U.S. Markets closed

Edited Transcript of DHG.AX earnings conference call or presentation 16-Aug-19 12:30am GMT

Full Year 2019 Domain Holdings Australia Ltd Earnings Call

Aug 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Domain Holdings Australia Ltd earnings conference call or presentation Friday, August 16, 2019 at 12:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Jason Pellegrino

Domain Holdings Australia Limited - MD, CEO & Director

* Rob Doyle

Domain Holdings Australia Limited - CFO

================================================================================

Conference Call Participants

================================================================================

* Entcho Raykovski

Crédit Suisse AG, Research Division - Research Analyst

* Eric Pan

JP Morgan Chase & Co, Research Division - Analyst

* Eric Choi

UBS Investment Bank, Research Division - Director and Australian Telco and Media Lead Analyst

* Fraser Mcleish

MST Marquee - Head of Australian Media, Online and Telecommunications and Telco & Media Analyst

* Gareth James

Morningstar Inc., Research Division - Senior Equity Analyst

* Kane Hannan

Goldman Sachs Group Inc., Research Division - Research Analyst

* Paul Mason

Evans & Partners Pty. Ltd., Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Thank you for standing by, and welcome to the Domain Full Year Results Announcement Conference Call. (Operator Instructions)

I would now like to hand the conference over to Mr. Jason Pellegrino, Managing Director and Chief Executive Officer. Please go ahead.

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [2]

--------------------------------------------------------------------------------

Good morning, everyone. Thanks for joining me and CFO Rob Doyle for Domain's 2019 Full Year Results Briefing. We'll run through our usual agenda. I'll start with an overview of how we are delivering on our group strategy and the key operational drivers of the results followed by some comments on the current trading environment. Rob will then take you through the group financial. After which, we'll both be happy to take your questions.

For FY '19, Domain delivered a solid performance in the context of the challenging year faced by the Australian property market. To put this into perspective, property sale as a percentage of Australia's dwelling stock are at their lowest point in more than 20 years. Our Residential business delivered growth in a number of paid depths contracts with agents supporting growth in depth revenue despite substantial declines in new market listings.

National depth penetration is at the highest level in the company's history, and we still see plenty of room to grow. We are leveraging our strong fundamentals and competitive strength of effective listings parity and large exclusive audiences to grow yield.

Our strategy builds on these solid foundations. Domain is better placed than ever to deliver on our growth ambition. This will be further supported as the market returns to a more positive listings environment.

During my first 12 months at Domain, we have been focused on establishing and driving the strategy which will support our next phase of growth. Our vision is to build a customer-centric Australian property marketplace. Everyone in our business is working to inspire confidence for all of life's property decisions. There is substantial headroom to step change our performance by using our data to build products and offerings that better meet the needs of buyers, vendors and agents.

Our business has been structured to deliver against 3 objectives: firstly, to grow the core listings business by providing solutions to our agent and corporate customers to help them grow their business; secondly, to grow new revenue in Consumer Solutions by partnering with specialist businesses to deliver direct-to-consumer services spanning home loans, insurance, utility and more; and thirdly, to simplify and optimize our business by remaining disciplined in our cost management and rationalizing our portfolio so we can redirect resources towards funding our next phase of growth.

Our relationship with Nine provides opportunity to expand Domain's reach and engagement through Nine's broadcast and digital assets, and we're excited by the early results of this partnership.

Highlights for the FY '19 year in our core listings business include a 12% increase in Residential yield in the context of significantly lower listings volumes; more than 30% underlying Commercial revenue growth and the strengthening of the business with the acquisition of CommercialView; and increased stake in Homepass giving us control of the business and accelerating product development and integration.

In Consumer Solutions, Domain Loan Finder and Domain Insure revenue more than tripled. Domain Loan Finder delivered significant momentum in operating metrics, and Domain Insure has had a successful proof-of-concept phase. Other highlights include an improved cost outcome with underlying expenses, which exclude Consumer Solutions, down 5%, notwithstanding continued investment in product, a better outcome than in the first half results; the introduction of a new organizational structure aligned to agents and corporates and consumers; portfolio rationalization with the sale of Compare & Connect and Star Weekly to pursue higher-margin models; and increasing our data capability to build valuable user experiences and support a smarter internal decision-making process on where to direct investment, product development and marketing spend.

Turning now to the detail of the result. For FY '19, excluding significant items, Domain reported revenue of $335.6 million; EBITDA of $98 million; EBIT of $65.9 million; and a net profit of $37.4 million; earnings per share of $0.0643; and a dividend of $0.04 per share, fully franked, bringing the dividend for the full year to $0.06 per share. Rob will take you through the detail of the statutory result and significant items. These largely relate to the impairment of goodwill, which was announced in our first half results in February.

Turning to the detail of the segment results. Residential revenue increased 0.5%. Media, Developers & Commercial revenue declined 12.9%. Agent Services revenue increased 15.1%. These categories delivered Core Digital revenues, which was slightly below last year, and Core Digital EBITDA of $108.7 million, down 5.2% year-on-year.

Consumer Solutions & Other revenue increased 10% with an EBITDA loss of $7.2 million, reflecting investment in our emerging businesses, Domain Loan Finder and Domain Insure. Print revenue and Print EBITDA both declined around 30% with cost discipline mitigating some of the revenue impacts. Group EBITDA margin was 29.2%.

I'll now speak in detail about Domain's 5 revenue categories. Residential is the largest contributor to Domain's revenue at 52% of total in FY '19. Residential revenue increased 0.5% to around $173 million. This is a solid result from Residential in the context of lower listing volumes in key markets, where auction volumes declined around 25% in Sydney and 28% in Melbourne. Nationally, Domain new listings declined around 12%, double the 6% decline we reported at the first half. Despite the lower volumes in the market, we achieved national yield growth with an increase in the number of agents on paid depth contracts in every state.

Domain's yield performance in the face of volume declines is underpinned by our powerful marketplaces model, which leverages supply in the form of listings and demand, in the form of audience. We have maximized supply with our listings at effective parity with our major competitor. Our demand is growing with a cross-platform audience of around 7 million people, which is around 70% the size of our major competitor.

Together, listings and audience are driving yield despite the lowering listing volumes. Pleasingly, this yield growth is driven by a healthy even mix of depth uptake and price increase based on the value we deliver to the agents and vendors, and we still see considerable room to grow.

