Domain reports net loss of $227.7m as earnings and revenue fall 10%
Real estate business Domain was forced to report a net loss after tax of $227.7m yesterday following a $256.1m impairment charge against its digital business.
The non-cash impairment charge will have no impact on banking covenants and Domain says it won’t impact the longterm growth prospects for the business. The charge was related to the outbreak of COVID-19 and the temporary restrictions implemented which impacted revenue through listing and auction volumes in the final quarter of FY20. The uncertainty around the near term impacts on the industry and the economy resulted in the charge.
Domain’s underlying results [click to enlarge]
Revenue across the business fell by 10.5% to $261.6m, which Domain says was a ‘solid result’ given the impact of COVID-19 and the bushfires. Expenses were reduced by 10% as Domain cut costs across print and salaries. The business was also entitled to the Jobkeeper scheme.
EBITDA (earnings before tax, depreciation and amortization) also fell 10% to $84.4m while EBIT (earnings before interest and tax) dropped 33% to $43.3m.
NPAT (net profit after tax) was $21.6m – a 40% drop.
Domain has reached a new agreement with its banking group for a new debt facility of $80m to strengthen its liquidity during COVID-19, in addition to the $225m agreement reached in November 2019. The financial covenants as at June and December 2020 have also been waived.
The Nine-owned real estate business said it was confident it could recover from the COVID-19 impact and that its quick movement in Project Zipline, which saw it offer staff payment options for reduced hours, had helped the business mitigate some of the worse outcomes.
Pellegrino is still confident in Domain
CEO Jason Pellegrino said the business is prepared for ‘rapid growth’ and ‘acceleration’ when markets ‘return to normal’.
“Despite the challenges brought about by COVID-19 in the fourth quarter, Domain’s key assets of large engaged audiences, effective listings parity and innovative solutions continued to deliver value to agents and consumers in FY20. In our residential business, the number of paid depth contracts increased in all states, underpinning record depth penetration. The introduction of our flexible pricing model and continued implementation of targeted market-by-market strategies, supported by a 6% increase in controllable yield, with further gains from favourable market mix,” he said.
Despite the negative results, Pellegrino said the year was one of ‘significant achievement for Domain’ with ongoing work on the company’s strategy and continued evolution of its business model.
No dividend was declared by the business due to ‘continued uncertainty of the outlook’. July 2020 trading however reflects a ‘strong year-on-year listings growth in Sydney and Melbourne’, but the outlook for the broader market ‘remains uncertain’ and FY21 will be ‘subject to the health and economic consequences of COVID-19’.
There should be some seriously good tax carry-overs resulting from the impairment charges available in upcoming financial years.
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Impairments are not an allowable deduction for tax purposes in Australia. So no tax losses arise, or can be carried forward.
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Not surprising. Unfortunately they cannot keep up with the beast in Realestate.com.au
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