The Agency Group delivers strong half-yearly results amid corporate growth

National real estate company The Agency Group Australia (ASX: AU1) has delivered strong financial results for the half year to December as it grows its presence in multiple states.

The company reported a 33% increase in underlying EBITDA (earnings before interest, taxation, depreciation and amortisation) for the period from $1.60 million to $2.14 million on the back of a growth in the number of transactions.

It sold 2,910 properties between July and December for a combined value of $3.1 billion.

The increase was aided by a 39% jump in gross commission income to $52.9 million compared to $38.1 million for the previous corresponding period.

Net profit after tax was $1.25 million compared to $830,000 for the previous year, while cash and cash equivalents increased from the previous six-month period from $5.10 million to $6.26 million.

The Agency’s net assets also increased from the previous period from $14.14 million to $15.77 million.

New states

Managing director and chief executive officer Geoff Lucas said the half-yearly results reflect the company’s growth into new states.

Since December, it has added 21 agents across Western Australia, the Australian Capital Territory, New South Wales and Queensland for a total 345 nationwide.

“So far this financial year, we have expanded our geographical presence although the success in agent recruitment has yet to fully flow through to our operating profit,” Mr Lucas said.

“Our recruitment success is due to our direct engagement model with agents … it provides tailwind opportunities to grow our national market share and earnings for future periods.”

Strong market

Research shows that 56% of Australian household wealth is held in residential property, within a $7.4 billion national addressable market which has continued to perform well amid COVID-19 lockdowns.

Mr Lucas said the trend was expected to continue as pandemic restrictions gradually ease.

“We expect a period of moderation in price growth as the market moves toward equilibrium in response to macro economic influences,” he said.

“Despite this moderation, are expecting transaction growth from expanded agent numbers and new geographical markets.”

He said a strong pipeline of listings into the remainder of the year on the back of a positive market would provide potential for a further growth in transactions.

National performance

Mr Lucas said the industry as a whole continues to provide opportunity and affordability.

A comparative market analysis shows the start of 2022 experiencing a strong uplift in listing volumes against prior years, with early February generating 23% more activity than the same time last year.

Investor participation remains well below the five-year average at 31.5% of new lending volume.

While investor lending was still growing at 2.4% in December, strong owner-occupier lending of 5.3% means investors made up a smaller proportion of lending through that month.

“This year is expected to be a more moderate year for price growth across key capital markets, with consensus across the “Big 4” banks that Brisbane will be the strongest,” Mr Lucas said.

Business model

The Agency’s business model is based on directly engaging with selling agents.

It is a change to the industry norm which promotes a franchisor/franchisee arrangement, whereby the franchisee employs the company.

Mr Lucas said the approach holds a number of benefits for selling agents.

“We have strategic partnerships with industry-leading suppliers to make selling real estate as easy as possible,” he said.

“Agents who join have access to a fully digital, cloud-based process which saves time on paperwork and allows them to operate from anywhere they have access to artificial intelligence and task automation which improves efficiency.”

Partnerships with Cooley Auctions, vendor advertising funding and insurance providers, mortgage brokers and other operators servicing the residential real estate market ensure selling agents can maximise their productivity.