McGrath rebounds on rising home sales

Listed real estate agency McGrath has seen a rebound in its underlying business with cash moving to new homes and renovations in lieu of people travelling and being locked in the house during the global pandemic.

While volumes of house sales were still lower than a year ago, sales price where higher and clearance rates averaged about 80 per cent, which had underpinned a 16 per cent jump in the group’s revenue to $56.7 million.

As a result, the business returned to the black with an interim net profit after tax of $8.1 million compared with a loss of $1 million in the previous corresponding half year.

McGrath Limited CEO Eddie Law.
McGrath Limited CEO Eddie Law.Credit:

The turnaround, highlighted by a $5 million rise in underlying earnings before interest, tax, amortisation and depreciation (EBITDA) to $6.6 million, has allowed a return to the payment of a fully-franked interim dividend, the first since 2017, of 0.5¢, payable on March 23.

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The ASX-listed $110 million McGrath operates as a corporate group business that runs the franchised real estate agencies together with a projects division and the Oxygen Home Loans business. John McGrath founded the business in 1988 and remains the largest shareholder.

McGrath chief executive Eddie Law said the profit excludes both the $2.1 million worth of Government COVID-related grants and a $1.9 million gain on the conversion of the Parramatta business to become a franchise.

The value of properties sold by McGrath rose 29 per cent to $7.6 billion from $5.9 billion, while the number of properties sold rose 20 per cent over the half.

Overall prices on the properties sold through the agency have risen 10 per cent in the last six months and the group expects that the prices and volumes sold will continue their growth momentum.

Mr Law, who took over the reins in late November last year, said while the rental market faced some headwinds, the overall housing market is in better shape than 12 months ago.

He said the combination of improving consumer sentiment, record low interest rates, limited listings in the market and the emerging COVID vaccine rollout has driven strong price growth in recent months.

“The residential property market has proved to be very resilient during the ongoing COVID-19 pandemic, compared with other sectors,” Mr Law said.

“Cashed-up homeowners, many of whom are prevented from travelling either domestically and internationally, are now largely working from home and as such, are reassessing their lifestyle and surroundings.

“This is positive for our industry as it results in homeowners either transacting or improving the asset value of their current home.“

Mr Law has expansion plans for the Melbourne market and will look to add new businesses for the franchise division as they are presented.

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Source: Thanks smh.com