MCGRATH UPBEAT AS PROFIT HITS TARGET
Written on the 24 August 2016 by Nick Nichols
REAL estate group McGrath Ltd (ASX:MEA) capped off a tough full year as a listed company by delivering on its revised profit forecasts issued earlier this year.
The Sydney-based company posted a net profit of $8.4 million in FY16, up 20 per cent from a year earlier, but short of the $10 million profit it had planned in its prospectus at the end of 2015.
It was enough to give the company's shares a small boost today, pushing them almost 3 per cent higher to $1.15.
Despite ongoing concerns over a slowdown in the property market, McGrath delivered a growth story to shareholders in FY16 with property sales rising 11 per cent to 12,322 and the combined value of those sales rising 14 per cent to $13.2 billion.
The company expanded its branch footprint by 20 offices to 87, with a push into Melbourne and strong expansion in Queensland.
Group revenue rose 41 per cent to $121 million, while the underlying result as measured by EBITDA (earnings before interest, tax, depreciation and amortisation) rose 27 per cent to $16.4 million.
On a pro forma basis, EBITDA was down 3 per cent to $26.2 million. This was at the lower end of its revised guidance which was triggered by a slump in listings in some of McGrath's most lucrative Sydney markets.
"Notwithstanding the challenging market environment for the real estate industry, given the low volume of listings and sales in the second half, the strength of our business model saw us deliver a solid result," says CEO and company founder John McGrath (pictured).
"We have successfully grown into new and emerging markets by opening our first four franchise offices in Victoria, and another eight in Queensland.
"In addition, we have opened three new company owned offices, and further increased the number of agents within the McGrath network.
"Property NSW's appointment of McGrath Estate Agents as the exclusive selling agent for two phases of the Millers Point program was a key milestone for the company.
"Our ability to achieve a 100 per cent clearance rate with 58 properties sold for $179.9 million is a testament to the capabilities of our people and the strength of our offering."
Last month, McGrath appointed Cameron Judson as joint-CEO. Judson is the former CEO of employment agency Chandler McLeod and his appointment follows the sharp fall in McGrath's share price earlier this year following the profit downgrade.
"While short-term market conditions remain challenging, the long-term fundamentals of the real estate industry remain attractive, underpinned by historically low interest rates, population growth, and the strength of the asset class generally," Judson says in a statement accompanying the McGrath profit results.
"In order to achieve the long-term growth potential of the business, we will remain focused on the things that are in our control.
"The current short-term industry uncertainty creates long-term growth opportunities. As a result, we will continue to invest in the business to build long-term shareholder value."
McGrath is paying a final dividend of 3.5c per share.
Author: Nick Nichols