REA Group Limited (REA) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the REA Group Limited Full Year Results 2020 Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Graham Curtin. Please go ahead.

Good morning, and welcome, everyone. My name is Graham Curtin, General Manager of Group Reporting, and I'd like to thank you for joining REA Group's 2020 Full Year Results presentation. Today, you'll hear from our CEO, Owen Wilson; and CFO, Janelle Hopkins. Owen will talk to the group financial performance, the Australian property market and business highlights for the year. He'll then hand over to Janelle to talk to our financial results in more detail. As always, we'll be then happy to take your questions. With that, I'll hand over to Owen.

Thanks, Graham, and welcome, everyone. REA has delivered an excellent result given the unprecedented backdrop of events this year. Despite the challenging conditions, many highlights have been achieved, which are summarized on this slide and covered in more detail throughout the presentation. 2020 has been a year unlike any other. The catastrophic Australian bushfires and the devastating impact of the COVID-19 pandemic have created significant social and economic hardships. Before detailing our results, I'd like to sincerely thank all those who worked tirelessly to support and protect our communities throughout the year and who continue to do so as we battle to control the impacts of COVID-19. I'd also like to recognize the efforts of REA's employees. I've been so proud of the way our teams have rallied together to deliver new product, features and support measures to our customers and consumers, while at the same time, looking out for each other. Our purpose to change the way the world experiences property has never been more evident. Looking at the results from core operations for the full year. Revenue was $820.3 million, a decline of 6%. EBITDA, before share of associates losses, was $492.1 million, a decline of 5%. And NPAT was $268.9 million, a decline of 9%. These results included a significant reduction in Q4 operating cost of 21% with full year cost down 9%. The Board has declared a final dividend of $0.55 per share fully framed. This represents a total dividend of $1.10 per share for the 2020 financial year, down 7%. Pleasingly, despite these difficult operating conditions, REA increased our strong core EBITDA margin to 60%. Looking at market conditions. And as you can see on these charts, the group's first half performance in FY '20 was impacted by significant declines in residential listing volumes and new project commencements. This was primarily due to the restrictive lending environment caused by the 2019 Financial Services Royal Commission. While we started to see signs of recovery at the beginning of the second half of FY '20 with national residential listings up midway through March, COVID-19 significantly impacted the real estate market in April and May. As COVID-19 restrictions eased across Australia in June, the market responded positively with residential listings increasing, albeit coming off very low volumes in June last year and remaining well below pre-COVID levels. From a rent perspective, the businesses remained relatively stable, as you can see here. Unsurprisingly, given the current environment, the commercial business has seen a significant drop in listings, as you can see on the graph on the bottom right of the slide. Despite weak tenant demand, we are not yet seeing signs of distress among commercial property owners. Janelle will provide more context in her uptake. Turning to our growth strategy. We remain focused on prioritizing factors within our control, providing the best opportunities to support people to find, buy and sell property. REA's growth strategy is centered around 4 core objectives: firstly, providing our customers with access to the largest and most engaged audience and property seekers; secondly, delivering unparalleled customer value; thirdly, providing the richest content, data and insights to our customers and empowering consumer through their property journey; and finally, creating the next-generation of property and property-related marketplaces. We have a strong pipeline of new and existing initiatives across our buy, sell and rent categories, which will underpin our future growth. REA responded decisively to COVID-19, prioritizing the health and safety of our employees and the immediate needs of our customers and consumers. We moved quickly to virtual working, which remains in place in Victoria, while all other locations have returned to the office. The accelerated delivery of new products, features and support measures has been critical to help our customers and consumers successfully adapt to the rapidly changing market conditions, and at the same time, maintaining a well-functioning property sector. Customer feedback has been extremely positive around the flexibility and variety of offers REA introduced. In Victoria, given the ongoing lockdown conditions, we have extended our support measures through to the end of September to help our customers give vendors and landlords the confidence to list their properties. We'll continue the ability to re-list properties at no cost, if they need to be withdrawn from the market, and re-upgrade properties at no cost, if they need additional time to sell. We have also extended our pay on sale product for Premiere All customers in Victoria. And all customers will receive a 50% reduction in subscription fees for August and September. Despite COVID-19 impacts, realestate.com.au continues to deliver record audience levels. On average, we received over 90 million visits each month with a new record in June of 114 million visits, up 43%. That's over 3x more visits than our nearest competitor. In terms of unique audience, on average, 9.8 million people visited realestate.com.au each month. And in May, we jumped to a new record of almost 12 million people visiting, up 34% year-on-year. Our superior mobile experience means people are using Australia's #1 property app more than ever before. The app remains a critical tool for buyer activity with over 50% of all buyer inquiries being generated via the app. Consumers are deeply engaged with the experiences we're providing with record app launches in June of 46.2 million, up 46%, and total app downloads reaching 10 million in FY '20. realestate.com.au is now reaching 60% of Australia's adult population each month. Of this audience, over 61% of people are using realestate.com.au exclusively when looking for property. This clearly demonstrates the unrivaled brand loyalty from our audience. The bulk of our audience growth is coming from traffic to our site by section. As you can see on this slide, in Q4, property views for buy listings increased 29% and buyer inquiries increased 46% year-on-year. This activity highlights a strong buyer demand despite COVID-19 impacts and positions realestate.com.au as a powerful source of high-intent property seekers. We continue to unveil new consumer innovations and make great progress in delivering a highly targeted, personalized property experience. We're seeing strong consumer uptake of our new digital inspections feature, which is helping to drive more qualified leads to our customers. Since launching in March, there have been 13.8 million video views and 14 million 3D tours. These digital features, including online options, will be even more critical over the next 6 weeks in Melbourne as we enter stage 4 restrictions. Next week, we will also be launching a new feature for buyers and renters to request a live video walk-through properties. We now have 1.8 million active logged-in users on realestate.com.au. Having access to these