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Real estate agency McGrath Group (ASX: MEA) has recorded a loss of almost $10 million for the first half of FY19 due to challenging property market conditions and one-off charges for legacy IT development costs and contracts.
The advanced technology upgrade cost the Sydney-based group $6.6 million, but McGrath claims rolling it out will help revolutionise its operations this year.
"After conducting a comprehensive analysis of the prior technology investment, we have determined our new in market solution will deliver our team and customers superior performance into the future," says CEO Geoff Lucas.
After registering a $1.8 million underlying loss for the same period last year, in the unaudited results announced today the company noted the figure had fallen further to a loss of $3.3 million.
"Market conditions are expected to remain soft during 2019, however there have been some signs of optimism with buyers, especially owner-occupiers who are increasingly more active as prices return to more affordable levels in many areas," says Lucas.
"This trend is underpinned by a stable economy with low unemployment and record low interest rates.
"Economic factors are contributing to a significant reduction in transaction volumes with settled sales for the real estate sector nationally down 13.2%, and across the eastern Seaboard with Sydney down 20.3%, Melbourne down 22.3% and Brisbane down 11.3% on the 12 months to January 2019."
He says prices continue to weaken with national dwelling values to January 2019 down 5.6 per cent, while the drop is more pronounced in Sydney (9.7 per cent) and Melbourne (8.3 per cent). In Brisbane prices are in line with last year.
"We continue to see a trend of rationalisation of real estate agencies in the current market creating a flight to quality," he says.
MEA shares are now worth just over half of what they were this time last year when a new board, including Lucas, was appointed in a bid to turn the company's fortunes around.
It was a period marked by sharp profit downgrades, impacts from competitor The Agency snapping up McGrath's top talent, and speculation around founder John McGrath's large gambling debts which were later confirmed as not connected to the company.
While the loss announced today is far from ideal, it is still a drastic improvement on the $63.1 million loss recorded for the full year in 2018.
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