McGrath's 36 departed agents to trigger 2017 revenue decline

McGrath Estate Agents have told shareholders this morning they believe the second half results will be materially weaker than the first half given fewer agents and the continued low listing landscape. 

McGrath has not ever given guidance for FY17 earnings, but noted Bell Potter equities research which gives full year estimates of $20.9m EBITDA.

McGrath’s first half trading results are being finalized, and early indications suggest they are in line with those analyst estimates.  

"However, we believe the second half results will be materially weaker than the first half, which would make those full year analyst estimates look high," it told the ASX.

The unprecedented low volumes of listings as a percent of total housing stock noted in the Chairman’s Address in November is not yet showing signs of improvement," it noted.

In addition, while McGrath grew market share in two thirds of its total offices in FY16, we have experienced an uncharacteristically large agent churn recently, especially over the Christmas and New Year period.

"The departures from our Company Owned offices segment suggests market share growth will be more difficult to achieve in that segment in the second half."

McGrath confirms the recent net departure of 36 sales agents from its Company owned offices segment.

"While the company is actively recruiting, the usual time for an agent to become fully productive means these new agents will not match the volumes required to maintain our previously expected second half earnings."

The Company Owned segment currently has 225 sales agents, down from 264 at its agm late last year.

McGrath’s Chief Executive Officer, Cameron Judson said the agency continued to have a concerted, ongoing focus on talent identification, to attract, develop and retain high performing and emerging sales agents.

"We have recently launched ‘McGrath Future’, 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, and aim to maintain that.

“However, the recent net outflow is more than we usually see, and we believe it prudent to alert the market to the likely impact.

“We are one of Australia’s largest residential real estate services companies and we continue to leverage the underlying strength of the McGrath brand, quality of its sales agents and network reach. Our other business units continue to see solid growth” Mr Judson said.

In 2016, McGrath opened 18 new offices, 3 Company owned and 15 Franchises, and plans to open additional offices, including its Victorian expansion plans, over the next 12 months. 

McGrath's share price is down by around 60 per cent since floating in December 2015 at $2.10. The share price closed on Friday at 85.5 cents. This morning it was at an annual low of 73.5 cents, having bounced off 71 cents.

It was reported last week veteran agents who recently quit the McGrath Estate Agency are set to launch as The Agency.