We are using our data and market insights to implement distinct market-by-market strategies to drive growth across Residential. We have segmented our markets into 3 categories of Established, Expanding and Emerging based on their competitive position. This approach allows us to customize the levers of audience, agent coverage, pricing and product upsell at the local market level. We can consider at a granular level the immediate opportunity and cost of investment to deliver a step change in performance.

To illustrate the opportunities arising from these strategies, Slide 13 includes a recent case study from Queensland. Domain has undertaken a targeted multiplatform campaign which has included paid search, social media and Nine's broadcast and digital platform. Domain's website audiences in Queensland has increased to record levels in the 6 months to June 2019, assisted by the strong growth in Nine's referral traffic. The quality of this audience is demonstrated by Domain's views per listing in Queensland, listing 26% to record levels. And despite the headwinds of lower property listings, Domain has delivered significant yield gains in Queensland. This demonstrates the opportunity for targeted and efficient marketing spend to drive the monetization of our listings and audiences. Our relationship with Nine provides further opportunities to expand Domain's audience reach and engagement. We have made significant progress since the merger of Fairfax Media with Nine was completed in December 2018.

Our initiatives to extend the Domain platform on Nine are promoting Domain's brands and reinforcing Domain's property expertise through Nine's broadcast and digital assets. These include property features and market updates on the Today Show, 9News and A Current Affair. On nine.com.au, homepage takeovers and a Dream Home (sic) [Homes] strap provide powerful digital integration opportunities. Our plans to deepen Domain's brand and content integration with Nine include the launch of a new Your Domain TV show on September 7. Our highly successful collaboration on The Block has seen Domain's property expertise even further integrated into the show.

The completion of a project to align Domain and Nine's data provides the opportunity to enhance the quality of our products and services by leveraging deep insights into audience behaviors. Together, Domain and Nine have 11.3 million unique registered users. Across Domain and Nine, we see the opportunity to maximize Commercial results by deepening partnerships to drive premium revenue and enhance advertiser solutions through cross-platform opportunities.

Turning to listings. The next 2 slides show total new market listings trends for the national market and capital cities. The dark blue line shows market listings for FY '19 against the last 3 years. National listing trends were very weak in the second half, held back by the significantly lower volumes in Sydney and Melbourne, which I mentioned earlier. Trends in Canberra were more stable. In other capital cities, Brisbane and Perth also experienced significant weakness in the second half, with relative stability in Adelaide.

Turning now to Slide 17 and Domain's depth product penetration by market. The green bar shows the penetration of our highest-value Platinum tier. The stacked blue bar shows Gold and Silver tiers. Domain delivered growth in both Platinum and other depth tiers, reaching record levels of penetration and supporting yield gains for the year. In New South Wales and Victoria, the depressed market environment in inner city Sydney and Melbourne has negatively impacted our mix. However, the number of paid depth contracts with agents has increased in all states. We remain confident about the considerable upside opportunity for depth penetration in the future.

There's been no letup in our efforts to deliver relevant, personalized and actionable products, and we're increasingly leveraging Domain's data to deliver great consumer experiences. Domain was first to market with school zones a few years ago. And in an Australian property portal first, we have introduced search by school name. This solved the school-focused search problems for parents and provides a list of properties available within the specified school zone. Other developments include even greater integration of Domain Loan Finder with Domain's core listings. The increasing personalization and timeliness of our products is reflected through enhanced notification and auction results as well as new recommendations.

We have strengthened our core product offering for owners with an expansion in price estimate tools as well as improved accuracy. A new appraisal tool provides qualified vendor leads to agents. We've created a centralized hub of seller tools to support vendors through the selling process, and launched a free property report with insights into individual properties.

Turning to Media, Developers & Commercial. This category contributed 14% of Domain's total revenue and declined around 13% for the year. This reflected a challenging market environment for the Media and Developers category, the adoption of a new operating model for Media and strong performance from our Commercial business. As highlighted a year ago, we made the strategic decision to streamline digital media sales by transitioning to a programmatic advertising offering. While as expected this new model delivers lower revenue, it also delivers much lower cost and has delivered an improved margin. The Developer market reflected significant weakness in New South Wales and Victoria. Financing constraints and other regulatory issues have shifted market demand from investors to owner-occupiers and from large high-rise developments to smaller boutique projects, which require a lower level of marketing support. Market share gains were achieved in our emerging markets.

Commercial real estate's growth momentum continued with underlying revenue of more than 30%, benefiting from a higher depth penetration and product innovation. The acquisition of CommercialView during the year further strengthens CRE's market position in Victoria. Our Commercial real estate performance is supported by our ongoing commitment to product innovation and investment.

Turning to Agent Services, which contributed 10% of our revenue. Agent Services increased 15% underpinned by yield growth and the consolidation of Homepass following the increase in Domain's ownership during the year. Excluding acquisitions, revenue increased by 10%. Our Agent Services business has a long history of partnering with agents to deliver rich data and unique insights through our trusted agent tools: Pricefinder, Homepass and MyDesktop. Homepass' insights into the off-line world are particularly valuable when combined with the online insights from our other digital platforms. We continue to enrich the agent experience through ongoing investment in innovation.

For FY '20, we are even more focused on how we can help agents prosper and build resilient sustainable businesses; how we can help them find the next listing, win that listing, sell the listing efficiently and for the best possible price; and improve the performance and profitability of their agency and agents. And an important element is how we help agents differentiate their brand and attract and retain talent within their own businesses.

Domain's unique and differentiated assets are a platform for us to help agents with the tasks that matter to them. We don't want to stand between consumers and agents with transactional leads models, which create a competitive and potentially combative relationship with agents. We will instead focus on always-on relationships that help agents build healthy, resilient businesses by making better use of the data relationships they already have.

We have launched pilots which demonstrate the value Domain can deliver agents through increased collaboration. We are also excited about the launch of Domain's new agent portal, Domain for Agents, which leverages our rich data to create a single entry point for agents to access our valuable products and services. This initiative enriches the value agents can provide to their customers by providing a wide range of market, listing, vendor and inquiry insights.

