Half Year Results
08/12/2022 07:00
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RNS Number : 9785I Purplebricks Group PLC 08 December 2022
08 December 2022
Purplebricks Group plc
("Purplebricks", the "Company" or the "Group")
Half Year Results for the six months ended 31 October 2022
On course to meet full year expectations, turnaround plan being delivered at
pace
Purplebricks Group plc (AIM: PURP), the UK's leading tech-led estate agency
business, announces its results for the six months ended 31 October 2022 ("H1
23" "H1" or the "first half").
· 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 H1 22 %
£m £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 EBITDA(1) (8.4) (0.8) (950)%
Operating loss (11.7) (11.1) (5)%
Loss from total operations(2) (14.6) (20.2) 28%
Cash and cash equivalents 31.3 58.3 (46)%
KPIs
Total fee income(3) 34.4 34.7 (1)%
Instructions(4) 21,205 21,131 -%
Average revenue per instruction(5) £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 consensus(6)
· Positive cash generation expected in early FY24
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) Includes a charge of £1.1m relating to business restructuring and £0.2m
relating to exit of former director.
(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.
(4) Instructions represents instructions net of refunds.
(5) Average revenue per instruction (ARPI) equates to total fee income,
divided by instructions.
(6) FY23 consensus EBITDA £(8.8)m (range £(11.3)m - (4.0)m)
(7) Market share - source Rightmove
Results presentation and conference call
Helena Marston, Chief Executive Officer, and Dominique Highfield, Chief
Financial Officer are streaming a video presentation of results via webcast at
08.30am today followed by a live Q&A session for analysts and investors.
The video webcast link is via the webcast registration page at
https://stream.brrmedia.co.uk/broadcast/637f8c6e67d69d6f0706597f
(https://stream.brrmedia.co.uk/broadcast/637f8c6e67d69d6f0706597f) and on the
website.
A replay will also be available on the Purplebricks website later today at
https://www.purplebricksplc.com/investors/results-reports-presentations/
(https://www.purplebricksplc.com/investors/results-reports-presentations/) .
Enquiries
Purplebricks
Dominique Highfield, Chief Financial Officer
Peter Hewer, Director of Corporate
Affairs
Equitory, Investor
Relations
investors@purplebricks.com
Zeus (Nominated Adviser & Broker)
Jamie Peel, James Hornigold (Investment Banking)
+44 (0)20 3829 5000
Benjamin Robertson (Corporate Broking)
MHP Communications
Charles Hirst
+44 (0)7595 461 231
Forward-looking statements
This announcement includes statements that are, or may be considered to be,
"forward-looking statements". By their nature, such statements involve risk
and uncertainty since they relate to future events and circumstances. Results
may, and often do, differ materially from forward-looking statements
previously made. Any forward-looking statements in this announcement reflect
management's view with respect to future events as at the date of this
announcement. Except as required by law or by the AIM Rules of the London
Stock Exchange, the Company undertakes no obligation to publicly revise any
forward-looking statements in this announcement following any change in its
expectations to reflect subsequent events or circumstances.
About Purplebricks
Purplebricks is a leading technology-led estate agency business, based in the
UK. Purplebricks combines highly experienced and professional Local Property
Partners and innovative technology to help make the process of selling, buying
or letting more convenient, transparent and cost effective. Purplebricks
shares are traded on the London Stock Exchange AIM market.
Chief Executive's statement
Summary
In August I set out our plans to dramatically improve the performance of
Purplebricks, to stem the cash burn and return this business to profitability
and ultimately growth. In the four months since we last reported, we have made
good progress. Our financial performance in the first half, whilst not where
it needs to be, is in line with expectations. We continue to work at pace to
deliver what is required across every part of the business.
Our overall financial performance was stable during the first half compared
with the comparable period. Total fee income(3), the purest measure of our top
line performance, was down 1% at £34.4m (H1 22: £34.7m), reflecting a
consistent level of instructions of 21,205(4) (H1 22: 21,131). At this level
of instructions, market share stood at 2.8% (FY 22: 3.6%). 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.
