Slowing Sydney and Melbourne markets hit Domain profits
Domain has posted a fall in profit and a $179 million goodwill writedown as the real estate market continues to slide in its key markets of Sydney and Melbourne.
The property listings portal reported a net loss of $156.4 million for the six months to December 2018, including the $178.8 million non-cash impairment. Excluding significant items, Domain's underlying profit fell 14.2 per cent to $21.1 million.
“In the context of current property market cyclicality, Domain delivered a solid performance in the half, with growth in average revenue per listing," Group chief executive Jason Pellegrino said in a statement on Friday. "The result is in line with market expectations."
The lower listings in the first half, notably in the key markets of Sydney and Melbourne, were the main driver for the goodwill impairment.
Domain's underlying revenue increased 0.3 per cent to $183.9 million while expenses were up 3.9 per cent to $130.8 million. Earnings (before interest, tax, depreciation and amortisation) fell 7.1 per cent to $52.7 million.
The most recent data from the Australian Bureau of Statistics shows total lending to new households has fallen almost 20 per cent over the last 12 months - the largest fall in home lending since the Global Financial Crisis.
Property economists are widely forecasting more falls in home prices. And typically, when there is uncertainty in the real estate market there are fewer home buyers and sellers in the market, and fewer developers.
“The developer market operated with a mixed backdrop, with particular weakness in high-rise
developments in NSW which experienced significant declines in new projects," Mr Pellegrino said.
He said there was resilience in the townhouse and house and land market.
"Financing constraints and other regulatory issues weighed on the market environment and property investment," he said.
'Seasonally low listings'
Details posted to the ASX by Domain on Friday morning showed the first six weeks of 2019 had seen lower listings volumes in a "seasonally low listings period".
Underlying costs over the financial year are expected to be down "slightly" compared to 2018, while total costs are tipped to rise in the mid-single digits, Domain flagged.
Domain's commercial listings business saw 20 per cent revenue growth, while residential revenue increased 8.6 per cent, with premium-priced products up 10 per cent, which somewhat offset the impact of lower listings in Sydney and Melbourne.
The real estate listings site is 59 per cent owned by Nine Entertainment Co. Nine is the owner of The Sydney Morning Herald and The Age.
Last week, Domain and its rival REA Group's shares slumped after Domain's News Corp-owned rival indicated the second half of the financial year would be tough as elections and the housing slowdown were affecting consumer confidence and the number of listings on the site.
Domain will pay a fully-franked 2¢ per share interim dividend on March 7, with the non-cash impairment weighing on the shareholder payout. It expects to pay a dividend of 4¢ a share in the second half.
More to come.