personal profiles means we're delivering highly targeted experiences based on people's individual needs. The number of consumers tracking properties in realestate.com.au grew 33% year-on-year, while the number of properties being tracked increased 62% to 1.9 million. This demonstrates the strength of our relationship with property owners. In June, we launched our next best action personalization feature, targeting property owners and first home buyers across our apps. This feature suggests the most relevant activities for consumers to pursue in order to successfully progress their property journey. Since launch, over 180,000 people have accessed this information, ranging from how to refinance their property to better understanding property values. Turning to our customers. We've seen improved product mix across both buy and rent with a record number of customers committing to our premium listing products in FY '20. With the headwinds that our customers are experiencing, we know that our role in driving new business to agents is more important than ever. In FY '20, we attracted over 1.6 million average monthly visits to the find agent section. Our agent's rating and review features now has almost 70,000 agent reviews. This provides a powerful way for agents to build trust and credibility with buyers and sellers through objective third-party endorsement. Agent Match, our vendor lead generation tool, continues to help customers win their next listing. During the year, we saw 19% growth in vendor leads as an increasing number of homeowners chose realestate.com.au as the place to find their agent. Pleasingly, 32% of these leads converted into listings. With push notifications now enabled, Ignite, our self-service customer reporting platform, delivered over 42,000 private inspection requests to customers during the COVID-19 restrictions. Turning to the next slide. Core to REA's growth is our focus on building next-generation marketplaces. Our rent strategy is integral to this. realestate.com.au continues to deliver Australia's largest consumer audience for rent, with average visits for the rent section of 18.9 million each month in FY '20. With over 2 million landlords in Australia, our research highlights that 33% are now self-managing their investment properties. We also found that 24% of these self-managed landlords are considering the use of an agent in the next 12 months. This presents a significant segment to tap into our customers but also in order to provide the most comprehensive view of rental listings. Our new offering will be launched this quarter, providing self-managed landlords with the choice to either connect with an agency on our site or list their property directly on realestate.com.au. 1Form, our digital rental application tool, also experienced strong growth with applications increasing to 3.9 million, up 21% year-on-year. Our investment in financial services continues to perform well, delivering growth in loans admissions and settlements despite difficult trading conditions. We now have over 1 million active users with financial profiles engaging with our online experiences. One of REA's most powerful assets is our data. We continue to progress in our goal of being Australia's authority in property data and insights. Our Hometrack business is providing Australia's largest financial institutions with access to property data and trusted automated valuation services. In June, we launched our REA Insights brand. REA Insights leverages our unparalleled audience data and behavioral market intelligence, providing a unique view of consumer activity and demand for Australian property. Now turning to our global businesses. While trading conditions across the Asia segment have been difficult, pleasingly, Malaysia had a very strong first half, maintaining a site leadership position and delivering audience growth. Our Hong Kong business also delivered strong audience growth with organic visits increasing 32% year-on-year. This was, however, overshadowed by the ongoing disruption caused by the unrest in Hong Kong, combined with the profound impacts of COVID-19 on the business. Events are a large part of the property landscape in Hong Kong, generating significant revenue while also providing excellent digital cross-sell opportunities. Due to the market conditions, all events had to be canceled this year, and there is no likelihood of their resumption in the near future. This confluence of events has significantly affected Asia's overall segment performance. Coupled with the unknown depth and duration of the pandemic's impact across the region, this has unsurprisingly reduced the current valuation of these businesses. Despite the difficult conditions we are currently experiencing, we remain confident that our investment in Asia will deliver long-term growth to our shareholders. REA Group has an investment in Move, Inc., operator of realtor.com. The negative impact of COVID-19 in the U.S.A., particularly in the fourth quarter, caused revenue to fall 2% to USD 473 million. Pleasingly though, realtor.com's monthly unique users across web and mobile sites for the fourth quarter grew 11% year-on-year to 80 million. We also have an investment in Elara Technologies in India, operating the property sites of housing.com, proptiger.com and makaan.com. Elara experienced strong revenue growth prior to the impact of COVID-19. India is the fastest-growing trillion-dollar economy in the world and the fifth largest overall, while Elara is the fastest-growing digital real estate business in India in terms of both revenue and audience. Finally, underpinning everything we do at REA is our people and culture. It's what provides our competitive edge. We know these are strange times, creating new pressures for our people. That's why we've introduced a range of different initiatives to ensure we're providing the right levels of care and support to our teams while operating in today's unique environment. And our people have responded brilliantly, continuing to deliver incredible customer service and new products and features despite the need for virtual working. Before I hand over to Janelle, a few comments from me regarding market conditions. The COVID-19 health crisis continues to create market volatility. The Australian economy is in its first recession in 29 years with rising unemployment and low levels of consumer confidence. However, Australians' love for property remains and buyer demand is strong. In July, property views for buyer listings increased 32% and buyer inquiries were up 38% year-on-year. July also saw national residential listing volumes increase, largely driven by Sydney and Melbourne, although we are cycling through 2019 financial year comparatives that were very weak. As you'll see in Janelle's slides, the impact of the Royal Commission and the election on Q1 FY '20 was actually worse than the impact of COVID-19 on Q4. We will see significant short-term listing weakness in Melbourne while the stage 4 restriction is in place. But like the last shutdown, we expect listings to rebound once restrictions are removed. In the period since Sunday, when the restrictions were announced, listings in Melbourne are running down around 60%. We should also remember this is a health crisis, not a liquidity crisis. The household savings rate is at 5.5%, the highest it's been since the September 2016 quarter, while the banks still have access to significant levels of liquidity. While it's still too early to identify clear trends about the shape and speed of any economic recovery, we expect the property market to be resilient, particularly given the financial support measures in place. I'll now hand over to Janelle to talk through our results in more detail.

