Real estate giant’s big loss

HIGH-PROFILE real estate agency McGrath has swung deep into the red after the departure of agents to rivals and writedowns hit the group’s bottom line.

The company yesterday reported a net loss of $63.1 million for the year to June – a sharp deterioration from its slender net profit a year earlier of $4.87 million.

McGrath had previously cut its forecast for underlying earnings, which excludes oneoff items, to $5 million before interest, tax, depreciation and amortisation.

It hit that mark, with earnings of $5.03 million – down from $15.25 million a year earlier. But its revenue fell heavily, sliding 23 per cent to $99.2 million.

Impairment charges of $59.4 million, largely against its company-owned agencies, and one-off restructuring costs of $4 million drove the bottom-line loss.

Chief executive Geoff Lucas said that in the last quarter, there were signs of stabilisation in the business as its new directors and management team settled in.

The real estate agency was “in the midst of a business turnaround”, he said.

A succession of directors and executives left the group the past year during a tumultuous period.

Prominent founder John McGrath – a former panellist on Ten Network’s entrepreneur talent quest Shark Tank – remained on the board and is still the biggest shareholder in the group, with a stake of about 22 per cent. Mr McGrath made headlines earlier this year with reports he had run up gambling debts of $16.2 million.

Since its listing as one of the glamour stocks of 2015, the group has suffered a series of earnings downgrades, the loss of high-earning agents and a plummeting share price.

Residential market conditions would remain challenging, Mr Lucas said.

McGrath’s market share remained at 3.1 per cent despite the loss of agents and recruitment would be a key focus this financial year, Mr Lucas said.

Ninety-nine agents left the group during the year, taking its headcount to 558.

“From March and into June we have stabilised that reduction and started to grow, ” Mr Lucas said.

Chinese group Aqualand, which took a stake in the company earlier this year through a placement of new shares, would provide working capital, the company said.

McGrath shares ended the day 2.6 per cent, or 1c, higher yesterday at 39c.