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September 2018
April 2019
The Agency Group
Australia Ltd
ASX:AU1
Contents
Introduction 3
Real estate market 6
Company overview and business model 7
Key assets 10
Financials and operational metrics – LTM 11
Key management 13
2
Executive summary
(1) (2) (3)
The Agency Group Australia Ltd (The Agency Group or the Company) (ASX:AU1) is one of Australia’s fastest growing integrated real
estate services companies
• In just over 2 year period since listing on the ASX, the Company has established a national presence across key metropolitan
markets in Australia led by an industry-leading management team
• The Agency Group today has built a fully serviced real estate firm creating an organisation designed to scale
• The Company dual property sales business model, offering both premium (full-service) and independent brand offering underpins its
strategy to reach leadership across Australia in terms of agent market share
• Integrated services, from property sales, property management and ancillary services provides the Company with cross-sell
opportunities, capturing revenue across the value chain
• The traditional landscape of the real estate agency offering in the current economic environment provides great opportunities for
The Agency Group to bring further consolidation to the industry
(4) (5) (6)
Notes: (1) Company figures include Illawarra region acquisition. (2) Value of properties exchanged in the LTM to March 2019. (3) Properties Under Management (“PUM”) (4) Gross
Commission Income (“GCI”) (5) Calculated on a blended valuation multiple of 3.5x on annualised management fee calculated from March 2019 quarterly management fee. (6) 3
Calculated on a valuation multiple of 2.4x on annualised trail income calculated from March 2019 monthly trail income.
Unique business model
The Agency has a unique, scalable business model, disrupting the real estate services industry by
returning value, previously given to franchisees and offices, to agents and shareholders. The Agency’s
offering in the market continues to expand its agent network by recruiting the industry’s top talents and
establishing market leadership based on property transaction volumes across Australia
One of the highest
commission models in the
market place and provision of
support services driving
recruitment growth
Franchisor Head Office
c.10% c.15%-25% (1)
Franchisee Principal
c.40% c.40%
Traditional Independent
Franchise Operations
Agent Agent
c.50% c.60%
Agent
✓ Brand support c.75%-85% (1) ₓ Brand support
✓ Overhead support ₓ Overhead support
ₓ Add-on services ✓ Brand support ₓ Add-on services
ₓ Corporate benefits ✓ Overhead support ₓ Corporate benefits
✓ Add-on services
✓ Corporate benefits
Notes: (1) Commission structure is tailored dependent on brand (The Agency or SLP) and agent performance.
4
Accelerating national presence
In just over 2 year period since listing on the ASX, the Company has established a national presence with
10 physical locations across key metropolitan markets in Australia. Led by an industry-leading management
team, The Agency has achieved and continues to capture Australia’s prominent property sales
#1office in WA (1)
#1in Lower North Shore (NSW) market (2)
Highest number of exchanges recorded since
inception in March 2019
Highest GCI in NSW recorded since inception in
March 2019
Highest residential sale result of c.$24m in
Australia in CY19 (3)
17 QLD Significant listings including beachside property
agents with price guide of c.$17m (4)
The Agency Gold Coast
The Agency Perth
Suite 301, The Wave, 89-91 Surf Parade
68 Milligan Street
Broadbeach QLD 4218
Perth WA 6000
113 NSW
agents (5)
The Agency Hawthorn
Level 1, 585 Burwood Road
Hawthorn VIC 3122
135 WA The Agency Albert Park
The Agency Central Coast
PO Box 3223
The Agency Bondi Junction
17-25 Spring Street
Wamberal NSW 2260 Bondi Junction NSW 2022
agents 89 Victoria Avenue
Albert Park VIC 3206
The Agency Neutral Bay The Agency Eastern Suburbs
Level 1, 3 Young Street 180 Campbell Parade
Neutral Bay NSW 2089 Bondi Beach NSW 2026
12 VIC The Agency Wollongong The Agency Inner West
agents 2/63 Burelli Street
Wollongong NSW 2500
103 Johnston Street
Annandale NSW 2038
Notes: (1) Based on value of listings sold in March 2019. (2) Based on number of listings sold in the Lower North Shore (NSW) area (February 2019) and the number of properties
currently listed (March 2019). (3) 20B Tivoli Avenue, Rose Bay, Sydney. Sold by Ben Collier. (4) 125 year old heritage-listed home, “Le Fanu”, Cottesloe, Perth. On market by Pamela 5
Wilkinson. (5) Company figures include Illawarra region acquisition.
