This article is from the Australian Property Journal archive
ASX-listed real estate agency McGrath is expecting lower earnings in the coming year as higher mortgage cause the property market to take a “much-needed and anticipated breather”, while it eyes off franchise office growth on the east coast.
McGrath posted a full-year 1.3% increase in underlying revenue of $112.4 million and a 7.9% increase in underlying EBITDA to $19.1 million.
Statutory net profit after tax was down $7.3 million to $11.7 million due to one-off items of $7 million.
It declared a fully-franked final dividend of 1.0c per share for a total dividend of 3.5 cps, following a 1.0c interim dividend and 1.5c special dividend that were paid in March.
CEO and managing director, John McGrath said the second half results were impacted by a range of external factors, including the federal election and a series of rapid rises in the cash rate by the Reserve Bank that have resulted in higher mortgage rates.
“The property market is taking a much-needed and anticipated breather following its rapid growth phase and it is expected these headwinds to continue for the remainder of the FY23,” he said.
The average sale price lifted 17.1% to $1.4 million and agents sold 31.6 properties on average, compared to 29.1 in FY21, with the total value of properties selling up 12.9%. However, as the market slowed down there was a 3.6% drop in the number of properties sold to 13,944.
McGrath said the earnings trend experienced in the second half of FY22 has continued in the first half of the current financial year.
“This strategic transition from company-owned to more franchise offices should yield a significant release of capital with more predictable and sustainable, albeit lower, earnings,” he said.
“The challenging economic conditions make the timing of this strategic change even more imperative and is expected to see our first half underlying earnings for financial year 2023 materially lower than the previous corresponding period.”
The company intends to retain a smaller number of company-owned offices and property management rent roll and will seek to sell a number of these offices to franchise ownership.
“The franchise model should also provide more predictable and stable levels of income. We have recently experienced great success and proven the strategy when a small number of our company-owned offices were sold into franchise ownership structure and will assess each opportunity on its merits,” McGrath said.
McGrath has $34.7 million in cash and no debt.
