Purplebricks Group plc (LON:PURP), a leading UK technology-led estate agency business, has announced its half year results for the six months ended 31 October 2020.
| Summary performance | H1 21£m | H1 201£m | Change |
| Group – continuing operations1 | |||
| Revenue | 44.2 | 47.1 | -6% |
| Gross profit | 29.6 | 30.0 | -1% |
| Gross profit margin (%) | 67.0% | 63.7% | +330bps |
| Operating profit / (loss) | 6.9 | (0.2) | n/a |
| Adjusted EBITDA2 | 8.4 | 4.0 | +110% |
| Cash at period end | 75.8 | 41.6 | +82% |
| KPIs – UK | |||
| Total fee income3 | 49.1 | 46.3 | +6% |
| Instructions (number) | 35,387 | 32,850 | +8% |
| Average revenue per instruction4 | £1,392 | £1,353 | +3% |
Financial and operational performance
· 4.8%5 share of properties sold by volume
· Total instructions increased by 8% to 35,387 (H1 20: 32,850)
· Instructions increased by 20% in the five months since May, post the market reopening
· Average revenue per instruction (‘ARPI’) increased by 3% to £1,392 (H1 20: £1,353)
· Total fee income3 increased by 6% to £49.1m (H1 20: £46.3m)
· Revenue of £44.2m, down 6% (H1 20: £47.1m), due to instruction revenue recognition
· Adjusted EBITDA increased by 110% to £8.4m (H1 20: £4.0m)
· Operating profit increased to £6.9m (H1 20: loss £0.2m), including £3.3m non-trading items6
· Group consolidated profit for the period of £6.8m (H1 20: loss of £14.1m)
· Cash increased by £44.8m since the year end to £75.8m (30 April 2020: £31.0m).
Progress in strategy execution
· The business has performed strongly in the period since the market shutdown ended, with buoyant trading supported by strong market recovery
· Purplebricks has never been more relevant, with brand awareness and consideration at record levels
· We demonstrated the strength of our model with the ability to continue to service customers during lockdown with virtual capabilities
· Our leadership team has been further strengthened with the appointment of new Chief Digital and Chief Marketing Officers
· Clear evidence consumers are starting to shift towards apps and tech-based alternatives
· Strategic initiatives under our House Strategy continue to be executed at pace
· The disposal of Canadian business gives us the financial strength to focus on our UK growth opportunity
Outlook
Whilst there are reasons to remain cautious on the economic outlook, we are confident in the levers which are under our control, and we currently expect adjusted EBITDA for the full year to exceed the upper end of the current range of consensus7.
Vic Darvey, Chief Executive Officer, commented:
“Purplebricks has delivered a strong performance in the period with instructions up 8% and total fee income growth of 6%, despite the UK housing market being disrupted through the height of
COVID-19. This continued momentum demonstrates the strength of our technology-led business model and our ability to adapt quickly to a changing market.“I am proud of the way we responded to the COVID-19 crisis, which demonstrated our ability to deliver our improved virtual capabilities to our customers throughout the period. We made sure we looked after our people when things got tough, we adapted quickly to new ways of working, and we enhanced our technology to make it easier and safer for customers to do business with us.
“We are now emerging from the pandemic in a very strong competitive position. As a result of continued financial discipline and operational excellence across the business we have experienced strong growth in adjusted EBITDA, up 110%, and a significant improvement in cash generation compared to last year.
“Our focus for 2021 will be to re-accelerate the growth of our core business by continuing to enhance our digital innovation, our virtual capabilities and increasing agent productivity through automation and efficiency. This period has shown that our technology-led business model is now more relevant than ever, as customers continue to shift to being more comfortable buying and selling their homes digitally.”
1 Continuing operations now represents the UK segment only with H1 20 restated. The results of our Canada business up to its disposal on 15 July 2020 and of our discontinued Australian and US operations for the prior period are presented in note 6.
2 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 / joint ventures and exceptional items.
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 published instructions, lettings and mortgage referrals; and conveyancing fees due in relation to completed transactions.
4 ARPI: Average revenue per instruction equates to total fee income excluding lettings, divided by the number of instructions published in the period.
5 Source: Twenty CI.
6 These non-trading items are a share-based payment credit of £1.9m and a gain of £1.4m on deemed disposal relating to the investment in Homeday, and are discussed in the Financial Results section.
7 As at 14 December 2020, the Group’s compiled full year 2021 consensus for adjusted EBITDA is £7.0m, ranging from £5.0m to £10.6m.
Results presentation and conference call
Vic Darvey, CEO and Andy Botha, CFO are streaming a video presentation of results via webcast at 9.00am today followed by a live Q&A session for analysts and investors.
The video webcast link is via the webcast registration page and on the website. A replay will also be available on the Purplebricks website following the Q&A session at http://www.purplebricksplc.com/investors/latest_results.