Average Revenue Per Instruction (ARPI)(5) also remained relatively stable at
£1,624 (H1 22: £1,642) as higher average fees for part of the period and
higher pro-pack sales were offset by the timing of receipts for conveyancing
income.
Adjusted EBITDA1 was a loss of £8.4m (H1 22: loss of £0.8m), reflecting
lower revenue, lower gross margin and an increase in adjusted operating costs.
The operating loss was £11.7m (H1 22: loss of 11.1m).
We have continued to take action to drive the improvements required to turn
around our financial performance. We have reduced the cost base significantly
in H1 and are now going further as we seek to become a much leaner, more
efficient organisation. We have made good progress in our plans to diversify
revenues and reduce our reliance on sales. We are particularly excited to
have been able to launch our new mortgage proposition ahead of plan, testament
to the hard work of our mortgage team and the new ways of working we have
adopted across the business.
Our plan to grow instructions is enabled by our 'Go-to-Market' strategy. This
strategy has validated the areas in which we are active to ensure we can drive
profitability in each of them, bringing the business back to profitability and
creating the foundation to scale it further. We now have a better
understanding of our demand drivers, enabling us to generate predictable
growth and capture market share. Operational excellence also forms part of the
'Go-to-Market' strategy. We have implemented multiple sales excellence
initiatives to improve conversion, field efficiency, customer service and
ARPI, all underpinned by a culture of better performance management.
It was exciting to see the launch of our 'Commisery' campaign in October and
the early indicators of its impact are very encouraging. I am looking forward
to seeing the further impact it will have in the second half.
Operational review
We have a clear plan to deliver a turnaround in performance, a return to
positive cash flow and profitability, and a scalable business model. Our plan
strikes a balance between driving short term improvements in performance
alongside a plan to drive long term, sustainable growth. It focusses on four
key objectives: cutting costs, growing and diversifying revenues, growing
instructions, and raising standards.
We have made good progress against the plan for the first half and we expect
to report further progress at year end.
1. Cutting costs
In August we set out plans to reduce the total annualised cost base by £13
million during FY23. This was achieved principally through a reduction in
marketing spend alongside a reduction in overall headcount. This has reduced
the excessive overhead in our business, protecting our assets and leaving us
leaner and healthier, ready for growth.
We have now moved to phase two of our cost cutting plan taking us from an
annualised £13 million to £17 million annualised cost savings.
2. Growing and diversifying revenues
Diversifying revenues is a strategic imperative and we have moved at pace to
identify the short term and longer-term opportunities available to us.
Mortgages
In August we announced we would launch a new mortgage proposition by the end
of the financial year which would see us become an Appointed Representative.
We received all the necessary regulatory approvals in September and launched
Purplebricks Financial Services ("PFS") on 1 November, five months ahead of
plan.
Our new mortgage model allows us to control the end-to-end customer journey
and receive a threefold increase in revenue per mortgage. It also provides
us with the opportunity to sell additional financial products, such as
insurance, to our customers, as well as generate repeat business when
customers look to re-mortgage or renew other financial products.
We are taking a compliance-led, disciplined approach and are scaling this
business in a phased approach, to match our resources with the growth in
demand.
We look forward to sharing the progress we are making at our full year
results.
Conveyancing
Conveyancing services accounted for approximately 17% of our revenues in the
period and are principally generated from our vendor customer base.
To accelerate revenue growth from conveyancing, we decided to launch the
buyer's side ahead of the tech being ready. The roll out was supported by
manual intervention that has exceeded expectations with 25% of viewers
contacted agreeing to receive a quote. We are working at pace to digitise the
process with a planned launch in Q3, to enable higher volumes of viewer
contacts and to improve efficiency.
The success from the first stage of the roll out gives us confidence for the
potential to generate significant additional income in future years from
conveyancing without the need for additional resources. We will provide an
update on the progress being made at the full year results.
