Domain Group widens annual loss as revenue falls

The real estate classifieds site has been hit by falling revenue and impairment charges and won’t be paying a final dividend.

Domain did not provide formal guidance, citing the uncertainty in the property market.

Real estate classifieds site Domain will not pay a final dividend after widening its net loss after tax to $227.7m as COVID-led declines in property market confidence hit print and digital advertising revenue.

Contributing to the company’s loss was a 10.5 per cent decline in underlying revenue to $261.6m and a $256.1m non-cash goodwill impairment charge in its core digital division. The impairment was attributed to COVID-19’s impact to “revenue through listing and auction values in the last quarter of the 2020 financial year”.

It saw the bottom line blow out 65.5 per cent from the prior year’s net loss of $135.180m.

But following cost-cutting measures implemented earlier in the year and the added benefit of $5.4m in JobKeeper wage subsidies, the company managed to combat revenue decline by reducing expenses by 10.4 per cent.

EBITDA fell 10.4 per cent to $84.4m while earnings per share fell from 6.19c to 3.7c.

Domain paid an interim dividend of 2c a share earlier in the year.

Revenue across most of the company’s divisions fell, with the decline in print the most severe.

Print advertising revenues, adjusted for the sale of the Star Weekly newspaper, declined by 41 per cent to $26.5m.

Domain CEO and managing director Jason Pellegrino said the sharp decline was due to a decline in listings in both Q1 and Q4 of the financial year.

“It’s been an extraordinary 12 months....I think what’s often forgotten is that the Q1 market conditions coming out of the post federal election and the royal commission were as tough on listings as the COVID impact in Q4,” Mr Pellegrino told an investor call.

“What COVID-19 has done is not really introduced any new trends, it has just accelerated already existing trends.

“So the structural decline of print through that period has accelerated, and what we are left with is a situation where I think print still plays an important role and a role that delivers a profitable product for us, in premium areas, and is increasingly challenged in areas outside of where average price houses are lower.”

Core digital revenue decreased by 6.4 per cent to $233.2m, driven by a 11 per cent reduction in total residential market listings and a 15 per cent decline in residential subscription revenue due mainly to a $5m customer support package.

The media, developers and commercial segment saw revenue declines of 8.6 per cent to $43m, with Mr Pellegrino singling out the exacerbating impacts of COVID-19 on existing structural problems.

“Broad weakness in the advertising market was exacerbated by COVID-19 in the second half, with reduced spending in key advertising categories,” he said.

“In the Developer market, lower investor demand and COVID-19 impacts on immigration, resulted in the deferral of high-rise apartment projects.”

Agent service revenue increased 0.6 per cent to $28.6m but strongest divisional growth occurred in Consumer Solutions and Other, which saw revenue increase by 83 per cent to $5.6m, driven by strong consumer demand for refinancing.

“Domain Loan Finder’s digital model has been uniquely placed to support consumers during the COVID-19 crisis, and is accelerating our evolution to a property marketplace,” Mr Pellegrino said.

“During COVID-19 there has been soaring demand for refinancing, and Domain Loan Finder responded with a timely marketing campaign and attractive solutions.

“This has underpinned a surge in new account creation in the third and fourth quarters.”

Mr Pellegrino said other successes occurred in the implementation of a new pricing model, organic traffic growth of 23 per cent and a reduction in marketing cost.

Net debt was also reduced to $105.8m from $147.9m in December of last year, with existing debt covenants for July and December waived. The company also will be eligible for JobKeeper for at least another three months, CFO Rob Doyle told investors in a call.

The company did not provide formal guidance, citing the uncertainty in the property market as a result of the COVID-19 pandemic, but Mr Pellegrino said July performance in Sydney and Melbourne was strong with “greater than usual market activity in a seasonally low period.”

“Notwithstanding the strong July trading, the outlook for the broader market remains uncertain,” Mr Pellegrino told investors on a call.

“FY21 H1 will be subject to the health and economic consequences of COVID-19, and in particular, the return of more typical seasonality patterns for the Spring selling season. Melbourne’s performance will reflect the duration of the COVID-related lockdown.”

Domain was trading at $3.58 shortly before midday on Thursday, down 1.24 per cent on opening.