Real estate services market
The Agency’s unique business model is disrupting the $24.9bn real estate services industry (1). The Agency
capitalises on both expansion and contraction markets, opportunistically capturing sales agents and
supported by its growing national property management business
Market trends Capitalising on market trends
Technology disruption Business scalability
• Technology disruption improving efficiencies of services processes to • Attractive commission rates against a backdrop of declining margins is
complement real estate agents: attracting agents, both independent and from other agencies, to The
Agency
‒ Reducing the need for offices
‒ Improving compliance, communication and marketing • Opportunistic acquisitions to drive scale of The Agency during a period
of low business valuations
‒ Increasing dominance of online websites such as Domain and REA
‒ Use of data analytics to generate property valuations Defensive business in a contracting market
‒ Use of virtual reality in property inspections • Geographical diversity across metro and rural areas, with 10 physical
locations across WA, NSW, VIC and QLD, as well as a national virtual
Industry consolidation presence
• Market decline is putting pressure on small offices as decreased sales
commission and reducing management fees due to oversupply of • Cross-sell opportunities between property sales, property management
rentals is reducing profit margins or offices – majority of real estate and ancillary services
offices have less than 15 agents (2).
• Reduced overall exposure to residential property real estate prices
• Fair Work Australia’s new legislation has introduced a minimum $55,000 through property management and ancillary services
earnings that has added further pressure to smaller agencies and seen
an exiting of poor performing agents • Stable revenue and cash flow generated from property management
business
• Increasing trend of independent real estate agents joining larger
organisations providing back office support in order to combat reduced
margins
• Reduced margins have encouraged M&A activity as synergistic cost
savings become increasingly required
Notes: (1) L6720 Real Estate Services in Australia, IBISWorld October 2018. (2) Real Estate Industry Report, Macquarie Bank.
6
Company overview
The Agency Group is comprised of three service categories, including property sales, property
management and ancillary services
The Agency Group’s divisions
Property sales Property management Ancillary services
Conducts sales of residential Manages residential properties on Provision of ancillary services
properties on behalf of property behalf of property owners. provides cross-sell opportunities
vendors.
Operates a unique agent incentive • Mortgage financing services:
Operates a unique agent recruitment model that encourages agent mortgage loan book with c.4,400
model that delivers high growth to performance and in turn generating loans and $2.1m in annualised
the company while generating value stable, recurring revenue for the trail income (1)
for customers. business.
• Financial planning: provision of
Disrupting the Australian real estate The Agency Group’s property risk products and advice to clients
brokerage market with its two management division operates under undertaking new mortgages
differentiated offerings under the The Agency brand.
brands The Agency and Sell Lease • Conveyancing: settlement
Property (SLP). services
Premium, full service offering
Value, SaaS support offering
Notes: (1) Calculated from March 2019 monthly trail income.
7
Property sales
Revenue model
The Agency’s dual offering, including a premium brand (The Agency) and a value brand (SLP) enables it to
attract sales agents across the spectrum of potential requirements and needs
Revenue model
Upon the successful sale of a residential property, a vendor commission, a percentage of the property’s sale value, is charged. This commission is subsequently split
between The Agency Group and the agent.
LTM Rolling GCI ($m)
45.0 85% YoY Growth
$38.9m
NATIONAL PRESENCE VIRTUAL PRESENCE 40.0
ACROSS 10 PHYSICAL PREDOMINANTLY ACROSS
LOCATIONS WA AND QLD 35.0
The Agency is a premium brand with a SLP is a value brand with a SaaS
full service offering that provides offering, boasting unique technology 30.0
agents with a progressive commission that supports the entire administrative
structure. process for real estate transactions.
25.0 Graph of GCI over time
An agent will typically retain c.75% of SLP provides agents with a progressive
the vendor commission, with The commission structure. An agent will
Agency Group receiving the remaining typically retain c.85% of the vendor 20.0
c.25%. commission, with The Agency Group
receiving the remaining c.15%.
