Interim results

RNS Number : 9464M
Purplebricks Group PLC
26 January 2016
 

 

 

26 January 2016

 

Purplebricks Group plc
Interim results for the 6 months ended 31 October 2015

 

Good start to the second half, on-course to meet full year expectations

 

Purplebricks Group plc (AIM: PURP) ("Purplebricks"), the hybrid estate agent providing a new way to buy, sell or let property, announces its Interim results for the six months ended 31 October 2015.

 

Financial Highlights

 

           

H1 2016

H1 2015

Change

Revenues

£7.2m

£0.8m

+777%

Gross profit

£4.1m

£0.4m

+814%

Gross profit margin

56.4%

54.1%

+230 bps

Sales and Marketing investment

£6.6m

£1.1m


Adjusted EBITDA 1

(£6.0m)

(£2.5m)


Loss before tax

(£6.4m)

(£2.5m)


 

Business Highlights

 

·      Strong end to the first half, with October revenues year-on-year up 579%

·      Completed the full national roll-out, launching in London in July and Scotland in November

·      Recruitment of LPEs increased 90% since November 2014 to 150 by the end of October 2015

·      Launched the in-house Data Sales Unit in October to develop and analyse the database to drive sales

·      Customer service continues to be rated "excellent", averaging 9.4 from over 3,500 Trustpilot reviews

·      Increase in online market share from 43% in April 2015 to 60% as at 31 October 2015

·      Fourth largest estate agent2 within 18 months of launch

·      Net cash at 31 October 2015 of £9.7m bolstered subsequently by the net £22.8m of growth capital raised in the December listing on the Alternative Investment Market (AIM)

 

Current trading & outlook

 

Trading in the second half of the financial year has started well with a 275% year-on-year increase in the number of instructions, with January alone currently at 1,660 and expected to exceed 2,000. This has been supported by our new marketing campaign, which went live on Boxing Day 2015. The strength of trading has resulted in the decision to accelerate the recruitment of LPEs, with a view to doubling their number by April 2017.

 

Early indications suggest that the launch in October of the Data Sales Unit to collect and analyse data is generating new leads and instructions.  With the strength of trading and the continued successful execution of the strategic plan the Board remains confident in meeting its expectations for the financial year.

 

Commenting on the results, Michael Bruce, Chief Executive, said:

 

"We have made great progress across the business in the last six months, culminating in our listing on the AIM market in December. The money raised will be used to deepen our national coverage through the recruitment of top quality local property experts and further investment in technology and marketing. This will build on our position as the number one next generation estate agent.

 

Our compelling proposition of personalised, high quality service and affordable fees provides the best of both worlds, resonating with a growing number of customers and posing a fundamental challenge to traditional estate agents, who currently dominate the £4bn market.

 

As a newly listed company, our focus is on executing the strategy in order to generate attractive returns for all our shareholders. I am pleased with the progress to date and I am confident that we can build a substantial share in this market."

 

Notes

 

1 Adjusted EBITDA is defined by the Group as loss/profit before tax, depreciation, amortisation, net finance costs, fees incurred in relation to the IPO, and share based payments charges

2 Purplebricks figure is based on annualised number of instructions received in September 2015, which is higher than the actual number of instructions received over the year to September 2015. The other figures have been obtained from publicly available information or estimated by management, may represent different 12 month periods and are based on completed sales numbers

A presentation to analysts and investors followed by a demonstration of the platform will be held at the offices of Instinctif Partners on 26 January 2016. For further details please contact Louis Supple on: +44 (0) 207 457 2020 or email louis.supple@instinctif.com.      

