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Highlights:
- Domain shared that new listings have fallen considerable in October, November and December.
- In the first half of the financial year 2023, the company expects EBITDA of AU$48 million.
Shares of Domain Holdings Australia Limited (ASX:DHG) are heading south on Tuesday (20 December 2022) after the company shared a trading update via an ASX filing. Real estate technology services company shared that it is experiencing an unusual decline in December listings following the deteriorating conditions of the property environment.
Domain shares were spotted trading 10.00% lower at AU$2.56 apiece with a market capitalisation of AU$1.80 billion. Including today’s fall, the share price has fallen by 50.87% in the last one year. On a year-to-date basis, it has declined by 55.10% and by 15.40% in a month. Meanwhile, the benchmark index, ASX 200 Communication (INDEXASX:XTJ) was down 1.55% to 1,420.70 points. ASX 200 was down 0.61% to 7,090.30 points around the same time.
How is Domain performing in a challenging property environment?
Domain reported a fall of 16% in new listings growth in October 2022 and a fall of 22% in November. The majority weakness is reported in the inner city of Melbourne and Sydney, as November listings decreased by 32% and 38%, respectively.
The company said that deteriorating conditions of the property environment since November are responsible for the fall.
For December, Domain said that it is witnessing an “earlier than unusual seasonal decline” because vendors and agents defer listings into the calendar year 2023. As reported, December month-to-date listings have fallen by approximately 37% in Melbourne and 51% in Sydney. For comparison, the previous year, in December 2021, the listings activity extended into late December.
New depth contracts and upgrades inked during November 2022 increased by 18% over the previous year.
Has Domain updated its guidance for the financial year 2023?
While sharing the AGM update, the cost expectations of Domain were in the range of AU$275-280 million. Worth mentioning here is that this cost expectation was under review because of the meaningful change in the property market.
After undertaking board ranging review, the company has identified and implemented a cost savings initiative of AU$21-26 million in FY23. The expected range of cost is AU$250 million to AU$255 million, out of which AU$135 million is expected for the first half of FY23 (1HFY23).
The company expects to report EBITDA of AU$48 million in 1HFY23. In the second half of FY23, material improvement is expected in EBITDA with higher revenue and cost-benefit of AU$15-20 million.
The higher revenue expectation is driven by recently signed upgrade contracts and residential depth, growth at Domain Home Loan, new business wins at IDS and subscription trends in Agent Solutions.
