McGrath flags $35 million cash impairment

McGrath flags $35 million cash impairment

Listed real estate group McGrath (ASX: MEA) has flagged it will be hit by a $35 million impairment charge following a "very challenging" FY18.

The company, which has been struggling with lower sales volumes this past financial year, has also confirmed it expects reported earnings for FY18 to be around $1 million.

McGrath says the impairment charge relates primarily to assets brought onto the balance sheet as part of acquisitions during 2015.

McGrath CEO Geoff Lucas says the year was tough for the struggling real estate business.

"The past 12 months have been very challenging for McGrath," says Lucas.

"While reduced sales volumes during FY18 impacted the performance of the business, I am pleased with the recent initiatives and the positive rebuilding of the business we have seen."

Additionally, the company held an extraordinary general meeting of shareholders on Tuesday, to decide whether the company would peruse a $10.7 million investment from property giants Aqualand.

Shareholders have since approved the investment and the placement of 11,568,042 shares to Aqualand at today's shareholder meeting.

As previously reported, the investment by Aqualand will be a welcome cash boost for the ailing real estate business, considering the company recently halved its anticipated full year earnings guidance.

As part of the deal Aqualand will be entitled to a director on the board of McGrath and give McGrath the first right to discuss being an agent to its new projects. Aqualand retains discretion as to whether or not to appoint McGrath.

The agreement has an initial term of five years and can be renewed for two further terms of three years each by agreement between the parties.

Aqualand was established in Australia in 2014 and has since generated a portfolio of 18 sites, with a collective gross development value of approximately $5 billion.

The $10.7 million in proceeds will be used for general corporate purposes, including business development and potential growth opportunities.

Aqualand has advised that CEO of AL Capital, Wayne Mo, is their nominee to the board of directors of McGrath.

McGrath intends to release its FY18 audited financial results on 20 August 2018.

Shares in McGrath have picked up following the announcement, and are now trading up 1.32 per cent to $0.38 per share at 2.45pm AEST.

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