 

For further information, please contact:

 

Purplebricks Group plc


+44 (0) 20 7457 2020

Michael Bruce, Chief Executive



Neil Cartwright, Chief Financial Officer






Zeus Capital

NOMAD & Broker


+44 (0) 20 3829 5000

Nicholas How (Corporate Finance)



Ben Robertson (Corporate Broking)



Mike Cuthbert (Sales)






Instinctif Partners


+44 (0) 20 7457 2020

David Simonson

Mark Reed

Louis Supple



 

About Purplebricks

 

Purplebricks is the leading next generation estate agency in the UK that combines highly experienced and professional Local Property Experts and an innovative use of technology to help make the process of selling, buying or letting so much more convenient, transparent and cost effective. Purplebricks is transforming the way people perceive estate agents and estate agency.

 

Summary

 

The first half of FY2016 has experienced good growth. Completing the national rollout and increasing the number of highly experienced LPEs, in conjunction with the planned national marketing programme, was achieved whilst maintaining our impressive high quality service. Purplebricks is rated "excellent" by independent review website Trustpilot (rated 9:4) with currently over 3,500 reviews from customers.

 

Going into the Spring market for the first time as a national estate agent, Purplebricks intends to accelerate the programme of recruitment of Local Property Experts in all areas of the UK as more and more sellers are choosing Purplebricks to sell their property. 

 

The Admission to AIM on 17 December 2015, which raised a further £22.8m of growth capital, in addition to the net cash position as at 31 October 2015 of £9.7m, provides additional firepower to build on its position as the leading next generation estate agent and to significantly grow its market share.           

 

Strategy

 

The annual UK estate agency market is estimated to be worth over £4.4bn. Purplebricks' strategy is to build upon its leading hybrid proposition to win market share which, combined with its flexible and low cost business model, should generate attractive returns.

The attainment of the strategy is based on the following key pillars of the Purplebricks offer:

 

Superior value - Traditional estate agents charge a fee on sales typically within the range of 1% to 3% on the sale price and average at over £4,000 (inc. VAT). By contrast, the average Purplebricks fee is £1,080 (inc. VAT).

Local experts, personal service - Purplebricks is not an online estate agent, it is a hybrid estate agent that has a growing number of LPEs (165 as at 18 November 2015). The LPEs, who have extensive experience and detailed knowledge of their respective areas, visit the properties and provide valuations. Once instructed the LPEs provide support, advice and assistance throughout the sales process and customers can speak to an expert 24 hours a day. LPEs are paid a fixed fee for each instruction and will also receive additional income for the sale of other products and services.

Over 90% of LPEs are self-employed, running and growing their own businesses within their allocated region. They are recruiting additional LPEs to work for them to support the growth of their region, which helps Purplebricks continue to build an 'ultra local' service to its customers. All LPEs, including those which are recruited by other LPEs, have to undergo a rigorous recruitment process and, if successful, a two week demanding training programme, so as to ensure recruitment of only the best people. 

To date 43 LPEs have already engaged additional LPEs in their business. Accordingly, as they grow their business, they can build capital value as part of their licence agreement with Purplebricks. The LPE can, subject to the terms of their agreement which includes an approval by Purplebricks, sell their licence to an acceptable third party. The LPE is therefore motivated, engaged and rewarded for building their business within a culture of personal and professional integrity.

24/7 customer service - The technology platform developed by Purplebricks enables the whole process to happen instantly 24 hours a day. The vast majority of Purplebricks' customer traffic happens when traditional agents are closed. Customers can instantly know what is happening with their property: they can book valuations, arrange viewings, see feedback from viewings, offers can be made and sales can be agreed, customers can receive performance reports and can contact Purplebricks 24 hours per day. Transactions take place day and night.

Focus on technology - Purplebricks has spent four and a half years developing and building its technology and has a team of developers who work on new features, maintenance and security. Purplebricks intends to continue to develop its offering, introducing new versions of its platform and assessing new and improved ways of accessing and operating the process of selling, buying and letting property.  A mobile app is in beta testing and is anticipated to be launched shortly. 

High profile marketing strategy - The differentiated marketing strategy is based upon a consistent presence on the media, including TV, to drive customer traffic to the website, complemented by extensive use of radio, Pay Per Click (PPC), social networking, retargeting and portal advertising. 

