Macquarie Australia Conference 2019 Commentary and ...€¦ · Macquarie Australia Conference 2019...

Domain Holdings Australia Limited | 55 Pyrmont Street, Pyrmont NSW 2009 | ABN 43 094 154 364 | www.domain.com.au/group

ASX ANNOUNCEMENT

Macquarie Australia Conference 2019

Commentary and Presentation

Sydney, 30 April 2019: Domain Holdings Australia Limited [ASX:DHG] (“Domain” or

“Company”) will today deliver a presentation at the Macquarie Australia Conference in

Sydney.

Presentation commentary and accompanying slides are attached.

The presentation contains a trading update, the details of which have been extracted below:

Trading Update

• Trading in the FY19 March quarter (31 December 2018 to 31 March 2019) saw:

‒ Digital revenue in line with prior corresponding period.

‒ Total revenue down around 6%.

• For the FY19 March quarter, total new market listings were down nationally with

auction volumes down 30% in Sydney and 36% in Melbourne. In this market context:

‒ Domain continued to deliver double digit growth in Residential Digital

yield, broadly consistent with FY19 H1, offset by the impact of a 13%

decline in Domain’s Residential sale listings.

‒ Residential depth revenue growth was 1%.

‒ Print revenue performance reflects these cyclical conditions.

• Continued investment in growth initiatives (including product development,

marketing, and driving sales performance) is being supported by ongoing cost

discipline.

• For FY19, Domain’s underlying costs (excluding investment in new Consumer

Solutions businesses) are expected to be down low to mid-single digit against

proforma FY18. Total costs are expected to increase low single digit against

proforma FY18. These cost expectations are lower than previous guidance provided

in February 2019.

Ends

Corporate Communications / Media: Brad Hatch, +61 408 118 690, [email protected]

Investors: Jolanta Masojada, +61 417 261 367, [email protected]

mailto:[email protected]



PRESENTATION COMMENTARY

Jason Pellegrino – Chief Executive Officer and Managing Director:

Slide 1

Good morning everyone.

It’s great to be here at the Macquarie Australia Conference.

CFO Rob Doyle is here with me today.

Slide 2, Slide 3

Today’s presentation provides a deep-dive into the three pillars of the Domain strategy. We

will focus on how we are:

• Growing our Core Listings business;

• Growing new revenue in Consumer Solutions; and

• Simplifying and optimising our business.

Rob will then provide a trading update.

We will have plenty of time for Q&A at the end of the presentation.

Slide 4

Domain has strong fundamentals and great competitive strength as a leading Australian

property technology and services business. In the eight months since I joined as CEO, I

have been greatly impressed by the talent and passion of the Domain team.

The progress we are making gives us confidence that Domain will emerge from this period of

property market cyclicality even stronger and with upside benefits from market recovery.

Slide 5

The strategy we have in place is building a customer-centric Australian property

marketplace. Everyone in our business is working to inspire confidence for all of life’s

property decisions.

Core Listings comprises Residential, Agent Services, Developers and Commercial Real

Estate subscription and premium products. These are powerful marketing platforms to help

agents and corporates to grow and deliver results for their customers.

Consumer Solutions comprises partnerships with industry leading experts to leverage our

large audiences and deliver direct-to-consumer services spanning home loans, insurance

and utilities connections.

Simplifying and optimising our business involves disciplined cost management in order to

redirect resources and investment towards funding growth. We are focusing our business on


its core in order to maximise returns. We are enriching our data platforms to support our

businesses and to deliver better consumer and customer experiences.

And across all of Domain, our strategic partnership with Nine provides us valuable new

audiences and marketing inventory.

Slide 6

Domain delivers value to consumers at every stage of their property journey.

We are expanding our business model beyond the typical six-month transaction window to

service the entirety of the typical 10-year property ownership cycle.

In the search phase, Domain’s mobile platforms are central to identifying suitable properties.

In the evaluate phase, Domain leverages a depth of data and insights to better inform

decision-making.

Moving into the transaction and ownership phases, Domain partners with industry-leading

experts to deliver solutions across financing and refinancing; insurance; and accessing utility

deals.

Getting a property sold is at the core of the Domain product. Our listing engine is a powerful

marketing platform to support agents to achieve the best sales results for their clients. We

attract large and highly-engaged audiences, with 58% of our app users unique to Domain.

Across the property journey, our audiences are inspired to dream and are constantly

engaged by our trusted editorial content which educates, entertains and informs.

The expansion of our business model and extension of the length of our engagement with

consumers provides significant revenue growth and diversification opportunity over the

medium to long term.

To achieve all of this, across Domain and Nine, we have access to one of the most unique

and largest logged-in and authenticated user bases in Australia. That is critical to allowing us

to more deeply understand our consumers’ journeys, which stage they are at, and how we

can best service their property needs. The access to an authenticated user base of this

scale in Australia provides us with un-replicable competitive advantage.

