Controversy as Domain Puts Its Joint Venture Mortgage Business up for Sale After Disappointing FY23

The Australian real estate portal operator Domain Group has released its results for the 2023 financial year. Notable points from the company's report include:

• Revenue of A$345.7 million, down 3% year-on-year.
• Underlying profit after tax of A$38.6 million and EBITDA of A$109 million.
• EBITDA margin of 31% (34% in FY22).

Domain is the number two real estate portal player in Australia and like eternal rival REA Group, the company suffered from a depressed housing market and some macro headwinds over the course of the last financial year.

Commenting on Domain's plan going forward, CEO, Jason Pellegrino said:

"Domain’s Marketplace Strategy builds on our mission to inspire confidence in life’s property decisions. We are leveraging the strength of our core listings business with additional solutions that add value to customers and consumers, and support them throughout the entirety of their property journeys.

The long-term investment we have undertaken in machine learning and AI is allowing us to leverage these new technologies with internal and market-facing products that provide new commercial applications to futureproof the business.”

Domain's core listings Residential business saw record depth penetration. Like many portals around the world, the company has done a good job of upselling customers with most of its revenues in FY23 coming from premium products rather than basic subscription fees.

It was more of a mixed bag for Domain's Media Developers and Commercial segment which saw revenue declining 3% year-on-year. The commercial real estate segment grew revenue by 6% largely thanks to a new pricing model in the second half of the year.

Agent Solutions revenue was up 88% year-on-year thanks to the acquisition of RealBase. Excluding the acquisition, revenue for the segment was up 6% year-on-year.

Domain Insight (previously referred to as Property Data Solutions) is the segment that houses the company's property data platform, AVM and reporting tools. The segment saw revenue increase 16% and 4% on an underlying basis, excluding the IDS acquisition in October 2021.

Aside from the relatively humdrum performance numbers, Domain's report contained one notable and controversial point.

The company said that it is looking to sell its 60% stake in the Domain Home Loans (DHL) mortgage brokerage business saying that it "sees much greater potential than has been able to be achieved through the joint venture". The venture was accounted for as a discontinued operation in the portal company's 2023 report.

Domain Home Loans' minority shareholder is Lendi, a privately owned digital mortgage brokerage that has been in partnership with Domain since 2017.

Lendi's CEO, Dave Hyman said in a statement seen by Australian Financial Review that it was “fundamentally misleading” and “factually incorrect” that the business was for sale while confirming that Lendi remains "100 per cent supportive" of the joint venture.

“Lendi Group is not aware of any active sale process for the Domain Home Loans JV, and confirms that it is not a buyer of Domain’s stake in the business".

According to Domain's report, DHL was responsible for a A$7.3 million loss in FY23. The company has plans to re-enter the mortgage space and said that the company "remain[s] very confident that home loans can play a key role in our Marketplace strategy in the future".