McGrath Estate Agents reports a weak start to 2019 sales
McGrath Limited today announced its FY19 first half results, with its revenue down 18 percent to $42.5 million.
The ASX listed company noted that trading to the end of January 2019 had been in line with the guidance provided last October.
However, trading over the first two weeks of February 2019 has been below those expectations, with generally lower listing volumes and lower average sale prices than expected.
The company post a statutory net loss after tax (NLAT) of $9.6 million.
McGrath company owned offices
1,367 sales $1.9 billion in 1H F19
1,712 sales $2.6 billion in 1H FY18
2,544 sales $3.5 billion in 1H FY17.
McGrath franchise offices
3,495 sales $3.1 billion in 1H FY19.
4,324 sales $3.9 billion in 1H FY18
4,222 sales $3.8 billion in 1H FY17.
Total McGrath offices combined
4862 sales $5 billion 1H FY19
6036 sales $6.5 billion 1H FY18
6776 sales $7.3 billion 1H FY17
As at 31 December 2018 the network comprised 27 company owned offices and 68 franchise offices with 552 agents operating within those offices.
The total number of offices has remained consistent with June 2018 with 2 openings and 2 closures with 1 transfer from franchise services to company owned sales.
Total agents marginally decreased to 552 from June 18 (558) with reductions in the project marketing and franchise businesses offset by gains in the residential company owned sales segment.
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"While March is a seasonally higher listings month, the upcoming elections, together with the late timing of Easter and general market uncertainty reduces the current visibility into the third and fourth quarters.
"Should the balance of the second half continue to be impacted, the Company will update the market in accordance with its continuous disclosure obligations," the board advised shareholders adding ongoing difficult trading conditions were expected given external factors such as the NSW and Federal elections, potentially further impacting performance of the property market and McGrath.
The estate agency advised the continuing subdued property market conditions had impacted McGrath’s performance in the first six months of the 2019 financial year, resulting in an underlying EBITDA loss for the first half of $2.5 million.
This result comprises the previously reported first quarter loss of $1.9 million and a reduced second quarter loss of $600,000, although in line with guidance provided to the market last October.
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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," Geoff Lucas, CEO of McGrath, said.
“Economic factors are contributing to a significant reduction in transaction volumes," McGrath reported citing industry-wide settled sales for the real estate sector down nationally by 13.2%, and across the eastern Seaboard with Sydney down 20.3%, Melbourne down 22.3% and Brisbane down 11.3% on the 12 months to January 2019.
"Prices continue to weaken with national dwelling values to January 2019 down 5.6%, with Sydney down 9.7%, Melbourne down 8.3% and Brisbane in line with last year.”
It noted a deterioration of higher value property prices in the market, and McGrath’s exposure to this segment, had adversely impacted its NSW result where there was a falling market sale share held by McGrath.
Its strongest growth in market. share was in Queensland.
In February 2018 McGrath reported revenue for the six months to December 31, 2017 was $51.6 million, which was down 23 percent on the same period a year earlier.
McGrath reported a strong balance sheet at 31 December 2018 with no debt and $36.7 million in net assets with $16.5 million in cash.
The company noted that an additional $38 million in rent roll assets is not reflected on the balance sheet.
Its board remains focused on conserving cash for business reinvestment and will not pay an interim FY19 dividend.
McGrath’s dividend policy will be reinstated as soon as it is deemed prudent.
It reported its 27 company owned offices with 180 agents secured 1,367 property sales with a $1.9 billion value, over the six months to December 31, 2018.
The 68 franchise offices with 372 agents saw 3,495 property sales with a $3.1 billion value over the six months to December 31, 2018.
It compares with the prior similar period when company owned sales generating $2.6 billion in sales value from 1,712 sales for 1H FY18 and $3.5 billion and 2,544 sales in 1H FY17.
Its franchise services offices exchanged 4,324 sales during 1H FY18 with a sales value of $3.9 billion compared to 4,222 sales with a sales value of $3.8 billion in 1H FY17.
With no trade this morning, the shares sit at 26 cents, a record low, with the company capitalised at $43 million.
It was in late 2015 when McGrath Holding Co Ltd (MEA ASX) filed a prospectus to sell a 53.7 per cent stake, or 72.1 million shares, for $2.10 each, giving it an envisaged market capitalisation of $281 million.
Some two decades in the making, the real estate services company commenced trading at $1.94, slightly below the public offering price at $2.10.