Slide 7

Turning to the first pillar of our strategy – growing our Core Listings business.

Slide 8

Domain’s listings business is underpinned by a marketplaces model, leveraging supply and

demand to drive yield.

In our Residential business, which is the largest contributor to revenue, supply has been

maximised to achieve effective listings parity with our major competitor.


Demand is growing with a cross-platform audience of 7.2 million Australians. Our digital

audience is 72% of our major competitor and there is opportunity to grow this further through

Nine’s audience strength, particularly in our emerging markets.

Listings and audience drive yield. Notwithstanding current lower listings volumes, we are

achieving strong momentum in yield through increased agent coverage (that is, the number

of agents taking a depth ‘all’ product); increased premium product upsell; and price

increases based on additional value delivered through audience.

Slide 9

We have implemented a data-driven approach to segmenting our Residential markets. Our

segmentation considers the immediate opportunity and the cost of investment to deliver a

step change in performance.

This nuanced approach moves beyond the more simplistic State-based geographic

segmentation. It allows us to set and operate distinct strategies market by market and

customise the strategic levers of audience, agent coverage, pricing and product upsell.

I’ll now take you through some indicative profiles of these segments to bring to life how we

are approaching each differently.

Slide 10

The indicative profile of our Established markets shows a strong competitive position:

• Our audience is around 90% the size of our major competitor;

• Around 75% of agencies have a depth ‘all’ contract with Domain;

• Pricing of our highest value Platinum premium product is around $2000; and

• Platinum penetration is around 60%.

The strategies we have in place for these markets are resulting in an impressive yield

performance, notwithstanding current listings volumes.

The key opportunities we see in our established markets are to lift audience engagement

and frequency to support pricing upside, and drive the take-up of new super premium

products.

Slide 11

The indicative profile of our Expanding markets shows a strengthening competitive position:

• Our audience is around 75% of our major competitor;




The strategies we have in place for these markets are resulting in strong yield performance.

The key opportunities we see in our expanding markets are to lift audience reach to support

pricing upside, increase the number of agencies with depth contracts and drive take-up of

higher tier premium products.


Slide 12

The indicative profile of our Emerging markets shows an early-stage foothold:

• Our audience is around 50% of our major competitor;




The strategies we have in place for these markets are resulting in substantial yield growth, in

the context of a relatively stable volume environment.

The key opportunities we see in our emerging markets are to lift audience reach and agent

depth coverage to increase depth penetration.

Slide 13

This slide illustrates Domain’s depth product penetration by State for the nine months to

March 2019 compared to the corresponding period; this is one of the drivers of Residential

depth revenue. The green bar shows the penetration of our highest value Platinum depth

tier. The stacked blue bar shows Gold and Silver tiers.

We are pleased with the continuing positive trends in Victoria where we have implemented

sales improvement initiatives and undertaken targeted marketing investment. Year to date

there has been a significant increase in the uptake of Platinum products and in the FY19

third quarter we have continued to see improved trends in total depth penetration in Victoria.

Slide 14

Turning to the second pillar of our strategy – growing new revenue in Consumer Solutions.

I am pleased to have earlier this month appointed Jason Chuck as Chief Consumer Officer.

He leads our Consumer Solutions businesses and content, audience and marketing

functions. Jason is a world-class marketer and entrepreneur, with extensive experience

building large scale, consumer facing content and consumer solutions businesses. He has

an extensive background in real estate and joins us from real estate technology start-up

Avnu where he was CEO.

Slide 15

Our Consumer Solutions businesses operate across the markets of home loans, insurance

and utilities connections.

Home loans and insurance are the two largest categories, each with a market size of

approximately $2 billion. Utilities connections is smaller at around $150 million.

The average home loan refinances every 4 years, with an approximate yield available per

converted customer of around $5000. This compares with annual transaction frequency for

insurance and utilities, with yields of around $200 and $150 respectively.

By comparison, property listings has a market size of $800 million, with an average

occurrence of once in 10 years and available yield ranging from $180 to more than $2000.


Domain partners with specialists to operate Domain Loan Finder and Domain Insure.

Domain Connections is our 100%-owned residential utilities connection lead generation

service, and we have a 50% interest in utilities comparison business Compare & Connect.

Slide 16

Domain Loan Finder’s home loan broking service, in partnership with Lendi, has a solid

foundation. Since launching in July 2017, the business has gained traction, is scaling

operations and deepening product integration.

This business reaches large audiences with high purchase intent and has an end-to-end

digital platform which is perfectly positioned to meet changing consumer requirements and

grow market share.

Key initiatives for Domain Loan Finder are to grow the brand’s awareness and engagement,

further integrate with Domain products, and drive expansion in broker capacity and

effectiveness.