Thank you, Owen, and good morning, everyone. As Owen has shared, REA's results were delivered in particularly challenging market conditions. Revenue from core operations declined 6% to $820.3 million. This reflects the resilient performance from our Australian residential business despite the headwinds experienced with a 12% decline in residential listings. Total core operating expenses reduced by 9% for the year with costs in the fourth quarter down by 21% driven by an immediate COVID-19 response with reductions across most expense categories. Full year EBITDA from core operations before associates declined by 5% to $492.1 million, reflecting the lower revenue performance. Pleasingly, core EBITDA margin increased to 60% through strong cost management throughout the year. During this challenging year, we have continued our investment in product innovation and growth strategies, which underpins the future success of the business. NPAT from core operations decreased 9% to $268.9 million. The NPAT results from core operations are different from the reported NPAT as a number of one-off items have been excluded. These are set out in the table at the bottom of Slide 18. We will now turn to trends in the Australian market. On this slide, we've set out the changes in listing volumes by month and dwelling commencements by quarter for the past several years. As you can see, the challenging market conditions due to the impacts of the Royal Commission and election uncertainty were evident from Q4 FY '19. This subdued activity continued throughout the first half with pronounced listing declines in Sydney and Melbourne, the highest-yielding cities. Q3 listings indicated a gradual market recovery with improvements in national residential listings, led by Sydney and Melbourne, particularly in February and early March. The emergence of COVID-19 in March quickly impacted the real estate industry with significant listings declines in April and May. As COVID-19 restrictions eased in June, the real estate market responded positively with new residential listings up 11% year-on-year, noting the low volumes in the comparative period. In July, national residential listings were up 16%, with Sydney up 47%. Again, the magnitude of the listings increases reflect the weak comparatives in July 2019. Whilst July listings ended positive nationally, the negative impact of a second wave can be seen in the Melbourne listings, ending up 13% for the month despite being up 30% in mid-July. The July impacts in Melbourne demonstrated the rapid impact that COVID-19 uncertainty can have on listing volumes. Stage 4 restrictions currently in place in Melbourne are likely to cause significant weakness in listing volumes for the duration of the lockdown. Moving to the developer market. This market has been challenged for a number of years. FY '20 continued this trend with new project commencements down 27% for the year. The factors driving these declines include funding constraints, a reduction in consumer confidence, lower foreign investment and now likely lower immigration. The FY '20 project commencement declines will continue to impact the FY '21 revenue as the average project profile is now above 12 months. And according to the BIS Oxford forecast, the decline in new dwelling commencements is expected to continue through to Q4 of FY '21. On the next slide, we've set out the key components of the EBITDA movement. The main drivers of the decline were the national residential listings impacting Australian residential depth business and the decline in new project commencements impacting the development in commercial and media data and other businesses. Additionally, the group responded to the COVID-19 health crisis by providing support measures to our customers and the broader real estate market. These included subscription discounts and changes to listing products, which also decreased the group's revenue during the fourth quarter. The impact of these declines were partially offset by the residential price changes, which came into effect in July 19, and higher premium penetration across buy and rent and growth from our Hometrack data business. Financial services operational revenue increased due to higher settlements and improved broker productivity. This was, however, offset by the annual noncash valuation adjustment to reflect the future trial commissions, which reduced this year due to faster loan runoff rates in the low interest rate environment. We continue to focus on what we can control in these difficult times. Our focused cost management program has been in place throughout the year. An organizational realignment in Q1, combined with targeted marketing and operational expense reductions, resulted in a 9% decrease in core operating expenditure or 6% down, excluding the impact of the new leasing standard. This expense outcome has partially mitigated the negative market impact on EBITDA. 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 is no scale to the graph, but the relativities between the categories are for scale. Despite the headwinds of residential business pace this year, both our total and Premiere penetration reached an all-time high. This graph illustrates the continued improvement in the level of depth penetration as well as an increase in total percentage of Premiere listings, clearly demonstrating the superior returns these products provide to agents and vendors. The improved mix during the second half is pleasing given the unprecedented market conditions. Moving to our international businesses. The Asian business comprises of iProperty and our Chinese listing site, myfun.com, contributing $47.9 million of revenue and EBITDA from core operations before associates of $8.9 million. This result was driven by strong first half performance from Malaysia with digital revenue growth increasing 