Lettings
Our number one priority in lettings is to improve the customer experience and
ensure we retain the landlords we have, as well as looking at how we scale
this part of our business.
We remain excited about the significant opportunity there is for Purplebricks
in the lettings market and look forward to setting out the growth plans for
lettings at full year results.
Other ancillary revenues
We are continuing to review opportunities to offer relevant or complementary
products and services to buyers and sellers, as well as ensuring we maximise
every opportunity within the property ecosystem to increase ARPI and provide a
simple and transparent customer experience.
3. Growing instructions
In August, I said we would no longer try to be everything to everyone, which
was neither efficient nor effective. Instead, we would work to identify the
customer segments and locations where we were most likely to win. Our
'Go-to-Market' strategy work is complete and we now have a clear strategy to
align our workforce and marketing efforts to focus on the areas where there is
high demand and where we can achieve profitable, predictable and targeted
growth. This approach, combined with the initiatives we are implementing to
deliver higher conversion, efficiency and customer service, will be executed
during the second half of the year.
Marketing
We kicked off our 'Commisery' marketing campaign in October and the early
indicators of its impact are very encouraging. Since the launch, our brand
awareness has remained strong and our consideration score has increased by
6ppts. With a clearer understanding of where we will play, we have started to
aggressively market out of home and on social channels in key cities. We are
confident that through targeting customers who are within our core segments
today, this density will drive organic growth and we will therefore adopt
other customers outside of our typical segments.
In summary, our 'Go-to-Market' strategy will enable us to create a profitable
business by focussing our resources in the right areas.
4. Raising standards
We continue to review our standards as a business both for our employees
and customers. Our performance culture continues to embed across the
organisation and this has allowed us to become a leaner business.
We continue to review our processes and procedures to ensure we are operating
within relevant guidelines and ensure that we keep our customers safe and give
them the best possible experience.
Board and leadership
Ensuring we have the right blend of relevant expertise and capabilities within
the Board and Executive Leadership Team has been a key priority.
Dominique Highfield joined the Group and the Board as Chief Financial Officer
on 1 November following a successful career with a number of large, well known
retail brands including Amazon and Sainsbury's. As well as her financial
acumen, she also brings strong strategic and commercial insight alongside
energy and determination.
Adrian Gill and Gareth Helm joined the Board as non-executive directors on 1
October. Both are highly experienced executives with property and marketing
expertise. Following their appointments, Adrian Blair stood down as
non-executive director after four years as a member of Purplebricks'
Board.
Having the right blend of skills and capabilities within the Board to support
the Executive Leadership Team is key to our ability to deliver the performance
improvement plans we have set out and position us for growth when the time is
right.
Summary and outlook
We have made good operational progress during the first half and remain
committed to the delivery of our performance improvement plans.
We are confident our marketing campaign will highlight the benefits of our
low-cost proposition which is well placed for today's 'cost of living'
environment. The additional cost actions we have taken, alongside the
initiatives we are implementing to drive better performance in the field, also
underpin our full year expectations including a return to positive cash
generation in early FY24.
Our plans to diversify revenue streams are being implemented at pace. We
expect to report further progress on our initiatives to grow mortgages,
conveyancing, lettings and other ancillary services at our full year
results.
Financial review
The first half of this year has seen Purplebricks invest in future growth,
through new marketing creatives and redesigning of our organisation.
Instructions remained flat year on year and fee income was down 1%, yet the
reported revenue number has declined 16% year-on-year, 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.
The gross profit percentage of 47% is in line with our expectations and is
lower than the prior year given the move to an employed model, this being a
further investment into our growth and improvement of standards.
A clear plan is in place to return to profitability and growth; actions have
already been taken to address the cost base, improve ARPI and increase the
number of instructions. The Group retains headroom in cash resources to
deliver against our plans to turn the business around.
