McGrath has revealed its plans to add 125 new, high quality offices to its national network as part of its growth strategy over the next four years.
The publicly released information formed part of an investor presentation today as the network unveiled its 2023 half-year results.
McGrath currently has 115 offices along the eastern seaboard states and plans to boost the number of offices in these locations, as well as opening 15 offices in both South Australia and Western Australia.
McGrath Managing Director and CEO John McGrath attributed the network’s solid half year results, which included a statutory net profit after tax of $1.8 million, in part to the new offices the group opened in the six months to December 2022.
“Our range of initiatives during the half-year, including a further 10 per cent reduction in our operating costs and the opening of seven new franchise offices, enabled the company to remain profitable for this period,” he said.
“We are also showing strong momentum in the delivery of our key strategies we announced last year.
“(We’re) growing our office footprint with new franchise partners where we envisage opening at least 10 further franchise offices in H2 FY23, attracting new talent, transition of selected company owned offices to franchise ownership and expanding our service offering to customers.”
The number of listing and selling agents with McGrath has also increased 5.3 per cent, from 584 at the end of the first half of the 2022 financial year, to 615 at the end of December last year.
McGrath also announced an underlying EBIT (Earnings Before Interest and Taxes) of $2.3 million and an underlying EBITDA of $3.4 million (Earnings Before Interest, Taxes, Depreciation, and Amortisation).
“As expected, the market is taking a much needed breather after a rapid growth over the past three years,” Mr McGrath said.
“Selling prices in most markets have corrected between 10 per cent and 15 per cent from their peak in late 2021 and selling volumes were at least 20 per cent lower in the spring selling season, compared with the corresponding spring season in 2021.”
Mr McGrath said the transition to a predominantly franchise model was delivering more reliable income from franchisees, based on a fixed percentage of total sales commissions, as well as ongoing marketing fund contributions.
The company currently has about $25 million cash and no debt, with the cash balance coming after the acquisition of a 30 per cent stake in its Central Coast franchise, the FY22 final dividend, the current on-market share buyback and tax payments.
Mr McGrath said the company has declared 1c per share, fully franked interim dividend, payable on March 14.
It also plans to continue with the share buyback program, with $3.2 million of its $5 million target already acquired.
McGrath will also consider further capital management opportunities as it receives proceeds from the sale of company owned offices and rent rolls.
“Our solid financial position will allow us to withstand further short-term market volatility and position us well to capitalise on industry consolidation opportunities to grow our earnings and increase shareholder value.
“While the economic climate and impact of further interest rate rises is difficult to predict, we think we are either at or approaching the bottom of this property cycle.
“Our view is the next stage of the market will be a consolidation, featuring a plateauing of prices, followed by further upward growth in property values in 2024.”
Mr McGrath said the luxury residential market had withstood the market headwinds and he expected the return of expats would continue this year.
“Looking ahead, we are targeting to remain profitable for the second half of FY23, however these profits will again be impacted by the market when compared with H2 last year but should be consistent with the trends evident in the first half of FY23,” he said.
“We expect conditions to improve as the calendar year progresses and we will provide further updates when there is more certainty on our full year earnings.”