Brand awareness and customer engagement - Purplebricks aims to increase brand awareness among UK homeowners, landlords, buyers and sellers as a trusted and effective alternative to high street agents and online competitors. Customer satisfaction and referral is a fundamental part of the Purplebricks service. Purplebricks is rated excellent by independent review website Trustpilot (rated 9.4) with currently over 3,500 reviews from customers.

The Business Model

Instructions convert quickly to cash - Purplebricks has a competitive and transparent, flat fee pricing structure of £798 (inc. VAT) for a sale anywhere in the UK other than certain defined London postcodes where there is a charge of £1,158 (inc. VAT). There are additional charges if the customer wants Purplebricks to undertake the viewings on their behalf, if they require an energy performance certificate or a Rightmove premium display. The Company's additional sources of revenue currently comprise fees from conveyancing, mortgage referrals and insurance.

The average Purplebricks fee including all other sources of income is circa. £1,080 (inc. VAT).

The customer can choose to pay upfront on instruction or they can delay the payment (at no additional cost) until the earlier of the sale of the property or ten months from instruction. The deferred payment is financed by Close Brothers. Purplebricks is paid by Close Brothers the next working day. If a customer wishes to defer payment, they are required to use Purplebricks' conveyancing services for the sale.

Low and flexible cost base - The cost structure of the business is different to that of a traditional estate agent. First, the hybrid model does not require the overheads of a high street estate agency business, with extensive, leased branches. Secondly, the LPEs are typically self-employed (90%) with fees payable upon instruction. As a result gross margins are substantial, reaching 56.4% for the six months ended 31 October 2015. The marketing budget is in alignment with the strategy of consistent presence in the media such as television, and aims not only to build awareness but also to help maintain and extend the Company's position as the leading next generation estate agent.

Financial Review

 

Total revenue in the six months grew by 777% year-on-year to £7.2m (H1 FY15: £0.8m), reflecting the on-going rollout of UK regions, the recruitment of LPEs and the step-up in the marketing programme. During the period the average fee per instruction was £829 (inc. VAT) and the average between September and October 2015 was £1,080 (inc of VAT) as a consequence of increasing conveyancing referral fee volumes.

 

Gross profit in the period was £4.1m (H1 FY15: £0.4m) a year-on-year increase of 814%. As a result the gross margin increased by 230 bps to 56.4%.    

 

Administrative and establishment expenses increased as the business scaled its operations for future growth. This has involved investing further in development resources for our eZie platform, relocating our offices within Solihull and also includes the creation of the Data Sales Unit.

 

During the period the business moved into profit before sales and marketing costs of £0.3m (H1 FY15: loss of £1.4m), demonstrating that the benefits of scale are now starting to come through.

 

Sales and marketing costs increased to £6.6m (H1 FY15: £1.1m) reflecting the step-up in the marketing programme onto a national footing.

 

As a result of the planned increase in sales and marketing expenditure the Group reported an operating loss before amortisation of intangibles and share based charges of £6.0m (H1 FY15: £2.5m).  There was no tax charge during the period.

 

As at the 31 October 2015 the Group had a net cash balance of £9.7m, following a private fundraising round which raised a net £10.0m in June 2015. This has been subsequently bolstered, post the period end, by the £22.8m of growth capital raised in the AIM listing in December.

 

Statement of comprehensive income

For the six month period to 31 October 2015

 



 

 

Six months ended 31 October 2015 Unaudited

 

 

Six months ended 31 October 2014 Unaudited

 

 

 

Year ended 30 April

2015

Audited


Note

£

£

£






Revenue


7,184,062

819,014

3,394,464

Cost of sales


 (3,132,589)

   (375,970)

 (1,383,337)

Gross profit/(loss)


4,051,473

443,044

2,011,127






Administrative and establishment expenses


(3,783,022)

(1,831,015)

(3,965,412)

Sales and marketing costs


(6,641,302)

