Domain boss welcomes Nine/Fairfax merger as property markets slump
Domain executive chairman Nick Falloon has welcomed a planned merger between Fairfax Media and Nine Entertainment Co, with hopes it'll allow the property platform to market itself more widely as Australia's major real estate markets continue to slump.
In Domain’s first full-year financial results since the company floated in November 2017, Mr Falloon pointed to a 7.7 per cent jump in net profit after tax to $52.9 million in the year to June 2018, excluding significant items. Domain's share price jumped 5.49 per cent to $3.36 by 10.30am on Monday.
Revenue was up 11.5 per cent to $357.3 million and earnings (before interest, tax, depreciation and amortisation) was up 12.5 per cent to $115.7 million.
Including a $29.6 million loss in significant items, such as exiting an "early stage" investment in personalised business moving service Beevo and a revaluation of its investment in online service marketplace Oneflare, there was a net loss after tax of $6.2 million in the year to June 2018.
Fairfax Media (owner of The Sydney Morning Herald and The Age) owns 60 per cent of Domain. Nine Entertainment Co recently announced plans to merge with Fairfax, including taking control of its stake in the property listings platform.
In the annual report, Mr Falloon said Domain “welcomes the proposed merger”.
“We only see considerable upside for Domain through the additional marketing and audience reach of the combined Fairfax/Nine businesses,” he said.
Rival REA Group chief executive Tracey Fellows said on Friday she expected the outcome of the merger would result in some “heavy marketing” across the platforms. Ms Fellows pointed to a slowing down in listings in July.
Mr Falloon said the recent appointment of Google managing director of Australia and New Zealand Jason Pellegrino, who will become managing director and chief executive officer of Domain on 27 August, as a move to the company’s next growth stage.
Mr Pellegrino will have to navigate the property classifieds site after subdued listings last month, amid a downturn in some of Australia's major property markets that some experts predict could continue until 2020.
So far, "depth products" have ensured growth in revenues despite Domain's annual report noting there has been "mixed national market environment for listings, with Canberra ahead of last year, modest growth in Sydney, and some weakness in Melbourne, Brisbane and Perth".
Over the past year, Domain's core digital revenue growth was up 16.7 per cent, residential revenue was up 19.9 per cent, and media, developers and commercial was up 11.2 per cent. Agent services were up 9.2 per cent.
"Media operates in a challenging revenue environment for digital display advertising,
constrained by the dominance of global giants Facebook and Google," Mr Falloon said.
“Trends in the second half were softer overall, reflecting a more challenging environment than in the first half,” he said.
Print revenues dropped 12.6 per cent, with earnings down 3.4 per cent over the year after cost reduction initiatives. This covers Domain’s magazines and content in metropolitan dailies, including The Sydney Morning Herald, The Age, The Australian Financial Review, and Domain Review.
A 70 per cent franked dividend of 4¢ a share will be paid to Domain shareholders on 4 September.
More to come.