Domain's lower revenues ahead of spin-off

Fairfax Media has warned that its revenues are down 4 percent to 5 percent on last year's levels, as it prepares its much anticipated Domain separation plan.

In a statement to the share market, the media company reported falling revenue for all parts of its business, except the real estate advertising arm that is about to be spun-off.

The new digital property group, Domain will have an enterprise value of $1.85 billion, less than the numbers being tossed around when private equity interest was briefly being shown.

The only part of the old Fairfax business with revenue growth was Domain, where gross earnings rose 13 percent on the back of an overall 22 percent rise in Fairfax Domain digital revenue.

However the total recent revenue growth at Domain of 13 percent, was down from its recent 16 per cent forecast, along with overall Domain digital revenue growth of 22 percent, coming in below a forecast of 26 percent.

Fairfax said it made the updated financial disclosure as part of the Domain separation.

The company said today's financial update will replace the usual disclosure provided at the annual general meeting, which will be on November 2.

After the spinoff, Fairfax will no longer have direct access to Domain's cash flow and will only receive money from Domain via dividends.

In a disclosure statement Fairfax also said Domain’s costs will increase approximately 13 percent in 2017-18, from $206 million in 2016-17, in line with previous guidance.

The worst decline in revenue was for its metro media division — which includes the mastheads, The Age, The Sydney Morning Herald and the Australian Financial Review — where gross earnings are down 11 percent so far this financial year compared to last.

Australian Community Media, the local newspapers division, has had a 10 percent revenue slide.

Domain has signalled its intentions to be far more than a property advertising platform.

Domain Group is expanding into insurance with the launch of Domain Insure in conjunction with insurance specialist Envest.

Domain Insure, expected to launch later this year, is set to become a must-use digital solution for Domain customers seeking to meet their insurance requirements arising from buying, selling or renting property.

Domain chief executive officer Antony Catalano said Domain Insure adds to Domain’s suite of real estate products and services spanning home loans, utilities connections and trade services "which together deliver on our ambition to meet the modern needs of property consumers throughout their property lifecycle of buying, owning and selling."

Domain’s portfolio of offerings include home loan brokering business Domain Loan Finder, utilities connections business Compare & Connect, home improvement and maintenance business Oneflare, open for inspection check-in management system Homepass, in addition to Domain Insure.

Fairfax confirmed in August it plans to retain 60 percent of the shares in the separately listed Domain, with Fairfax shareholders taking the other 40 percent.

The company also confirmed in August Fairfax Media chairman Nick Falloon will take the same post at Domain.

The board will be:

Nick Falloon, Chairman and Non-Executive Director;

Greg Ellis, Independent Non-Executive Director;

Geo Kleemann, Independent Non-Executive Director;

Diana Eilert, Independent Non-Executive Director;

Patrick Allaway, Non-Executive Director;

Gail Hambly, Non-Executive Director; and

Antony Catalano, Chief Executive Officer and Managing Director.

"Domain is a real estate media and technology services business, covering services across digital and print platforms," Falloon said in the statement.

"The business, which delivered FY17 revenue from operations of $320 million, has a strong track record of growth, with total revenue increasing at a 28% compound annual growth rate over the past three years.

"Domain has a subscriber base of approximately 12,000 agencies and the large majority of all property listings in every state on its site, providing a strong platform to drive national expansion and depth revenue in the future."

Post separation, Domain will incur a range of costs and adjustments attributable to being a standalone, ASX-listed company. 

The total pro forma standalone cost adjustments are $10 million in FY17 consisting of:

$2 million for Domain Board costs, listing and other costs associated with Domain becoming a standalone entity;

$6 million for additional corporate duties; and

$2 million in FY17 reflecting corporate costs attributable to Domain which were previously unallocated to Domain for the purpose of Fairfax Media segment reporting.

The amounts include charges paid by Domain to Fairfax Media.

Following the separation, Domain will continue to be consolidated by Fairfax Media and therefore the incremental costs for Fairfax Media (post separation) will be $5 million, as opposed to $10-12 million for Domain.

The senior leadership team will comprise of:

• Antony Catalano, Chief Executive Officer and Managing Director;

• Robert Doyle, Chief Financial Officer;

• Graeme Plowman, Chief Operating Officer;

• Melina Cruickshank, Chief Editorial and Marketing Officer;

• Simon Kent, Group Director (Domain Media and Developers);

• Tony Blamey, Chief Commercial Officer;

• Mark Cohen, Chief Technology Officer; and

• Trent Casson, Managing Director, Domain Victoria.