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McGrath boasts $10m, 12-month turnaround: How did it do it?

By Grace Ormsby
25 August 2020 | 1 minute read
McGrath

ASX-listed McGrath Limited has revealed its full-year results, posting a return to the black for earnings and an 11 per cent improvement to revenue.

In a statement for shareholders, McGrath highlighted its earnings before interest, taxes, depreciation and amortisation (EBITDA) was $3.7 million for the year — a $10.1 million turnaround from underlying EBITDA loss of $6.4 million last financial year.

Calling the turnaround “significant”, the real estate giant posted an 11 per cent lift in revenue to $91.69 million for the year — a 31 per cent rise in sales per agent for the period, achieved despite the negative effects of the COVID-19 pandemic in the last quarter.

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The board said it was pleased with the $10 million turnaround, as well as a return to after-tax profit and a further strengthening of the balance sheet with $17.3 million in cash.

“Our business performed significantly better than the market during the year and we have a strong platform on which to build in 2021, notwithstanding the ongoing impacts of COVID,” it said.

McGrath has attributed a number of initiatives to the turnaround which included:

  • A move of the company’s headquarters to Pyrmont
  • reinvigorated IT solution focused on a new CRM platform that saw a widespread rollout
  • The launch of a new data-centric website that provided more than 500 vendor and landlord leads and over 11,000 buyer inquiry leads
  • Continued revitalisation of the property management business
  • The acquisition of four company-owned offices (Millers Point, Castle Cove, Northbridge and Wilston) to complement new franchise offices in Ulladulla, Mollymook, Albury | Wodonga and Mansfield

The balance sheet

The above initiatives enabled McGrath to close with a strong balance sheet: no debt, $17.3 million in cash and $30.2 million in net assets.

The real estate company’s rent roll is also estimated to hold a market value of $52.2 million, of which $38.5 million is not reflected on the balance sheet, it was reported.

But, despite the strong figures, the board has decided to not pay an FY20 dividend, acknowledging the uncertain economic environment and the desire to conserve cash for business reinvestment.

Outlook

Overall, McGrath’s leaders hold an optimistic view of the business as we move towards 2021.

According to the board of directors, dwelling prices are expected to decline over the coming months, but will be cushioned by government stimulus, banking community support and record-low interest rates.

It does expect some softness in rents to continue due to uncertainty, but it does not expect Melbourne’s stage 4 restrictions to have any more than a “limited” impact on the business’s FY21 results.

But McGrath still expects “continued market share gains, with experienced agents and strong brand positioning”.

It also forecasts “ongoing consolidation of a highly fragmented industry, presenting acquisition opportunities” for the brand.

In fact, McGrath aspires to be a leader in industry consolidation with earnings accretive acquisitions, labelling it a key priority for FY21 and explaining that it predicts attractive opportunities to emerge in this “difficult economic environment”.

Over the coming year, it indicated it will be focused on recruitment of high-performing and experienced agents, while increasing the company-owned property management portfolio and revenue and redesigning a number of processes and improving operational efficiencies.

On the release of the financial results, McGrath also announced the resignation of CEO Geoff Lucas, and the handing over of the reins to Edward Law.

McGrath boasts $10m, 12-month turnaround: How did it do it?
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ABOUT THE AUTHOR


Grace Ormsby

Grace Ormsby

Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.

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