Buried in Monday’s update from Sydney-based real estate agency, McGrath Limited (MEA) were strong hints of the bloom going off the house price boom.
MEA said its full year earnings will end up around 8% compared to the 2020-21 year despite house sales starting to fade.
McGrath said it now expects its full year underlying EBITDA for the year to June 30 to be in the range of $18.0 million to $20.0 million – it said the midpoint being approximately 8% above the previous year $17.6 million.
But comparing the data in Monday’s update with the interim report in February and data from the 2020-21 accounts, there are clear signs McGrath is experiencing weaker June half year earnings.
In February, McGrath revealed a solid 60% rise in underlying EBIT to $10.6 million from $6.6 million for the six months to December.
Full year underlying EBIT of around $19 million would be up from $17.6 million in 2020-21, meaning McGrath’s current June half underlying EBIT will end up around $8.4 million down from $11 million in the six months to June, 2021.
From the figures, that would support comments in Monday’s update about the company’s sales experience in April and that expected until June.
McGrath said “April and May have been disruptive for the real estate industry with a spike in COVID-19, public holidays, the federal election campaign and a rise in the interest rates announced by the Reserve Bank.”
“April new listings for the industry were around 17% lower than previous corresponding month in 2021.
“Listing volumes appear to be stabilising at lower levels in May, holding at the same reduction against prior year experienced during April.
“In the three months to April, average selling prices capital city homes saw upper quartile values fall -0.5%, and similar trend is expected in May and June.
Returning former CEO John McGrath said in the statement that, “While our results in April and May have been impacted by a range of external factors, I am very happy overall with the new direction of the Company with a firm focus on talent and technology delivering our customers continued superior results.
“Our internal estimates indicate we are gaining market share in many key markets, which is a testimony to the high quality of our agents and franchise partners’ service offering alongside our brand.
“The previous cycle was overheating and we needed a breather to slow down the sustained price escalation,” McGrath said.
“We expect McGrath will show high single digit growth in EBITDA for the financial year and we are in a very strong financial position, with currently about $35 million in cash on hand after investing more than $6.0 million in corporate expansion and approximately $1.3 million in the current on market buyback program.
“We expect an increase in listing activity now the Federal election is over and are well placed to grow further market share moving forward,” McGrath added.
McGrath shares rose 4% on Monday to 38.5 cents in a confident judgement on the update but retreated by more than that gain on Tuesday to end down more than 5% at 36.5 cents.
McGrath also warned that its 2021-22 statutory after-tax profit was expected to be lower in the year to June because of around $6 million in one-offs.
