Login
iscover
Doubling down on his company’s plans for an ambitious period of growth, John McGrath has shared how the network has maintained profitability post-early 2022’s “silly” property market.
Speaking exclusively to Real Estate Business following its trading update to shareholders and the release of its financial results for the first six months of FY23, the McGrath CEO and managing director said he was “actually delighted” that the market has seen a slowdown.
“It was just overheated at the time. If we’re going back 18 months ago, there were silly results. Silly people were paying just crazy money for properties and there was a heightened sense of anxiety amongst buyers.”
Stressing that the period of growth was “quite an unhealthy environment”, he did acknowledge that the resulting pullback has caused some industry discomfort, but that overall, “it’s positive that the market’s pulled back a little bit.”
“It’s a natural part of any growth cycle to have a plateau and even have a pullback,” he conceded.
Adding that no CEO “wants to report that their numbers have declined even for one period”, he stressed that “it is what it is.”
“When listing volumes are tight, generally, the industry suffers because that’s really where we generate our fees from is transaction numbers. Interestingly, even though prices have come back about 15 per cent, our prices have not suffered that badly,” he touted.
“I think we’ve been operating in segments of the market that have held up quite well in many instances, including coast, rural, regional, and so forth.”
“We always want to keep growing the business and can keep returning better outcomes for our shareholders, but we do recognise from time to time that you are faced with headwinds, as we are now, and you just need to be able to move through them intact,” the managing director continued.
Even with those headwinds, in its trading update to shareholders held on 20 February 2023, McGrath unveiled an EBIT of $2.3 million for the first six months of FY23. It also reported an underlying EBITDA of $3.4 million and a statutory net profit after tax of $1.8 million.
That’s all underpinned by a “strong” balance sheet: a total of $25 million in cash and no debt.
Offering shareholders an interim dividend of 1.0¢ per share fully franked, Mr McGrath noted a range of initiatives over the last six months had led to the strong result, despite the “much-needed breather” being seen in the property market.
“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 over this period,” he outlined.
And that result means the company is still well-placed to forge ahead with its ambitious growth strategy of 250 McGrath territories.
“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 our customers,” he shared.
According to Mr McGrath, they’ll look to South Australia and Western Australia “at some point, when the right opportunity presents [itself].”
“But right now, we’ve got the opportunity to double the size of the business by remaining on the East Coast and very focused on the East Coast.”
That plan is already well in motion, with the CEO explaining McGrath’s aim to go “wider and deeper at the same time.”
“There are three ways to increase a company’s success and profitability: one is [to] increase the number of offices and/or agents; two is [to] increase the productivity and success of existing agents; [and] three is both A and B combined,” he explained.
“We are choosing option three, so we’ll be increasing by 125 offices over the next four years. We expect that between 20, 25 per cent of those will come from internal expansion.”
Pointing to recent growth on the Central Coast and the fact that McGrath’s presence across the Hunter will double from six offices to 12, the managing director said “internal success will breed new success for the business.”
“So there’s definitely going to be increased activity from our existing team, but we’re also working with each and every franchise partner to help them recruit and obviously retain the best quality talent in the industry,” he continued.
He has stressed a heavy focus on “structuring the business to be attractive to have people join, structuring the business where people will never want to leave and helping each and every agent within your business increase their success [and] productivity.”
While headwinds are set to continue, the CEO expects that McGrath will “remain profitable for the second half of FY23.”
“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,” he commented.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
You are not authorised to post comments.
Comments will undergo moderation before they get published.