The Agency Group Australia Limited (AU1) Earnings Call Transcript

Good morning or good afternoon, everyone, depending on where you are, and thank you for joining the Agency Group Full Year '25 November Investor Webinar. My name is David Tasker, and I'll be your host for today's session. We're delighted to have you with us as we discuss the company's strong start to the financial year and hear directly from the agency's leadership team on performance highlights, market conditions and the outlook heading into the spring/summer selling season. Joining us today are Paul Niardone, Executive Director; and Andrew Jensen, Chairman of the Agency Group. Before we begin, a quick reminder that this session is being recorded. Following the presentation, we'll open the floor for a Q&A session where you'll be able to submit questions directly through the webinar platform. We'll aim to cover as many as we can, sorry, with time allowing. The agency recently reported a very strong first quarter, featuring a 26% year-on-year growth in gross commission income to $37.4 million, over $2.3 billion in property sales nationally, nearly 12,000 properties under management and $140.5 million annualized GCI run rate, supported by the ongoing recruitment of high-performing agents and an ever-expanding pipeline. Importantly, the business remains operationally cash flow positive and continues to invest in scalable growth initiatives. A full investor presentation has been or will be shortly lodged with the ASX, so we won't be going through the full deck. Rather, we will not go through every slide of that deck. Paul and Andrew will focus on the key quarterly results, operational performance and outlook for the remainder of the financial year. So without further ado, I'll hand over to Paul and Andrew to present the Agency Group investor update. Paul, Andrew, over to you.

Thank you, Dave, and thank you, everyone, for joining us. It's exciting to be able to present these strong results for the quarter, coming off an improved financial year. You'll see with the stats when we get to the first page, we'll go through some key highlights that reflect the strength of the quarter. So if we might start with the revenue, you can see we're up over $3 million for the quarter when compared to the quarter -- first quarter last year. As Dave mentioned, GCI has grown strongly to $37.4 million for the quarter as opposed to $29.6 million in the previous year. The number of properties sold has gone up to $2.3 billion from $1.7 billion. And the number of properties sold has also gone up to 1,788 compared with 1,629. On the property management side, we've also had good numbers. Our property management now are 11,895. And our number of agents have increased only slightly, 20, but the focus of the company has now been on recruiting quality agents, and that is being paid off when you look at the GCI being written. When we look at that, so the current run rate is now $140.5 million, which is strong at $15 million annualized of the GCI, which is a great start to the year, and it shows that the people that we have put on are actually strong performers. Property management, again, due to the scale that we have, we've increased the number of properties that we've managed by 165. When you look at property management, they're roughly worth $8,000 each. And I think one of the things that gets missed with our company as opposed to other real estate companies is that they belong to the company, and we're growing a strong asset in that area. At the moment, our management valuation is around $39.1 million of that rent roll.

Look, just on the $37.4 million GCI, in fact, if we go back 6 years ago, back to financial year 2019, that was the full year actual numbers for that financial year. So it's over 6 years ago, that was a full year. So the quarter is one of our strongest obviously in record. We started strong in October, which we're happy to announce. But I think people will come to the question around this 1,700 transactions versus the 1,600-odd. There's not a lot of transaction growth there compared to the $2.3 billion to the $1.7 billion for the quarter last year. And that's because we are a national business and obviously, it's segmented to the East Coast and West Coast. We are starting to see obviously tight stock levels over in Perth, but this demonstrates the value of being a national business where it tightens in market, and we're growing on the East Coast still in infancy markets, which I think if we can go to the next slide, demonstrates we're still in our infancy in certain markets, which is shown here. Queensland and Victoria, we're actually gaining momentum. We've got great market share in these markets. The strong markets that we don't have a solid presentation yet. However, they are starting to contribute to us to our sales volumes and seeing a lot of uplift, I suppose, from a GCI point because the market is strong in these markets at the moment. You'll see on this slide that we have grown our market share quite significantly from 1.12% to 1.22%. It doesn't sound much, but it makes us in the top 10 nationally. In fact, in the top 20 real estate brands or groups that we do obviously representing the market from a brand perspective, we are actually in the top 10, and we've done that in 9 years compared to the other companies, probably closest to us in that top 20 is 34 years. So obviously, we're definitely gaining momentum. We're now in the top 10 of the group, and we believe we can be in the top 5, and that's our target. And we're actually seeing that penetration going into the new markets. New South Wales has been strong. You can see the actual market shift there for us from a GCI perspective. But I'm happy to say quarter-on-quarter from the sales business is that we are seeing us grabbing market share in our markets. That's based on obviously our agents are top performers. And we're also seeing our new recruits come through and contribute to this growth that we've seen from the GCI growth of the extra $6 million compared to last quarter.

