Home Agents & Agencies Industry watch: McGrath stock dives 25% on profit warning

Industry watch: McGrath stock dives 25% on profit warning

Source: news.com.au

Real estate company McGrath was the worst performing stock on the ASX on Monday, with the share price dropping 25% to 47 cents.

The stock has since made a minor recovery and is currently trading at around 54 cents.

The reason for the sudden drop in investor confidence was McGrath’s admission that it wouldn’t meet the 2018 financial year’s earnings expectations.

Stockbroking firm Bell Potter originally set a full-year estimate of $16.6 million but, even with cost-saving plans in place, McGrath is likely to fall short by around 20-25%.

McGrath blames the underperformance on the Budget changes, which targeted foreign buyers and tighter lending requirements, lower volumes of listings and lower agent numbers.

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The cost-cutting plans include restructuring the Board, executive and leadership team, also cutting down on management associated with company-owned expansion activities and non-revenue generating roles.

Other real estate franchises will be watching the fate of Australia’s only listed real estate company closely.

In January, the CEO of LJ Hooker Grant Harrod resigned unexpectedly after the board decided to can plans for a $400 million initial public offering (IPO).

Commenting on McGrath’s IPO, Ray White’s chairman Brian White said that he’d rather “chop off both his hands” than ever take the company public.

Source: ABC/ The Australian