Turning to Consumer Solutions & Other, which contributed 8% of total revenue. Revenue increased 10% at a slower rate of growth than in FY '18. Momentum slowed at Compare & Connect, which was responsible for the bulk of Consumer Solutions' revenue, with a further impact from our strategic decision to sell the business in Q4. Underlying revenue from Domain Loan Finder and Domain Insure, while still modest, more than tripled in size.

We continue to see significant potential for revenue growth and diversification in our emerging Consumer Solutions business across home loans, insurance and utilities connections. We are focused on large markets that are adjacent to our core listings business and strategically well placed to leverage Domain's core audience and trusted brand. Domain Loan Finder's home brokering service, in partnership with Lendi, has a solid foundation and is growing rapidly. Domain Insure provides insurance services for home, contents and landlord. Domain Insure does not assume claims risk, which remains with the underwriter. We are pleased with the progress made during the proof-of-concept phase. The business is now entering its next stage of development, moving from a white-label offering to an agency model.

In the utilities connection vertical, we made the strategic decision to sell Compare & Connect to focus on developing a higher-margin model. We see lead generation as the right model to leverage our strong relationships and engage with the major energy companies.

Domain Loan Finder is revolutionizing the home loan industry, establishing a unique way for consumers to find the finance they need while they search for a home. The Domain Loan Finder business model has always been and remains focused on consumer needs during the home loan process. We provide consumers with live pricing across more than 35 lenders and a pathway to online approval. The integration of Domain Loan Finder into Domain's property search experience provides a seamless property purchase journey. Our understanding of consumer needs is fueled by the digitally led engagement we have had throughout the property search cycle. And consumers value our unbiased, personalized advice, which is based on a broad menu of around 1,600 products. As you can see, our offer is resonating with consumers with exceptionally high customer ratings and strong momentum in approvals and settlements.

Print revenues declined around 30% and comprised 16% of total revenue. This result was affected by market cyclicality, with some offsets from disciplined cost management. Print revenue declines reflected the continued shift to digital exacerbated by cyclical market conditions. Print is particularly exposed to the high-value auction and developer markets in Sydney and Melbourne, which were especially impacted by the market downturn. Markets that experienced a lesser property downturn demonstrated lower rates of Print decline. Ongoing cost initiatives and the lower Print volume contributed to a 29% reduction in expenses year-on-year. The sale of Star Weekly titles at the end of FY '19 reflects our focus on higher-margin models across all our businesses. Adjusted for the impact of this divestment, Print margins increased year-on-year, a significant achievement in the context of the market environment. Valuable passive audiences and a platform to build agent's profile and brand underpin the strategic value of our Print products to agents.

Turning now to the current trading environment and outlook. In line with the broadly reported market indicators, Domain's proprietary data sets have also shown some encouraging signs of buyer activity in the first weeks of FY '20, including increased attendance at open for inspections and an increase in home loan application volumes. However, listing volumes remained weak in a seasonally low listings period, with national market new listings declining 20% in July 2019 with Sydney and Melbourne new listings down 26% and 27%, respectively.

For FY '20, Domain will remain disciplined in managing its cost base to take account of the trading environment while continuing to invest in growth initiatives.

Over to you, Rob.

--------------------------------------------------------------------------------

Rob Doyle, Domain Holdings Australia Limited - CFO [3]

--------------------------------------------------------------------------------

Thanks, Jason. And thanks, everyone, for joining the call today.

Slide 35 provides a reconciliation of the statutory (4E) to Domain's trading performance excluding significant items. I'll run through the detail of the significant items shortly. Jason has already taken you through the operating performance of the Domain businesses, so I will focus on the items below EBITDA.

Depreciation and amortization expense of $32.1 million was slightly ahead of the full year guidance of around $30 million, largely due to the impact of the acquisitions of Homepass and CommercialView. The increase from FY '18 also reflected the investments in product development, which has a short amortization period.

For FY '20, depreciation and amortization expense is expected to be modestly higher before the impact of AASB 16, which I'll discuss in more detail later. Net finance costs of $8.5 million was slightly ahead of last year, largely due to the impact of deferred payments from the Review Property transaction. Tax expense is $17.7 million, reflects an effective tax rate of around 31%. And for FY '20, we expect a similar rate.

Net profit attributable to noncontrolling interests, or NCI, of $2.4 million reflects the share of profits or loss attributable to the agent ownership models and other consolidated nonwholly owned entities. NCI was lower versus FY '18, reflecting the buyouts of the interests associated with the Review Property agent ownership model in February 2018, lower profits from Print entities and higher losses in nonwholly owned Consumer Solutions businesses. Further detail is contained at Appendix 1.

Slide 36 provides the adjustments from statutory to pro forma results for FY '18.

Slide 37 provides a reconciliation of statutory to trading expenses, which excludes significant items. Total expenses, excluding significant items, declined 1% to $237.3 million as reductions in Print costs offset growth-focused investment in staff and related costs, technology and Consumer Solutions businesses. This compares with the guidance provided in May 2019 of a low single-digit cost increase for the full year. The improved cost outcome reflects the impact of the disposal of Compare & Connect and other efficiency measures. We remain committed to investing in the growth of the business while continuing to drive operational efficiency.

The charts on the right of the slide provide a breakdown of Domain's cost structure by major category. The proportion of total cost from production and distribution reduced from 20% to 15%, reflecting Print cost-savings initiatives and lower Print volumes. The proportion of total cost from promotion was stable at 17%, reflecting our commitment to invest in our brand and audience while remaining focused on efficiency in our spend. The other category increased from 13% to 15% largely due to costs associated with our growing Consumer Solutions businesses.

Looking forward to FY '20, I wanted to talk through the expected impact on our cost structure from the new accounting standard for leases, AASB 16. Around $8 million of the costs under the property, repairs and maintenance category will move to depreciation and interest, and therefore, its percentage share of operating cost is expected to reduce significantly.

Due to the calculation of present value, there will be a negative noncash impact from the new standard on net profit in FY '20 of up to $3 million with an offsetting positive impact in later years. In FY '20, we also expect the other category to reduce its percentage share of operating costs due to the divestment of Compare & Connect. The impact of the sale of Compare & Connect as well as Star Weekly is outlined in the appendices of the investor presentation.

Slide 38 provides an overview of significant items. As reported in the first half results, there was an impairment charge of $178.8 million recognized due to the lower listings environment. The charge is noncash in nature, and there is no impact on banking covenants.

