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Mcgrath : 2019 Annual Report Opens in a new Window

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08/25/2019 | 06:51pm EDT

McGrath Limited and Controlled Entities

2019 Annual Year Report

ACN 608 153 779

McGrath Limited and Controlled Entities

McGrath Limited and Controlled Entities

A.C.N. 608 153 779

Corporate Information

McGrath Limited is a company limited by shares, incorporated and domiciled in Australia. McGrath Limited listed on the Australian Securities Exchange on 7 December 2015 (ASX: MEA).

Its registered office and principal place of business is:

McGrath Limited

191 New South Head Road

EDGECLIFF NSW 2027

All press releases and other company background information is available on our website: www.mcgrath.com.au.

In this report, McGrath Limited is referred to as the Company or McGrath, McGrath Limited and the subsidiaries that it controlled at the end of the period and from time to time throughout the period are together referred to as the Consolidated Entity.

What we do

Founded in 1988 by John McGrath, McGrath has been established as one of the leading residential real estate service providers in Australia with a strong market presence in New South Wales and the Australian Capital Territory, a growing presence in Queensland and entered the Victorian market during financial year 2016.

McGrath is an integrated residential real estate services company providing a range of services including residential property sales, property management, mortgage broking, auction services and real estate training.

McGrath Limited and Controlled Entities

McGrath Limited and Controlled Entities

A.C.N. 608 153 779

Annual Financial Report 2019

Letter from Chair and CEO

2

Operating and financial review

3-6

Corporate Governance

7-8

Remuneration Report

9-22

Directors Report

23-24

Auditor's Independence Declaration

25

Financial statements

Consolidated statement of profit or loss and other comprehensive income

27

Consolidated statement of financial position

28

Consolidated statement of changes in equity

29

Consolidated statement of cash flows

30

Notes to the financial statements

32

A

Financial performance and

B

Financial position

cash flows

B1

Trade and other receivables

41

A1

Revenue and other income

34

B2

Property, plant & equipment

42-43

A2

Operating segments

35-36

B3

Intangible assets

44-46

A3

Cash and cash flow related information

37

B4

Trade and other payables

46

A4

Employee benefit expenses

38

B5

Loans and borrowings

46

A5

Earnings per share

39

C

Risk, capital management and

D

Unrecognised items

related parties

D1

Commitments for expenditure

56

C1

Financial risk management

48-51

D2

Contingent liabilities

56

C2

Capital management

52

D3

Events subsequent to reporting date

56

C3

Dividends paid and proposed

52

C4

Key management personnel disclosure

53

C5

Related party transactions

54

  • Other information

E1

Taxation

58-60

E2

Other assets

61

E3

Provisions

61

E4

Capital and reserves

62

E5

Subsidiaries and non-controlling interests

63-64

E6

Parent entity disclosures

64

E7

Auditor's remuneration

65

E8

Deed of cross guarantee

65-67

E9

General accounting policies

68-70

Directors' Declaration

71

Independent Auditor's report

72-75

Shareholder Information

76-77

Corporate Directory

78

Joint letter from the Chair and CEO

Dear Shareholders,

The 2019 financial year (FY19) was a year heavily impacted by the continued contraction of the Australian real estate market, resulting in another difficult and challenging year for McGrath. Market conditions and an evolving real estate industry structure have demanded that we adapt our business, reduce our cost base and move swiftly to right size for the conditions we are currently facing. These conditions present an opportunity to improve our processes, quality of service and market share, while maintaining our unwavering commitment to excellent results for our clients. The outcomes of the extensive work being undertaken in our financial results is not yet evident, however assuming the markets in which we operate stabilise, we believe we are on the path to returning to sustainable growth. We are pleased to report continued evidence of excellent results for our clients and communities to whom we serve.

FY19 was a year during which we set out to stabilise our base of agents and improve the quality of our team. Focusing on a quality team has laid a foundation for future growth and the reestablishment of McGrath as the aspirational choice for both staff and clients.

The fundamentals of our brand remain strong, with one of Australia's leading sales agent teams, customer service and network reach. These are supplemented by a first-class Property Management business with over 32,000 properties managed for more than 28,000 landlord investors.

McGrath continues to dominate the annual Real Estate Business Online Ranking, with more than three times the number of agents in the top 100 than any other company. Despite the difficulties of the market, we have gained market share based on sales data published by the industry leading data provider. Substantial capital has been allocated and reinvested into our operations to create the best possible environment to list, sell and manage real estate, ensuring our team of professionals are best placed to efficiently deliver the best possible results to our clients.

