McGrath Real Estate is looking to the positive after a tough financial year, yesterday noting “…the core fundamentals of McGrath are robust” and the company remains “one of Australia’s leading sales agent teams” with “brand, customer service offering and network reach”.
The publicly-listed company released its end of financial year results on Monday, reporting the revenue and Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) were much in line with expectations.
The company posted a revenue downturn of 23 per cent, to $99.2 million and an underlying EBITDA of $5 million, down from $15.3 million in 2017.
“Reported results reflect the impact of one-off restructuring costs ($4.0 million) and impairment charges ($59.4 million) – EBITDA of $1.0 million, and loss after tax of $63.1 million,” the report stated.
The impairment charges were further reported to be set against the company owned sales segment and relate to assets that were primarily brought onto the balance sheet as part of agency acquisitions in 2015.
They were also quick to note the balance sheet indicated no debt and $10.9 million cash.
“Even after the departure of some of McGrath’s sale agents, market share was constant at 3.1%,” they said.
There’s little doubt it’s been a rough year for McGrath, with a company restructure coinciding with tightening market conditions, lower sales volumes and the departure of some of the team’s sales agents.
The report went on to indicate revenue was impacted by a lower number of agents, challenging market conditions that impacted listings, a net decline in offices, particularly within the franchise network, and a slowdown in the project marketing business with tightening regulatory conditions impacting investment demand.
Meanwhile, properties under management in the company owned network were also lower.
Yesterday’s results came as little surprise after being flagged earlier in the year.
“The ability of the business to generate positive earnings even after a $30.2 million reduction in revenue is testament to the robustness of the McGrath brand and position in the real estate industry,” the report stated.
Commenting on the results, McGrath CEO Geoff Lucas said the company was now looking to a positive future.
“With the new Board and senior leadership team settled in, the last quarter of FY18 saw the beginning of a period of stabilisation, and we are in the midst of a business turnaround.
“We are already seeing good progress in culture and agent recruitment, and critically we are seeing some strong sales results within our key markets.
“McGrath is committed to, and focused on, restoring its industry-leading position in FY19.
“We intend to introduce a range of strategic initiatives that are designed to improve the business, including initiatives relating to learning and development, data driven technology improvements and assessment of select acquisitions.
“We remain committed to growing the contributions of our annuity businesses in Property Management, Franchise and Oxygen as well as de-risking the volatility of our earnings in Company Owned Sales. At the same time, we are focused on maintaining a disciplined approach to cost management across the business.
“While the current property market conditions are challenging, we believe this will continue to generate some very real opportunities as more agencies and sales people will be seeking to join larger, well capitalised, quality branded groups like McGrath. Company owned agent numbers returned to growth over the fourth quarter of FY18, and that trend has continued into FY19.
“Our strategic plan has, as its centrepiece, the goal of growing McGrath’s franchised and company offices across Australia over the next five years. We will be concentrating our growth in predominantly franchised offices along the Eastern Seaboard, with particular focus on Victoria and Queensland. We will also be strengthening our presence in our existing company owned offices with an additional focus on the growth precincts around Western Sydney,” he added.
“With an industry-leading team and unmatched knowledge of the market developed over 30 years, we believe that McGrath’s most difficult days are behind it. The Board and the new management team are united and focused on stabilising the business and returning it to growth in FY19, and pleasingly we are already seeing signs of positive momentum.”
