Annual Report 2020 Contents
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Annual Report 2020 Contents Business Performance Overview 2 Chairman’s Report 4 CEO’s Report 6 Corporate Social Responsibility 10 Directors' Report 19 Remuneration Report 26 Corporate Governance Statement 45 Management Discussion and Analysis Report 59 Auditor’s Independence Declaration 62 2020 Financial Report 63 Shareholder Information 117 Corporate Directory 120 Inspiring confidence for all of life’s property decisions We are a leading property technology and services business that is home to one of the largest portfolios of property brands in Australia. Domain helps agents and consumers at every step in the property lifecycle – renting, buying, selling, investing, financing, insurance and utilities. The Domain Group is home to Domain, Allhomes, Commercial Real Estate, and CommercialView. Our portfolio also includes agent products Homepass, Pricefinder and Real Time Agent. Our consumer solutions products include Domain Loan Finder and Domain Insure. As a customer-centric property marketplace, we are committed to making the property journey easier, more enjoyable and connected at every stage. Annual Report 2020 1 Business Performance Overview Core Digital Residential by COVID-19’s impact on key advertising Residential generates revenue through categories in H2. The Developer market listings of ‘for sale’ and rental properties was impacted by the deferral of high rise across its desktop, mobile and social apartment projects resulting from lower platforms. Premium (depth) listing investor demand and COVID-19 impacts products account for the largest on immigration. Activity in smaller, proportion of revenue, with monthly boutique projects was stronger, however these require lower levels of marketing * subscriptions contributing the balance. $227.0m support. Commercial Real Estate (CRE) FY20 Revenue Residential revenue reduced 7%, a delivered solid revenue growth for the solid performance in an environment year. A strong H1 performance reversed of unprecedented declines in new in H2 due to the rapid and significant property listings. Early signs of impact of COVID-19. Industrial and office volume improvement in March 2020 outperformed retail and hotel sectors. were reversed due to the sudden CRE continued to deliver strong growth and substantial impact of COVID-19 in depth penetration in H1, with yield on the property industry. Despite benefiting from the introduction of a new * $99.4m the challenging backdrop, Domain’s flexible value based pricing model in FY20 EBITDA proportion of depth listings was at the lease. highest level in the Company’s history. Together with an innovative new flexible Agent Services pricing model, the business delivered Agent Services includes Pricefinder, continued growth in controllable yield. Australian Property Monitors (APM), Core Digital comprises Residential; This reflects the responsiveness of our Homepass, and Real Time Agent, product and sales teams in adjusting Media, Developers & Commercial; which was acquired in November 2019. to the environment, and recognises the and Agent Services subscription MyDesktop was divested during the year value Domain provides to agents and and premium products. These as part of Domain’s strategy to simplify consumers through every stage of the platforms reach large and highly and optimise, and work in alignment property journey. engaged audiences and provide with all agents. Pricefinder and APM produce property data, insights and agents and corporates with powerful Media, Developers & Commercial reporting tools for the property industry, marketing tools to deliver effective Media provides a platform for digital customer solutions. financial institutions and other non-real display advertisers to reach high estate businesses. Homepass provides value consumer audiences. The open-for-inspection tools, while Real Developers business generates Time Agent digitises key steps in the revenue by delivering marketing property journey, including agency solutions to residential property agreements, auctions and contracts. developers. Commercial Real Estate (CRE) comprises digital subscription, Agent Services revenue increased listings and display advertising for a 1% for the year, with the strong first range of sectors including office, retail half performance offset by the impact and industrial. of support initiatives which Domain provided to agents in response to Revenue across Media, Developers COVID-19 in H2. Real Time Agent and Commercial declined 9% with contributed revenue from the time of the market environment impacting its acquisition, with its digital products the performance of all three verticals. seeing accelerated take up as valuable Media’s revenue declined in H1 reflecting solutions to implement a COVID-19 safe the strategic decision to transition environment. Domain’s product suite to a programmatic offering, with enriches the agent experience at every lower revenue but improved margins. stage of the property journey. Additionally, broad weakness in the * excluding significant items and disposals. advertising market was exacerbated Despite the challenging backdrop, Domain's proportion of depth listings was at the highest level in the Company's history. Together with an innovative new flexible pricing model, the business delivered continued growth in controllable yield. 