Home alone
TRADING UPDATE
Need To Know
- 1H23 EBITDA guidance downgraded to ~$48m
- Sydney and Melbourne listings down 38% and 31% in November compared to last year, December worse
- DHG cutting costs a further $15-20m
New residential listings have plummeted since October putting DHG’s guidance under pressure. The company had already implemented costs savings announced at the November AGM, but this will now be substantially increased.
DHG said that the 4% new listings growth in 1Q23 had been followed by a decline of 16% in October and 22% in November. December so far is down 51% as agents and vendors defer listings into 2023.
Sydney and Melbourne have fared worst with November listings down 38% and 32% respectively.
DHG has lowered its 1H23 EBITDA guidance to around $48m vs market at $61m, implying a ~20% downgrade.
DHG is hoping a further $15-20 million of cost reduction vs 1H23 will see a material improvement in 2H23 EBITDA with margins only slightly down on the same period last year. The market is currently forecasting flat margins in the FY23.
Investment view
DHG makes no mention of the impact of rising interest rates on the activity levels in the residential housing market. It simplistically describes the environment as ‘challenging’ and pins its hopes on the on-going penetration of higher value depth products and the growth of its adjacency businesses.
Business had been going well for DHG as it ended FY22 with controllable yield up 14%. The company’s marketplace strategy has been successful in delivering double-digit yield growth through the cycle, but this is now being tested as interest rate rises give homeowners pause for thought.
The next catalyst will be DHG’s 1H23 result due in February. Given the downgraded guidance, we have placed our Buy recommendation under review.
Stock overview
Share Price
Company overview
Domain Holdings is an online and print real estate advertising business. It has adjacent businesses in home loans, insurance and solutions for real estate agents.
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