Restructuring charges of $2.9 million pretax largely relate to the implementation of the new organizational structure. The accelerated depreciation charge of $2.5 million relates to assets associated with the sublease of a portion of our Sydney office premises. Gains on contingent consideration payable and sale of controlled entities of $7.7 million largely related to the sale of Compare & Connect and Star Weekly and the Review Property tranche 2 earnouts.

Slide 39 provides the cash flow for the current and prior years. FY '19 cash from trading of $103.4 million compares with EBITDA of $98 million. The FY '18 comparable numbers are not representative of underlying cash flows due to the timing of the separation from Fairfax Media in November 2017. Investment in PPE and software was $22.8 million. For FY '20, we expect CapEx in the mid-to-high $20 million range. The net cash outflow of $11.5 million for the year included the repayments of borrowings of $25 million.

Turning to Slide 40. At separation, Domain Group entered into a $250 million syndicated bank facility with a maturity of 3 to 4 years. As at June 2019, this facility was drawn down to $163 million, reflecting the $25 million repayments of drawn debt. The earliest tranches become current in November 2019, and we have commenced the refinancing process.

Slide 41 shows the balance sheets of Domain Group as at June 2019. Key movements within the balance sheet from June 2018 reflect the impairments of intangible assets and repayments of bank debts I discussed earlier. Domain has a strong balance sheet, finishing the year with net debt of $113.2 million, a leverage ratio of 1.2x.

With that, I'll hand back to Jason for some closing remarks.

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [4]

--------------------------------------------------------------------------------

Thanks, Rob.

I'd like to conclude by saying that in a challenging market environment Domain has shown progress against all 3 pillars of our strategy. The core listings business has offset listings volume declines with a strong yield performance. We are seeing good results from the differentiated products and services we are delivering to agents to help them thrive. Domain Loan Finder is building momentum. And operating costs reduced in FY '19. And for FY '20, we will maintain our track record of cost discipline while continuing to invest for future growth.

Domain is better placed than ever to deliver on our growth ambitions as the market returns to a more positive listings environment.

We'll now hand back to the operator for Q&A.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Your first question comes from Kane Hannan with Goldman Sachs.

--------------------------------------------------------------------------------

Kane Hannan, Goldman Sachs Group Inc., Research Division - Research Analyst [2]

--------------------------------------------------------------------------------

Just 3 for me, please. Firstly, just in terms of that investment outlook into FY '20. I know you're talking about remaining disciplined with your cost base in '20. So given what REA looks to doing with theirs, could you comment on whether it would make sense for Domain and Nine to really step up that investment and really drive traffic growth in the longer-term value of the Domain business given what REA's doing? Secondly, just on the listings outlook, just on that proprietary data set you guys referenced, how much of a leading indicator was that in terms of the listings decline in FY '19? And then I know it's difficult to forecast, but could you comment on your need around -- how the listings department plays out for the rest of this year? And then finally, just on the vendor leads opportunity, can you comment on any progress you've made with that strategy during the year and whether any decision has been made around potentially monetizing that opportunity?

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [3]

--------------------------------------------------------------------------------

Sure, Kane. I've got -- I picked up 3 of the questions. That third question was just a bit mumbled. Could I just ask you to repeat, just the vendor leads one?

--------------------------------------------------------------------------------

Kane Hannan, Goldman Sachs Group Inc., Research Division - Research Analyst [4]

--------------------------------------------------------------------------------

Just in terms of the listings outlook into '20 and how you guys are thinking about spring and sort of the second half of the year?

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [5]

--------------------------------------------------------------------------------

Yes, okay. So let me run through those quickly. So in terms of investment, I don't think it's for us to comment on what REA strategy is on that. We will be maintaining our track record of discipline around costs of meeting the market condition. However, there are many ways to actually manage cost, and we are being more disciplined and more analytical about how we go about doing that. That doesn't just mean that you wholesale reduce cost. It's also about picking the winners and funding the growth opportunities and growth strategies that you do apply. So for example, over the course of the last 6 months particularly, we decided to divest a number of opportunities that we see as low margin and not aligned with our future strategy. That allows us to supercharge our investment in areas of growth going forward. In terms of a leading indicator of the market, we have a number of proprietary data sets, particularly Homepass, which looks at attendance and open home inspections. There is some alignment that we've seen in the past, and we've done the work on that to look at market conditions. And you did see particularly around Easter, the election, that really interesting time over April where there was a decline in attendance at home loan inspections. And post the election, the very next weekend and subsequently, that trend discontinued and increased straightaway.

Look, I think it's too early to call a direct correlation between those indicators and the market conditions, but we're definitely echoing what we're seeing and what's been called in the market as a more positive market environment on the buy side. And you're seeing that play out in terms of auction clearance rates and results.

In terms of outlook for listings in FY '20, I think that, again, what we have seen over the course of the, say, fourth quarter with -- and particularly the third quarter, it was an interesting set of quarters and half because you had the impact of Easter changing between Q2 and Q4 in FY '19 versus FY '18 followed by a federal election and the timing of Anzac Day in close succession. So it's really difficult to sort of project forward. I think that, again, I would reference the fact that we are seeing really encouraging buyer activity. And as to the point in time when that translates to the sell side activity and listings improving, it's too difficult to pick an exact date. I would sort of count -- I would structure that in a way that -- we released a research report yesterday that's worth reading. It just sort of highlights that we're more than 20-year low in the proportion of Australia's total housing stock that is being listed. You have to go back to the extraordinary dislocation of the finances that happened in 1990 and '91 to get close to these levels. So as to when it happens, we really won't put a finger on it. We're not sort of willing. We'll manage our business in line and focus on what we can control.

