McGrath looks past housing boom to franchise and digital growth

Chief executive Eddie Law is turning around the performance of McGrath Estate Agents.

Listed real estate agency McGrath has gone from being tagged as “embattled” to “firmly recovering” on the back of the residential property boom.

Now, chief executive Eddie Law is trying to make it into a more steady corporate player with the former ANZ institutional property head flagging a new phase of growth.

The company had a sharp turn around, delivering a $19m profit last month, and Law says it is on budget despite lockdowns in Sydney and Melbourne.

With concerns building about unsustainable house price growth prompting macroprudential intervention in the market, the agency head says he would be happy with pricing staying at current levels, and expects a pick up in listings in the run up to Christmas.

“I think the price points are very healthy at the moment, and if they stay where they are then that’s not a bad outcome,” Law says.

But Law is looking well beyond the vicissitudes of the property market. Since his arrival he has focused on bringing out the company culture, citing the loss of too many good agents in recent years.

He wants to dial down conflicts that have beset parts of the operation and bring out the sales culture associated with founder turned executive director John McGrath. “My observation was, this is an environment that’s clearly about performance, culture and people first,” he says.

But now he is now looking for growth opportunities.

While the moves are less public than ahead of McGrath’s listing – when it dealt with major Victorian chains – McGrath is still in the market for potentially business changing deals, particularly through its franchise network.

A big deal could even double the scale of the McGrath operation but one barrier is the high multiples on rival businesses as agencies are lifting profits as sales pick up.

“We’ve been extensively trying to grow over the last six months; we’ve been active in the market in discussions with others of significant size to almost double the size of the group,” Law says.

But he is taking a measured approach. “The reality is what you’ve got at the moment is a lot of people who are making a lot of good money,” he says.

While this makes short-term expansion difficult, the company’s resurgent share price gives it the currency to make plays, even if it has come off mid-year highs.

Law flags the growth of the Oxygen business as the other big area to watch. This is more a digital platform than a mortgage business on his account.

“We’ve been doing a lot of work on that,” he says.

“We’re looking at the digitisation of insurance provision, the digitisation of utilities, and similar programs (in) legal conveyancing, car loans and personal loans.”

McGrath has a 45 per cent exposure to the business and Law sees it as a technology play which has become a substantial player in the digitisation of personal and financial services, expanding the agency’s ties with customers.

The property management business is also fairing well, giving the company a solid bedrock which underpins its market valuation, which is yet to account for its agency earnings and growth options.