And we often get asked the question on productivity and how does the model affect agent productivity. And I think a good example there is if we look at WA, it has been a very tight market in WA. Andrew has mentioned, the beauty about our model of having the East Coast has been quite a strong market, which has moved the numbers significantly in this quarter. But in WA, just a few interesting stats. One is that what we define as a productive agent. So if you look at the total number of agents, it's around 7,000, what we define as agents that are actually productive, it's probably around 4,500. So there's 4,500 agents at the moment fighting for 2,800 listings. And if you look at those numbers, we probably account for 3% of the agent numbers, but we're listing 9% of the properties. So I think that goes a long way to show that our model does help agent productivity.

And obviously demonstrated by #2 in the market in WA from a branding perspective. I will go to the next slide. This is basically building a bridge just to demonstrate where that growth has come from. As mentioned previously, we've had new recruits that started in the last 12 months from that previous quarter. Half of that growth, nearly 50% of that growth is from those new recruits that have joined us and 50% is actually increased productivity of our agents, predominantly on the East Coast as we see the market conditions change. But also the fact is that our model is reflecting our agents being more productive based on what tools we're giving them. And obviously, our trading academy that we've launched, it is actually starting to see that we're actually getting the benefit from our existing agents. And we see that continuing moving forward based on if the market continues where it is, we see this obviously always increasing over the next few quarters.

Yes. And I think we've always said that to help this productivity, we've been investing in technology to assist the agents, but also we've been investing in training in the new year. We hope to announce that we have even strengthened our training department within the company that allow our agents to access this course at any time they want and to actually pinpoint the skills that they're actually looking for.

And that's probably the training piece, which we do see growing is actually for our secondary agents, which is our primary agents having teams building teams. As we've talked about before, 1 in 10 of our agents that's a primary agent actually does write more than GCI and commission, which is quite significant. There would be many groups can say that as part of their business. We're actually seeing that they can actually write more. They want more secondary agents to grow. With our model, they can do that. They don't need premises. As you're aware, they can go to one of our hubs or they can build teams in their own office if they so like. And we can actually help them develop by bringing in this new training process. So we're looking forward to getting the benefits from that in the next 6 months. Next slide.

Okay. This is probably one of the key slides that shows our growth over the years and also where we're trying to be and where we want to be. So the first highlight or milestone you can see is $150 million. And as the slide says, we're on a run rate of $140 million at the moment. So I'd say we're getting very close to getting to that milestone. The $200 million is the number we always talked about as delivering a very solid profitability to the company. And you can see the numbers haven't moved up that much, but it's the GCI, which again reflects in quality agents coming across to us and joining us rather than just putting [indiscernible].

So yes, so if you look at the last quarter, I suppose, Paul, from our perspective is that with the $140 million, that's what we've achieved. We've got between $15 million to $18 million in the GCI pipeline. And when we talk about our pipeline, we're actually talking about -- we've had connectivity. We have multiple meetings with those agents that would contribute to that GCI component. This is not just one meeting, we've got a meeting with them. This is actually meeting with agents that we believe there is a very good chance or 50% chance that we can move forward with them. And that's obviously growing all the time. It goes up and down based on the activity of improvement that we're doing with our GMs in each state. And we actually have put on additional recruits across the country to help us expediate that recruitment process. So we will start hopefully seeing that benefit. Next slide.

