In its yearly earnings report released today, digital property company Domain Holdings Australia Limited (ASX: DHG) announced a revenue uptick of 23% compared to FY21, reaching $357 million. Most notably, the Company’s home loan arm, Domain Home Loans (DHL) delivered a strong performance, underpinned by 9% underlying revenue growth at Consumer Solutions.
As the net profit increased by 46% to $55.3 million, earnings per share went up by 43%, reaching 9.3 cents. That said, the Company did witness a significant expense of $20.2 million.
As per Domain Chief Executive Officer and Managing Director, Jason Pellegrino, the Company’s FY22 trading results on a reported basis are significantly impacted by the timing of JobKeeper, and the benefits and costs of Zipline, the voluntary employee program undertaken during the early stages of the COVID pandemic. In FY21, Domain received a net $6.5 million EBITDA benefit from JobKeeper and Zipline. But in FY22 this reversed to an additional expense of $8.0 million.
In the past financial year, Domain witnessed a 14% increase in controllable residential yield, and record depth penetration. Residential revenue increased 23% to $239.2 million, supported by outstanding depth revenue growth of 26%. Depth growth was supported by a 9% uplift in new ‘for sale’ listings, and a controllable yield increase of 14%, driven by both price and depth penetration. Overall depth penetration and Platinum penetration continued to grow strongly in every state despite the continued COVID disruptions during the first half.
Commercial real estate was the best performing business, delivering solid revenue growth for the year. The segment benefitted from its flexible value-based pricing model. It delivered record levels of depth penetration across every state in both sale and lease which offset a weaker listings environment.
Consumer Solutions’ revenue also increased by nearly 70% thanks to DHL. In fact, in the coming year, the Company has decided to step away from Domain Insure and other ventures to focus on DHL. The segment’s award-winning service, differentiated marketplace solutions and refreshed leadership team are set to transform its performance. In FY22, Consumer Solutions’ operating losses reduced 31% year-on-year, reflecting the benefits of increased revenue scale and operating efficiencies.
In light of this, Pellegrino affirmed, “Over the past four years our team has remained laser focused on the elements of our business that we can control, against a backdrop of considerable trading volatility. This mindset has positioned Domain to leverage property market strength, while providing downside protection when the cycle has been less supportive. The creativity and hard work of our team are building Domain into a fundamentally stronger business, and this is reflected in the outstanding set of results we are delivering today.”
For the following financial year, the Company’s goal is to realise the benefits of its marketplace strategy to drive business growth. In FY23, the Company will see the full year expense impact of the FY22 acquisitions of IDS and Realbase. These are expected to add approximately $27 million to ongoing operating expenses, with associated incremental revenue contribution.
Though their focus is on long-term margin expansion, the Company expects its FY23 investment initiatives to stabilise their FY23 EBITDA margins while expanding on a reported basis.
Domain is not the only digital-first company to see the potential of the growing home loan market. Other top portals, such as realestate.com.au, have also jumped on the wagon. It will be interesting to see how this re-imagines the ecosystem for home buyers.
Alinda is a Business Reporter for The Sentiment
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