McGrath: Glass half-full despite crisis

McGrath: Glass half-full despite crisis

26 January 2018

Australia’s third biggest real estate agency, McGrath Group, is in turmoil after the company’s CEO and entire board, barring founder John McGrath, quit the company after its lower-than-expected earnings were leaked to the media, reports The Sydney Morning Herald.

Mr McGrath—dubbed Sydney’s Mr Real Estate—will take up the position of executive chairman in a move likely to fuel speculation that the wealthy real estate agent will privatise the company.

He previously resigned as CEO in 2016 as part of a management and board shake-up.

The company share price dropped over 13 per cent to around 50 cents on the news but has recouped half that amount at the time of writing.

Analysts Shaw Partners have downgraded the share price to as low as 25 cents, a far cry from its $2.10 listing price in December 2015.

The crisis emerged after details of earnings for the first five months of the half were leaked to the AFR and published on Sunday night.

The leaked documents showed McGrath’s earnings for the five months to November were only $1.3 million, rather than the $7.8 million the market was expecting.

Former board chair, Cass O’Connor, described the leaking of the company’s results for the five months to November as “appalling” and said it was investigating how the information made its way into the public realm, notes The Age.

She defended the company’s decision not to release a trading update despite those figures showing McGrath was not tracking in line with its forecasts.

”We wanted to see what the December numbers were and whether there was any rebound,” she said.

“We didn’t believe we needed to release any update in December.”

Mr McGrath acknowledged in a statement that he was “very disappointed” with the company’s performance over the past two years.

“Now is the time for a new approach,” Mr McGrath said. “I have a clear plan to rebuild momentum but I will let our results speak for themselves from here.

“Despite the challenges we have endured since listing, McGrath remains one of the best real estate businesses in Australia with outstanding talent throughout the company.

“I am very excited and proud to once again be leading the team in the future.

The Australian reports the mass departure of directors sent speculation about the company swirling around the market, including a possible privatisation by Mr McGrath, who owns 26 per cent, and franchisee head Shane Smollen. Both earned substantial cash and shares in the float.

There was also speculation that Mr McGrath’s resignation from the REA Group board earlier this month after 19 years as a director signalled that the high-profile real estate agent’s future plans may include a conflict of interest with REA’s listings website.

The troubles at McGrath have not dented the faith of its sales agents, with many applauding John McGrath’s return to the company’s helm.

On Tuesday Mr McGrath on Tuesday fronted 1,000 agents and team members from the real estate network at the company’s annual “kickstart” event at Royal Randwick Racecourse in Sydney.

“It’s the best few days of my life rather than what could’ve been the worst,” he said, thanking the agents for their support.

“He’s got his mojo back,” said one Sydney agent who attended the event. “He was extremely positive.

“We are all ecstatic that John has taken back control of the company,” sales agent and shareholder Peter Chauncy said.

Despite the conditions, other agents who attended the conference share the same thoughts as Mr Chauncy, believing in the value of the company.

“For someone who has been with the company for over 23 years, it was one of the most energising and leadership-driven events that I have ever attended,” agent Adrian Bo said.

“The passion and determination shown by John was inspiring and I am excited for the future.”

In other news, ABC News reports that Antony Catalano, CEO of online real estate advertising company Domain, has quit just two months after it listed on the share market.

Mr Catalano has citied family reasons for the exit. He has eight children.