The Agency yet to turn a profit after doubling revenue
Written on the 3 September 2018 by Nick Nichols
A solid pace of real estate agent recruitments and acquisitions has led to a near doubling of sales revenue for The Agency (ASX:AU1), but one-off set up costs continue to impact the tearaway group which posted a marginally higher bottom-line loss for FY18.
The Agency, formed two years ago by a handful of McGrath's (ASX:MEA) top agents, has posted a net loss of $3.84 million for the year to June 30, marginally up from $3.8 million a year earlier.
However, revenue surged 75 per cent to $16.8 million which was bolstered by three months' contribution of the Sell Lease Property group acquired in February this year.
The Agency has added 185 agents to its network over the past year, up from 50 a year earlier.
One-off costs associated with the acquisitions and integration of Beaufort Realty, Inglewood Estate Agency and Sell Lease Property wiped about $2.5 million from the bottom line.
One-off costs from the establishment of the property management division are also reflected in the latest result.
"The Agency, which has only been operating for two years, is in a sustained growth phase and therefore has made significant investment in expanding its business, even though organic growth via recruitment had played a major part we have invested in acquisitions, in technology and in our people and processes," says managing director Paul Niardone.
"We have also used our cashflows to fund the establishment and staffing of two offices, one in Albert Park in Victoria and on the Gold Coast, which we believe will add revenue to our business in future financial years.
"In a market where real estate companies are contracting or seeing little to no growth, we are achieving strong revenue growth across all business units in our group.
"We are confident that this will continue via organic growth which is driven by recruitment due to the attractiveness of our model."
The Agency, which formerly flew under the flag of listed entity Ausnet Financial Services, is based in Perth and has extensive operations in WA.
The latest acquisitions, including the planned buyout of Top Level Real Estate, have expanded its profile nationally.
Niardone says he is confident of maintaining or exceeding current revenue growth in the current year and the company is planning to deliver a break-even result this financial year.
The Agency was formed following the departure of some of McGrath's top agents, including Matt Lahood, Ben Collier, Shad Hassen and Steven Chen, in late 2016.
McGrath has been struggling for some time since these agents jumped ship amid a weakening real estate business environment.
McGrath last month posted a $63.1 million loss in FY18 after accounting for $59 million in impairments.Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia
Author: Nick Nichols