McGrath's stock plunges 25 per cent on downbeat profit warning
www.first2move.com.au
Real estate
company McGrath took a beating on the share market after declaring its
financial performance fell "short of expectations".
McGrath was
by far the worst performing stock on the ASX, plunging by as much as 25 per
cent in early trade on Monday.
Its
underperformance — in the first four months of the current financial year — was
due to changes in government policy targeting foreign buyers and developers,
and tighter lending requirements.
The company
also said, in a statement to the market, its results were also impacted by
"lower volumes of listings in most markets we serve" and "lower
agent numbers".
Significant
cost cuts
Unless market
conditions improve, McGrath's board is not expecting its pre-tax earnings to
exceed $16.6 million — which is the full-year estimate provided by stockbroking
firm Bell Potter.
However, in
order to reach that target, the company foreshadowed it would need to
"make significant cost cuts that may not be in the best interests of the
business in the long term".
Under a
"preliminary plan", these cost cuts may save about $5 million per
year from the business, after it incurs a one-off restructuring cost of $1.4
million -$1.6 million.
"Most
of these savings will be achieved by restructuring the Board, Executive and Leadership
team, removing management associated with M&A and Company Owned Office
expansion activities and non-revenue generating roles across the
organisation," the company said.
If that
cost-saving plan is pursued, McGrath expects pre-tax earnings in the current
financial year to be around $12.5 million - $13.3 million — which is 20-25 per
cent lower than what Bell Potter estimated.
(Australian
Broadcasting Corporation )
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