The Domain Holdings Australia Ltd (ASX: DHG) share price is up 12% after reporting its half year report to 31 December 2018.
Domain is the business behind one of Australia’s largest property portals, Domain.com.au, which allows property sellers to try to advertise to as many potential buyers as possible. Some of the other real estate websites it operates includes Allhomes.com.au and Commercialrealestate.com.au.
Here’s What Domain Reported In HY19
On an underlying basis, Domain’s revenue grew by 0.3% to $183.9 million, EBITDA was down 7.1% to $52.7 million and net profit fell 14.2% to $21.1 million (click here to learn what EBITDA is).
However, looking at the statutory result the property portal company showed a net loss of $156.4 million, which included a goodwill impairment of $178.8 million. The value of its goodwill was reduced because of the lower listings environment, particularly in Sydney and Melbourne, which is largely due to falling property prices.
Looking at Domain’s different divisions, it was only the Print segment that was particularly challenging where revenue fell by 23.6% to $32.8 million. The important residential segment grew revenue by 8.6% to $93.6 million and Agent Services saw a 15.2% increase of revenue to $15.8 million.
According to Domain, its app downloads were up 13% year on year.
Due to the large reduction in statutory profit, Domain declared a fully franked dividend of 2 cents per share, but expects to declare a dividend of at least 4 cents per share at the full year result.
Domain Management Comments
Domain CEO Jason Pellegrino said: “In the context of current property market cyclicality, Domain delivered a solid performance in the half, with growth in average revenue per listing. The result is in line with market expectations.”
Is Domain a buy?
Domain said that the first six weeks of the second half of the year have shown continued growth in yield and lower listings volume in a seasonally low listings period.
The company expects total costs to increase in mid-single digit terms against proforma FY18.
Whilst the share price is up 12%, it’s back to what it was during January. Out of Domain and REA Group Limited (ASX: REA), I do think that REA Group could be the better choice as an investment because of its market-leading pricing power and overseas investments. Unless Domain expands overseas it is limited to the domestic market, although the merger between Fairfax and Nine Entertainment Co Holdings Ltd (ASX: NEC) is interesting.
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