All right. So transaction volumes, again, all heading in the right direction. It's got the comparison of what's happening nationally, where you can see it's pretty flat, where we're aiming -- we've been putting growth on it. And again, I think this reflects on the productivity of our agents and the quality of our agents because you can see the percentage growth here is larger than the recruitment numbers. But again, it just goes to reflect that we're doing the right thing in supporting the agents. We're delivering to them what they need. We always said the agents are our clients, and we need to get them to focus on just listing and selling and to take the other noise of nonproductive activities away from them. I think this slide is a clear indication that, that's happening when you can see the commission growth in the business.

Yes. I think what the key thing message is that we always work on a basis on the first slide there, we talk about that contributing GCI -- new GCI growth that we contribute to the bottom line, which we've spoken about, was 50% was from new recruits that will contribute around 12.5% margin as a minimum to our EBITDA number. So it's fair to say that our EBITDA number the 6 months and the first 6 months this year will be obviously, we believe a lot higher for the next -- for the 6 months compared to last year, which we obviously reported close to $500,000 for the profit was $1 million of EBITDA for the financial year. So this GCI growth is going straight to the bottom line from those agents that are new and that have joined us in the last 12 months. Next slide.

Thank you, Dave. Now, property management. It is a very key part of our business as well. And it is where our asset value lies. You can see it's much more significant than our market cap, and that's why we believe that the agency is a great investment at the moment. But you can see the growth that's happened in our property Management division, both from an organic perspective and also a relationship with MDC Trilogy. They've both been growing which is very important. I think most people know that we've touched on the past that we're now exploring how we can turbocharge this in a fund. And the way that they would work with us in that we've grown not only the Property Management division, but will turbocharge our recruitment as well in terms of number of agents and GCI. We've been doing a lot of work on that as a Board over the last 9 to 12 months. And it's very important that we've taken our time to do this properly. It is a big step if we move into this direction. And we've analyzed the models and the numbers through and through. And I think we're almost at a point ready to move on that.

Yes, [indiscernible]. In properties under management, obviously, the key measurement there is our management fees, which is where it is a marketable asset. Management fees have obviously got a value in the market, is recurring revenue. For example, over 500 transactions of rent rolls were sold that's estimated in the last 12 months. So it is an asset that is exchangeable and it trades regularly in the real estate market. So it demonstrates this value is there, it's available. It's a visible asset. And we've growing rent roll at the moment, which we collected, I think, over $100 million in rent from tenants in the last quarter and it's growing consistently with our revenue. We estimate that we have $15 million in property management fees alone of our own asset, excluding the Trilogy assets that we've got under management. So we're aiming for sort of recurring revenue on an asset. It is growing. It's growing over $2 billion in the last 15 months. And that $2.4 million let's be realistic. It's 20% of our market cap at the moment. So that's just in the growth value. And that's obviously not demonstrated in the share price, we believe. So it's an asset we really look at. We're growing it, and it obviously contributes very positive to our bottom line.

And with Macquarie Bank now, our facility is only running at 26% LVR.

The facility is available to 40% of the LVR. So I suppose from our point is that we're comfortable where it sits at the moment, it comfortable. There's opportunities that will probably come across. We'll have to look at that in partnership with MDC Trilogy, which still has another 2 years to run under that funds management piece. But we've also got a facility available to us to assist if it's going to contribute to earnings obviously straight away. So at the moment, the MDC Trilogy business, as you'll see in the numbers here, has grown. It's been a very solid relationship that we have with those guys, and it continues. What it has demonstrated or to the group is that it actually is a model that is attractive to investors in relation to [indiscernible]. It's a difficult asset class that we believe will continue to grow. Even with Trilogy, we've got opportunities available to us in the future. And what that means is that we know it works. We've been doing it for [indiscernible] years. Trilogy are obviously happy with how it's running. We're very comfortable with it. They've put over $45 billion in asset acquisitions that we now manage on their behalf, and we believe it's obviously something unique to us because we're a national business, not many franchise groups will be able to do this. It's impossible actually because we actually run our management property manage business centrally across the group and we're company-owned. So we already have the infrastructure for it. So it's one of those points of difference for us at the agency where we can see it's still adding value in the future.