In terms of vendor lead strategy, that's probably an interesting point. It's definitely an area that we've looked into in significant detail. We've studied how these models have evolved and emerged across markets like the U.S. and Australia. And to be frank, our conclusion is that there's more value in helping agents find vendors than there is in helping vendors find agents. Most of the models that we've seen have focused on stepping in between vendors and agents using an access to a large pool of consumers to qualify potential leads and then selling those leads to agents, initially on a per lead fee and then evolving to a percentage of the commission. And the general consensus is that this tracks towards 20%, and we've seen that consistently. And while it's true that platforms like Domain we do attract a large number of potential vendors, but our long history of partnering with agents through our Agent Services business has raised concerns about whether our portal would be the only place or even an attractive place for agents to find their next listing. Look, we know through our business that there's over 100 million customer records in the CRM databases of agents across Australia. And we're skeptical about how many qualified leads are truly new and unique and don't already exist or known to agents or agent somewhere in the country. So we've qualified and tested that view over recent months with a small number of agents across Australia in all states, and the findings are consistent. And there's really 2 key findings. Firstly, the majority of potential vendors in any area are already known to agents and they're in their contact databases. And secondly, even the best agents that we've seen through these tests are failing to extract the value of their existing relationships, and they're missing out on an alarming number of listings by vendors who are already known to them. So we think it's absolutely an area that we're focused on. We think it's a great area of opportunity. We're working on this. We're looking to scale the pilots that we've actually done, but we think there's a real opportunity here with our approach to step away from offering a transactional product to agents and instead deliver a differentiated service aligned with our culture and history of agent partnership.

Discussions -- it's really interesting. Our discussions with agents on these tests have sort of highlighted this concern about who owns the lead in terms of -- a lot of agents that I've discussed are wary of the long-term consequences of relying on a third-party vendor leads model and the risks of productizing their business. For any agent, reliance on third-party leads will ultimately leave them. And they understand this. The competition where it's whoever can actually productize the process, capture the leads the cheapest and deliver the leads -- deliver a service against those leads the cheapest that will win. It's a race to the bottom. Profitable, sustainable and resilient service businesses, on the other hand, rely on building strong relationships and then nurturing those relationships to drive repeat business. And the best agents that we've worked with and the best agents we're talking to investing their time on building and nurturing their client base strategically rather than competing with other agents for unknown leads. And so we think there's a real opportunity to actually help agents build sustainable, profitable and resilient businesses through helping them build really strong service businesses.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

Your next question comes from Entcho Raykovski with Crédit Suisse.

--------------------------------------------------------------------------------

Entcho Raykovski, Crédit Suisse AG, Research Division - Research Analyst [7]

--------------------------------------------------------------------------------

A couple of questions for me. Firstly, the 12% increase in Res yield. I know you've spoken about this throughout the presentation, and you've shown us the slide on depth penetration. But can you talk about the breakdown of contribution within geographies? I mean is it fair to say that, that increase in yield was much lower in Victoria given what's happening to volumes and the slight decline in depth penetration? So that's the first question. And then secondly, obviously, a pretty tough listings environment. How do you think about potential price increases for agents within that environment? I mean I'm conscious that REA didn't go quite as hard as they have in the past. So any thoughts would be appreciated.

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [8]

--------------------------------------------------------------------------------

Entcho, I think the best way to think about this is that 12% increase in yield was in the face of pretty significant volume headwinds, which we've spoken about at length. Volume headwinds that -- there's probably 2 aspects to it -- accelerated into the fourth quarter because of the impact of Easter, the election and Anzac Day. We saw in the fourth quarter volume headwinds that were nearing 30% in Domain's listing mix. So on a revenue-weighted listings volume impact, Q4 for us was sort of sailing into a headwind of nearly 30%. So in those -- the second thing to highlight is that it was not consistent across all geographies. And I think there's a lot of public analysis that's out there that shows that this was specifically -- a larger significant impact in Sydney and Melbourne and particularly in premium market. And hence, the volume weighted listing volume impact that Domain has felt because of our strength in those premium Sydney and Melbourne markets was probably larger than the market on a national basis. So that's the case. That split would not be consistent across all states.

What I would say though is, again, focusing on controlling what we can control. When I look at the total number of agents who are signed up to paid depth contracts, we've seen an increase in agents on paid depth contracts over the last 6 months and over the last 12 months in every state.

Turning to your second question around price increases in a tough environment. Look, we -- one of the things probably just to point out is the difference in the pricing cycle timing. So we adjust prices on an annual basis from the 1st of January. Our competitor adjusts from the 1st of July. So in the last 6 months results is a reflection of probably some tempering of price growth given the market situation that took impact from the 1st of January and flowed through the second half of the year. We will review that, and we're currently underway in reviewing that for what our approach will be on the 1st of January. We actually think that there is encouraging ability to deliver significantly more value. And we're looking at this at a much granular level and thinking about this more than just price in terms of what are the opportunities on a suburb-by-suburb basis, what's the competitive dynamics looks like, what's our pricing situation versus the value that we deliver and how can we actually increase that value. So we're seeing encouraging signs in Queensland. We see encouraging signs in Victoria and New South Wales as well and growth.

If I looked overall, what a healthy business looks like is roughly an even mix of growth in price as well as depth uptake driving yield over the medium to longer term because that really does signify a great value exchange. The agents are taking on board the price increases and are willing to recommit. And of that 12% yield increase that we spoke about in the last -- over the last 12 months, it's roughly evenly split 6% each in terms of price and depth uptake.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

Your next question comes from Eric Choi with UBS.

--------------------------------------------------------------------------------

Eric Choi, UBS Investment Bank, Research Division - Director and Australian Telco and Media Lead Analyst [10]

--------------------------------------------------------------------------------

I just had a few as well. First one, I guess if we sort of try and work out what your fourth quarter Residential depth revenues data sort of implies and maybe you did like minus 18% growth in the fourth quarter, and I don't know there was a sort of Easter impact and election in there. But I guess given listings growth has stayed in the high 20% declines in New South Wales and Victoria sort of suggests early first quarter '20 declines could be in the teens as well. Just wondering if there's anything wrong with the logic there. The second question, just a bit of housekeeping on those extra week benefits in '19. Can you just tell us exactly which divisions that benefited? And then thirdly, just on the costs again, there was this big step down in the cost base ex transactions in the second half '19. I think it was down like 9% year-on-year. But if you sort of annualize that into next year and account for some seasonality, it still suggests you could sort of do low to mid-single-digit declines in that costs space again. But I guess is that the wrong way to think about it? Like do we invest more in growth initiatives? And does that bring it to sort of more flattish type growth? If you can help us with the shape, that would be great.

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [11]

--------------------------------------------------------------------------------

Sure. I might cover the first 3 questions there, and I'll pass across to Rob. He can talk you through our view on cost.