20%. This growth was underpinned by improved yield and continued customer acquisition. This positive first half momentum in Malaysia was offset by ongoing disruption in Hong Kong and significant impacts of COVID-19 across the region, resulting in a 2% full year revenue decline for the Asia segment. As Owen mentioned, property events are a key revenue driver in Hong Kong. Market conditions stopped the ability to run these events during FY '20, and this is likely to extend into the future. As a result, we've moved to streamlining the Hong Kong operations to focus on the digital market and will reduce the cost base accordingly. Overall, Asia EBITDA before associates increased 20% for the year. This was driven by cost savings, lower operating costs post the divestment of Indonesia and Singapore and favorable FX movements. Moving to our investments in associates. The 99 Group investment was successfully completed on the 28th of February. This investment strengthens the group's competitive position in Indonesia and Singapore in the long term. However, in the short term, this business has also been negatively impacted by COVID-19. Elara business continues to strengthen and is the fastest-growing real estate classified platform in India. Elara's revenue increased due to a strong contribution from housing.com prior to the effects of COVID-19. Our share of losses increased by $1.9 million to $7.5 million due to the impact of continued investment in the first half and COVID-19 on revenue in the second half. As you can see, the Asia segment experienced adverse market conditions during the year. The force of these macroeconomic events, combined with the uncertain timing of recovery, has reduced the current valuation of these businesses resulting in a noncash impairment charge of $141.2 million, reducing the Asia goodwill balance and carrying value of investments in Elara and 99 Group. Finally, shifting to our investment in the U.S. Move reported a decrease in revenue of 2% to USD 473 million due to the impact of COVID-19 in the fourth quarter, including an estimated USD 15 million negative impact from customer relief measures and lower software services and advertising revenue. Our share of losses from core operations in Move was $7.2 million, a decrease of $1.2 million on the prior year due to a reduction in operating costs despite the increased investment in OpCity. On the next slide are our operating jaws. As previously forecasted, our jaws remained open for the full year. Despite the uncertainty for FY '21, the group continues to prudently manage its cost base, targeting full year positive operating jaws. Based on the current market outlook, we are targeting no increase in core operating costs for FY '21. While expenditure growth rates will vary quarter-on-quarter, Q1 core operating costs are expected to be approximately 5% to 10% lower when compared to Q1 2020. Despite the reduction in OpEx for the year, we continue to invest for the future with CapEx as a percentage of revenue consistent with prior years. This represents the continued investment in product innovation that Owen spoke to earlier. Fiscal year 2020 fit-out costs largely relate to an additional Melbourne office and no significant fit-out costs are planned for FY '21. The group implemented AASB 16 on 1 July, 2019, which saw significant changes to the way in which businesses account for leases. For REA, this was a $2.6 million net decrease to the P&L with additional depreciation and amortization expense and finance costs, offset by reducing our rent to operating expenses. Turning to our cash position. We delivered a strong operating cash flow of $419 million for the year, which is the addition of the first 4 bars on this graph. Our operating cash flow was assisted by lower tax payments as a result of COVID-19 payment deferrals, which is expected to be paid in first half FY '21. Strong operating cash flows enabled the repayment of $70 million in debt in December '19, continued capital investment and shareholder returns in the form of dividends. Our closing cash position was $223 million at 30 June. Our strong liquidity position is supported by an additional $149 million loan facility and $20 million overdraft facility. These remain undrawn and was put in place to cover the event of a significant and prolonged market downturn. Finally, on current trading. The COVID-19 health crisis continues to create widespread market volatility. The uncertainty in relation to the extent and impact of ongoing government lockdowns, fall-on effects to economic performance and future action the government will take to support economic recovery makes it difficult to predict market outcomes. The latest COVID-19 restrictions in Melbourne, which ban physical property inspections, are likely to cause significant short-term weakness in listing volumes for the duration of the lockdown. This, coupled with the projected reductions in new projects -- new development project commencements and listing volume declines in the commercial and Asia business, is likely to cause adverse impacts on revenue in Q1 FY '21. In response to the effects of COVID-19 on the real estate market, the group deferred residential price increases, which were due to take effect on 1 July, 2020. The group will continue to assess market conditions and will only implement price changes if a sustained residential market recovery is evident. As noted earlier, the group continues to prudently manage its cost base, targeting full year positive operating jaws. Based on the current market outlook, we are targeting no increase in operating costs in FY '21. While expenditure growth rates will vary quarter-on-quarter, Q1 core operating costs are expected to be approximately 5% to 10% lower when compared to Q1 2020. I'll stop here. Operator, if we can now please open the line for questions.

