McGrath profit tumbles 42 percent on low listings, announces buyback
Real estate agent McGrath’s profit fell sharply for the year ended June 30 and the company announced a share buyback to support its sliding share price.
The full-year underlying earnings in the year ended June 30 falling 5 per cent to $15.6 million and underlying earnings were slightly below market forecasts of $16 million though net profits were slightly higher than a forecast $4.5 million.
Shares were at 77 cents during morning trading on the ASX today. McGrath’s shares have tumbled more than half since their ASX float at $2.10 per share. There was a 54 cents low earlier this year.
The share buyback is expected to be in effect on or after September 8, McGrath said though the number of shares to be bought back will depend on the stock’s price and other market factors. The buyback could go on for 12 months, it said.
It has more than 139 million shares on issue.
Net profit after tax fell 42 per cent to $4.9 million from $8.4 million in the previous financial year, hit by low listings and sales.
Revenue rose a modest 7 percent to $129.4 million.
Chief executive Cameron Judson described market conditions as challenging during the results presentation.
“Notwithstanding the challenging market environment, particularly as a result of the low volume of listings and sales throughout the financial year, and the loss of a number of high performing sales agents in the Company Owned segment in December 2016 and January 2017, the strength of our business model saw us deliver $15.6 million EBITDA,” said Judson.
"Disappointingly, listing in our company-owned offices were down 11 per cent," Mr Judson told an investor briefing.
McGrath added 15 offices to its network during the reporting period -- three company-owned in NSW, and 12 franchise offices in NSW and Victoria.
It has 102 offices, of which 28 are company owned.
The company had earlier dismissed talk that it was facing an exodus by its franchisees, following exits by senior executives.
McGrath said its market share by sales value was constant at 3.4% nationally.
Judson said McGrath was exploring new revenue opportunities in adjacent property services.
“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,” he said.
The investor appetite for McGrath shares will be tested shortly when around 46 per cent of its shares come out of escrow, with a significant number held by Mr McGrath, who remains the biggest shareholder of the company with his name, with a 27 per cent stake, though he has indicated he won't ever be a seller.
The company declared a final dividend of 1 cents.
