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NETWORK REAL ESTATE REPORTS REVENUES UP 78 PERCENT; OPERATIONS APPROACHING PROFITABILITY FOR NINE MONTHS ENDED MARCH 31, 1992

NETWORK REAL ESTATE REPORTS REVENUES UP 78 PERCENT; OPERATIONS

APPROACHING PROFITABILITY FOR NINE MONTHS ENDED MARCH 31, 1992
 SANTA CRUZ, Calif., May 19 /PRNewswire/ -- Network Real Estate of California today reported revenues climbed 78 percent and the company reached break even for the nine months ended March 31, 1992. For the third quarter, Network's revenues were up 33 percent, and the company reported a net profit. Lee Danna, chairman and chief executive officer, said, "Network restated second quarter results, moving the recognition of a non-operating gain on the sale of real estate owned from the second to the third quarter. This was necessary due to an unexpected delay in the close of escrow. While the adjustment did not affect operating results, we believe our nine-months results provide a clearer picture of Network's performance." Revenue and Profitability Increase in the First Nine Months
 "Strong performance in both real estate brokerage and mortgage operations contributed to increased revenues," Danna said. For the nine months, revenues were $10.9 million, up from $6.2 million a year earlier. Real estate commissions grew 38 percent to $6.5 million compared with $4.7 million a year ago. The mortgage subsidiary, acquired in December 1990, contributed $4.4 million in revenue, up from $1.4 million in the prior fiscal year period.
 "Our strong performance, in light of the continued recession in California real estate, illustrates the strength of the Network system. Our revenues are expanding rapidly while many other California real estate firms, hit hard by the recession, have been forced to cut back," Danna said.
 "We are particularly pleased with the performance of our mortgage business. Expanding at an annual rate of more than 30 percent, mortgage operations have the potential to become our most profitable business segment. They have proven to be a strong strategic fit with our real estate operations, providing significant profit synergies. By offering a wide spectrum of services, we can attract additional customers. In turn, our extensive real estate brokerage operations act as an effective marketing force for mortgage origination. The broker, the buyer and the seller all benefit from our ability to provide this access to financing."
 Year-to-date, gross profits have increased 180 percent to $2.1 million compared with $732,000 in the same period a year ago. The gross margin has expanded significantly to 18.8 percent up from 11.9 percent in the first nine months of fiscal 1991, reflecting the increased contribution of the higher gross margin mortgage operations.
 Operating expenses increase 95 percent for the nine months to $2.1 million or 19.0 percent of sales, up from $1.1 million or 17.3 percent a year earlier, also reflecting the expanded mortgage operations. The payroll for mortgage employees is reflected in operating expenses, while most real estate brokers and agents are on commission which is reflected in the gross margin.
 Cost control measures, higher revenues and economies of scale contributed to a significant improvement in operating profitability. For the nine months, Network has reported an operating loss of only $26,000. This compares with an operating loss of $332,000 in the same period a year earlier.
 Year-to-date other income of $40,000, reflecting a $114,000 gain on the sale of real estate originally acquired in the purchase of mortgage operations, contributed to net income of $14,000. With average shares outstanding of 3.9 million, earnings per share are effectively zero. This compares with a net loss of $368,000 in the same period a year ago or 11 cents per share on 3.2 million shares. Third Quarter Financial Performance
 For the quarter, commissions on real estate sales rose 34 percent to $1.9 million, up from $1.4 million in the same quarter a year ago, as the value of total real estate sales rose to $67 million from $49 million. Revenues from mortgage brokerage increased 32 percent to $1.7 million, up from $1.3 million a year earlier. This is the first quarter of full quarter comparisons for mortgage operations.
 For the quarter, gross profit grew to $637,000, up from $542,000 in the same period a year ago. The gross margin contracted slightly to 18 percent of revenues, down from 20 percent in the third quarter of last year, reflecting higher cost of sales in the expanded mortgage operations. "Operating expenses as a percentage of revenues declined to 18 percent, down from 21 percent a year ago, as we continue to focus attention on controlling expenses and realized economies of scale in the mortgage area," Danna said.
 For the third quarter, the loss from operations was $22,000, down from $26,000 a year ago. The real estate sale explained above resulted in a net gain for the quarter of $36,000, or one cent per share, on 4.2 million shares outstanding. This compares to a loss of $47,000, or one cent per share, on 3.7 million shares outstanding in the same quarter a year ago. Looking Ahead
 Addressing the outlook for the remainder of the year, Danna said, "We are enthused by the progress in such a difficult environment. We believe that if we can succeed in today's market, we will be in a stronger position as the market recovers. Our primary barrier to significant profitability is a lack of capital to fund further expansion of our mortgage operations. We are currently working on a debt/equity package that should facilitate this growth and ensure ongoing profitability. In addition, our recent agreement with ERA Real Estate provides Network with an exceptional opportunity to further expand our business by distributing Network financial service products, including mortgages and insurance, through the more than 300 ERA franchise offices throughout California."
 Network Real Estate of California is one of the largest real estate brokerage firms in Northern California and is successfully capitalizing on the recent opportunities presented by the mortgage origination market. Network distinguishes itself from the traditional real estate broker by offering home buyers "one-stop" shopping for a home, mortgage financing, homeowners' insurance and ongoing home services including cleaning, gardening, and home maintenance. The company achieves economies of scale and operating synergies by marketing a basket of services to a select target group. The company has grown rapidly over the last several years, and is now the largest ERA franchise in California operating more than 38 offices with 420 agents.
 -0- 5/19/92
 NOTE: For additional information on Network Real Estate of California via fax, dial 800-PRO-INFO, code 008.
 /CONTACT: Lee J. Danna of Network Real Estate, 408-462-6200; or Lise Needham of the Financial Relations Board, 415-986-1591, for Network Real Estate/ CO: Network Real Estate of California ST: California IN: SU: ERN


MM -- SF003 -- 1812 05/19/92 12:12 EDT
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