[Operator Instructions] Your first question comes from Eric Choi from UBS.

Great results. Also congrats on that. Just a few for me. First question, just on the difference between your listings outcomes versus CoreLogic. Your listings in Melbourne especially were much higher than what CoreLogic suggested. So just wondering, do you think this reflects an increase in your share versus your peers who are providing a feed to CoreLogic? And then the second question, I just wanted to unpick the fourth quarter residential depth result a little bit. Listings were down 14%. If I do a back of the envelope, it sort of suggests the net benefit from price increases, depth, new products and revenue deferrals was enough to broadly offset that minus 14%. Just wondering if you can confirm that's the case. And then just a last question on the timing of price increases. Just wondering what are the key property market metrics you're looking to improve, specifically in the scenario where second half FY '21 listings are rebounding strongly? But say, house prices are down 10%, do you think that would still be a suitable backdrop for price increases?

Thanks, Eric. I think I'll take questions 1 and 3, and Janelle will take 2. In terms of listings versus CoreLogic, I'm not sure it's an indication of market share, but it's possibly one of the underlying factors in it. We can't comment on the CoreLogic methodology for how they report listings. We can only see what comes on to our site. And we feel we've got an incredibly comprehensive view of the market across the entire country, but particularly here in Melbourne and Victoria. So in terms of what's important, which are new listings, which is what we monetize, we think our measure is the right one. In terms of price increases, look, there's no one metric that we'll be looking for. It will be a combination of what's happening with listings, what's happening with house prices. It will be consumer confidence. It will be feedback from customers. It will be a whole series of measures considered and ultimately, a very subjective judgment as to when would be the right time to do it. We've said before that if we don't go with a price rise increase, we do believe that will create the circumstances where we would be able to implement a higher price rise on 1 July next year than we otherwise would have. And so we're relatively relaxed about when we go with pricing, if at all, this financial year. As we sit here today, it's definitely looking less likely, given what's happening in Victoria and you see the numbers in New South Wales. I think we're a long way from the circumstances where we'd be able to put a price rise in right now. That is one of the other factors that will play a big part is just what's happening with the virus, not just listings, not just house prices.

And Eric, as per usual, your back of the envelope is generally right. And you're right, as we have seen Q4 versus Q4 last year, with listings down 4%. We have been pleased with the benefit of higher particularly Premiere penetration and price coming through has enabled us to offset the substantial portion of that listings decline in Q4 from a revenue perspective.

Very helpful. Janelle, can I ask one follow-up? Can you just confirm whether the revenue deferrals were net negative or positive during the quarter, given you had some revenues flowing from 3Q '20 but also some June recognition flowing out to first quarter '21?

Yes. Net-net, we are net negative for Q4.

Our next question comes from Lucy Huang from Bank of America.

I have 3. You mentioned since the Melbourne market has gone into lockdown, that listings are down 60%. Just wondering, I guess it's only a few days of data, but are you seeing any flow-through impact from sentiment and listing volumes in some of the other markets like Sydney. And are you seeing any signs of kind of distressed properties coming on to the market at this point in time? And then my second question is on the margin outlook. So in terms of increase in core operating costs for FY '21, which areas of cost are you likely to pull back on to achieve that guidance? And should we interpret it as, if market conditions do rebound much quicker than expected, that cost growth could come back into FY '21? And then just lastly, on the pay on sale product. Just wondering if you can give us a sense on what the take-up was during COVID-19 for that product. And I guess how is the sales rate of those products?

So thanks, Lucy. Once again, I'll take 1 and 3, and Janelle can take 2. It's becoming a theme. Look, it's still early for Victoria. The restrictions are only announced on Sunday, but we do track listings daily against kind of the same days last year. And to date, it's looking down around about 60%, some up a little bit higher than that, some days lower. In terms of the other states, it hasn't had an impact. So you can see that very strong listings number for July. And month-to-date, listings for Sydney for August, they're looking very, very healthy. So it doesn't appear to be having an impact anywhere else but Melbourne for obvious reasons. And as I said in my speaking remarks, that it's highly likely that these listings will end up being deferred. We saw a huge rebound in Melbourne and Sydney from -- after April and May restrictions were lifted. We would expect a similar sort of outcome. We are trying to put in as many features as we can that will still allow consumers to list during this period, knowing they've got a long period of time, knowing that you can still do a virtual walk-through with the owner as an example. And that while physical inspection will be required probably to consummate the transaction, that can be queued up and ready to go for when restrictions are lifted. So we're going to do what we can to stimulate the market, but we do expect them to be significantly down for that short term. In terms of distressed sales, that's very hard for us to track as to why a property has been put on the site. We don't get informed of the underlying reason. Anecdotally, we don't think there's much about at the moment. We think it's probably too early. The mortgage holidays are still in place for consumers. You still got a stack of government stimulus out there in JobKeeper and JobSeeker and the like, and they're probably going to be continued from what we can see, particularly here in Victoria. So we're not seeing a lot of distressed sales. I think if that's going to happen, we're probably looking at more towards the end of -- back end of September, October, November as to when consumers might find that time is up and they need to either downgrade or exit the property market. So we may see some volume from that in those later months. I'll take POS and let Janelle take question 2. The POS was -- it delivered what we wanted it to do. We brought pay on sale in to help get nervous vendors across the line and give our customers the ability to convince the vendors to list. We had something like 1,000 pay on sale listings over the period, and we still got sales coming through. But at the moment, I think it's tracking at about less than half of those actually sold to date, but that number is increasing every day as sales are taking slightly longer in this situation than normal.

In relation to your question around costs, Lucy, you're right to flag that we are targeting flat costs for the full year. So again, we will look across all expense line items, particularly with the organizational restructures we've done throughout the year. We'll provide ongoing employee-related savings. We are getting even more savvy in our marketing, as you can see by the advertising campaign we put out recently. It was very cost effective. So we continue to focus on those things, and we'll just continue to manage it really tightly. I think what we've shown this year is the flexibility we have in managing our cost base. And if the market goes substantially down, we can continue to take cost out. If the market rebounds quickly, we may look at putting some additional cost back in to support specific growth opportunities. But it will really depend on how the market plays during the next quarter. We also really don't want to short term the business as well, so we're trying to balance all those things.

Our next question comes from Entcho Raykovski from Crédit Suisse.

