McGrath says east coast cities to drive real estate comeback as interim profit slips

McGrath is weathering the property downturn by adding more agents and offices, but its average selling price has dropped amid a slide in interim profit.

Eastern seaboard real estate network McGrath is weathering the property downturn by adding more agents and offices, but its average selling price has dropped amid a fall in interim profit.

Announcing its half-yearly results, McGrath’s chief executive John McGrath said the number of agents the group employs has increased to 615 and its network of offices has expanded to 115, but the amount of properties sold in the year to December 31 dropped nearly 29 per cent to 5569, with the average selling price falling to $1.3m from $1.38m.

The group’s net profit dropped 74 per cent to $1.8m for the six months to December 31 as revenue fell 28 per cent to $42.7m.

Led by Brisbane, Mr McGrath reckons the major east coast cities will lead Australia out of the property downturn from next year.

“Brisbane has the most upside in the next five years,” Mr McGrath told The Australian on Monday.

“The regional and coastal areas had a very strong run in the past five years … (but) Brisbane will outperform the rest of the country if you take a five-year view,” he said.

Asked about McGrath’s share price, which is down 44 per cent over the past 12 months, Mr McGrath said it was “obviously a reflection of the property market and a reduction in listings.

“We take a view the market will find the right price,” he said, adding that “the market has been getting out of property stock over the past 12 months.”

Meanwhile, Mr McGrath said he had bolstered McGrath’s performance by reducing operating costs, including removing non-essential roles.

“Running a lean, mean company is important. As the new CEO, I looked at the essential and non-essential roles, such as (the removal of) internal communications functions.”

He said previous McGrath CEOs had thought internal communications roles were particularly important.

“I am a hands on CEO, I write my own emails, some people want teams of people to do that, I do it myself. Technology allows us to do that.”

Moving forward Mr McGrath expects more industry consolidation opportunities to occur and while there is no company on the radar at present for McGrath to acquire he is always looking. “But it has to be a very strong cultural fit.”

He expects the return of expats to continue to help bolster local real estate markets as political and economic challenges exist in many regions of the northern hemisphere. He also expects to remain profitable for the second half of the 2023 financial year.

“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.”

McGrath declared a fully franked interim dividend of 1c a share payable on March 14. Its shares closed up 4 per cent at $0.39.