So not only is it unique, as we've mentioned, because of the agency model, it's a great asset to have on our balance sheet, but it's also future sales that go back to our agents when those properties come out of a situation where they're being managed and the owners are looking to sell. That's the summary of the quarter and the highlights. We thought we'd just keep it short and sharp and then open it up to questions from the viewers.

Thanks, guys. That was a comprehensive update, and thanks for sharing the progress of the company and its growth trajectory. It's clear that the agency continues to build on its national scale, backed by strong agent engagement, disciplined financial management and a differentiated model that's continuing to gain momentum across all major markets. As I said at the start, we'll now -- we will be conducting a Q&A session, and we'll now move into that. For those of you who are joining us live, please submit your question via the Q&A panel, and we'll do our best to get through as many as we can. We do have a lot of questions and a number came in before the webinar commenced. So we're going to get through as many as we can in the 10 or so minutes we do have available. Question in relation to WA. You touched on it, Paul, in the presentation that it is a tight market. Given the tight supply environment in the market, how is the business performing? It is a mature market for the agency, but how is the business performing?

As I mentioned, when you have 3% of the agents and you're doing 9% of the listings, you're punching above your weight. There was actually a month there. Last quarter, that we actually ranked #1 in market share for that month, which was very positive to see. It's -- the tightness of the market, the main question people are asking is when it's going to loosen up. And I'm afraid I probably can't give you a definitive answer on that. So there's a lot of factors at play there, not just interest rates, but also construction levels and immigration, which doesn't seem -- I don't think will let up. So all we can do again is going back to what we've been doing with our agents to help them be productive is to give them the support they need to be productive, the tech they need to be productive and the marketing they need to be productive, and training, sorry, which is the last one. And I think we've been doing that well. I think it's been proven by the numbers that are coming out, which has been fantastic. Dave, you know many people when we first started this business, there was -- we were constantly -- our agents were being bombarded the fact that we were going to go broke and not be around. The turnaround in the last 12 months is those people are now ringing us telling us that their office is not going to be around because of the tightness of the market and is there opportunities in joining us. So I think the other benefit of the tightness of the market in WA is recruitment of good agents.

And in terms of -- that's WA, obviously. But in terms of the rest of the companies -- countries, sorry, what are listing numbers tracking like compared to last year? And are you seeing any regional differences in buyer activity?

Dave, obviously, we've grown our agent number account as well. So when you compare it to this quarter compared to last year's quarter, we are obviously gaining market share in certain markets because we've got more agents on the ground and our agents are productive. But the market has definitely been a factor in that. But as I've said before, we've got good agents in those markets. They're capitalizing on these opportunities. We've actually got at the moment around for the last 6 weeks, we've had 780 listings to market. So that's nearly close to what is it, 16 million -- 17 million GCI in listings that we've got at the moment in the last 6 weeks. Obviously, we've got listings that are longer than 6 weeks, but I'm just saying for the last 6 weeks, the listings have been really strong, and we're seeing that in our quarter numbers come through in relation to exchanges. At the moment, we believe we've got a solid month ahead with October. I'm happy to say that we just had a record. We'll be releasing that today. We had a record October, which means it's a record number in the history of the agency. We did in excess of $15 million in GCI. It's nearly 10% compared to the closest month, which was March '25. It was off one of our top performing agents and founders. But from our perspective, we're now in a position to capitalize on the East Coast growth if it maintains the same kind of market conditions.