Domain reports $3.4m net loss after tax following separation from Fairfax
Domain has released its first financial results since being spun out of Fairfax, reporting revenue of $112.7m and a net loss after tax of $3.4m in its statutory results.
The results come at a turbulent time for the ASX-listed company, which is majority owned by Fairfax, with executive chairman Nick Falloon using it as an opportunity to dispel any market fears about how the company will perform without embattled former CEO Antony Catalano at the helm.
“Domain has today reported a pleasing first standalone result”: Falloon
The Domain separation implementation date was 22 November, 2017, but Falloon highlighted the pro forma – rather than the statutory – results which exclude significant items and are calculated as if Domain has been a separately listed entity for the current and comparative periods.
“Domain has today reported a pleasing first standalone result, with pro forma EBITDA [earnings before interest, tax, depreciation and amortisation] growth of 8.7% and a strong underlying performance. It demonstrates the strength of Domain as a separately listed company and the ongoing success of its strategy,” he said.
According to these pro forma results, revenue would be $183.3m, a climb of 12.5%. EBITDA would be $56.8m, which is up 8.7% on the comparative period. Net profit after tax however would be $24.7m, which is down 8.1%.
The company is carrying a net debt of $139.4m. The interim dividend for investors will be 4c per share (30% franked), with a payout ratio of 93%. Investors who were registered by 26 February, will be paid on 12 March.
The separation expenses totalled $5.7m in the first half of the 2018 financial year, and $5.1m for the corresponding period in the 2017 financial year.
Domain Group’s pro forma performance (Click to enlarge)
Falloon also attempted to impress upon the market the strength of the Domain team and highlight the character traits the company will be seeking in its new leader – following Catalano’s resignation and ongoing accusations about the culture he fostered.
“Having stepped in as executive chairman, I can attest to the bench strength of the entire Domain team and their passion, skill and commitment. The business is in great shape with strong underlying momentum.
“The listing of Domain in November 2017 was a tremendous milestone. It was the culmination of the dedication, hard work and support of many – from Domain and Fairfax Media.
“I’m pleased to say the global search is underway for a new CEO. We are searching for an individual who will take Domain through its next stage of growth. We expect the new leader to have execution discipline and relevant experience in driving a growth business and building a great culture. The calibre of the candidates that we are attracting is truly impressive, benefitting Domain’s position as a leading real estate media and technology business.”
Using the pro forma calculation, the company saw significant growth in digital, but a decline in print revenue.
Domain’s pro forma segment results (Click to enlarge)
From the core digital arm of the business, Domain had $128.6m in revenue for the first half of the 2018 financial year – a jump of 22.3%. Had Domain been a separately listed company in the first half of the 2017 financial year, this figure would have been $114.3m.
Print, however, suffered a decline, bringing in $43.0m in H1 FY18, compared to $48.6m the year prior – a decline of 11.6%. Print revenue still accounts for 24% of the company’s overall revenue, with Domain saying the print arm was benefiting from a focus on cost efficiency.
“Print revenue declined 11.6% and print EBITDA declined 25.4%. This performance reflects ongoing structural decline, with some offset from cost initiatives,” Falloon said.
“Cost initiatives delivered a 6% reduction in expenses year-on-year. There are further cost opportunities in printing and distribution efficiencies.”
Revenue from residential listings was up 19.3%, from $72.2m in the first half of FY17 to $86.1m.
Domain also said it was closing the gap with a near parity in listings with competitors.
Domain says it is closing the gap on its competitors
The company is forecasting an increase in pro forma costs of between 12% and 13%. Pro forma costs for the 2017 financial year were $216m.
