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Major turnaround for McGrath

McGrath has reported a major turnaround with half-year results indicating a revenue increase of 15 per cent to $48.9 million on the back of strategic initiatives, improved market sentiment and strong clearance rates.

Releasing their FY20 first half results this week, McGrath CEO Geoff Lucas said the turnaround on the prior year was significant and reflected the adoption of a number of initiatives to improve the company’s bottom line.

“I’m pleased to say that in the face of what has been a challenging property environment, our focus on talent development, improved customer service the execution of our strategy has allowed us to achieve solid results this half,” Mr Lucas said

“Our company-owned sales division in particular has benefited from improved agent productivity and has contributed a strong uplift in revenue. As the market conditions improved in Q2 of FY20, we were well placed to capitalise on these positive tailwinds.

“We have seen a strong start to activity in January 2020 with an increased number of vendors who have gone to market early and benefitted from strong demand and continued rising values during the last quarter of CY2019.

“We believe this will have a positive impact on vendor sentiment for the second half,” Mr Lucas added.

In addition to a revenue increase, McGrath also reported a significant improvement in EBITDA. The recent half-year results indicate an EBITDA of $1.6 million – a $4.1 million turnaround from the $2.5 million loss recorded in the second half of last financial year.

The company is also enjoying a strong balance sheet, with no debt, $8.1 million in cash and $28.4 million in net assets. In addition, their rent roll is estimated to be worth $52.9 million.

Mr Lucas noted strategies McGrath took to execute the turnaround included:

  • Growing the McGrath-owned store footprint through three acquisitions and organic growth
  • Optimising the company-owned portfolio by consolidating unprofitable offices
  • Investment in and execution of a marketing and technology (Martech) strategy
  • Growing the property management business organically and via acquisitions, providing stable annuity styled income
  • Building closer partnerships with McGrath agents and franchisees to increase agent productivity through integration of new data and technology solutions.

In the process, over 32 real estate professionals who had previously left McGrath returned over the past 18 months, he continued.

Future focus

In the wake of the improved results, McGrath will now concentrate on:

  • Further agent experience improvements following the successful roll out of their reinvigorated IT solution to offices and the launch of the new mcgrath.com.au platform
  • Continuing to develop larger agent teams and further improve agent productivity across the network
  • The further roll out of new franchise offices in select key markets with a focus on Victoria
  • Continued optimisation of the company-owned office footprint
  • Continuation of earnings accretive acquisition

“Trends for the first half of FY20 have continued into the second half of FY20. Subject to economic conditions, we expect to the turnaround of the business to continue throughout the year, which will manifest in the FY2020 full year results,” Mr Lucas concluded.

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