More revenue and profit woes for embattled listed real estate agency McGrath Ltd as it reveals its second or third earnings downgrade of the year so far.
In a statement to the ASX yesterday, McGrath said it now expected the company to generate underlying profit before tax, depreciation and amortisation (EBITDA) of between $5 million and $5.5 million.
This more than halves the figure (of between $10.6 million and $11.6 million) it revealed in January when it announced almost the entire board and the company’s chief executive would leave.
"Based on unaudited management accounts year to date, the company has generated an underlying EBITDA for the eight months ended 28 February 2018 of $720,000 (before $3.2 million of one‐off costs),” directors said yesterday
After one off items, the new lowered EBITDA figure including those items would be as low as $1 million and $1.5 million ( with the one off costs estimated at $4 million.
That compared to a prediction in January for full-year EBITDA to be in the range of $5.8 million to $6.8 million after one-off items.
“It is important that the market is aware of the right baseline financial position that appropriately reflects the current status of the McGrath business and trading conditions," chief executive Geoff Lucas said.
“The impact of reduced sales volumes has affected the company more significantly than the prior forecast contemplated,” he said.
‘The cost cutting program put in place late last year is starting to generate the financial benefits expected, and we are seeing an uplift in performance so far this month, with expectations of continued rebuilding to the end of this financial year.”
Mr Lucas said a refocused strategic plan to return the company to growth is being developed by the Board and management team, and is centred on three key initiatives:
- Implementation of the right corporate office structure to generate further efficiencies and better support the McGrath network
- Recruitment of new high quality franchisees and agents into the McGrath network
- Continued rollout of industry leading training and development, and systems, to consolidate McGrath’s position as the property sector’s leading provider of customer service and results for clients. The latest reduction followed an initial review by the board and chief executive after their dramatic appointments last month.
The shares fell to 42 cents, just above the all time low of 39 cents hit in mid February, but rose in the afternoon and closed unchanged at 43 cents.