EYE NEWS UPDATE: Purplebricks Half Year Results Published

Purplebricks has just issued its half year results for the six months ended 31 October 2021.

The online estate agency says that it is on course to meet full year expectations, with its ‘turnaround plan’ being delivered at pace.

Highlights:

· Stabilised instruction numbers

· Annualised cost savings increased from £13m to £17m

· Purplebricks Financial Services launched five months ahead of plan

· New marketing campaign from October driving 6ppts increase in consideration

· Financial benefits of the plan will start to come through in H2 and drive positive cash generation early in FY24

Summary performance	H1 23 £m	H1 22 £m	% change
Group
Revenue	34.5	41.3	(16)%
Gross profit	16.2	26.2	(38)%
Gross profit margin %	47.0%	63.4%	(16.4)ppts
Adjusted EBITDA1	(8.4)	(0.8)	(950)%
Operating loss	(11.7)	(11.1)	(5)%
Loss from total operations2	(14.6)	(20.2)	28%
Cash and cash equivalents	31.3	58.3	(46)%
KPIs
Total fee income3	34.4	34.7	(1)%
Instructions4	21,205	21,131	-%
Average revenue per instruction5	£1,624	£1,642	(1)%

Helena Marston, CEO, commented: “The turnaround plan is working and is being delivered at pace, with the financial benefits starting to come through in the second half of the year. We have taken further steps to reduce our cost base, from an initial £13m of annualised savings to £17m, while also investing in our strategic priorities and increasing the efficiency of our field.

“Our plan to diversify revenue streams and build a more scalable, balanced business, with less reliance on instructions is gaining momentum. We launched our new mortgage proposition last month, five months ahead of plan, and are rapidly scaling our conveyancing services to the buyer segment of our customer base.

“Our plan to drive instructions is now underpinned by a better understanding of the areas where we know we can win and initiatives to drive profitability in each of them.

“We are ever mindful of the current economic environment. Our relevant, low-cost proposition, effectively communicated via our new marketing campaign, supports our customers and is especially attractive in these economically challenging times.

“I am confident that the progress we are making and the initiatives we are implementing to drive better performance in the field, together with the additional cost actions to ensure we are a leaner, more efficient organisation, underpin our full year expectations including a return to positive cash generation in early FY24.”

Financial performance

· Instructions stable at 21,205 (H1 22: 21,131), with average revenue per instruction (‘ARPI’) down 1% at £1,624 (H1 22: £1,642)

· Total fee income also down 1% at £34.4m (H1 22: £34.7m), reflecting the stable level of instructions and ARPI. Revenue was £34.5m (H1 22: £41.3m), in line with expectations, the reduction reflecting the impact of movements in deferred and accrued income (in respect of both instructions and conveyancing respectively), which flattered H1 22

· Gross profit margin of 47.0% (H1 22: 63.4%) reflecting the increase in fixed cost base following the transition to an employed model in September 2021, which is in line with our expectations

· Adjusted EBITDA loss of £8.4m (H1 22: loss of £0.8m) reflecting lower revenue and as a result of the investments made in the period, including the change to an employed model

· Loss from total operations of £14.6m net of finance expense (H1 22: loss of £20.2m also reflecting a tax charge of £7.3m)

· Cash and cash equivalents at 31 October 2022 of £31.3m (30 April 2022: £43.2m), reflecting the loss in the period

Good progress made against plan to drive positive cashflow and return to profitability and growth

· £13m of cost saving actions taken in H1. Further cost reductions being implemented and expected to deliver £17m of annualised total savings, enabling us to invest in our strategic priorities and drive new revenue streams

· Significant progress building new revenue streams to reduce reliance on instructions. Mortgage business launched ahead of plan and sales of conveyancing to viewers being digitised through H2 following highly successful launch in Q2 of FY23

· ‘Go-to-Market’ strategy work required to drive profitability completed and shifting to implementation phase in H2

· Multiple sales excellence initiatives being implemented to continue growth in conversion (up 170bps in H1), field efficiency, customer service and ARPI, all underpinned by improved performance management

· New marketing and creatives developed with launch of proven ‘Commisery’ campaign in October which has driven higher awareness and consideration scores, key measures of its effectiveness

Outlook and guidance

· Reiterating FY23 revenue guidance to be between £67.5 – £72.5m

· FY23 EBITDA expected to be in line with market consensus⁶

· Positive cash generation expected in early FY24

A video presentation and live Q&A for analysts and investors will be given at 8.30am by Marston and Dominique Highfield, chief financial officer.

The latest trading figures have been revealed just over a week before the online estate agency is due to hold an emergency general meeting at which investors will discuss the potential removal of Paul Pindar as chairman of Purplebricks, and Harry Hill, former chairman and CEO of Countrywide and co-founder of Rightmove, is appointed to the Board.

Activist investor Lecram Holdings Limited, beneficial owner of a 5.16%% stake in Purplebricks, wrote to the Board of the Company last month to request a general meeting where it will propose the senior change.

The general meeting will be held at 10am on 19 December 2022 at the offices of Norton Rose Fulbright LLP, 3 More London Riverside, London SE1 2AQ.

The following two ordinary resolutions will be proposed to shareholders for consideration at the general meeting:

· A resolution to remove Paul Pindar as a director of the Company; and

· A resolution to appoint Harry Hill as a director of the Company.

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