I have got 3. So the first one, just looking at the relief measures that you've put in place in the fourth quarter, are you able to quantify those across the Australian business? Even just an approximate number, given that, I guess, arguably, you should expect those to be in place later in the year. And then secondly, you mentioned there's been some tax payment deferral with that payment falling to the first half. Are you able to give us the quantum, not just taking the difference between the income statement tax and the cash flow tax but just so in order to adapt? And just finally, the 19% decline in media and data, just interested to what extent that's driven by people, so COVID-related weakness, as opposed to some of the structural that you've spoke about before, given the great number of Premiere listings. You've got less listings on the site sort of in play. So a breakdown would be useful. Just -- and what I'm trying to get to here is how much of that, will come back in future years instead of having been lost.

Thanks, Entcho. Look, I'll take the first one on relief measures. At the moment, all relief measures in all the other geographies had expired. You might recall, we put the listings re-upgrade and re-list in all Australia until 30 June, and we had subscription discounts across all of Australia through to 31 July. All of those have now expired and not being reintroduced. The only ones we now have now are in Victoria. And it's same raft of measures. It's re-list, re-upgrade, pay on sale for Premiere customers and a 50% discount on subscriptions for only-Victorian customers. The impact of that is about $1.5 million in the quarter. So it's not significant. There also might be a little bit of revenue deferral from some of the offers to re-list and re-upgrade. But again, given its only Victoria, there will be a lot less impact than the revenue deferral that happened in Q4 from those offers.

Sorry. I think so $1.5 million, and that's 4Q '20 impact business.

That's the full impact in Q1. And all of these offers expire on 30 September. So...

Okay. Got it, got it. Sorry. And presumably the impact the fourth quarter and the June quarter that we've just had that you've just reported on was greater and that it applied across the board. Okay, got it. Got it. And I...

Sorry. Go ahead, Entcho.

And I just wanted to check first. And do you have a fourth quarter '20 number that you could give us, given that what I'm conscious on there is that in 12 months time, you should be comping that number then as well? You shouldn't have those relief measures in place. But if you have a broad number you could give us, that would be useful.

It's around -- so between 7% to 10%.

Right.

And so in relation to your tax payment deferral, we got benefits through income tax as well as PAYG and GST. It's approximately about $75 million. And that will be repaid in the first half of FY '21. And in relation to your question around what's sitting in the development -- the media and other line, a lot of that decrease is actually around developer display as we've seen the yield, particularly for some of the display listings come down as they've gone to more some smaller developments. There was a bit of softness in media, clearly in Q3 and Q4, impact of the bush fires as well as the impact of COVID on media spend. But the biggest driver of that is actually in relation to the developer business.

Okay. Got it. And I guess if we look forward, I mean, I appreciate this is crystal ball gazing, but is that -- these are the soft revenues that should theoretically come back.

Well, yes, when we see the project commencements go back up but will be when that comes back. Although, as you've heard me say from BIS Oxford, that's unlikely to happen until at least Q4 of FY '21.

Your next question comes from Craig Wong-Pan from CLSA.

Just 2 questions for me. First 1 is on depth. I'm just noting the increase in depth numbers with our customers and increasing the Premiere product. I was just wondering if you could give any details or comments around which customers, what kind of groups you are seeing that increasing. And then second question on cost out, noting that your outlook is sort of flat cost but first quarter cost to be down. Is that just in terms of growth rates? Or are you seeing -- expecting some growth -- I guess, a growth in your costs in Q2 to Q4?

I'll take the depth and let Janelle talk to the costs. Look, in terms of where the increase in depth contracts is coming from, it's right across the country. We did see a very healthy increase in rent depth across the year, and it's been a great driver of the growth in our rent revenue in the year. In terms of the buy/sell depth contracts, it's literally -- we've had this conversation before around -- it's customer by customer, suburb by suburb. It's broadly spread. There's no way to sort of -- you can't categorize as any one particular type of customer.

And in relation to costs, our costs do vary quarter-on-quarter. There's flex -- timing of things like marketing campaigns, et cetera. So what we're really just trying to flag at the moment is our expectation for Q1 being down 5% to 10%, but overall at the moment, based on our current expectations, flat costs and no increase in costs.

Your next question comes from Paul Mason from Evans & Partners.

Just 2 from me. The first one, just on the free re-upgrade or re-listing products, can you just run us through sort of how the revenue recognition works in terms of -- in the event that it needs to re-listed? And the second question is just on your pricing approach. I suppose it's implied in the way that you guys have commented today that you are going to do a sort of one policy across the country approach to implementing price rises or not. Would you think about maybe like putting Victoria to the side and giving us like a holiday for the year and putting a price rise through for the rest of the country, given the rest of the country is in a much better state than what we are down here in Melbourne? That's it.

Let me take the revenue recognition one to begin with. So the re-list and re-upgrade offers, so effectively, you can -- for re-upgrade, you can -- if the time you have on-site runs out, you can then extend that for the same period again. So we had that in play up until 30 June. And then for re-list, if you didn't feel comfortable with your property and selling, you could take it down and then re-list up to 6 months after the initial date of listing. So what that does is really to play into deferral. So for the proportion that was re-list, the deferral recognition period is over quite a long period of time, obviously the 6 months post when you actually put that listing on-site. For re-upgrade, it's a shorter period of time. Say originally it 60 days, it's in another 60 days. What we've actually seen, most of our customers have preferred to do re-upgrade rather than re-list. So the deferral hasn't been as big as what we thought it might have been when we originally put those offers out.