(1,124,125)

(3,473,028)

Loss from operating activities


(6,372,851)

(2,512,096)

(5,427,313)

Loss from operating activities before adjustments in respect of the following:



(6,026,381)


(2,494,611)


(5,282,234)

Amortisation of intangibles


(34,112)

(17,485)

(40,063)

Share based payment charge

3

(312,358)

-

(105,016)

Loss from operating activities


(6,372,851)

(2,512,096)

(5,427,313)






Finance expenses


(17,349)

(6,630)

(8,467)

Loss before taxation


(6,390,200)

(2,518,726)

(5,435,780)

Taxation


-

-

-

Loss for the year and total comprehensive loss


(6,390,200)

(2,518,726)

(5,435,780)

 

 

 

 

Basic and diluted loss per share (pence)                                         4

 

      (3.44)

 

     (1.79)

 

     ( 3.57)

 

Statement of changes in equity

For the six month period to 31 October 2015

 

 

 

For the six months ended 31 October 2015
Unaudited

 

 

Share capital

 

 

Share premium

 

 

Retained earnings

Share based payments reserve

 

 

Total

 equity


£

£

£

£

£







At 1 May 2015

17,658

12,298,269

(8,026,657)

105,016

4,394,286

Issue of shares

1,358

9,998,659

-

-

10,000,017

Share-based payment charge

-

-

-

312,358

312,358

Transactions with owners

1,358

9,998,659

-

312,358

10,312,375

Loss for the period

-

-

(6,390,200)

-

(6,390,200)

Total comprehensive loss

-

-

(6,390,200)

-

(6,390,200)

At 31 October 2015

19,016

22,296,928

(14,416,857)

417,374

8,316,461

 

 

 

For the six months ended 31 October 2014

Unaudited

 

 

Share capital

 

 

Share premium

 

 

Retained earnings

Share based payments reserve

 

 

Total

 equity


£

£

£

£

£







At 1 May 2014

10,350

4,163,618

(2,590,877)

-

1,583,091

Issue of shares

7,308

8,134,651

-

-

8,141,959

Share-based payment charge

-

-

-

-

-

Transactions with owners

7,308

8,134,651

-

-

8,141,959

Loss for the period

-

-

(2,518,726)

-

(2,518,726)

Total comprehensive loss

-

-

(2,518,726)

-

(2,518,726)

At 31 October 2014

17,658

12,298,269

(5,109,603)

-

7,206,324

 

 

 

 

For the year ended 30 April 2015
Audited

 

 

Share capital

 

 

Share premium

 

 

Retained earnings

Share based payments reserve

 

 

Total

 equity


£

£

£

£

£







At 1 May 2014

10,350

4,163,618

(2,590,877)

-

1,583,091

Issue of shares

7,308

8,134,651

-

-

8,141,959

Share-based payment charge

-

-

-

105,016

105,016

Transactions with owners

7,308

8,134,651

-

105,016

8,246,975

Loss for the period

-

-

(5,435,780)

-

(5,435,780)

Total comprehensive loss

-

-

(5,435,780)

-

(5,435,780)

At 30 April 2015

17,658

12,298,269

(8,026,657)

105,016

4,394,286

 

Statement of financial position

As at 31 October 2015

 




31 October

2015

Unaudited

31 October 2014

Unaudited

30 April
2015

Audited

Non-current assets

Notes


£


£

Property, plant and equipment



168,996

30,904

63,207

Intangible assets



174,663

85,713

137,893




343,659

116,617

201,100

Current assets






Current taxation



-

-

-

Trade and other receivables



1,445,590

434,542

746,083

Cash and cash equivalents



9,744,843

7,190,706

4,609,771




11,190,433

7,625,248

5,355,854

Current liabilities






Trade and other payables



(2,934,822)

(535,541)

(1,052,739)

Deferred income



(282,809)

-

(109,930)




(3,217,631)

(535,541)

(1,162,669)







