Collapsing sales volumes and the departure of key sales agents and franchisees have hit real estate group McGrath Limited (ASX: MEA) which has booked a full year loss of $63 million on the back of a revenue drop of 23 percent over the previous year.
At the company AGM on Friday, McGrath CEO Geoff Lucas revealed the serious issues facing the company including the "reduced performance" of its company-owned businesses with EBITDA falling to $4.2 million from $15.5 million in FY17.
"After sustaining a significant reduction in sales agent numbers in the first nine months of the 2018 financial year, we stabilised the agent team by stemming losses and achieving a small growth in company owned agents in the fourth quarter," Lucas says
"The impact of large numbers of agents leaving the business generates a revenue lag effect that has been carried over into the beginning of the 2019 financial year.
"This is a business that takes some time to turn around, especially from a loss in agent numbers the quantum of which this business experienced."
Last month, McGrath released a quarterly update which confirmed a worsening residential sales market with losses from that period but Lucas says the company is expecting to "break even" this financial year.
"Whilst improvements in the business have been made, with agent losses stemmed, and small increases in numbers being achieved, the impact of these factors along with a continually challenging real estate market had a marked effect on trading performance in the first quarter," Lucas says.
"We have seen a number of factors contributing to a deteriorating residential sales market.
"These include a significant reduction in credit availability, a downturn in Sydney and Melbourne dwelling values, reduced auction clearance rates and a lower number of new listings as vendors adjust their value expectations."
Lucas also pointed to monthly national transaction numbers as a cause of falling revenues and profits with the number of settled sales for Sydney, Melbourne, and Brisbane down on the prior year by 16.7 percent, 14.4 percent and 8.4 percent respectively.
"Our management team is operating in some of the most challenging real estate market conditions in several decades."
Business News Australia
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