National real estate company The Agency Group Australia (ASX:AU1) has delivered a strong increase in national market share in FY23 as it continues to grow market presence nationally across six states and territories.
The Agency achieved its fifth straight year of growth in the number of properties sold, with The Agency exchanging 5,734 properties (+0.4% to FY22 exchanged properties of 5,709). This growth was achieved in an environment where National Market Transactions decreased by 20.3%2 over the same period.
This achievement was a significant outperformance to the market volumes that were impacted by a range of negative external factors, most notably rising interest rates and the adverse impact on home values across the country. This resulted in an increase in national market share where The Agency sold 1.23% of all residential property transactions across Australia, up from 0.98% national market share in FY22, a 25 basis point increase.
A 7% reduction in Gross Commission Income (GCI) to $95.4m (FY22: $102.5m) was the result of a higher proportion of sales in WA combined with a reduction in average selling price across the East Coast that resulted in a 7% reduction in Gross Value of Properties sold.
Revenue grew by 6% to $76.93m (FY22: $72.66m), which was primarily driven by a strong performance by payroll agents in WA3 and increased management fees from national properties under management (FY23:$7.43m, FY22: $5.11m). Investment initiatives undertaken increased operating expenses which resulted in an Underlying EBITDA of -$1.30m (1H FY23: +$3.85m).
During the financial year, The Agency announced a new strategic alliance with MDC Trilogy Group. The alliance with MDC Trilogy provides an opportunity for Principals to sell their business, including rent roll assets, and join The Agency as sales agents. Since its announcement, MDC Trilogy have deployed nearly $20m in purchasing rent roll assets across NSW and Queensland. These rent roll assets comprise of over 3,000 properties under management, which are now managed by The Agency, enabling greater cost synergies across both The Agency and MDC Trilogy owned portfolios.
As at 30 June 2023, the Group’s Cash and Cash Equivalents was $4.63m (30 June 2022: $8.22m). During the financial year, The Agency settled the Bushby Property Group Tasmania acquisition and continued to invest in the businesses long term, strategic objectives.
Following the acquisition of Bushby and the re-establishment of the Western Australia property management business, The Agency has grown to 5,018 properties under management as at 30 June 2023, which during FY23 collected over $135m in rent for our landlords. Under accounting standards, the value of organically generated growth in the number of properties under management is not included as an asset on the balance sheet or as part of The Agency’s statutory net assets. The property management and mortgage book has a combined value of $27.9m5, and underpins Estimated Net Assets for Agency Shareholders of $29.2m.
The investments undertaken in FY23 which have contributed to an EBITDA loss will generate returns for many years to come,” The Agency Managing Director and CEO, Geoff Lucas, said.
“The second half of FY23 saw a return to sales commissions growth and improved operational performance from the 1H growth initiatives underpinned a reduction in the second half of FY23 operating expenses. The second half FY23 cost of doing business materially reduced to 32.6% of revenue from 35.9% in the first half. As a result second half EBITDA loss reduced significantly from $950k EBITDA (Pre AASB16) loss in the first half, to $350k EBITDA (Pre AASB16) loss in the second half.
“We continue to build our business for scale and the management team continue to take a long term view ensuring the business can continue to deliver robust, scalable and profitable growth as the business continues to win further market share in what is a highly fragmented market. Targetted investments by the management team have resulted in our recent market share growth and reinforces the alternate and attractive business model to many of the franchise operations.
“We remain committed to continuing to deliver market share growth and the delivery of exceptional results and service to our customers. Our total commissions of $95.4 million is just a fraction of the $6.0 billion7 total Australian residential real estate commissions paid by vendors in FY23 across Australia. We believe our contemporary business model, national reach, culture, and commitment to excellence in customer service means we are well positioned to expand our share of this $6.0 billion residential sales commissions market.”