Domain Insure, operating as a joint venture with Envest since January 2018, provides

insurance services for home, contents and landlord. Domain Insure does not assume claims

risk, which remains with the underwriter.

The business benefits from Domain’s large audiences with high purchase intent and cross-

selling opportunity.

We are pleased with the progress made during the launch phase of Domain Insure. The

business is now entering its next stage of development, moving from a white label offering to

an agency model. This model provides us the ability to leverage our rich data to significantly

enhance the product, create bespoke consumer experiences, and to further grow brand

awareness and engagement.

Domain Connections is developing a higher margin model. This involves service expansion

and increased focus on lead generation. As with Domain Loan Finder and Domain Insure,

this business benefits from large audiences with high purchase intent and our rich data

assets. We have strong relationships and engagement with major energy companies, which

provides opportunity for cross-selling and product integration with retailers’ rapidly

developing digital pathways.

Slide 17

Turning to the third pillar of our strategy – simplifying and optimising our business.

Slide 18

Domain now has in place a new organisational structure aligned to our Core Listings

business and consumer solutions. This structure enables more effective coordination of

product, content and audience, go-to-market and sales activities.

We have a strong leadership team and highly experienced hands at the helm of our

business and consumer divisions. Tony Blamey is our Chief Commercial Officer responsible

for leading our Core Listings business with a long track record at Domain and extensive and


strong agent relationships; and as I noted earlier, Jason Chuck is our Chief Consumer

Officer.

Cost efficiencies are being achieved and are supporting targeted reinvestment of around

15% of our cost base to fund our next phase of growth. We have undertaken a forensic

review of our expenses and are being disciplined in our cost management.

Print remains a valuable differentiator and source of hard-to-reach passive audiences. We

are operating the business efficiently which is supporting margin.

We now expect FY19 underlying costs (excluding investment in Consumer Solutions) to be

down low to mid-single digit year on year.

Salesforce effectiveness improvement initiatives, including the use of data, have been a

major focus across the business and are supporting the increased depth penetration.

Investment in talent and training is delivering pleasing results in Victoria.

Slide 19

There is substantial headroom to improve our performance by using our data to optimise and

build valuable products and offerings, which we are increasingly able to commercialise. Data

is the key to better supporting Domain teams, agents and consumers. As demonstrated

earlier in this presentation, Domain is harnessing data to supercharge a more granular

analysis of market segmentation and opportunities to drive growth in our Core Listings

business. Consumer Solutions benefit from improved conversion. Our data is unique and

broadly sourced from our property market intelligence business APM Pricefinder and the

insights we have into our listings platform. We are making smarter decisions on where to

direct investment, product development and marketing spend.

Agents are getting a boost from the additional market intelligence we are delivering which

helps them to strengthen vendor engagement with information such as prediction of demand

for specific properties. Capability to more effectively match buyers and sellers is making

property transactions more efficient. We are delivering agents insights into which are the

most qualified leads so they can focus their time and investment. An example of this is our

recent ‘Sell smarter with data’ partnership with McGrath, providing every agent across their

network with bespoke research and insights on their local market.

Consumers are benefiting from increasingly personalised search experiences, listings

recommendations and editorial content. They can be served relevant and timely offers

across home loans, insurance and utility connections. We are providing consumers with a

depth of information and market intelligence to support and better inform their buying and

selling decisions.

Slide 20

Our relationship with Nine provides unparalleled opportunity to expand Domain’s reach and

engagement. We have several initiatives underway.

Extending the Domain platform on Nine includes promoting Domain brands and reinforcing

Domain’s property expertise through Nine TV and digital assets.


Deepening the Domain brand and content integration with Nine includes a new ‘Your

Domain’ TV show and other TV integrations including our highly successful collaboration on

The Block.

Leveraging the unique audience scale of Domain and Nine and combined audience and

data includes tapping Nine’s incredible national TV audience and large digital audience, the

majority of which do not currently use Domain. Unifying Domain and Nine’s authenticated

data provides rich and deep insights into audience behaviours and opportunities.

Maximising commercial results includes enhancing advertiser solutions through cross-

platform opportunities and deepening partnerships to drive premium revenue.

The initiatives we have underway are expected to make Domain’s brand even stronger,

increase our audience reach and frequency, drive premium revenue and further improve

yield.

Rob will now talk to trading.

Slide 21

●●●

Rob Doyle – Chief Financial Officer:

Slide 22

• Trading in the FY19 March quarter (31 December 2018 to 31 March 2019) saw:

‒ Digital revenue in line with prior corresponding period.

‒ Total revenue down around 6%.

• For the FY19 March quarter, total new market listings were down nationally with

auction volumes down 30% in Sydney and 36% in Melbourne. In this market context:

‒ Domain continued to deliver double digit growth in Residential Digital

yield, broadly consistent with FY19 H1, offset by the impact of a 13%

decline in Domain’s Residential sale listings.