And on pricing, look, the reality is we price across about 150 zones across the country, and so we have the flexibility not only to do different outcomes for states but also different outcomes for zones within the states. So we do have incredible flexibility there. So theoretically, we could keep Victoria out of it. New South Wales is kind of the next worst in terms of the virus. We could leave New South Wales out, et cetera. So we don't have to do one policy. As an example, I think 3 years ago, WA, we gave them a price increase holiday for very strategic reasons. So that's definitely within our capability and an option. I think I made the point though that we have generated significant goodwill amongst our customers at the moment with the offers and the support we've provided to the market. And we are getting credit for genuinely helping stimulate the market during these difficult conditions. And while our customer sentiment is incredibly high, one of the things we will take in consideration is short term versus long term. And as I've said, if we don't do a price increase this year, I'm absolutely confident that the price increase in July next year will be higher than it would have been. And so we're really just deferring and we will call, I think, back. So we're going to play the long game, not the short game in regards to our pricing consideration.

Your next question comes from Kane Hannan from Goldman Sachs.

Just 3 questions for me as well, please. Just firstly, the Melbourne lockdown. I think Melbourne was about 20% of new listings last year. I mean the reason we think given the higher yields in the Melbourne market, it could be up to 1/3 of your Australian revenues. Secondly, just on the rental opportunity. I think it was about 21% of your visitation. Just talk a little bit more about your rental strategy, how significant it is in terms of your revenue and then the growth that actually came through in FY '20, if you could talk to that number. And finally, just time and market blowing up to 49 days now, I think, on those CoreLogic numbers. Is there any consideration or any discussions around extending the timing of Premiere All beyond the 45 days that you recently moved to potentially July next year?

Thanks. Look, we don't obviously quote revenue by state. And obviously, Melbourne is the second largest market in the country and second highest yield. And therefore, it is a big part of our revenue for buy/sell, rent, et cetera. And so it will have a big impact over these next 6 weeks, there's no doubt. But as we alluded to, hopefully, like the last lockdown, it will rebound. We're not coming out of -- the earliest we're coming out of potentially lockdown is 30th of September. Let's hope is that. But therefore, we're not going to see any benefit or any rebound this quarter. So it's going to have a significant impact. In terms of rental, again, we don't disclose but it is meaningful. It is a very healthy part of the residential revenue number, and it did grow year-on-year on the back of really strong increases in depth. So we're very pleased with that. In terms of time by market, we are -- most of our customers are on Premiere 60 at the moment, so we actually got 60 days with Premiere. And then with the states sort of through the crisis, they got longer than that with re-upgrade, re-list. Victoria can obviously re-list as well, so effectively make that 120 days, which we think is more than enough given the conditions. So no plans to make a change to that. But the features that are attached to Premiere drive a lot of the value, and you've seen us tweak those over time. And as we look to what our contract construct looks like for next year, we have a number of features up our sleeve. Duration is one of them that we can look to adjust.

Do you think, Owen, pay on sale could come back into the contracts next year?

Yes. Look, it's funny. It's definitely one of our options, right? And so whether it becomes a feature of Premiere All, whether it becomes a feature -- a different type of Premiere All contract, we've got very divergent views on that from customers. Some customers really loved it and said it helped stimulate listings and bring nervous vendors to the market. Other customers refused to touch it on the basis that they want vendors to have skin in the game and having a pure pay on sale product meant that it's easier. Every cost then is contingent, both the agents' commission and the advertising, and it's too easy for customers -- sorry, vendors to walk away. So it's definitely in our armory. We've collected a lot of fantastic data on how the product works, and it will be up for consideration. That's for sure.

Our next question comes from Roger Samuel from Jefferies.

Two questions from me, please. Just wondering, in the current environment, how do you engage with the agents in the industry? Because I imagine you can no longer hold any road shows or major events around the country. Second one is on your impairment charges. There have been some ongoing write-downs alluding to your businesses in Asia and also financial services. So I'm just wondering, what's the outlook for Asia and financial services? And can you also touch on the relative size of your Asian business, i.e., Malaysia versus Hong Kong?

