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TODAY'S OTHER NEWS

Purplebricks posts £52m loss, 55% revenue rise and confirms US withdrawal

Purplebricks has revealed its annual results for the year ending April 30 2019. 

The hybrid agency has posted an operating loss of £52.3 million, up from £27.8 million in 2018. It does, however, report a UK operating profit of £5.3 million.

It reports total revenue up by 55% to £136.5 million and UK revenue up by 21% to £90.1 million.

As expected, the agency has also announced that it will be withdrawing from the US market following a review launched in May. 

The agency says its decision to withdraw from both the US and Australian property markets this year will allow it to 'significantly reduce cash burn going forward'.

In the year to April 30, the agency completed on over £10 billion of UK property with average revenue per instruction at £1,243, up by 6%.

Purplebricks also claims to have 76% share of the online agency market.

"It’s been another year of strong revenue growth and we continue to build a highly relevant disruptive brand and defensible position in the market," says Vic Darvey, Purplebricks chief executive.

"We have taken the difficult decisions to exit our businesses in both Australia and the US as it is very important that we now focus our resources on the UK and Canada, where we have a strong established presence and where there are significant opportunities to grow market share and deliver profitable growth for shareholders." 

"Both exits will be conducted in an orderly manner with the expectation they will be completed by the end of 2019."

In the outlook section of the results, the agency says it has 'fundamentally changed the estate agency market' in the five years since its launch. 

The agency adds that it believes its 'technology-led proposition' will enable it to take market share from traditional agents. 

Purplebricks says it intends to continue investing in its brand, technology and product development, but will ensure greater control over 'cash management and generation'.

It says that rapid expansion into international markets in recent years has been 'distracting' and that this has caused its product and technology teams to be 'stretched to the limit'.

You can see the full results here.

This time last year the agency's full-year results revealed UK revenue up 81% and online market share of 74%. The figures also revealed pre-tax losses of £26 million and marketing costs of £42 million.

Last week, the agency published a range of figures compiled by TwentyCi, including claims that Purplebricks is the fastest selling agency brand in the UK and that on average it achieves the second highest price for a property out of the top 10 agents in the UK

Data from the Advisory, published on Monday, shows Purplebricks’ share of the online estate agency sector is now over 70% and that it listed 2,618 new properties over the previous two-week period.

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    Revenue up 55% and a £52 million loss? interesting one!

  • Kit Johnson

    The article says Purplebricks have fundamentally changed the estate agency market in the last 5 years.

    I could not agree more, never in my 28 years have High Street agencies been held in such high regard, the public are really now beginning to understand there is so much more to selling a house than listing it, thanks in large part to on line "agents".

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    Kenny Bruce ...... I will be back !!!!
    How funny he should come back as an aggressive Terminator that would suit his style :)
    The amount of crap everyone had to put up with from this guy just makes me laugh as now he has had to leave the firm. Could not happen to a nicer chap...
    High Street agents now have a 97.2% market share great times ahead. Bye Bye Kenny for now :)

  • Kristjan Byfield

    Anyone know what the actual UK figures are (not EBITDA fantasy)?

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    So the recent article posted a week or so ago on EAT said High Street agents have a massive 97.2 per cent market share. Purple bricks have 76% of the remaining 2.8% so scraping the barrel with around 2% market share. Refreshing that only 2.8% of the public are blinded by the thought of saving a few quid on fees. I thought it would be more so at least more people can see the value of agents (real agents that is), the true salesmen & women who proactively handle the sale, understand their buyers needs and can extract the best price for their clients rather than the onliners who just flop it online and waiting for the online viewing requests to come in.

  • Andrew Stanton Estate Agency Insights Strategies

    Cash Management Cash Generation and Cash Burn.

    In 12 months PB have burned through 90M of their cash. Or burnt 7.5M every month for the last 12 months.

    A year ago Purplebricks had 152.8M of cash, now they have only 87.8M.

    Regarding the UK arm of the company, the supposedly profit making part, the Purplebricks balance sheet is very creative.

    In the period 2017 – 2018 (3rd July) it states that in the UK it made 74.4M in revenue, and the cost of sales was 31.3M, giving a gross profit of 43.1M, or gross profit of 57.9%.

    But, then in the next line down in the accounts, when admin costs of 19.5M are added in, and marketing costs of 21.4M are added in the operating profit is 2.2M (not 43.1M).

    2.2M as % of 74.4M revenue = 2.9% return.

    Also, it had 152.8M cash as a war chest to trade forward as of July 2018.


    In the period 2018 – 2019(3rd July) it states that in the UK it made 90.1M in revenue, and the cost of sales was 33.3M, giving a gross profit of 56.8M, or gross profit of 63%.

    But, then in the next line down in the accounts, when admin costs of 24.8M are added in, and marketing costs of 26.7M are added in the operating profit is 5.3M (not 56.8M).

    5.3M as % of 90.1M revenue = 5.8% return.

    But, the company as a whole had no longer got 152.8M cash as a war chest to trade forward, this had reduced 62.8M over the 12 month period.

    So, the company had burnt through 90M in 12 months, or 7.5M a month.

    Given that Axel Springer injected over 130M into the company in the recent past, when the share price was three times its present level, it is unlikely that a further round of funding will happen.

    Which means that even with closing down operations in Australia and America, commissary to all those self-employed realtors, the cash burn will continue for the scaled down Purplebricks model, with over 30M a year used in tv and other advertising alone, to keep the brand alive.

    Even if the cash burn is only 3M a month, in a year that is 36M, and as can be seen increased revenue in the UK, has only yielded a wafer thin return, so even if the average fee was to rise another £100 and revenue was 120M in the UK next year, the admin and marketing costs will grow even larger.

    And it could be a case that they make a 5M profit, but the cash to trade forward will dwindle by year end 2020 to only 26.8M or less than 9 months of capital to trade forward into 2021.

    What the accounts actually show is that the true cost of the sale for the Purplebrick online brand is prohibitive, as in;-

    In 2017 – 2018 is 74.4M monies in, 31.3M + 19.5M + 21.4M monies out, or 74.4M monies in, 72.2M monies out. Giving a true cost of sale of 97% of revenue generated.

    And in 2018-2019 is 90.1M monies in, 33.3M + 24.8M + 26.7M monies out, or 90.1M monies in, 84.8M monies out. Giving a true cost of sale of 94% of revenue generated.

    So the other money or cash washing around Purplebricks – comes not from making vast trading profits, but from raising capital from private investors and then from investors, private and blue chip companies when it was launched on the Alternative Investment Market.

    The allure of the company and its perceived value is that it has few fixed tangible assets or employees, though HMRC are likely to think that the Pimlico Plumbers have a lot in common with the self-employed LPE’s, but without high street premises (those assets), the company is forced to continue spending a multi-million budget on reminding the public that they exist.

    All financials taken from the Purplebricks - accounts as posted today.

  • Paul Barrett

    I read somewhere that Uber will never make a profit.
    A bit like PB!
    For investors it is a bit like a giant Ponzi scheme.
    Perhaps individual High St EA should offer shares in their actually profitable businesses!

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