The listed property company run by high profile real estate agent John McGrath faces scrutiny from the Australian Securities Exchange after a board and management exodus and shock earnings downgrade led to a share price plunge.
The upheaval at McGrath Ltd led to the company's shares diving 13.8 per cent to close at 50 cents after the departures of four board members and the company's chief executive Cameron Judson were announced.
The company announced on Monday that Mr McGrath, dubbed Sydney's Mr Real Estate, will take up the position of executive chairman - a move likely to fuel speculation that the wealthy real estate agent could privatise the company.
McGrath made the statement to the ASX after details of earnings for the first five months of the half were leaked to the Australian Financial Review and published on Sunday night.
The leaked documents showed McGrath's earnings for the five months to November were only $1.3 million, rather than the $7.8 million the market was expecting.
The company became aware of the impending media article on Friday on the same day as a board meeting.
It is believed that McGrath's results for the entire six months to December were discussed at the meeting.
The document leaked to the media relating to the company's draft results for the five months to November predates the meeting. It is not clear whether this document was made available to the board.
A spokesman for the ASX confirmed it was monitoring McGrath.
"As per it usual practice, the ASX is closely reviewing the media coverage, the announcement today and earlier market updates by the company,'' he said.
A spokeswoman for McGrath said the company was in full compliance with its continuous disclosure obligations.
On Monday, McGrath also updated its forecast for the six months to December 31, saying earnings before interest, tax, depreciation and amortisation (EBITDA) would now come in at $1.63 million. McGrath also flagged it would post a bottom line loss of $50,000 for the first half of 2018.
It said its full year earnings (EBITDA) were expected to be between $5.8 million and $6.8 million after one-off items.
The company had warned the market in November that its earnings were tracking at 20 per cent below analyst expectations of $16 million plus in full-year earnings.
The crisis came after a tumultuous history for the company that has been hit hard by the drop off in residential property listings and its struggling sales division.
The group has also been affected by a string of departures of some of its highest profile agents who have jumped ship to other agencies.
The company gave no explanation about the departures of chairman Cass O'Connor, directors Elizabeth Crouch and Cath Rogers, only to say the three would leave after an "orderly transition period" that will include the release of the company's results in February.
McGrath said director Nigel Dews has resigned as part of the strategic review and also because other work commitments.
McGrath told Fairfax Media it had commenced a search for replacement directors to join Mr McGrath the only director committed to the company beyond February.
McGrath had flagged the potential for management and board changes in its November update but the depth and breadth of the changes caught the market by surprise.
Ms O'Connor - a former business partner of Prime Minister Malcolm Turnbull - said Mr Judson's and Mr Sloper's resignations came after a strategic review that found the company did not currently require the expansion and mergers and acquisitions skills of the two executives.
"Cameron and Morgan were engaged when we anticipated a higher volume of corporate activity. Their skill-sets are broader than the company currently needs," Ms O'Connor said.
Mr McGrath, who is a major shareholder in the group, said he was very disappointed in the performance of the company over the past two years.
"Now is the time for a new approach. Despite the challenges we have endured since listing, McGrath remains one of the best real estate businesses in Australia with outstanding talent throughout the company," Mr McGrath said.
He had resigned as CEO in 2016 as part of an earlier management and board shake-up.
