Amid its well-documented personnel challenges, McGrath Estate Agents has had another difficult year, reporting falls in both earnings and profits, but the high-profile group has shown the size of its fight by maintaining market share, increasing revenue and delivering a credible after-tax return to its shareholders.
In delivering its FY17 results to the market, McGrath reported a 7 per cent increase in earnings to $129.4 million, a market share constant at 3.4 per cent year-on-year and an underlying net profit of $6.4 million.
But it reported a fall of EBITDA by 5 per cent to $15.6 million and a 42 per cent drop in NPAT to $4.9 million. The group also reported that it holds $8 million cash and has no bank debt.
CEO Cameron Judson identified low listings and sales as well as the group’s personnel issues over the last year as reasons for the modest results. But he remained optimistic.
“We’ve looked at the first six weeks for the trading of the year, and although it’s too early to call it a trend, we are seeing that listing volumes are improving," the CEO told REB.
“Notwithstanding the challenging market environment, the strength of our business model saw us deliver $15.6 million EBITDA.
“We continued to grow into new markets with the addition of 15 offices to our network, with three company-owned offices in NSW and 12 franchise offices in NSW and Victoria. The McGrath network now comprises 102 offices and over 2,300 people. Year-on-year we maintained our market share by sales value at 3.4 per cent nationally."
Mr Judson said that there were clear highlights in the group’s business mix.
“Particularly pleasing has been the strength of our annuity businesses, property management and franchise, which have delivered revenue and EBITDA growth year-on-year."
On the future, Mr Judson said that McGrath would continue to leverage its brand and reach and attract and retain the best agents in the country.
"McGrath Future is a compelling remuneration and longer-term wealth creation framework specifically for high-performing agents. We have an unparalleled track record of growing and nurturing the best real estate agents in Australia.
“In addition, we have added leadership capability and depth to our team, with the recent appointments of Adrian Wilson and Chris Mourd, who will support our plan for growth.
He said that the company's focus is firmly on talent identification, "attracting, growing and developing the best agents and principals in the market; giving them the tools to be more productive and reach their potential”.
“Our aim is to continue to grow the relative contributions of each of our annuity businesses in property management, franchise and Oxygen and de-risk the volatility of our earnings in company-owned sales.
“We continue to take a disciplined approach to investment in the business to build long-term shareholder value.”
He said that with $8 million cash, no bank debt and net assets of $98.7 million, McGrath's balance sheet is in a solid position to support its strategy.