Group UK
For the six months ended 31 October H1 23 H1 22 Change H1 23 H1 22 Change
Revenue 34.5 41.3 (16)% 34.5 41.3 (16)%
Cost of sales (18.3) (15.1) (21)% (18.3) (15.1) 21%
Gross profit 16.2 26.2 (38)% 16.2 26.2 (38)%
Gross profit margin 47.0% 63.4% (16.4)ppts 47.0% 63.4% (16.4)ppts
Adjusted operating costs (14.2) (12.5) (14)% (14.2) (12.5) (14)%
Marketing costs (10.4) (14.5) 28% (10.4) (14.5) 28%
Adjusted EBITDA (8.4) (0.8) (950)% (8.4) (0.8) (950)%
Depreciation and amortisation (2.1) (1.6) (31)% (2.1) (1.6) (31)%
Share-based payment credit 0.1 1.1 (91)% 0.1 1.1 (91)%
Exceptional items (1.3) (8.3) 84% (1.3) (5.6) 77%
Share of results of associate - (1.5) n/a - - n/a
Operating (loss)/profit (11.7) (11.1) (5)% (11.7) (6.9) (70)%
Key Performance Indicators (KPIs)
KPI Definition H1 23 H1 22 Change
Instructions Number of instructions won in the year, net of the number of instructions
refunded in the year
21,205 21,131 -%
Total fee income Fees receivable in respect of instructions (as defined above excluding Money £34.4m £34.7m
Back Guarantee provision) and mortgage referrals, and conveyancing fees due in
respect of completed transactions (1)%
ARPI Total fee income divided by the number of instructions in the year
£1,624 £1,642 (1)%
CPI Marketing costs divided by the number of instructions in the year £490 £686 29%
Revenue
H1 23 saw a relatively flat period-on-period performance in terms of number of
instructions. Our performance slowing against the market is as a result of
the overhaul of our Go-to-Market strategy and of a reorganisation of our
people. Both these actions have caused short-term disruption, but have been
taken to position the Group for improved future performance.
A 1% decrease in the average revenue per instruction (ARPI) to £1,624 (H1 22:
£1,642) reflected upside from our price increase effective from July 2022 and
additional Pro Package attachment rate in H1 23, however this was more than
offset by the timing of receipts of conveyancing income. These factors led to
an overall 1% decrease in total fee income (as defined above), at £34.4m (H1
22: £34.7m).
H1 23 revenue overall saw a period-on-period reduction of 16% to £34.5m (H1
22: £41.3m) despite flat instructions in H1 23 and H2 22, primarily
reflecting activity levels in each period. H1 22 benefitted from high
instruction levels towards the end of FY21, compared with FY22, revenue for
which was partly recognised in H1 22. Conversely, instruction activity has
increased through H1 23, meaning that higher revenue is deferred into future
periods at 31 October 2022 compared to 30 April 2022. Price increases in H1
23 have partly offset this effect.
Conveyancing income is down from £8.8m in H1 22 to £5.8m in H23, driven by
timing of cases referred to our partners. Lettings revenue is down
period-on-period from £3.0m to £2.0m, as the business rationalised its focus
during the move to an employed model. Other revenue is relatively flat at
£2.7m in H1 23 compared to £2.9m in H1 22.
Gross profit margin
Gross profit of £16.2m was down 38% (H1 22: £26.2m), due to the decrease in
revenue and an expected lower gross profit margin of 47.0% (H1 22: 63.4%),
following the change to an employed sales model in September 2021.
The majority of our cost of sales is represented by amounts paid to our sales
field. Up until August 2021, these amounts were commissions paid to
self-employed Local Property Experts (LPEs). From September 2021, we moved to
an employed field sales model. Therefore, for the whole of the current period,
but only part of the prior period, cost of sales largely represents salary and
commission costs paid to employed agents.
The largely fixed nature of these costs has led to a significant reduction
during the period in the gross profit, despite a period-on-period increase of
£4.0m, or 93%, in prepaid cost of sales linked to deferred income, arising
from lower margins in H1 23 compared to H1 22, caused by the change to an
employed model in September 2021.