Additional revenue to the business is 15.0 c.12 months
generated from: Additional revenue to the business is from ASX listing
• if an agent chooses to have a generated from: 10.0
physical desk provided, a desk fee of • $10,000 p.a. member fee;
Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19 Feb 19 Mar 19
$6,000 p.a.; and • $720 p.a. I.T. platform fee; and
• $250 per transaction fee. • $250 per transaction fee.
8
Property sales
Market position
The Agency’s offerings across both brands boast a superior financial and non-financial value to sales
agents above independent operations and traditional franchises
Enhanced fee offering across the market
Whilst franchised based brand networks dominate the Australian brokerage market, it creates significant fee leakage away from agents with multiple layers of
administration and costs that sit above an agent, including the franchisee and the franchisor.
The primary alternative for agents has been to establish their own operations, either standalone or with peers. In exchange for a higher share or their fee income
agents take on significant overhead cost and administrative burden.
The Agency and SLP brands provide overall larger profits to the agent than a traditional franchise or an independent operations, respectively:
• The Agency brand returns previously leaked fees to the agent, with the same level of support as a traditional franchise
• The SLP brand enables agents to operate an independent operation with a highly sophisticated cost efficient technology platform
Portion of
commission
to an agent
Independent
Operations
Traditional
Franchise
Level of support to agent
9
Key financial assets
Property management Mortgage financing
Revenue under the property Mortgage financing is one of The Agency’s ancillary services, under
PUM (#) 12% YoY Growth the brand Mortgage and Financial Solutions. The Agency’s
management division is predominantly
composed of management fees. For all 4,500 mortgage book currently consists of c.4,400 loans. Revenue
4,324 predominantly consists of upfront fees and trail income.
properties under management (PUM),
4,400
the management fee, a percentage of
rental income, is retained by The 4,300
$5.0M VALUE OF MORTGAGE BOOK (4)
Agency Group. (5)
4,200
4,324 PUM
4,100
(1) 4,000
3,900
Unlike traditional property managers,
Apr 18
May 18
Jun 18
Jul 18
Aug 18
The Agency incentivises agents through Sep 18
Oct 18
Nov 18
Dec 18
a long-term value proposition. Jan 19
Feb 19
Mar 19
As at 31 March 2019 WA NSW VIC QLD
PUM
Number of properties # 922 3,331 46 25
Annualised rental income $m 13.94 118.5 1.8 0.8
Rental income per property (2) $’000 17.6 36.7 39.1 32.9
Management fee % 8.7% 4.9% 5.9% 3.1%
Annualised management fee (1) $m 1.1 5.6 0.1 0.02
Value of Rent Roll (1,3) $m 3.1 20.7 0.3 0.1
Notes: (1) Calculated from March 2019 quarterly management fee. (2) Calculated on occupied properties under management. (3) Calculated on a blended valuation multiple of 3.5x.
(4) Calculated on a valuation multiple of 2.4x on annualised trail income calculated from March 2019 monthly trail income. (5) Calculated from March 2019 monthly trail income. 10
Financials – LTM
The Agency recognised a loss of $0.2m in 3Q FY19, an 84% improvement on the pcp (loss of $1.5m
EBITDA in 3Q FY18). The Company will continue to benefit from further cost synergies as it looks to
0.0
achieve scale and reap the benefits of its growth initiatives
0.0
EBITDA ($m) (1)
0.0
(0) (0.2)
(1.0)
(0) (2.4) (2.4)
(0)
(0)
4Q FY18 1Q FY19 2Q FY19 3Q FY19
4Q FY18 1Q FY19 2Q FY19 3Q FY19
Property sales revenue 6.1 5.5 5.1 5.7
Property management revenue 2.1 2.2 2.2 2.2
Ancillary services revenue 1.1 1.3 1.2 1.1
COGS (1) (5.3) (4.8) (4.8) (4.3)
Gross Profit 4.0 4.1 3.6 4.8
Expenses (2.8) (2.3) (2.2) (1.8)
Corporate costs (3.6) (2.9) (3.8) (3.2)
Cost Base (6.5) (5.1) (6.0) (5.0)
EBITDA (2.4) (1.0) (2.4) (0.2)
EBITDA margin (26%) (12%) (28%) (3%)
Notes: (1) COGS excludes non-cash Future Fund item.
