McGrath CEO says housing come back on the cards as pr

McGrath is optimistic about a housing turnaround as it booked a $15.6m loss for the full year.

Sydney real estate identity John McGrath. Picture: AAP

The John McGrath-backed real estate agency McGrath has fallen to a $15.6 million loss as property listings failed to recover despite a pick up in auction clearance rates.

McGrath (MEA) chief executive Geoff Lucas said the market had remained challenging over the past 12 months and expressed optimism about the market, saying a late spring or even summer come back was on the cards.

“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 criteria and subsequent interest rate drops all contributing to the bottoming of the residential sector,” Mr Lucas said.

But he cautioned that further interest rate reductions signal a challenging mid-term economic outlook.

“While listing volumes remain at a decade low, down by up to 30 per cent compared with historical levels, we have seen stronger auction clearance rates and healthy buyer engagement. This signals an eventual recovery in listings volumes, indicating a potentially later spring/summer selling season this financial year,” Mr Lucas said.

The company turned in an underlying earnings before interest, taxes, depreciation, and amortisation loss of $6.4m, which it said was within guidance provided in June.

How McGrath’s loss narrowed ($m)

McGrath was hit as its revenue was down 17 per cent to $82.7m and said that its reported EBITDA loss of $10.1m came after the impact of an onerous contracts expense of $3.7m.

The company said the $16.5m net loss also contained one-off impairment charges of $3.4m and maintained that it has a strong balance sheet with no debt and $10.3m worth of cash.

McGrath said last year was marked out by weakened real estate industry conditions that hit sales volumes and prices.

Sales volumes plunged by 17.5 per cent and prices were down 6.9 per cent nationally with volumes hardest hit in Melbourne, Sydney and Brisbane, with the NSW and Victorian house price markets showing falls of close to 10 per cent.

Mr Lucas said despite the challenging conditions, the company had gained market share.

The company has net assets worth $30.8m and no debt. It values its property management and Oxygen portfolio at about $52m but has put only $11m on the balance sheet. If this was fully included it would have a net asset per share value of about 43 cents, almost double the trading price of 23.5c.

McGrath will again not pay a dividend and but said it would reinstate a “dividend policy” when it was “deemed prudent”.

The company bought three sales businesses with rent rolls in key suburbs last year. Two of the deals were agencies that returned to the McGrath chain.

“We believe there is opportunity for further industry consolidation and McGrath’s board and management will continue to assess potential acquisitions in fiscal 2020”, Mr Lucas said.