Chief Executive’s review
Summary performance
Trading has been strong since the market opened up in May, and our first half performance is ahead of our upgraded expectations. We have seen a strong market recovery during the period – overall we delivered an 8% increase in instructions, with a 20% increase in instructions for the five months since May. Meanwhile, our overall share of the market has remained stable at 4.8% of properties sold.
As a result of continued financial discipline and operational excellence across the business, we have experienced very strong growth in our adjusted EBITDA, up 110% vs last year. Excluding the Canada sale, we have also generated cash from operating activities of £13.6m, compared to consuming £14.1m in the same period last year.
We are now emerging from the pandemic in a strong competitive position. During the first half of the year, we have continued to simplify the business and focus on the delivery of our House Strategy, details of which are outlined below. This has included the disposal of our Canadian business, which has considerably strengthened our cash position and allowed us to focus fully on our home market once again. We have also strengthened our leadership team with the appointment of a number of new hires across the business to ensure that we have the right capabilities to continue to deliver our digital transformation program.
As we move into the second half of the year, we strongly believe that technology-led estate agency is continuing to emerge as the winning model. Purplebricks has never been more relevant, with prompted brand awareness at 98%, its highest ever level. We are starting to see evidence that consumers are shifting towards apps and tech-based alternatives, and with our strengthened leadership team and balance sheet, we are in a strong position to accelerate our model and extend our market leadership.
Building a business for the future
We have worked hard this year to strengthen our business and restructure the organisation to deliver on our strategic pillars.
Our priorities for building our business for the future are clear: we need to evolve our pricing model; we need to achieve the best possible performance in the field; and we need to go even faster in Tech, introducing new products and features to the market to ensure we continue to improve the home moving experience for UK consumers.
House Strategy – delivering against our strategic objectives
Evolving our pricing
Whilst our first half performance has confirmed that the up-front fee model still resonates with consumers in the UK, we continue to look at ways to evolve our proposition, exploring new pricing models and introducing new proposition bundles that will help us to expand our target market.
We started in-field tests at the end of August and these will continue in 2021. Early lead indicators have provided valuable data on the penetration of new customer segments but it’s far too early to assess the likely outcome of our trials, especially given the current lag in the time it’s taking to completion.
Further iterations of pricing tests are being launched in calendar Q1 21 and we look forward to reporting back on those tests at our Full Year results.
Estate agent of the future
We are creating the best home moving experience by redefining the end-to-end customer journey. Innovation is the key to that journey, with better personalisation that brings us closer to the customer.
In the first half, we continued to invest in technology and in building out our engineering capability and I’m pleased to say that we now have a new Chief Digital Officer on board as well as a new Head of Product.
Already the new team are starting to drive a step change in our customer experience with
a clear focus on improving our virtual capabilities and enhancing our visual content, having introduced interactive 3D tours and video trailers and re-designed our search and listings functionality.
With the ever-increasing adoption of mobile, we’ve also increased our resources in this area to deliver an easier, faster and simpler experience on our mobile app.
Our focus for the rest of the year will be to re-accelerate the growth of our core business by continuing to enhance our digital innovation and our virtual capabilities and increasing agent productivity through automation and efficiency.
Enhancing performance in the field
We’re empowering our people to improve their effectiveness and efficiency in the field. The use of real-time analytics and market data will improve sales conversion in the living room, and, by getting closer to our customers, we are confident we can sell more ancillary services.
We have scaled our team of Local Property Experts, and placed a stronger focus on training, recruitment, retention, and talent management in the first half of the year.
Following the restructuring of our field teams in March, we have redesigned our agent support structure, ensuring that we start to deliver a more consistent and improved performance across all regions.
We’re introducing a new value proposition to bring to life our culture and values in the living room. We’re starting to implement a new target operating model to drive a strong sales culture balanced by high quality service standards. We’re also introducing a new talent tool to help Territory Operators recruit, train and retain the best agents in the field.
Lastly, as we continue to evolve our journey as a digital business, we’re launching a new initiative called “Your key to PB” providing continuous training modules and learning opportunities for everyone in the field.
Transforming our customer processes
We are building for scale, by transforming our platform and processes. Over the last six months we’ve made significant investments in both people and technology to improve the level of service provided to customers and to focus the business on selling more houses.
The improvements we’ve seen in the year have been validated with our Net Promoter Score of 77 at the half year and we continue to be the most positively reviewed estate agent in the category.
We’ve also recently been awarded the Gold Trusted Service Award for the second year running by our review provider Feefo which is a great endorsement of our improving service levels.
Over the last six months we have continued to invest further in technology to deliver innovative customer processes for improved service and scaled growth, including the delivery of automated anti-money laundering checks for sellers. We have also started work on a number of other initiatives including self-certification through facial recognition and automated anti-money laundering checks for buyers and the automation of processes for property management in our lettings business.
