Your next question comes from Paul Mason from E&P.
Just 3 for me. So the first one is on REA India and the audience gain. I was just wondering if you could talk to sort of your beliefs around attribution between SEO and then the basic brand advertising, which is obviously like plan and then anything to do with agent referrals or anything else driving the website, or whether it's all just like media spend at the moment?The second one was just on depth and it's a bit of a follow-up question to Eric's question earlier. In terms of the, say, the percentage change in the depth chart, does that correlate really strongly to the percentage change in number of agents that are now on a new contract versus the prior period?And then the last one, just if you could give some updated thoughts on what the prospects around New South Wales stamp duty reform look like from your side. Obviously, it's been quiet in the media for a little while now?
Thanks, Paul. Look, in India, it is a combination of SEO. So doing really well in SEO, and it's been one of the benefits of REA's ownership. We have a very strong SEO performance here in Australia. Most of our traffic is organic, and we've taken a lot of those learnings across to India and so it's had a big uplift in our SEO performance. But a lot of it is brand. This is still a relatively immature market. And so the COVID lockdowns, I think, accelerated the move to digital in India significantly. But I think our brand advertising has been very, very clever. We've got a huge uplift, for example, advertising around cricket in India. So it's been a combination of the 2.In terms of depth, it is a combination of the number of agencies signed up to higher depth products. And so that is probably the primary driver. And then you get a bit of movement depending on geography because of different depth penetration across the geographies. But I'd say the key driver there is just the number of new contracts the customers signed up to.In terms of New South Wales stamp duty, you're right, it's gone quiet. The change of -- it was being led by the then Treasurer and now Premier. I think it feels like that's going to be delayed until after the next New South Wales election cycle. He has indicated publicly that he would like some federal government support on that, and we would hope that they can see the logic of this as well. So it does feel like that's been pushed out until at least after the next New South Wales election.
There are no further questions at this time. I'll now hand back to Mr. Wilson for closing remarks.
I'd just like to thank everyone for joining us today. We had a very pleasing result for the half year. I'd also just like to pause and just pass on my condolences to Janelle and her family. It's a really tough time for them. We are a family at REA, and we feel her pain. So we look forward to seeing you again and updating you in the third quarter. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.