So the fourth quarter, yes, you -- your -- you suggested sort of a decline in yield there. I would just point to that the key [part] for us, the revenue-weighted volume impact or the headwind that we're getting in terms of the listing volumes are things we don't control, was close to 30% in that Q4. So what's encouraging for us is in the face of that extraordinary movement, we still managed to sort of drive quite decent yield growth, and we're really encouraged by that. I would be careful in doing a straight-line attribution of that into the FY '20 year, the reason being a lot of the real differences or some of the anomalies such as Easter, the election, timing of Anzac Day were early on in Q4. You can see that we're not seeing anything different from what the public numbers are there in terms of auction volumes. But July is a significantly low-volume month from a timing perspective. We'll have a clearer picture as we move into the spring as to what that trajectory looks like. Again, I'd sort of point to we are encouraged by the signs of buyer activity. As to when the seller activity really comes back in to match that in the marketplace, we can't really pick a specific day -- day, week or month.

In terms of the extra week, which businesses does it apply? Really, it's across all Print, across all segments. So all of our businesses are exposed to that extra week, particularly in Print and digital where you run extra campaigns and extra formats that go through. So really the way I would think about that is really thinking about that across the entire business rather than picking a specific segment or division.

--------------------------------------------------------------------------------

Rob Doyle, Domain Holdings Australia Limited - CFO [12]

--------------------------------------------------------------------------------

And I think on the cost question, Eric, I mean as Jason said, I think we've shown that we're able to manage the cost profile through the market cycle. And obviously, that -- we expect that to continue. I think in the current market environment, particularly in the first half where it's a bit nearer term, you wouldn't expect to see costs growing in this current environment, for sure, so flat at worst and potentially slightly better than that. I mean I think in terms of the investment question, we pointed to the Queensland case study, for example, in the investor pack. I think we're showing that we can drive better returns from the investment that we've got. We've restructured half the business now including product in tech and content and audience. And again, that's really designed to make sure that we get the maximum bang for buck for the investments that we are putting in, but we do have to obviously look at the market environment as that unfolds over the year, and we'll respond accordingly.

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [13]

--------------------------------------------------------------------------------

Yes. I'll probably just add, just in terms of intent, I think we just need to clearly state that there is enormous opportunity still in Domain businesses and the segments in which we operate. We're still strategically positioning ourselves as a growth business. We are making decisions that match the market but with a view towards funding future growth. I think you would see that as a signal in sort of trends around our depreciation and amortization line, which is sort of an indicator that we are not taking the foot off the accelerator in terms of product development and innovation.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

Your next question comes from Eric Pan with JPMorgan.

--------------------------------------------------------------------------------

Eric Pan, JP Morgan Chase & Co, Research Division - Analyst [15]

--------------------------------------------------------------------------------

So 3 for me. Within Media, Developer & Commercial, how much of the revenue decline in the second half came from the move to programmatic selling and media versus a decline in the developer segment? And then the second one. Can you just comment on the magnitude of cost growth for Consumer Solutions this year now that you've gotten rid of Compare & Connect? Should expect losses to increase from Loan Finder and Insure? And when can we expect breakeven on these businesses? And then lastly, within Print, with the larger-than-expected decline given the market cyclicality, are you able to take cost out at least at the same pace as the revenue decline going forward?

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [16]

--------------------------------------------------------------------------------

Okay. Eric, I'll cover that first one, and I think Rob can cover the cost in our Print approach. So for Media, Developers & CRE, there was really very different trends in there. So Media, we spoke about the strategic change to move to a higher-margin model and reflect really our reconcentration as a technology marketplace rather than a media publisher business. On Developers, there is -- clearly, that's a challenged segment, particularly in Sydney, that's not only driven by the shift from investor to owner-occupiers in the market trend, the lower access to capital but also it has been impacted by some of the news around issues with -- from a development -- development particularly in Sydney. Commercial -- CRE, on the other hand, has had a really buoyant and positive environment. So if you take out the Media segment within -- Media business within that segment, the revenue actually grew a small amount, sort of [depths and ferrea] offsetting each other but was a positive [growth]. So Media revenue really was the sort of key driver there of the decrease in revenue. But I'd point to that on an EBITDA basis, we actually delivered a better result. We improved margins there.

--------------------------------------------------------------------------------

Rob Doyle, Domain Holdings Australia Limited - CFO [17]

--------------------------------------------------------------------------------

I think on the Consumer Solutions question there, we'd expect the EBITDA losses to reduce from here on in, so we think we peaked in terms of an EBITDA loss in the first half of '19. You can see from the presentation, there's some very strong momentum from a revenue perspective. We scaled up to about 40 brokers within DLF. But pleasingly, what we've seen is an improvement in the throughput and efficiency per broker. So we're delivering more applications per broker than we were previously, and that's continuing to improve. So I think we'll continue to scale the size of the team and the cost base in line with the revenue opportunity, which you see very clearly into next year.

In terms of Domain Insure, that's still relatively nascent. So we're just coming to the end of that pilot period with the white label products and very shortly about to embark on the underwriting agency model. So I'd expect to see an increase in revenue there but also an increase in costs. But certainly, we think we're on an upward trajectory, particularly within Domain Loan Finder going forward.

--------------------------------------------------------------------------------

Eric Pan, JP Morgan Chase & Co, Research Division - Analyst [18]

--------------------------------------------------------------------------------

And then on Print?

--------------------------------------------------------------------------------

Rob Doyle, Domain Holdings Australia Limited - CFO [19]

--------------------------------------------------------------------------------

And then on the Print costs, I mean as you can see from the actions we've taken over the past sort of 12, 18 months, we've been working very hard and I think done a pretty good job of maintaining margin. I think the sale of Star Weekly will obviously help that. That was a reasonably high revenue but a very low-margin part of the Print portfolio. So we're continuing to address the cost base in a number of different ways, and we'll continue to do that. So I think we can certainly go a long way towards mitigating that. And as the market comes back into Print as well will obviously improve things as well.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

Your next question comes from Paul Mason with Evans & Partners.

--------------------------------------------------------------------------------

Paul Mason, Evans & Partners Pty. Ltd., Research Division - Research Analyst [21]

--------------------------------------------------------------------------------

A couple of questions for me including a couple of follow-ups to ones that were asked earlier. The first one is a small accounting one, so maybe for Rob. The accelerated depreciation in the nonrecurring items, could you just give us an idea of what that was about?