‒ Residential depth revenue growth was 1%.

‒ Print revenue performance reflects these cyclical conditions.

• Continued investment in growth initiatives (including product development,

marketing, and driving sales performance) is being supported by ongoing cost

discipline.

• For FY19, Domain’s underlying costs (excluding investment in new Consumer

Solutions businesses) are expected to be down low to mid-single digit against

proforma FY18. Total costs are expected to increase low single digit against

proforma FY18. These cost expectations are lower than previous guidance provided

in February 2019.

Jason and I are happy to open up for Q&A.


Ends

Corporate Communications / Media: Brad Hatch, +61 408 118 690, [email protected]

Investors: Jolanta Masojada, +61 417 261 367, [email protected]



1 | Investor Presentation

Note: 1. Domain and APM PriceFinder data; 2. Source: emma™ conducted by Ipsos, people 14+ for 12 months ending October 2018. 14+ Nielsen Digital Panel data calibrated to Digital Content Ratings

(Monthly), October 2018, Total Audience reach includes Domain, Domain Review and Allhomes; Digital Audience reach includes Domain and Allhomes.


0

100,000

200,000

300,000

400,000

500,000

Jan

14

May

14

Sep

14

Jan

15

May

15

Sep

15

Jan

16

May

16

Sep

16

Jan

17

May

17

Sep

17

Mar

18

Au

g 1

8

Jan

-19

Domain Listings

Competitor Listings

Listings

volume

Yield per

listing


Established Expanding Emerging

Continue to grow consumer

engagement and strengthen

market position

Targeted investment to

grow audience reach and

accelerate depth coverage

Continue to develop market position

via cost-effective marketing

and sales activities

Market Segments

Objective

Agent

coverage

Audience Expand reach

Pricing

Product

upsell

Increase in frequency Expand reach

High upsideMedium upside High upside

Audience-driven upsideAudience-driven upside Audience-driven upside

High upsideHigh upside High upside

Key opportunity


Competitive status

~90%

of major competitor1

Strategy

~$2,000

Platinum listing

~60%

Platinum penetration

~75%

of agencies with depth ‘all’ contracts

Drive frequency

Price increase linked to

additional audience value

Drive take-up of new

super premium products

Maintain coverage

Performance of Established

markets (FY19 March YTD)

Agent

coverage

Audience

Pricing

Product

upsell

Listings

volumeYield per

listing

Note: 1. Based on Domain’s established markets via emma™ conducted by Ipsos Australia, people 14+ for 12 months ending October 2018 to January 2019, 14+ Nielsen Digital Panel data calibrated to

Digital Content Ratings, monthly average for October 2018 to January 2019. Comparison includes Domain and Allhomes unique audience (unduplicated vs Realestate.com.au unique audience).


Competitive status

~75%


Strategy

~$600

Platinum listing

~20%


~40%


Drive reach

Price increase linked to

additional audience value

Drive take-up of premium products

Increase coverage

Performance of Expanding


Agent

coverage

Audience

Pricing

Product

upsellListings

volume

Yield per

listing

Note: 1. Based on Domain’s expanding markets via emma™ conducted by Ipsos Australia, people 14+ for 12 months ending October 2018 to January 2019, 14+ Nielsen Digital Panel data calibrated to

Digital Content Ratings, monthly average for October 2018 to January 2019. Comparison includes Domain and Allhomes unique audience (unduplicated vs Realestate.com.au unique audience).


Competitive status

~50%


Strategy

~$200

Platinum listing

~10%


~25%


Drive reach

Price increase linked

to additional audience value

Drive take-up of premium products

Increase coverage

Performance of Emerging


Agent

coverage

Audience

Pricing

Product

upsell

Listings

volume

Yield per

listing

Note: 1. Based on Domain’s emerging markets via emma™ conducted by Ipsos Australia, people 14+ for 12 months ending October 2018 to January 2019, 14+ Nielsen Digital Panel data calibrated to Digital

Content Ratings, monthly average for October 2018 to January 2019. Comparison includes Domain and Allhomes unique audience (unduplicated vs Realestate.com.au unique audience).


FY18YTD

FY19YTD

FY18YTD

FY19YTD

FY18YTD

FY19YTD

FY18YTD

FY19YTD

FY18YTD

FY19YTD

FY18YTD

FY19YTD

Total NSW VIC QLD SA WA

Platinum Tier Gold & Silver Tiers

15 | DomainPresentation

16 | DomainPresentation

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^ Underwriting agency model provides Domain with delegated authority to sell insurance products on behalf of multiple insurers, with greater control over the customer proposition as well as the sales and claims experience.

Domain Insure does not assume claims risk, which remains with the underwriter.

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Macquarie Australia Conference 2019 Commentary and ...€¦ · Macquarie Australia Conference 2019...

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