Domain hit as Pellegrino exits as Nine faces shake up

Investors were shaken as Jason Pellegrino flagged his exit from Domain after six years running the company, and Nine is keen to turn its property offshoot around.

Domain CEO Jason Pellegrino. Picture: Domain Holdings Australia Limited

Investors have sold off Nine-controlled property listing company Domain Holdings on the back of news that chief executive Jason Pellegrino will stand down from the company without a successor in place.

The sudden move will see both Nine and the lagging Domain operation hunting for permanent chief executives as the media sector comes under fresh revenue pressures and the property company drops behind larger rival REA Group.

Domain shares fell on news of the sudden executive change and were off by 3.4 per cent to $3 in mid afternoon trading while Nine dropped by 3c to $1.23.

Domain has been in the cross hairs of private equity firms, with US group KKR rumoured to have run the ruler over the company, as Nine tries to turnaround the real estate unit’s performance after years as a share market laggard.

Mr Pellegrino’s departure comes as the media company deals with an investigation that found extensive misconduct including sexual harassment and bullying in the television business and former Nine chief Mike Sneesby left last month.

Mr Pellegrino, who had six years at the helm, will continue as chief executive for three to six months to support the succession process before leaving. Domain said the “staged and orderly exit” would allow the board to “assess its requirements and evaluate candidates to lead the company going forward”.

The company has been left behind by its main rival, the much larger REA Group, which is controlled by News Corporation, publisher of The Australian. Domain traded around $3.20 in the month that Mr Pellegrino started but on Wednesday were below this level. REA shares have jumped from around $85 to $227 in that period.

Domain was unable to capitalise on the nation’s residential property boom and to expand into adjacent areas in the same way that REA did, while it also struggled to grow its geographic footprint and it also made a failed play for PEXA in 2021.

Domain chair, Nick Falloon, said Mr Pellegrino had shifted the company from a media-led classifieds business to a technology-led property marketplace. “He leaves Domain in a strong financial, operational and cultural position, underpinned by robust digital infrastructure that enables us to be highly competitive across the entire property ecosystem,“ Mr Falloon said.

The company faced disruptive periods, including the Covid-19 crisis that slashed property listings, and then the bounce back in the market driven by low interest rates.

Nine’s acting chief executive Matt Stanton said Domain had a highly promising pipeline of innovation. “Jason has also been instrumental in cultural transformation, overcoming historical challenges to create an environment that is positive and rewarding for staff. I look forward to working with Jason’s successor to deliver on the significant opportunities that lie ahead for Domain,” he said.

Mr Pellegrino said that the company was in a strong financial position and the property market was in a robust state, making it an “appropriate time to initiate this change”. “In the meantime, I remain committed to the company and supporting my successor with a smooth transition,” he said.

Citi analyst Siraj Ahmed said the market would not be surprised by the exit. “We do not think investors will be surprised with Domain announcing a CEO transition process given the 6-year tenure of the current CEO and Domain’s market share loss to REA over the last two years,” he said.

Mr Ahmed said that from a timing perspective, not to read too much into potential for near-term earnings weakness and he expects Domain to report a strong first quarter given the strength in listings growth in Sydney and Melbourne.

Citi is hoping a candidate can emerge to boost Domain’s consumer profile, potentially using its media assets. “While the current CEO has transformed Domain from being a classified business to more of a marketplace, we believe a change in focus more on the consumer and increasing consumer engagement as key to driving market share and yield growth,” he said.

“We do note that the current leadership has been focusing on ‘Only on Domain’ experiences recently and we see an opportunity to leverage Nine’s audience to drive further audience growth for Domain,” he said.