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McGrath announces disappointing results after difficult trading period

18 February 2019 Tim Neary

McGrath Limited has released its FY19 first-half results, where revenue is down and the size of the loss has increased but where the company is gaining market share ahead of some of the biggest networks in the country.

It’s a case of silver linings, as CEO Geoff Lucas presented the results to the media at a results presentation this morning, that McGrath has increased its market share marginally year-on-year to 3.1 per cent from 2.9 per cent. But the hard fact remains that the “continuing subdued property market conditions” have resulted in McGrath returning more than $3 million loss in the first six months of the 2019 financial year.

Mr Lucas reported an underlying NPAT loss of $3.3 million, from a $1.8 million loss in December 2017; an underlying EBITDA loss of $2.5 million, down from an EBITDA of $1.6 million in December 2017; and revenue down by 18 per cent to $42.5 million.

Despite the business’ difficult financial performance, Mr Lucas remained buoyed.

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“Market conditions are expected to remain soft during 2019; however, there have been some signs of optimism with buyers, especially owner-occupiers who are increasingly more active, as prices return to more affordable levels in many areas,” he said.

“This trend is underpinned by a stable economy with low unemployment and record low interest rates.”

Mr Lucas reiterated that the trading conditions have been tough.

“Economic factors are contributing to a significant reduction in transaction volumes, with settled sales for the real estate sector nationally down by 13.2 per cent, and across the eastern seaboard with Sydney down by 20.3 per cent, Melbourne down by 22.3 per cent and Brisbane down by 11.3 per cent on the 12 months to January 2019.

“Prices continue to weaken, with national dwelling values to January 2019 down by 5.6 per cent, with Sydney down by 9.7 per cent, Melbourne down by 8.3 per cent, and [only] Brisbane in line with last year.”

Mr Lucas said that the rationalisation trend continues and he foretold of an agency “flight to quality”.

Mr Lucas reported that McGrath’s balance sheet is “strong”, with no debt at 31 December 2018 and $36.7 million in net assets with $16.5 million in cash. But he said that trading over the first two weeks of February 2019 has been below expectation, with generally lower listing volumes and average sale prices than expected.

He added that the company’s underlying EBITDA for the second half of FY19 is expected to be impacted by ongoing difficult trading conditions, with external factors such as the NSW and federal elections that could impact performance, of the property market in general and of McGrath in particular.

More to follow.

McGrath announces disappointing results after difficult trading period
JohnMcGrath GeoffLucas
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