Net current assets



7,972,802

7,089,707

4,193,185

Total assets less current liabilities



8,316,461

7,206,324

4,394,285

Net assets



8,316,461

7,206,324

4,394,285

 

Equity






Share capital



19,016

17,658

17,658

Share premium



22,296,928

12,298,269

12,298,268

Share based payments reserve



417,374

-

105,016

Retained earnings



(14,416,857)

(5,109,603)

(8,026,657)

Total equity



8,316,461

7,206,324

4,394,285

 

Statement of cash flows

For the six month period to 31 October 2015

 



Six months

ended 31

October 2015

Unaudited

Six months

ended 31

October 2014

Unaudited

 

Year ended 30

April 2015

Audited

Cash flows from operating activities


£

£

£

Loss for the period after taxation


(6,390,200)

(2,518,726)

(5,435,780)

Adjustments for:





Amortisation of intangible assets


34,112

17,485

40,063

Depreciation


23,719

7,163

15,757

Share-based payment charge


312,358

-

105,016

Tax refund


-

-

265,884

Operating cash flow before changes in working capital


(6,020,011)

(2,494,078)

(5,009,060)

Movement in trade and other receivables


(699,505)

192,924

(205,271)

Movement in trade and other payables


1,882,083

29,260

368,640

Movement in deferred income


172,879

-

109,930

Cash flow from continuing operations


(4,664,554)

(2,271,894)

(4,735,761)

Net cash flow from operating activities


(4,664,554)

(2,271,894)

(4,735,761)

Cash flow from investing activities





Purchase of property, plant and equipment


(129,509)

(1,752)

(42,650)

Development expenditure capitalised


(70,882)

(48,471)

(123,229)

Net cash flow from investing activities


(200,391)

(50,223)

(165,879)

Cash flow from financing activities





Issue of shares, net of costs


10,000,017

8,143,370

8,141,958

Net cash flow from financing activities


10,000,017

8,143,370

8,141,958






Net increase in cash and cash equivalents


5,135,072

5,821,253

3,240,318

Cash and cash equivalents at beginning of year


4,609,771

1,369,453

1,369,453

Cash and cash equivalents at the end of the year


9,744,843

7,190,706

4,609,771

 

Notes to the financial statements

1     Basis of preparation

Purplebricks Group plc, is incorporated and domiciled in the United Kingdom.

The interim financial statements for the six month period ended 31 October 2015 (including the comparatives for the six month period ended 31 October 2014 and the year ended 30 April 2015) were approved by the board of directors on 26 January 2016. Under the Security Regulations Act of the EU, amendments to the financial statements are not permitted after they have been approved.

It should be noted that accounting estimates and assumptions are used in the preparation of the interim financial information.  Although these estimates are based on management's best knowledge and judgement of current events, actual results may ultimately differ from those estimates.  The interim financial statements have been prepared using the accounting policies as described in the year-end financial statements.

The interim financial information contained within this report does not constitute statutory accounts as defined in the Companies Act 2006, section 434.  The full accounts for the year ended 30 April 2015 received an unqualified report from the auditors and did not contain a statement under Section 498 of the Companies Act 2006.

2     Segmental reporting

The Company is managed as a single division, providing services relating to the sale of properties. The financial information reviewed by the board is materially the same as that reported under IFRS. The Company only operates in the United Kingdom.

During the period, no one customer contributed greater than 10% of the Company's revenues (six month period ended 31 October 2014: none, year ended 30 April 2015: none).

3     Share-based payments

The Company operates an HMRC approved executive management incentive plan (EMI).

The vesting conditions are based on length of service with 25% of the options vesting on or after the 12 month anniversary of the employee's start date and a further 6.25% vesting every three months thereafter so that options vest in full on the 48 month anniversary of the employee's start date in respect of schemes 1, 2 and 4.

The options vest from the date of grant for scheme 3 except for 32,000 options which vest on the first anniversary of the date of grant if the company achieves the sales target or as otherwise determined by the directors.

