This article is from the Australian Property Journal archive
DIFFICULT market conditions and decade low residential property listings volumes have resulted in real estate agents McGrath (ASX: MEA) posting an annual loss of $9.7 million.
The FY19 underlying loss result is worse than FY18’s $1.5 million loss. Underlying EBITDA was a loss of $6.4 million compared to a $5 million profit last year. Revenue declined 17% to $82.7 million from $99.6 million.
The statutory result improved to $15.6 million loss from $63.1 million loss in the previous corresponding period. McGrath will not pay a final FY19 dividend.
CEO Geoff Lucas said the company was impacted by the difficult market conditions, lower sales volumes and prices.
Sales volumes were down in key markets of Sydney (21.9%) Melbourne (27%) and Brisbane (13.4%) during the period, with prices down 9.9%, 9.2% and 2.6% respectively.
“Despite the challenging conditions, we have gained market share based on sales transactions data published by CoreLogic,” he added.
McGrath’s market share by sales value increased to 2.8% nationally, making it the fourth largest behind Ray White (8.1%), LJ Hooker (3.9%) and Harcourts (3.0%).
The agency’s co-owned sales revenue fell from $58.2 million in FY18 to $47.5 million, impacted by weakening market conditions with the core Sydney market dwelling prices down 10% on the prior year with the number of settled sales down 22%.
Property management revenue increased from $19.2 million to $19.4 million and franchise revenue fell from $11 million to $8.1 million over the period.
Lucas said notwithstanding market conditions, buyer sentiment has improved in recent months.
“While listing volumes remain at a decade low by up to 30% compared with historical levels, we have seen stronger auction clearance rates and healthy buyer engagement. This signals an eventual recovery in listings volumes, indicating a potentially later spring/summer selling season this financial year,” he added.
He also signalled that McGrath has recommenced a further roll-out of premium franchise offices in key markets along the eastern seaboard, while optimising the company owned footprint.
Lucas confirmed three strategic acquisitions in FY19 of sales businesses with quality rent rolls in key growth areas. Two acquisitions were market leaders who returned to the business, after operating their own franchise businesses outside McGrath.
“We believe there is opportunity for further industry consolidation and McGrath’s board and management will continue to assess potential acquisitions in FY2020,” he concluded.
