Real estate advertising portal Domain has taken a savage $178 million haircut to its value thanks to a crumbling housing market and the evaporation of properties listed for sale.
- Domain’s share price has tumbled 40pc since listing, weighed down by the harshest property market correction in a decade
- Underlying profit fell 14pc on stalling sales revenues
- Shares bounced on opening with the market expecting worse and applauding postive forward guidance
In its first-half results announcement, Domain said lower-than-expected listings in the Sydney and Melbourne markets required a re-assessment of carrying value in company.
The write-down comes a little over a year since Domain’s ASX listing in the wake of its separation from the old Fairfax media group, which is still its majority shareholder in its new form as a merged company with Nine Entertainment.
The big hit to goodwill saw Domain’s first-half result tumble to a $156.4 million loss, down from a $3.3 million loss in the previous corresponding period.
It is the second significant write-down the company has been forced to take in its short life, following a $30 million blow in August last year on costs associated with rebranding.
The underlying first-half result — stripping out one-off items, such as the goodwill write-down — was a $21.1 million profit, down 14 per cent on last year.
Sales revenues were effectively flat — up just 0.3 per cent — to $184 million for the half.
Shares bounce on guidance
The loss of goodwill is treated as a non-cash item and does not affect banking covenants, the company said.
Domain has endured a rough start to life on its own, putting up its shingle on the ASX in the midst of the most savage decline in the Australian property market in at least a decade.
It also lost its initial chief executive, the high-profile former Fairfax journalist Anthony Catalano, in contentious circumstances just two months after listing.
Tanking house prices and thin new listings have seen its share price tumble 40 per cent from its opening day close of $3.69 a share.
Current Domain chief executive Jason Pellegrino said it was a “solid performance” in the context of the current property market.
“We are confident in Domain’s long-term growth prospects and have a strategy in place place to build on our solid foundation, scale and capability as we enter our next growth phase,” Mr Pellegrino said in a statement to the ASX.
The company slashed its interim dividend from 4 cents a share last year to 2 cents.
However, the market was expecting worse and bid Domain’s share price up 5 per cent on opening to $2.20 (at 10:30am AEDT).