Domain grows revenue by 27.9% to 175.3M, as print revenue increases 75%

ASX-listed Domain Holdings Australia Limited (DHG) yesterday released its 2022 half-year financial results.

Domain, which is majority-owned by Nine Entertainment Co, reported a statutory revenue of $176.2 million, and a net profit after tax of $19.5 million including a significant loss of $6.6 million. A dividend of 2.0 cents per share was also declared.

For FY22 H1, Domain reported revenue of $175.3 million up 27.9%, expenses of $114.3 million and EBITDA (earnings before interest, taxes, depreciation, and amortisation) of $61.0 million. Net profit of $26.1 million and earnings per share of 4.46 cents increased by 34%.

Key FY22 H1 achievements included, accelerating the delivery of Domain’s Marketplace strategy across the business, a 19% increase in controllable residential yield, and record depth penetration.

In addition, a 43% growth in ongoing Core digital EBITDA and record margins, and 65% of underlying revenue growth at Domain Home Loans.

Domain chief executive officer and managing director, Jason Pellegrino, said: “Through the volatile trading environment of the past three years, Domain has maintained the pace of our business strategy evolution. We have responded to the changing environment, while continuing to innovate for the future.

“The outcome of our strategic focus, and the increasing value we bring to our customers and consumers, is reflected in the outstanding set of results we are announcing today. We have achieved growth across every revenue line, and 53% EBITDA growth on an ongoing basis, and delivered on our commitment to deliver expanding EBITDA margins on an ongoing basis. The entire Domain team is delivering on the promise of our Marketplace strategy.”

Domain Results FY21 [click to enlarge]

Pellegrino said: “The FY22 H1 trading results on a reported basis are significantly impacted by the timing of the JobKeeper grant and repayment, and the benefits and costs of Zipline, our voluntary employee program undertaken during the early stages of the COVID pandemic. In FY21 H1 we received a net $8.7 million EBITDA benefit from JobKeeper and Zipline, while in the first half of FY22 this reversed to an additional expense of $7.5 million. Domain’s ongoing results exclude the impact of JobKeeper and Zipline from both periods. On this basis, expenses of $106.7 million increased 15.7% and EBITDA of $68.5 million increased 53%. Pleasingly we delivered margin expansion across every segment, with the ongoing core digital margin of 50.9% a stand-out, and all-time record.

At December 2021, net debt was $166.4 million representing a leverage ratio of 1.4x ongoing EBITDA.

Domain’s Jason Pellegrino

Print revenues increased 75% year-on-year reflecting the resumption of the normal publishing schedule together with strong property market conditions. The pause on print in the first half of FY21 resulted in only 61% of the usual publishing schedule. 

“Print experienced significant margin improvement in the first half, underpinned by the revenue recovery, and continued careful management of cost. Domain’s magazines are focused on high-value premium markets where print remains sustainable due to the value it provides to agents and vendors,” Pellegrino said.

Core digital revenue increased 25.5%. Core digital EBITDA increased 16.3% on a reported basis and 42.7% on an ongoing basis.

Residential revenue was up 29% to $120.3 million, benefiting from strong depth revenue growth of 33.5%, which Pelligrino linked with strong demand fuelling recovery in listings after FY20’s COVID-impacted lows.

“Canberra’s first lockdown of the pandemic was a noticeable drag on performance given Allhomes’ strong market position. As lockdown conditions have eased, we have seen the Canberra market bounce back strongly in January. Excluding Allhomes, residential revenue increased 31% and depth revenue increased 36.5%. Buoyant market conditions supported a 14% increase in new listings volumes, and controllable yield grew 19%, an exceptional performance,” said Pellegrino.

“The 19% uplift was made up of a pleasing even mix of 10% price and 9% depth, a strong endorsement by agents of the value Domain delivers. The successful execution of our micro-market strategy is the basis for our confidence in our long-term target of an average controllable yield increase of 12% through the cycle,” he added.

Over in the commercial space, he said commercial real estate’s performance was underpinned by strong depth penetration growth, with Victoria topping penetration rates by state and encouraging progress in Queensland. 

“Overall, the listings environment was mixed with a strong performance in sale offset by a weak leasing market, particularly in office and industrial. Media continued to build on its strong FY21 performance, leveraging Domain’s quality audiences and content with niche and premium advertisers,” he said.

Looking ahead, FY22 ongoing costs are expected to increase in the low-teens range from the FY21 ongoing expense base of $195.5 million. This excludes the impact of the JobKeeper and Zipline expenses which are included in FY22 H1 reported trading expenses.

Since Domain’s AGM update, strong market performance as COVID restrictions were eased in Sydney and Melbourne, and targeted investment decisions, have increased its FY22 cost expectations by around $3 million. This is a mix of revenue-related expenses arising from the strong trading environment, and targeted investment to accelerate the evolution of our Marketplace strategy.

As of 18 February 2022, Domain is trading at $4.37 and has a market capitalisation of $2.55 billion.


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