Adjusted operating costs
Adjusted operating costs (see definition in note 4) increased by 14% to
£14.2m (H1 22: £12.5m), due to additional investment in operational
capability and additional support costs related to the change to employed
model.
Marketing
Marketing costs decreased by 28% to £10.4m (H1 22: £14.5m), which includes
investment in new creative and compares to a high above the line marketing
spend in the prior period. The resulting cost per instruction (CPI) was
£490, 29% down from £686 in H1 22, as a result of more effective and
targeted marketing.
Adjusted EBITDA
Adjusted EBITDA (see definition in note 4) was a loss of £8.4m (H1 22 loss of
£0.8m), as a result of lower revenue, lower gross margin and an increase in
adjusted operating costs. This reflects a point in time, with this financial
year being a year of reset and of investment, with our more effective cost
base being well poised for future growth.
Depreciation and amortisation
Depreciation and amortisation was £2.1m, up from £1.6m in H1 22, mainly
reflecting digital investments across the period and an increased rate of
capitalisation of internally generated software.
Share-based payment credits
Share-based payment arrangements gave rise to a credit in the period of
£0.1m, reflecting charges for recent grants more than offset by credits in
respect of lapses relating to employee leavers in the period. H1 22 saw a
significant credit of £1.1m, arising on reversal of charges taken in previous
periods in respect of both options held by LPEs (which lapsed on termination
of their self-employed contracts), and former employees leaving the business.
Exceptional items
Exceptional items include amounts that management believes are necessary to
present separately in order to show a more comparable view of the performance
of the business.
Exceptional costs in H1 23 amounted to £1.3m (H1 22: £8.3m). £1.1m of
these costs arose in respect of business restructuring costs, and £0.2m
relating to exit of former directors.
In H1 22, £2.0m represented costs in respect of the move to an employed sales
field model, including retention payments, exit payments and consultancy
costs. A charge of £3.6m represented a provision for potential future claims
which could arise under the Housing Act 2004, and a charge of £2.7m arose
from impairment of goodwill and other intangible assets relating to the
lettings business.
Operating loss and loss for the period
Overall, the Group made an operating loss of £11.7m (H1 22: loss of
£11.1m). H1 22 included our share of losses of an associate of £1.5m. This
amount is net £nil in H1 23, since the Homeday business was impaired in full
during FY22 as described below.
Taxation
A tax charge of £nil arose in the six-month period (H1 22: £7.3m). The prior
period charge represents the decision to derecognise in full deferred tax
assets, primarily in relation to brought forward losses, in light of current
period losses.
Finance charges
Finance charges of £3.1m (H1 22: £1.9m) represent losses on derecognition of
receivables relating to Pay Later customers. Where these customers remained
eligible for the Group's Money Back Guarantee product (which was launched in
July 2021 and withdrawn in July 2022), this cost has been spread over the
average period from sale of receivables to the point at which customers become
ineligible to claim under the Money Back Guarantee. There is a higher
finance cost in H1 23 compared to H1 22 due to the timing of instruction
activity in each period, and reflecting the timing of the introduction of and
withdrawal of the Money Back Guarantee.
Loss for the period
The Group's total loss for the period was £14.6m (H1 22: loss of £20.2m).
Investment in Homeday
The Group's investment in Homeday was impaired in full as of 30 April 2022.
There is no net impact of Homeday in the H1 23 result, however this reflects
the overall effect of a number of transactions as described below.
During H1 23, the Group's share of Homeday's losses was £1.5m (H1 22:
£1.5m). Step-down gains resulting on funding provided to Homeday not matched
by Purplebricks amounted to £1.3m (H22: £nil), bringing the Group's net
share of result to a loss of £0.2m (H1 22: £1.5m). £0.2m of the impairment
provision held against the investment at the start of the period was released
in the period such that the net impact of Homeday on the income statement in
H1 23 was nil (H1 22: £1.5m).
