This morning McGrath Limited (ASX: MEA) released its results for the financial year ending June 30, 2019. Below is a summary of the results with comparisons to the prior year.
- Revenue of $82.7m, down 17%
- Net loss after tax of $15.6m, including $3.4m in impairments
- EBITDA loss of $10.1m
- EBITDA loss of $6.4m backing out one-off 'onerous contract expense'
- Diluted loss per share 9.33c
- No final dividend
- Sales volumes in key Sydney market down 21.9%
- No debt and $10.3m cash on hand
- Net tangible assets per share of 43c
The Sydney focused real estate agent blamed the weak result on challenging residential property markets over the fiscal year with McGrath reporting sales and price volumes were down 17.5% and 6.9% respectively over the fiscal year.
In Sydney its CEO suggested listing volumes were at a "decade low" or down around 30% on historical levels.
McGrath earns fees on property sales and its rental roll primarily, with the tough conditions meaning its working to cut costs and win market share through a rocky period.
On the outlook CEO Geoff Lucas commented: " Notwithstanding market conditions, we have seen improved buyer sentiment in recent months. This sounded the bell for property market stabilisation, along with APRA's easing loan serviceability criteriaand subsequent interest rate drops all contributing to the bottoming of the residential sector. However further interest rate reductions, as welcome as they may be, signal a challenging mid-term economic outlook."
More generally auction clearance rates and property prices in Sydney have picked up steam over the last month where it appears the market has bottomed.
The McGrath share price is now down 88% since its 2015 IPO at $2.10 a share, but that's no guarantee the only way is up.
However, if it returns to profitability in FY 2020 it looks likely shares will rebound higher. I'm not a buyer of McGrath shares myself, even though I do expect we'll see a strong rebound in the Sydney market in fiscal 2020.
Other major property market players such as Commonwealth Bank of Australia (ASX: CBA) and Adelaide Brighton Ltd (ASX: ABC) will also benefit if confidence returns to the local housing market.