Okay. In terms of agent engagement, we've been in virtual working conditions now since March. And ironically, we've never had greater engagement with our customer base. The fact that our staff doesn't have to travel, virtually visiting customers means they're having much more customer interaction than we've ever had. We've done 4 waves of customer sentiment surveys since COVID-19 started. And the feedback on the level of support and the level of interaction has been absolutely fantastic. We're running at something like scores of 9.2, 9.3 across both our residential and commercial customer base in terms of the level of support and interaction with our account managers. So that's been really positive. We also have run a lot of virtual events. We've had developer customer leadership forums, commercial customer leader forums, and we did ran 3 resi ones in June. And we started our Prop20 series, which is an education program for agents across the country. We had thousands attending the first ones that we got in prior to cohort, but then we ran them virtually and got thousands of attendees as well. So our engagement with customers has been fantastic despite the restrictions. In terms of your question on Asia and the site relative to size, Malaysia is obviously the dominant business in the Asia segment. And it had an incredibly strong first half. We brought a new product construct into Malaysia, which saw us bring on new customers and which saw us increase yield across that market. So that business is going incredibly well. Our audience lead is being maintained. It's such a -- one of the biggest disappointments of COVID-19 was that, that business was in full flight until COVID-19 hit. Our outlook for the business is no different to here once the restrictions are lifted. And if you look at the numbers in Malaysia, they've done better on the virus that we have. The numbers are -- their current infection rate is incredibly low. And so we're very confident that, that growth trajectory will resume. In terms of Hong Kong, look, the outlook is very subdued. We've still got social unrest in Hong Kong. The virus hasn't gone away. And so the revenue outlook there is very subdued. But as Janelle said, we have radically streamlined the cost base in Hong Kong. And so you will see a significant reduction in costs in FY '21 versus FY '20 for Hong Kong. Financial services, we're very bullish. It had -- the first half of the year for financial services was really tough. We talked about the Royal Commission. And that impacted the property market, but it definitely impacted the mortgage market more than that. As we cycled into this year, as banks are back with lending and have got strong liquidity, we've seen really healthy growth in our submissions and settlements. And in fact, July was off the charts, I've got to tell you, in terms of submissions for mortgages out of the pipeline business. So we are really positive about the outlook for FY '21 for fin services. Bear in mind there are a couple of negatives you'll see in the numbers, the partnership income that we get from NAB will be down year-on-year. It's just as we move towards the end of that contract, the recognition of that revenue decreases in '21. And then there's the unknown of the valuation of the back book, that will depend on what mortgage holders are doing with their mortgages this time next year.

Your next question comes from Fraser Mcleish from MST Marquee.

Just a couple of quick ones from me. Just on yield, so again, geographic mix has been a drag through most of the way through FY '20. That looks as if it has shifted significantly in July with those big jump in Sydney listings. Can you just confirm if you're seeing that coming through in your yield in July, if we've seen a big turnaround from that? That's the first one. And then just a second one, just on Agent Match monetization, Owen, if you could just give us a quick update on that. Is that still going to kind of be dependent on the timing of the price changes? Or can you do something around that and separately from that?

So on the yield, Fraser, you're right. Effectively, the benefits we've seen from that strong growth in Sydney, in particular, coming through and Melbourne up until the second half of July has been -- has had a positive impact on our yield in July.

In terms of Match, Fraser, we are firming up on our plans for monetization, I would say. We actually have a Board meeting yesterday, presented our strategy for monetization of seller leads yesterday. Obviously, that's very commercially confidential. But we're confident in the new calendar year, we'll be ready to roll out the way we're going to go-to-market with that.

Okay. Great. Is it still going to be consistent with the timing of the price changes? Or could we see -- if some things come earlier, if you didn't put the price changes through to July next year, could we still see some Agent Match monetization before that?

Stay tuned, Fraser.

Your next question comes from Anthony Porto from Morgans Financial Limited.

Just 3 from me. Obviously, for various reasons, we've seen housing churn kind of move down from -- since 2016, moved down from that 5% level down to probably annualizing at less than 3%, obviously for good reasons at the moment. But is there anything structurally that you guys think that means that housing churn will not get back up to that kind of 5% level? That's the first one. I guess the second one is depth. Given Premiere is so dominant now, any thoughts on removing the highlights or introducing another tier of depth product there? And just thirdly, a bit more mundane, but a fair bit of debt is currently due, just looking to refi that. When can we expect an announcement on that and potential pricing outcomes there?

I'll take -- thanks, Anthony. I'll take the first 2, and Janelle will take the third one. Housing churn has been -- or turnover has been down, kind of on a sort of downward trajectory for many, many years. The average hold of an owned occupied residential property has blown out over the last decade, from sort of around about 7 years, a decade ago, to sort of 10 to 12 years now. And in some suburbs, you're up around 15 years average hold for a residential property. I don't know that's going to reverse. I think some structural things that have caused that. One is the prevalence of investment properties in the market. They are held for a longer period of time. The other one is stamp duty, with the bracket creep on stamp duty. So I'm saying bracket creep on stamp duty, which means the frictional cost of moving properties has gotten higher over the years. And we're pleased that there's talk of maybe changing that, but we're not hopeful. So I don't expect that to rebound, but it may improve. In terms of our Premiere tiers, there's no plan to get rid of our features and highlights. That's for sure. They're still very popular products among various parts of the constrained geographies. As whether we go for another tier, that is absolutely an option. And as I said, we've got a whole bunch of features up our sleeve that we will be looking to introduce next year. And whether we do that by another tier, whether we do it as add-on features for various types of products, we'll see. So as you saw this year, during COVID, our Premiere All customers got access to a whole bunch of features that no one else got and that's sort of the way we think about bringing in new features to the market. Might be another tier, might be just for another type of contract. I'll leave Janelle to talk about debt.

Yes. Thanks, Owen. As we flagged in the account, we got a strong cash position, $223 million, at 30 June. Our maturity is coming up in April '21, that's $70 million, and December 2021 is $170 million. So we'll reassess closer to the time as our expectations around the repayment of those. But at the moment, we're comfortable with the repayment plan.

All right. We might close it off there. Firstly, thank you to everyone for joining. I think we've done a new audience record this year. We set a new record for the duration of the call. So well done, everyone. Look, in closing, I just want to make the point that we entered this health crisis in a position of strength, and I feel we've navigated our way through the challenges very well to date. We are really well prepared for a variety of scenarios that might come our way in the future, and we can leverage our growth opportunities definitely as the business conditions improve. So thank you for attending today and look forward to talking soon.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.