Purplebricks Group plc (LON:PURP), the UK’s leading tech-led estate agency business, announced today its half year results for the six months ended 31st October 2021.
| Summary performance | H1 22£m | H1 21£m | Change |
| Group | |||
| Revenue | 41.3 | 44.2 | (7)% |
| Gross profit | 26.2 | 29.6 | (11)% |
| Gross profit margin (%) | 63.4% | 67.0% | (360)bps |
| Operating (loss)/profit | (11.1) | 6.9 | (261)% |
| Adjusted EBITDA1 | (0.8) | 8.4 | (110)% |
| (Loss)/profit from total operations | (20.2) | 6.8 | (397)% |
| Cash and cash equivalents | 58.3 | 75.8 | (23)% |
| KPIs2 | |||
| Total fee income3 | 34.7 | 48.8 | (29)% |
| Instructions (number)4 | 21,131 | 34,150 | (38)% |
| Average revenue per instruction5 | £1,642 | £1,428 | 15% |
Business transformation delivering a strong platform for growth
· The Group has driven considerable transformation during the first half of the year and has significantly invested in and transformed its business model in this period, introducing new Money Back Guarantee pricing, a simplified customer proposition, and a redesigned employed operating model in the field, with in excess of 95% of required workforce in place
· Greater control over our employed field sales agents will enable us to scale up growth quickly
· Early signs that our transformation is positively impacting performance with key performance metrics improving; assisted viewing attachment rates6, now branded as Pro, have increased by 8.4 percentage points (ppts) since the start of the half, and since September, when our employed model went live, attended conversion7 has increased by 4.0ppts and market share of new instructions8 has risen by 0.6ppts
· Appointment of a new Chief Financial Officer, Steve Long, who joins the Board on 1 February
· Financial strength and a strong platform in place to support next phase of growth and delivery of our medium-term targets.
H1 22 financial performance
· Financial performance impacted during a period of significant transformation for the Group and by lower market instructions
· Instructions fell by 38% to 21,131 (H1 21: 34,150), but average revenue per instruction (‘ARPI’) increased by 15% to £1,642, driven by higher attachment rates, pricing optimisation and phasing of higher conveyancing income
· Total fee income decreased by 29% to £34.7m (H1 21: £48.8m), with the reduction partially offset by the increase in ARPI. Revenue was down 7% to £41.3m (H1 21: £44.2m), benefiting from revenue earned in the prior period
· Our market share of properties sold by volume was 3.9%9, down from 4.8% last year
· Adjusted EBITDA loss of £0.8m (H1 21: profit of £8.4m)
· Loss from total operations of £20.2m including a provision of £3.6m relating to potential claims arising from process issues within our lettings business, £2.7m relating to impairment of goodwill and other intangible assets in the lettings business, and a charge of £7.3m arising from derecognition of deferred tax assets in H1 22 (H1 21: profit of £6.8m, including £2.9m from discontinued Canadian operations)
· Cash and cash equivalents at 31 October 2021 of £58.3m (30 April 2021: £74.0m), reflecting trading activity and a number of one-off and non-recurring items.
Lettings
· We have taken appropriate and swift actions to address the process issues that we became aware of within our lettings business in December
· We are very confident that all issues are being addressed and the business has stabilised
· The provision10 of £3.6m is towards the lower end of our previous guidance.
Outlook
Since the period-end, we have continued to see a significant imbalance between the strong demand for housing and a very limited supply of stock, which has driven house prices higher. Although housing supply has increased in January, we expect these market dynamics to continue through the second half of our financial year, which will continue to impact instructions and gross margins. In addition, the comparable performance will also be impacted by the expected increase in costs associated with our transition to a fully employed model.
Set against these market challenges, we are greatly encouraged by the positive signs we are seeing in our operational performance since we implemented our new operating model. We are confident that the steps we have taken to improve the business will drive a return to growth and market share gains in 2023.
Vic Darvey, Purplebricks Group CEO, commented:
“The first half was undoubtedly challenging, with the implementation of a major change to our operating model coinciding with the UK property market experiencing a substantial fall in new instructions. This dynamic led to a disappointing financial performance but we are confident that we now have the right levers in place to drive a stronger financial performance going forward. Central to our business transformation, is our move to a fully employed workforce which we are confident will increase conversion rates, drive higher standards and improve customer outcomes. Early signs are encouraging with recent rises in conversion levels and market share gains.
“Our lettings business, while relatively small, has significant potential. We were disappointed by the process issues that we became aware of in our lettings business in December. These are being corrected and a root and branch review of the lettings business has been completed in relation to our processes and procedures.
“Looking ahead, the outlook for the housing market remains uncertain and we expect the constrained levels of sales supply to continue throughout the second half. The initial results from our operational improvements are very encouraging and there are early signs of improving market conditions during January, although we do not anticipate a meaningful financial benefit until FY 23.”
Notes:
1 The underlying performance of the Group is monitored internally using a number of alternative performance measures (“APMs”), which are not defined within IFRS. Such measures should be considered alongside the equivalent IFRS measures. For full definitions and reconciliations of APMs, please refer to note 4. Adjusted EBITDA is defined as operating profit, adding back depreciation, amortisation, share-based payment charges / credits, results of associates and exceptional items.
2 As detailed in the financial review, there have been changes to four KPIs (Instructions, ARPI, Total Fee Income and Cost Per Instruction) in the prior year, while the names of these KPIs remain the same. The current and previous definitions and half on half movements under both methods are set out in the financial review.
3 Total fee income is a KPI used by management to track income from current activity levels. Total fee income is a non-IFRS measure and represents fees receivable for instructions and mortgage referrals and conveyancing fees due in relation to completed transactions. This definition has been amended since H1 21.
4Instructions represents instructions net of refunds. This definition has been amended since H1 21.
5 Average revenue per instruction (ARPI) equates to total fee income, divided by instructions. This definition has been amended since H1 21.
6 Pro package attachment rate is the percentage of customers who select the higher priced instruction offering which includes assisted viewings and 3D Tours.
7 Conversion is the percentage of customers who choose to instruct Purplebricks following a valuation appointment attended.
8 Source: Rightmove.
9 Source: TwentyCi.
10 The basis of estimation for this provision is set out in note 3.5, together with the judgements, assumptions, and uncertainties the Board have considered.
