Domain plan to slash staff costs with share rights, leave program

Real estate media business Domain has outlined a plan to cut staff costs by 20 per cent as it hits pause on printed products.

Domain is hitting pause on its printed products until demand returns to the property advertising market. Picture: AFP

Tough cost-cutting measures by online real estate listing company Domain Holdings Group, that is majority owned by Nine Entertainment Co., were welcomed by investors on Monday as the company confronts a slump in volumes.

Domain shares jumped by 18.6 per cent to $2.55 as the business instituted company-wide pay cuts and suspended print publications in the wake of the coronavirus tearing through residential and commercial property markets.

The company also obtained waivers on its lending facilities that have been boosted in size by its banking group. Domain has a new $80m debt facility, with a term of 18 months, in addition to $225m facilities announced to the market last November.

Domain revealed its March quarter - before the full force of the virus struck - showed signs of recovery before this fell away as auctions were forced to shift online.

UBS analysts said that Domain had de-risked its balance sheet and made about $8m of staff cost savings. They said the strong yield growth prior to COVID-19 was the most positive surprise for the company.

But Domain has a high exposure to metropolitan markets in Sydney and Melbourne, which may lag a recovery in other areas less affected by the virus, including Queensland and WA.

Domain confirmed plans to cut staff costs by 20 per cent, with staff reducing work hours or taking share rights in lieu of salary.

The Australian this month revealed that Domain would cut staff hours by 20 per cent, with the reduction in pay transferred to share rights. Domain staff will have to wait 18 months to exercise the share rights as they would be available by November 2021.

This avoided harsher options of cutting staff pay by 20 per cent and no share right issue and a more draconian option of staff stand-downs that could have spurred redundancies of up to 30 per cent of the workforce.

“In a time of rapid digital transformation, the employee program and additional debt facility provide Domain with flexibility to maintain the pace of our business model evolution,” Domain chief executive Jason Pellegrino said.

The slowdown in house listings has prompted parent company Nine Entertainment to suspend various print publication titles following the significant slash of spending by advertisers.

“Around 45 per cent of Domain’s cost base relates to staff and employee-related expenses, which cannot realistically be excluded from a broad based cost management program,” the company said.

“To address these competing priorities, Domain has launched a voluntary staff program to deliver a 20 per cent reduction in staff costs, while retaining employee talent and business momentum for the long term.”

“The plan has been overwhelmingly supported by Domain employees, with the majority electing to take a percentage of their salary in rights,” the company said.

Domain’s leadership team has elected to participate at higher rates: 30 per cent for executive leaders and 50 per cent for the CEO and board members, including Nine boss Hugh Marks.

For the third quarter ending March 31, Domain posted a 3 per cent quarterly increase in its digital revenue, while its total revenue increased by 1 per cent over the same period.