New Writedown Provides More Misery For McGrath

By Glenn Dyer | More Articles by Glenn Dyer

More bad news for the listed real estate agency McGrath yesterday with investors warned to expect a bottom line loss of more than $50 million for the year to June 30.

The company yesterday warned shareholders that they can expect $35 million hit from weakening housing sales for the six months to June 30.

CEO Geoff Lucas said after a balance sheet review as part of the normal year-end financial statement process, "the company expects to recognise an additional impairment charge of about $35 million against the company-owned sales segment". The $35 million is in addition to the $21.8 million goodwill impairment company owned sales taken in the interim results announced in February.

"The past 12 months have been very challenging for McGrath. While reduced sales volumes during the 2018 financial year impacted the performance of the business, I am pleased with the recent initiatives and the positive rebuilding of the business we have seen," Mr Lucas said.

Shares in McGrath closed up 2.6% at 39 cents.

Mr Lucas said that in accordance with prior guidance, based on the unaudited financial accounts for 2017-18, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was expected to be about $5 million.

After about $4 million of one-off cash costs, reported full-year EBITDA was expected to be about $1 million.

The earnings update was issued prior to the extraordinary shareholders meeting on Tuesday where investors approved the second part of a $10.7 million strategic investment in McGrath by AL Capital Holding Pty Ltd, which is part of the Aqualand property group.

McGrath chairman Peter Lewis said the investment by Aqualand will provide McGrath with additional capital and resources to grow and "expand to benefit you, our valued shareholders".

Under the first tranche, which has now been completed, Aqualand acquired a stake of 8.7% in McGrath. The second tranche will give Aqualand a further 6.3%, giving it a 15% stake in the company and the second largest shareholding.

McGrath founder John McGrath, who remains the largest shareholder in the business.

In his address to the shareholder meeting, Mr Lewis said “For the 2019 Financial Year, the recent changes in the management of your company are having a positive impact and good momentum is being achieved, albeit in a weakened overall market.”

"We can provide more details on the conditions and outlook at the annual results presentation on 20 August 2018.”

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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