--------------------------------------------------------------------------------

Rob Doyle, Domain Holdings Australia Limited - CFO [22]

--------------------------------------------------------------------------------

Yes. Sure. The ground floor of our Sydney office in Pyrmont we sublet that. So it's literally just accelerating the write-down of the fit-out costs for the ground floor.

--------------------------------------------------------------------------------

Paul Mason, Evans & Partners Pty. Ltd., Research Division - Research Analyst [23]

--------------------------------------------------------------------------------

And just on the Consumer Solutions business, just going through like the appendix and the -- there's about $3.1 million of revenue left over. Is that basically all Domain Loan Finder at this stage? Or is there something else in there as well?

--------------------------------------------------------------------------------

Rob Doyle, Domain Holdings Australia Limited - CFO [24]

--------------------------------------------------------------------------------

It's mostly Domain Loan Finder. So that would be in the high 2s and then a small contribution from Domain Insure.

--------------------------------------------------------------------------------

Paul Mason, Evans & Partners Pty. Ltd., Research Division - Research Analyst [25]

--------------------------------------------------------------------------------

Yes. Okay. Great. And then just in terms of a follow-on question around the number of weeks, just to get the numbers completely right. So this year was the equivalent of like 53 weeks, was it? And then for FY '20, could you give us like what you're expecting to be your equivalent reporting weeks?

--------------------------------------------------------------------------------

Rob Doyle, Domain Holdings Australia Limited - CFO [26]

--------------------------------------------------------------------------------

Yes. So the -- I'll give you the breakdown of the impact of the extra week on revenue, expenses and EBITDA. So it's $4.6 million of revenue, $1.9 million of expenses and $2.7 million of EBITDA. And then FY '20 will be 52 -- back to 52 weeks.

--------------------------------------------------------------------------------

Paul Mason, Evans & Partners Pty. Ltd., Research Division - Research Analyst [27]

--------------------------------------------------------------------------------

Okay. And just related to that, looks like the elections sort of gone on the structure of Easter and then Anzac Day. How many weeks do you think you guys effectively lost because of that in FY '19?

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [28]

--------------------------------------------------------------------------------

The simple answer, we didn't lose weeks. They existed. But in terms of the activity, it's interesting. It's a really difficult question, but what we did see was essentially a freezing of activity in terms of listing volumes and also buyer activity in the lead up post-Easter into the election. And if you recall, the calling of the election was being delayed. So even if people that were thinking about, back in January, February, putting their property onto the market, the fact that the election wasn't called -- the calling of it was delayed, really delayed their decision. It then came very late in the autumn-spring cycle, which meant that there wasn't a great period of time post the 18th of May to put a campaign out and go to market. So it actually just was an extraordinary series of events. The timing of Easter, the timing of the election and then the timing of Anzac Day that meant, particularly in Sydney and Melbourne with the auction-heavy market, we lost a lot of Saturdays that really took out the opportunity to drive an effective auction campaign. It's really difficult to point to a number. But when we look at the headwind -- the revenue [way], the listing volume impact of -- that we faced in the second half, you can see that that's an extraordinary impact, and the loss of weeks would be part of that.

--------------------------------------------------------------------------------

Paul Mason, Evans & Partners Pty. Ltd., Research Division - Research Analyst [29]

--------------------------------------------------------------------------------

Yes, okay. And just on the Melbourne and Sydney charts. Melbourne's depths in percentage terms crept backwards, but you made a comment that specifically total agents on contracts have gone up. Is there something going on there about gross agents versus like net agents? Or something where any big agents have walked away and smaller agents have signed? Or like -- can you comment maybe -- like have you seen anybody leaving? Or nobody's leaving and it's just that some of the inner city guys where you make a lot of really, really high depth are just doing [any] volume.

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [30]

--------------------------------------------------------------------------------

I think the way to think about that is there are 2 specific drivers. There are existing agents who are on depth. What we have seen because of the market impacts and we know that this is the first half and it's continued into the second half is in Victoria, particularly, there's declining listings in inner city Melbourne that has been offset by an increase in listings in outer suburban and regional Victoria. So for existing agents on depth contracts, that's a pretty nasty mix shift for us in terms of where we have high Platinum penetration, for example, is where the biggest impact in terms of listing volumes. And it's not made up for increases in listing volumes in regional and outer suburban Melbourne, where our Platinum penetration is lower.

Then there's a second impact which was what's happening with agents themselves actually signing up to contracts or not. And we're seeing -- yes, even in the context of a really poor market condition in Victoria, we're seeing an increase in the number of agents across all -- are signing up to all sort of levels of tiers about our premium contracts or depth contracts. So at the end of the year versus the half or at the half versus the beginning of the year, we're seeing consistent increase in growth in agents signing up to paid depth contracts.

--------------------------------------------------------------------------------

Paul Mason, Evans & Partners Pty. Ltd., Research Division - Research Analyst [31]

--------------------------------------------------------------------------------

Okay. And just a quick follow-on on that, which would be my last question, around the charts in New South Wales and WA where a lot of your depth growth appears to have been Gold and Silver in percentage terms. Is that just like the exact same thing going on in those states as well? Or is there something specific about your marketing campaigns you have going on there where you're targeting like the lower level of depth contracts?

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [32]

--------------------------------------------------------------------------------

I think that's absolutely the case in New South Wales and WA, it's the same. The Sydney impact is similar to Melbourne and WA. We've seen strong growth in rental as well, rental contracts, which has been really positive. And we're also taking a much more analytical and granular approach and a mature approach to our -- the way that we go to market. We don't necessarily have to take a subscription agent and try to upsell them to Platinum in one hit or take 2 or 3 years to actually get them to sign up to that premium-level product. We are better off on taking them on a journey through Silver, Gold and Platinum. That's better for the agent, it's better for us. So yes, you'll see a lot more of a mature approach to that sales cycle.

--------------------------------------------------------------------------------

Operator [33]

--------------------------------------------------------------------------------

Your next question comes from Gareth James from Morningstar Equity Research.

