McGrath Limited’s new chief executive is drawing a line under a series of profit warnings and boardroom churn, halving the company’s full year earnings guidance in a new trading update.
The embattled property group expects to generate underlying full-year earnings of between $5 million and $5.5 million, down from between $10.6 million and $11.6 million announced in January when former chief executive Cameron Judson, chair Cass O’Connor and three other directors stepped down.
McGrath on Monday blamed the impact of reduced sales volumes, saying it had affected the company more significantly than previously thought.
It expects statutory earnings to be between $1 million and $1.5 million, after approximately $4 million in expected one-off cash costs.
The earnings cuts comes following an initial review of the company’s accounts and operations by McGrath’s newly appointed board and chief executive, which found the profit momentum was not consistent with the previous guidance.
Chief executive Geoff Lucas, who was appointed to the role in February, said a refocused strategic plan to return the company to growth is being developed by the board and management team.
“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,” Mr Lucas said in a statement on Monday.
“The impact of reduced sales volumes has affected the company more significantly than the prior forecast contemplated.
“We are pleased that this period is behind us, and are encouraged by current activity levels generating improved results.”
McGrath is coming out of a tumultuous period marked by profit warnings, boardroom and staff exits and, most recently, media reports alleging founder John McGrath had accumulated a $16 million gambling debt.
Mr McGrath had rejected the allegations and issued a statement in February saying his gambling account was within his means.
Mr Lucas, who was McGrath’s chief operating officer for eight years from 2008 to 2016, on Monday said the company’s cost cutting program put in place last year is starting to generate financial benefits.
“We are seeing an uplift in performance so far this month, with expectations of continued rebuilding to the end of this financial year,” he said.
“At the core of the McGrath business is a high quality and well respected real estate agency with a market leading position.”
McGrath shares were down in early morning trade on Monday but were down one cent, or 2.3 per cent, at 42 cents by 1403 AEDT.