11
Operational metrics – LTM
The Company, has experienced a strong improvement in GCI in the last quarter despite maintaining agent
numbers as its strategic transformation of SLP has removed poor producing agents. The Agency continues
to be supported by a strong property management division
Number of agents (#) (1,2) Number of new listings (#) Number of PUM (#)
286 285 283 0.0 0.0
0.0 277 1,040 4,324
0.0 3,966 4,013 4,020
0.0 914
0.0 832 0.0
100 97 90 68
0.0 739 0.0
0.0 0.0
0.0 0.0 3,331
0.0 3,355 3,375 3,323
0.0
0.0 193 209 0.0 0.0
186 188
0.0 0.0
0.0
0.0 922
592 604 639
- - -
4Q FY18 1Q FY19 2Q FY19 3Q FY19 4Q FY18 1Q FY19 2Q FY19 3Q FY19 4Q FY18 1Q FY19 2Q FY19 3Q FY19
The Agency SLP WA NSW VIC QLD
GCI ($m) Value of exchanges ($m) Annualised management fee ($m) (3)
0.0 0.0
0.8
680 6.6 6.6 6.9
0.0 11.0 0.0 6.5
10.3 0.7 630
596 613
0.0
0.0 1.8 9.0 8.7 1.4 0.6
0.0 1.2 0.5 0.0
2.0
0.4 0.0 5.6
0.0 5.7 5.7 5.7
0.3 0.0
9.1 8.9
0.0 7.5
7.0 0.2 0.0
0.0 0.1 0.0
0.8 0.8 0.9 1.1
- - -
4Q FY18 1Q FY19 2Q FY19 3Q FY19 4Q FY18 1Q FY19 2Q FY19 3Q FY19 4Q FY18 1Q FY19 2Q FY19 3Q FY19
The Agency SLP WA NSW VIC QLD
Notes: (1) Company figures include Illawarra region acquisition from 3Q FY19. (2) Following Fair Work Australia’s recent legislative changes the Company have performed a strategic
review of the SLP agent network. (3) Calculated from quarterly management fee. 12
Key management
Senior management Board of directors
Paul Niardone Andrew Jensen
Managing Director Chairman
Previously Executive Director and founder of Professional Public Relations (WA), Andrew, formerly CFO of Top Level Real Estate (acquired by The Agency), has
the largest PR and communications firm in the State until he sold the business to extensive knowledge in the management of all aspects of finance with strong
WPP. Experience in marketing and strategic planning for clients in both commercial, strategic, M&A, and change management experience. He has
Government and the private sector and over 15 years experience with public financially led companies engaged in various fields including real estate and
companies. ancillary services sectors globally. Fellow of IPA and member of the AICD.
Matt Lahood Paul Niardone
Chief Executive Officer – The Agency Executive Director
More than 30 years in real estate sales; 2,000+ property sales worth over $2bn.
Previously Director of Sales for McGrath Real Estate, responsible for market entry
strategies and management of 22 company owned offices and more than 250
people.
Steven Chen Matt Lahood
Director of Projects Executive Director
Over 20 years’ experience in real estate sales delivering over 3,000 properties
worth in excess of A$2.5bn. Ranked 16 in the top 100 agents of 2016 by REB. x
Previously Head of Projects for McGrath Real Estate where he was responsible for
a team of eight Associate Directors and over 50 agents and support staff across
Sydney, Brisbane and Gold Coast.
Maria Carlino John Kolenda
Director of Property Management Non-Executive Director
Over 27 years of real estate experience in key markets incl. Sydney, Brisbane and John is the co-founder and Managing Director of Finsure Group, one of Australia's
the Gold Coast. Previous senior roles at RUN Property, Ray White and McGrath fastest growing retail finance brokerages, writing over $1 Billion in new mortgages
Real Estate where she was responsible for the management and growth strategies every month across 1300 brokers. He formed the Loan Market Group with Ray
of the rental portfolio and team across all company owned offices. White and before that worked as the General Manager of Sales & Distribution of
Aussie Home Loans.
Adam Davey
Non-Executive Director
Adam is Director, Private Clients and Institutional at Patersons Securities. His
expertise spans over 25 years and includes capital raising (both private and public),
mergers and acquisitions, ASX listings, asset sales and purchases, transaction due
diligence and director duties.
13