McGrath Limited (ASX: MEA) announced its FY19 first-half results, showing an 18 per cent drop in revenue.
A release to the ASX points to the subdued market conditions having an impact on performance, resulting in an EBITDA loss for the first half of $2.5 million.
This result comprises the previously reported first-quarter loss of $1.9 million and a reduced second-quarter loss of $600,000 and is in line with the guidance that was provided to the market in October last year.
Results overview
- Revenue down 18 per cent to $42.5 million
- Underlying EBITDA loss of $2.5 m down from EBITDA of $1.6 million
- A small increase in market share by sales value to 3.1 per cent from 2.9 per cent (based on CoreLogic figures)
- A pre-tax one-off write-down of $6.6 million relating to legacy IT development costs and contracts
- Lower number of properties under management impacting revenue growth.
The announcement states that continued focus on conserving cash for business reinvestment and will not pay an interim FY19 dividend, noting the policy would be reinstated ‘as soon as deemed prudent’.
Technology evolution
But there could be good news on the horizon with the company stating they are well down the track in rolling out a new and advanced technology solution, they say will revolutionise operations in 2019.
McGrath’s CEO Geoff Lucas said, “After conducting a comprehensive analysis of the prior technology investment, we have determined our new in market solution will deliver our team and customers superior performance into the future.”
This comes after the announcement that Ross Hoier will be joining the team as McGrath’s first Head of Digital.
His previous role, as reported by ITWire, was leading a large scale digital transformation at TEEG (TimeZone, Zone Bowling, KingPin and Playtime).
Mr Hoier told ITwire, “It’s really crunch time for that type of business to transform, both from an overarching but also from a digital perspective.
“I’ll be heading that digital layer.”
Recruiting and developing the best
In addition to a focus on technology, the strategy for the next six months will be focusing on strategic acquisitions, attracting and developing the industry’s top agents, and focusing in on increased productivity, efficiency and cost reduction initiatives.
“We continue to see a trend of rationalisation of real estate agencies in the current market creating a flight to quality,” Mr Lucas concluded.
Mr Lucas said, “We are pleased with the success of our current recruitment program and believe it will give us the strength to further consolidate our presence in key markets.
“We will ensure that McGrath delivers the best professional advice to both buyers and vendors, while landlords and tenants are also assisted through our advanced technology”.
On 1 February 2019, McGrath opened its first company-owned office in Sydney’s Lower North Shore following the termination of the previous franchise agreement, while a new franchise has been granted to service the Wollongong region.
Outlook
Mr Lucas said that he expects that conditions will remain soft during 2019, but there was reason to be somewhat optimistic with owner owner-occupiers becoming more active as many areas return to more affordable levels coupled with low unemployment
“Economic factors are contributing to a significant reduction in transaction volumes with settled sales for the real estate sector nationally down 13.2 per cent, and across the eastern Seaboard with Sydney down 20.3 per cent, Melbourne down 22.3 per cent and Brisbane down 11.3 per cent on the 12 months to January 2019. Prices continue to weaken with national dwelling values to January 2019 down 5.6 per cent, with Sydney down 9.7 per cent, Melbourne down 8.3 per cent and Brisbane in line with last year.
McGrath securities closed up 1.9 per cent to 26.5¢.
