Executives at REA, the parent company of realestate.com.au, have asked staff to go into “negative leave” in an effort to reduce costs – a worrisome omen for the rest of Australia’s media and advertising industry.
The ASX-listed digital real estate powerhouse has been a significant profit-maker for shareholders and a breakout success story for News Corp, which owns 61 per cent of the company.
REA Group chief executive Owen Wilson said its Indian operations are performing well.
But REA announced this month that profits at the company were down 9 per cent in the last three months of 2022, driven mainly by a huge decline in property listings off the back of rising interest rates. REA chief executive Owen Wilson publicly said the company would not be part of a 5 per cent reduction in headcount at News Corp.
But behind-the-scenes, REA executives took the unusual step of putting the responsibility of cutting back costs onto the company’s 3000 staff, according to messages seen The Australian Financial Review.
“Given the challenging market conditions we are facing a business, we have to look at all avenues to manage our costs, which significantly impacts EBITDA delivery,” said the internal note by REA’s chief people and sustainability officer Mary Lemonis.
“As an ELT (Executive Leadership Team) we are focused on ensuring we bring our cost base down; increasing the total annual leave days taken across REA is one way we can do this.”
‘Negative leave’
Staff questioned the arrangements, including what would be the situation facing those who had all their leave booked for the current financial year. An HR officer responded that they would be asked to go into “negative leave” by bringing forward their leave from next year.
“While the majority of people carried some leave over into this financial year, we understand that some people did not and will therefore have a zero balance based on having booked in their full FY23 allocation.”
“Workday allows us to take up to ten days of annual leave in advance, which means we are able to go into negative leave if we choose to do so.”
Sources say the request was characterised as being ‘volun-told’ by management to dip into their leave balances. REA will also have a full company shut down for one day in April, aimed at again forcing staff to take excess leave.
“Strong cost management is a clear priority for us, and we are focused on achieving this in a measured way that doesn’t short term our business,” an REA Group spokesman said in a statement.
“We are encouraging our employees to take annual leave as an opportunity to help the business manage its costs. This enables team members to participate subject to their individual circumstances, while sharing the impacts of cost reduction equitably across our entire team.”
The unusual request comes as lay-offs and belt-tightening begin to sweep the global digital media and advertising industry. Mr Wilson told this masthead REA would not be making lay-offs, but expected natural attrition to bring down employee numbers this year.
The Media, Entertainment and Arts Alliance, the media union, is expected to meet with News Corp on Tuesday to discuss the company’s plans to sack 5 per cent of the global workforce. Nine Entertainment, publisher of this masthead, will deliver results on Thursday this week.
Domain, REA’s biggest competitor, delivered results last week, showing similar declines in profits, driven by lower property listings. The company laid off up to 70 staff at the end of last year.
Digital property prescience
The future of News Corp’s controlling stake in REA has been questioned recently after the company began serious discussions to sell Move, the US digital real estate assets at the firm. Investors and analysts wondered whether News Corp would be looking to also offload the Australian company.
News Corp CEO Robert Thomson. Bloomberg
But News Corp CEO Robert Thomson poured cold water on speculation, telling analysts on this month’s earnings call that REA remains a “core part of our portfolio”. He also praised News Corp’s co-chairman Lachlan Murdoch’s initial investment in the Australian business.
“You can do the math for what REA is worth to us, in terms of market cap, which is around $16.6 billion, and our shares around 61.4 per cent,” said Mr Thomson.
“Obviously, we all owe Lachlan Murdoch our gratitude for his digital property prescience.”
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February 19, 2023 at 12:05PM
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News Corp's REA asks workers to go into 'negative leave' to cut costs - The Australian Financial Review
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