--------------------------------------------------------------------------------

Gareth James, Morningstar Inc., Research Division - Senior Equity Analyst [34]

--------------------------------------------------------------------------------

Just wanted to clarify something. So I think you talked about having an audience of 7 million, which was 6 -- 7% of the -- of REA group. Just interested to know how that's changed over the past year. And also, obviously, REA you've kind of implied that they've got around 3x your audience, and there's a few metrics out there. Just interested to know what you think the best one is to look at.

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [35]

--------------------------------------------------------------------------------

I won't comment on REA's 3x the audience. I believe that's a 3x the visits rather than the audience. But I'm actually not too sure exactly the definitions of what that is. In terms of the audience, I would think through that, that is the available audience to which you can actually market a property. It's the available audience to which you can deliver editorial and deliver on our vision of inspiring confidence for those large property decisions. We are seeing really pleasing growth in areas like Queensland where our audience numbers are up significantly. If you look at the case study that we provided, not only are they up significantly but they're up in terms of high-value audiences. So whilst our audience overall has increased in Queensland, which is a good result in a challenging marketplace, the -- it has been -- we've had an even greater increase in views per listing. So activity based or the higher-value audiences that we're driving in Queensland. And Nine's audience base up there and profile has helped us, so we're seeing really sort of pleasing growth through that. These numbers will change month-to-month, quarter-to-quarter depending on a lot of different variables, activity in the marketplace, competitor activity, marketing spend. We're being a lot more analytical about the types of audience that we want to engage with, how we actually engage with that relative to seasonality and market conditions. A good example of this really ties into the cost bases. There's no point actually continuing to invest in significant marketing in periods where -- that we have seasonal downturns or -- there's no point in driving great activity when you have events like Easter, Anzac Day and elections when you know that there's going to be actually limited activity or people are going to be watching the sport or doing other things.

--------------------------------------------------------------------------------

Gareth James, Morningstar Inc., Research Division - Senior Equity Analyst [36]

--------------------------------------------------------------------------------

Okay. So regarding that, the 70% figure that you quoted, is that a number that you're going to kind of track going forward and provide to the market? Is that the key number that you're going to be looking at?

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [37]

--------------------------------------------------------------------------------

That provides a reach number. In terms of activity and effectiveness, we track a number of different numbers, right down to suburb level in terms of the pool of audience. If you're selling a property, you want to know -- and depending on that property whether you want to target a national audience, a state-based audience or even a local audience. So at that level, we have very granular ability to sort of target and understand that. Even at the suburb base level, it affects our ability or it's an input into how we think about competitiveness and pricing, how we think about how we go to market with agents. So I think at a top line level, we've consistently spoken about the size and scale of that unique audience, the size of that -- at a growth, and we'll continue to provide that. At a deeper level, it just gets really complex. And actually, a lot of that becomes deeply commercial and confident.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

Your next question comes from Fraser Mcleish with MST Marquee.

--------------------------------------------------------------------------------

Fraser Mcleish, MST Marquee - Head of Australian Media, Online and Telecommunications and Telco & Media Analyst [39]

--------------------------------------------------------------------------------

Just 3 for me. Firstly, just the back to the listings penetration chart, should we read the flat premium Platinum listings in New South Wales means you've kind of maxed out there? That would be the first one. Second one, can you just give us a broader update on Melbourne given the issues there in the past and how you've progressed and resolved those? And finally, just for Rob, just a quick one. I'm not sure if I might have missed it, did you give D&A guidance for next year?

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [40]

--------------------------------------------------------------------------------

Okay. On the Platinum in New South Wales, we've got significant headroom to grow consistently across most zones, although -- and probably zone 1 would be the one that we -- you're above 70% penetration in that zone. I'll come back to that in a second because that doesn't mean you're capped out. So we've significant ability to grow relative to the competitive environment and relative to the value that we deliver. I would go back to a question previously. That is a -- it's a listings-weighted revenue, so it's paid listings in that. So it is impacted by the overweighting negative impact in higher-penetration zones in Melbourne inner city -- sorry, inner city Sydney relative to zone -- outer zones where we would have lower Platinum penetration. So Fraser, there's going to be a mix shift in that. So what we -- again, going back to the theme of controlling what we can control, what we know is that in New South Wales across all zones we have more agents who signed up to Platinum and premium contracts than we had previously, so we're seeing a pleasing trend. Even when we get to really high levels of penetration with Platinum, what we're seeing is an ability to actually offer extension in the super premium product. That is -- so for example, Dream Home (sic) [Homes] extension, social boost extension. And we're exploring the opportunity to actually extend those Commercial products onto the Nine network. We announced this morning the launch of the Your Domain TV show on Nine, which will be a cross-platform opportunity on TV, on digital, across Nine, across Domain to expose -- potentially expose premium properties or properties with significant marketing budgets to a large audience. So we don't see the capping out of high penetration of Platinums being the end of the road. At the end of the day, if we can provide agents and vendors with access to exclusive audiences that deliver strong value and deliver a strong interest in the property, we think there is the ability to keep growing that.

In Melbourne, particularly the ongoing sale -- improvement in sales, effectiveness and efficiency have continued. The first half of the year really when we spoke was about rebuilding that team and rebuilding that focus. We're seeing pleasing progress, particularly a more geographically disbursed uplift in terms of agents on premium contracts. Again, in Victoria, we have more agents on premium contracts at the end of the year than we did at the beginning of the year, which is really pleasing. The overall penetration rates in those graphs are impacted by the mix shift and the market conditions. So it's early days, but it's definitely something that we are pleased with the progress, and we'll continue that.

I'll pass across to Rob for the D&A guidance.

--------------------------------------------------------------------------------

Rob Doyle, Domain Holdings Australia Limited - CFO [41]

--------------------------------------------------------------------------------

Yes. Fraser, I did touch on it in my comments to the Slide 35. So we've said for FY '20, it will be modestly higher than the year just gone. And then obviously, you need to factor in the AASB 16 impact, which we've set out on the cost slide for you as well, about a $9 million impact.

--------------------------------------------------------------------------------

Operator [42]

--------------------------------------------------------------------------------

Thank you. There are no further questions at this time. I'll hand back to Mr. Pellegrino for closing remarks.

--------------------------------------------------------------------------------

Jason Pellegrino, Domain Holdings Australia Limited - MD, CEO & Director [43]

--------------------------------------------------------------------------------

So thank you very much for taking the time this morning. It's been great. And we look forward to talking to you all again soon.