Details of the total number of shares under option at the period end and conditions on qualification and exercise are set out below:

 

Grant

Date

Scheme

Number

Employees entitled

Number of options

Performance conditions

Exercise price (p)

Earliest exercise date

Expiry
date

09/01/2015

10/07/2015

06/08/2015

10/08/2015

1

2

3

4

14

11

2

11

44,937

45,301

69,328

6,300

Length of service

Length of service

Length of service

Length of service

£0.01

£14.00

£0.01

£14.00

09/01/2015

10/07/2015

06/08/2015

10/08/2015

09/01/2025

10/07/2025

06/08/2025

10/08/2025

 

















No share options were exercised during the period (H1 FY15: nil). The number and weighted average exercise price of share options are as follows:

 


31 October 2015

Weighted average exercise price

31 October 2015

Number of options (number)

31 October 2014

Weighted average exercise price

31 October 2014

Number of options
(number)

30 April 2015

Weighted average exercise price

30 April 2015

Number of options
(number)

Outstanding at start of period

Granted during the period

£0.01p

£5.98

42,637

120,929

-

-

-

-

-

£0.01p

-

44,937

Exercised during the period

-

-

-

-

-

-

Lapsed during the period

£14.00

(1,500)

-

-

£0.01p

(2,300)

Outstanding at end of the period

£4.36

162,066

        -

-

£0.01p

42,637

Exercisable at end of the period

£1.49

61,935

-

-

£0.01p

13,800

 

Options outstanding at 31 October 2015 for schemes 1 and 3 have an exercise price of £0.01p (30 April 2015: £0.01p. 31 October 2014: not applicable).  The weighted average remaining contractual life of the options is 10 years (30 April 2015: 10 years. 31 October 2014: not applicable). 

Options outstanding at 31 October 2015 for schemes 2 and 4 have an exercise price of £14.00 (30 April 2015: £nil. 31 October 2014: not applicable).  The weighted average remaining contractual life of the options is 10 years (30 April 2015: 10 years. 31 October 2014: not applicable). 

Fair value assumptions of share-based payments

The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted.  The estimate of fair value is measured using the Black-Scholes model.  Details of the fair value of share options granted in the period and the prior period, together with the assumptions used in determining the fair value are summarised below. No options were granted in the preceding period.


31 October 2015

31 October 2014

30 April

2015





Weighted average share price at date of grant

£14.00

-

£14.00

Weighted average exercise price

£5.98

-

£0.01

Weighted average contractual life (years)

10

n/a

10

Weighted average expected volatility

27%

-

27%

Weighted average risk free interest rate

1.5%

-

1.5%

Total weighted average fair value of options granted

             £318,372

-

£596,510

 

The volatility assumption, measured at the standard deviation of expected share price movements, is based on a review of volatility used by listed companies in the same sector.

Charge to the income statement

The charge to the income statement, included with administrative expenses, comprises:


Six month period ended 31

October 2015

Six month period

ended 31

October 2014

Year ended

30 April 2015


£

£

£

Share-based payment charges

312,358

-

105,016

 

4     Earnings per share


Basic and diluted


 

Six month

period ended

31 October

2015

 

Six month

period

ended 31

October 2014


Unaudited

Unaudited

Audited


£

£

£

Loss

(6,390,200)

(2,518,726)

(5,435,780)

Weighted average number of shares

1,856,363

1,409,954

1,522,219

Loss per share (pence)

(3.44)*

(1.79)*

(3.57)*

*This is based on the share capital pre IPO re-organisation and re-registration of New Broom Ltd to become Purplebricks Group plc which completed on 10 December 2015.

 

5     Events after the balance sheet date

 

On 17 December 2015 the Company completed its admission to the Alternative Investment Market (AIM) raising £25m of gross proceeds into the Company as part of the placing which after costs results in a net £22.8m.  At Admission, the Company had 240,259,152 ordinary shares in issue.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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