Fairfax unveils details of Domain performance as it looks to start separate trading in November

Ahead of Domain’s separation from Fairfax on the Australian Securities Exchange, Fairfax has revealed the details of the real estate portal’s financial performance.

In a teleconference call after the publishing giant’s financial results – which reported revenue growth for Domain Group up 8.1% to $320.3m – Fairfax’s chief executive Greg Hywood explained depth penetration, yield increases, and strong growth in the developers and commercial sectors were key revenue drivers.

Earlier this year Fairfax confirmed it would spin off Domain as a separate entity on the ASX, after equity houses TPG Capital and Hellman & Friedman decided not to go ahead with a binding offer to purchase the overall business.

“Domain has created a strong platform for revenue growth, and is well positioned for a standalone future,” Hywood said.

“We are further building on Domain’s core offering through expansion into complementary transactions businesses,” he added.

“This includes areas such as utilities connections, home improvement services and home loans and insurance, to capture a greater share of revenue associated with the property ecosystem.”

Domain “well-positioned” for a stand alone future, said Hywood

According to the report, Domain’s operating expenses climbed 17% and digital expenses increased 34%.

Revenue in digital was broken up into ‘Core Digital’ (residential, media, developers and commercial; and agent services), as well as ‘Transactions’ and ‘Other’.

Residential revenue climbed 11%, while Media, Developers and Commercial increased by 23%.

Print expenses declined by 6%, which was attributed to the “implementation of efficiencies, partially offset by investment in Domain’s new magazine format”.

The transition to a digital business weighed on print revenue, which showed a year on year decline of 13%.

Domain’s costs are also expected to rise, Hywood said.

“For FY18, Domain’s costs are expected to increase approximately 13% from FY17’s $206m, which is 10% like-for-like excluding acquisitions.”

He also emphasised the company would draw $150m of net debt upon separation, with proceeds to go to Fairfax as part of business transfers.

The real estate arm will be 60% owned by Fairfax Media once it is separately listed, and Nick Falloon will be appointed as chairman.

Domain’s business revenue FY17

“Domain’s differentiated consumer and agency customer experience is the result of aggressive investment to create a leading mobile platform, supplemented by high-quality editorial,” Hywood said.

“These first two strategies deliver audiences of scale and conversion to quality leads.”

Asked whether he had any concerns around discussions with the Australian Taxation Office, Hywood said he was “confident” of the outcome.

“We’ve engaged very constructively with the ATO and we are confident of the outcome. We are still in discussions. We are very pleased with our discussions in relation to comfort around the spin out not providing shareholders any taxable event and we’re just continuing discussions,” he said.

Hywood also pointed out the company’s broader strategy remained focused on shareholder value, by growing “core strengths”, transforming the business through “cost efficiency and business model innovation”, and “building value through strategic decision-making and portfolio management”.

He said the performance of the company’s publishing businesses – Australian Metro Media, Australian Community Media and New Zealand Media – were “an outstanding achievement”.

Australian Metro Media’s annual revenue fell 9% to $522.2m, Australian Community Media fell 11.7% to $428.2m and New Zealand Media fell 3.7% to $310.6m.

Commenting specifically on the New Zealand business, Hywood also said the company would appeal the rejection of its proposed merger of Fairfax New Zealand with NZME in the New Zealand High Court. 

“Our three publishing businesses are modern, cost efficient and sustainable across digital and print,” he said.

“In the context of the global structural change impacting upon the media industry, the fact that our publications remain profitable and sustainable is an outstanding achievement.”


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