2 Consumer Solutions & Other Print * * $5.6m $26.5m FY20 Revenue FY20 Revenue * * $6.1m $(3.6)m FY20 EBITDA FY20 EBITDA Consumer Solutions includes Domain’s Print reaches an audience of around businesses in home loans, insurance 1.5 million through the Domain, and utilities connections. Domain Loan Allhomes and Domain Review Finder and Domain Insure operate magazines. The Domain magazine as joint ventures with specialist is distributed through leading providers, and Domain Connections is metropolitan dailies The Sydney a residential utilities connection lead Morning Herald, The Age and The generation service. Australian Financial Review. The Allhomes magazine is distributed Consumer Solutions revenue increased through the Canberra Times. Domain 83%. This was underpinned by strong Review is a free premium lifestyle growth at Domain Loan Finder, which and property magazine distributed in significantly expanded its refinancing Melbourne. activities while continuing to deliver growth in new home loans. Domain Print revenue declined around Loan Finder’s new accounts increased 41% reflecting the challenging by 45% year-on-year. EBITDA losses environment. Weakness in auctions reduced reflecting the benefits of and developers in H1 was exacerbated increased scale and strong revenue by the impact of COVID-19 in H2. momentum. Consumer Solutions Print publications were paused in Q4 businesses reach Domain’s large to respond to the COVID-19 impact. audiences with high purchase intent, and Ongoing cost initiatives and lower print are well placed to deliver on Domain’s volumes contributed to a 34% decline vision to build a customer-centric in expenses, and profitability was Australian property marketplace. maintained despite the lower Q4 revenue. While structural shifts to digital have accelerated during COVID-19, Domain magazines remain a desirable marketing platform for agents to access high value, aspirational audiences, as well as providing the opportunity to strengthen agent’s own profiles and brands. * excluding significant items and disposals. Annual Report 2020 3 Chairman’s Report Nick Falloon “Domain’s COVID-19 response, Project Zipline, was implemented with the guiding principle of doing the right thing for our employees, our customers, our shareholders and the broader community. The plan protects our key assets – our people and our capacity to deliver innovative product solutions – and supports our vision of building a customer-centric property marketplace.” $261.6m* Revenue $84.4m* EBITDA $21.6m* Net Profit after Tax 3.7c* Earnings per share 2c Total dividend per share 1.3x* Net debt to EBITDA * reflects trading performance excluding significant items and disposals. 4 In a challenging year for all of us, we Underlying earnings per share were In addition to providing COVID-19 related particularly appreciate the support 3.7 cents and total dividends were 2.0 support initiatives, we fast-tracked of our shareholders, and we wish cents, 100% franked. No final dividend development of innovative products you well. Despite the unprecedented was declared, reflecting the uncertainty for agents and consumers. These circumstances, FY20 has been a year of the current outlook. digital solutions support Domain’s evolution to our vision of a digital of progress for Domain. The business As part of our COVID-19 response, property marketplace. has continued to deliver against its Domain strengthened its liquidity strategic objectives. Our people have position by reaching agreement with its Confidence In Our Company responded to the challenges posed banking group for a new debt facility of by a property market recovering from $80 million, with a term of 18 months. The Domain recognises our responsibility historically low volumes, and then facility is in addition to the $225 million to the communities we serve. We impacted further by the twin shocks of facilities agreed to in November 2019. are committed to progressing our bushfires and COVID-19. Domain has In addition, the banking group agreed Environmental, Social and Governance made the most of opportunities arising to a waiver of the group’s financial (ESG) management practices to deliver from accelerating digital adoption that covenants as at June