This article is from the Australian Property Journal archive
LISTED real estate agency McGrath has returned to profitability but CEO Geoff Lucas, who steered the company over the past two and a half years has announced his resignation.
McGrath announced a statutory net profit of $700,000 for the full year to June 30 compared to a $15.6 million loss in FY19. But the agency posted an underlying net loss of $600,000, a marked improvement from the $9.7 million loss in FY19. Revenue grew 8.9% to $91.6 million from $82.7 million.
Underlying EBITDA was $3.7 million, excluding $2.2 million worth of government COVID-related grants, compared with a loss of $6.4 million in the previous year.
Despite COVID-19, the company achieved 12,004 property sales during the period, an increase of 30% from 9,213 in the previous corresponding period. Total value also rose to $11.9 billion, up 31% from $9.1 billion in pcp. McGrath also bolstered its rental roll to 8,375 properties up from 7,627 in FY19,
Its rent roll has a market value estimated to be worth $52.2 million, of which $38.5 million is not reflected on the balance sheet.
Outgoing CEO Geoff Lucas said the business performed significantly better than the market during the year and has a strong platform on which to build in 2021, notwithstanding the ongoing impacts of COVID.
“McGrath implemented a range of initiatives during the third quarter to protect the safety and wellbeing of all our workforce and our clients, successfully transitioning the business to digital auctions and viewings, while the group’s Melbourne-based offices, which make up approximately 1.5% of group revenues, remain closed during the stage four restrictions.
“We are proud of our team in the way they have responded to the recent challenges and continued to operate effectively and efficiently. Having implemented salary reductions of 30% to 40% for a three month period and successfully navigating the COVID crisis to-date, we are pleased today to confirm to our team that we will repay these reductions to those who were affected, forthwith,” Lucas said.
However, given the uncertain economic environment and conserving cash for business reinvestment, the board has decided to not pay an FY20 dividend.
Lucas added that McGrath finished FY20 with no debt, $17.3 million in cash and $30.2 million in net assets.
“While dwelling prices are expected to decline over coming months, the government stimulus packages, support by the banking community and record low interest rates, are likely to cushion the extent of decreases.
“Melbourne’s stage four lockdown is expected to have limited impact on McGrath’s FY21 results. Some softness in rents is likely to continue through the uncertain economic conditions expected throughout the 2021 financial year,” Lucas said.
Despite this, Lucas said McGrath is expecting continued market share gains as well as consolidation of a highly fragmented industry, presenting acquisition opportunities.
Meanwhile this is Lucas’ last time delivering the company’s result after resigning.
Lucas was lured back to the company over two years ago following a tumultuous period after CEO Cameron Judson and the entire board resigned.
Lucas left McGrath to work as chief operating officer of Sonoma Bakery Group after he was chief operating officer of McGrath for eight years between 2008-2016.
Chair Peter Lewis yesterday said the board had accepted Lucas’ resignation and paid tribute to his service to the company during what has been a difficult two and a half years.
“We thank Geoff for navigating McGrath from losses to profitability through the current COVID crisis, and we wish him all the very best in his future endeavours,” Lewis said.
Lucas said the turnaround marks a new beginning for the company.
“The business is now in a strong financial position to navigate through the uncertainty of the current environment. I would like to congratulate the leadership team for their tireless work and the board for their support. Having achieved the financial turnaround, it is now time to hand the business to refreshed leadership to continue successfully into the future,” he added.
The agency has appointed Edward Law as his successor. Law has had a 14-year career at ANZ, most recently as global head of institutional property.
An expert in structured commercial real estate debt funding, Law has held the role of executive director of Newground Capital Partners and investment director of MaxCap Group.
“Edward brings to McGrath vast experience in the real estate and finance sector and I am confident he will lead the group to earnings and market share growth, as well as improving shareholder value,” Lewis said.
Law said McGrath presents an exciting challenge.
“We have a sound platform, with strong cash reserves and brand positioning in what is a challenging market, ripe for consolidation.” Law concluded.