Extensive work has been undertaken with more work to be done, and our progress to date includes:

  • We have announced after 15 years at Edgecliff, our move to a new state of the art office in Sydney's technology hub of Pyrmont, placing us at the forefront of innovation. Our new office will offer industry leading training facilities available to everyone in our expanding network;
  • We have now rolled out our new CRM platform to 45 of our 97 offices, expecting to be operational across the whole network by Christmas;
  • Launching our new industry social media based marketing campaign with great success and we now have a new contemporary customer and data centric website in development, which will provide an enhanced digital experience for all stakeholders, expected to launch before the end of the calendar year;

McGrath Limited and Controlled Entities

  • Substantial work has been done and progress made in revitalising our property management businesses, with an intense focus and success on improving the customer experience;
  • We've opened new offices in Willoughby, Mosman, Neutral Bay, Greensborough, Ballarat, Avoca, Nambucca Heads and Wollongong; and
  • We've carefully acquired premium businesses in key markets lead by high calibre people.

Real estate has been a particularly tough market over the past two years, however our strong capital position, partly through our partnership with Aqualand, has allowed us to invest in training, development, technology and our agents, at a time when others in the market are retracting.

We are committed to maintaining our industry-leading position in FY20. Central to this is retaining and attracting the best real estate talent in the market, and ensuring McGrath is a great place to work for all, with a welcoming and supportive culture. This underpins our commitment to delivering the best results for our customers.

Throughout FY20 we will continue our strategic initiatives that are designed to improve the business with learning and development programs, a hallmark of McGrath, our data driven technology improvements and the assessment of selected acquisitions.

McGrath is committed to reducing costs in our business, a fundamental necessity in a difficult market. We have a clear cost reduction strategy currently being implemented.

With an industry-leading team and unmatched knowledge of the market developed over 30 years, we believe that we are well placed for any market outcomes. The established board and management team are unified in their commitment to return the company to growth after a tumultuous period.

On behalf of the Board and the management team, we would like to thank shareholders for their support and loyalty during a difficult FY19. Our founder, John McGrath continues to provide much needed inspiration and stability during this time.

Finally, we would like to thank all our team members and franchise partners for their tireless work, commitment to our company and leadership shown in the industry.

We have a unique platform from which to reaffirm our leading market position and are dedicated to ensuring that rewarding times are ahead for all stakeholders in our business.

Yours sincerely,

Peter Lewis

Geoff Lucas

Chair

Chief Executive Officer

2

McGrath Limited and Controlled Entities

Operating and financial review

Business Overview

The Consolidated Entity operates a diverse business model which provides a range of services that include residential property sales, property management, mortgage broking, auction services and real estate training.

The McGrath Network of real estate offices includes both sales offices operated by the Consolidated Entity (Company owned offices) and sales offices operated by franchisees of the Consolidated Entity (Franchise offices).

The operating segments are:

Company owned sales: This segment undertakes residential property sales on behalf of property vendors through Company owned offices and agents. The segment generates earnings by charging a sales commission to a property vendor upon successful sale of a property. The commission is generally based on a percentage of the property's value.

Company owned property management: This segment directly manages residential properties on behalf of owner clients. The segment generates earnings through charging a commission to manage a property and leasing fees earned upon successful letting of a property.

Franchise services: This segment manages franchise offices that undertake both property sales and property management activities. The segment receives fees from its franchisees that include:

  • An ongoing franchise fee based on a fixed percentage of the total sales commission paid on the sale of a property (Gross Commission Income);
  • An ongoing marketing fund contribution based on a fixed percentage of the gross commission income generated by the franchisee; and
  • A fixed percentage of the Franchisees' property management fees.

Other services: The Consolidated Entity also has a number of other services which complement the service offerings of the segments above. These include:

  • Mortgage broking services which earn revenue based on an up-front fee and an ongoing trailing commission;
  • Training services organise a number of Australian residential real estate conferences and receives revenue from fees paid by attendees, exhibitors and sponsors; and
  • Auction service group generates earnings based on a fixed fee per auction.

Agents and office locations

As at 30 June 2019 the network comprised 30 Company owned offices and 67 Franchise offices with 525 agents operating within those offices. The spread of offices is across the Eastern seaboard as seen in the graphic in figure 1 below. There was a net increase of 2 offices in the year with 8 openings, 6 closures and one transfer from Franchise services to Company owned sales.

Total agents decreased to 525 from June 2018 (558) with reductions in the Project Marketing and Franchise businesses offset by gains in the residential Company owned sales segment. McGrath is continuing to focus on recruiting and retaining high performing agents complemented by a focus on learning and development initiatives and data technology improvements to enhance the agent and vendor experience.

Figure 1: McGrath office Network

3

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Mcgrath Ltd. published this content on 26 August 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 August 2019 22:50:04 UTC

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