No further investment in Homeday was made during the period and no further
investment is currently anticipated.
Cash, working capital and statement of financial position
Non-current assets of £7.8m at 31 October 2022 (£6.9m at 30 April 2022)
reflected further investments in intangible assets and an extension to the
Group's Solihull office lease in H1 23.
Current assets of £54.8m at 31 October 2022 (£64.2m at 30 April 2022)
primarily reflected a decrease in cash of £11.9m as described below.
Current liabilities of £32.9m at 31 October 2022 (£27.3m at 30 April 2022)
reflect an increase in deferred income due to timing of instruction activity,
and an increase in trade and other payables of £3.2m.
Cash and cash equivalents (which are presented as a single class of asset on
the face of the Statement of Financial Position) comprise cash at bank and
other short-term highly liquid investments with a maturity of three months or
less.
H1 23 saw a total cash outflow of £11.9m (H1 22: £15.7m). £8.7m of this
outflow arose from operating activities (H1 22: £13.1m outflow).
Investing activities in H1 23 saw an outflow of £1.8m (H1 22: £2.4m).
Financing activities in H1 23 saw an outflow of £1.4m (H1 22: £0.2m),
primarily arising from a reduction in the loan from factor balance in H1 23
due to the withdrawal of the Money Back Guarantee product.
We expect to further stem the cash burn in H2 23 and become cash generative in
FY24, as our investments begin to deliver performance benefits.
Going concern
As stated in note 2.2 to the condensed financial statements, the Directors are
satisfied that the Group has sufficient resources to continue in operation for
the foreseeable future, a period of not less than 12 months from the date of
this report. Accordingly, they continue to adopt the going concern basis in
preparing the condensed financial statements.
Estimates and judgements
In preparing the condensed consolidated financial statements, the Directors
have taken an approach to the areas of critical accounting estimate and
judgement as described on pages 96-98 of the Annual Report 2022 which is
available at
https://www.purplebricksplc.com/investors/results-reports-presentations/
(https://www.purplebricksplc.com/investors/results-reports-presentations/) in
line with that taken at 30 April 2022. See note 3.1 for an update to the key
estimate taken over the level of provision held for potential claims in
respect of historical instances of non-compliance with the Housing Act 2004.
We have also identified a new key judgement in respect of a contingent
liability arising from compliance issues identified in H1 23, as described in
note 3.2.
Principal risks and uncertainties
The principal risks and uncertainties are set out in the 2022 Annual Report.
The Board have reconsidered these principal risks and uncertainties, including
the implications of the compliance issue discussed above, and are of the view
that these remain valid at the date of this report.
A detailed explanation of the risks summarised below, and how the Group seeks
to mitigate the risks, can be found on pages 40 to 43 of the Annual Report
2022 which is available at
https://www.purplebricksplc.com/investors/results-reports-presentations/
(https://www.purplebricksplc.com/investors/results-reports-presentations/)
In summary, these include:
Market and performance - the success of the Group is dependent on maintaining
scale in a competitive sector, which is largely dependent on the
macro-economic conditions in the UK and internationally.
Brand reputation - the Group has established an identifiable and respected
brand which could be damaged by factors (in either the field or head office)
such as unethical, unlawful or non-brand compliant activity, poor customer
service, negative customer reviews or negative press.
People - the Group's success is dependent on the quality of its management,
operational teams and agents. There is a risk we might not be successful in
attracting, retaining, training and developing the right employees.
Compliance with laws and regulations - the Group operates in a sector with an
evolving legal and regulatory environment and monitors developments to ensure
legal, regulatory and ethical compliance, with particular focus on anti-money
laundering compliance, which is key to our operations.
Cyber security and protection of data - The Group's website and IT
environments could be the target of cyber attacks. Through such an attack,
there is a risk that we fail to manage and protect both customer and employee
data, or we may not comply with legal or other regulatory requirements
relating to customer data security and data privacy in the course of our
business activities, including in our marketing activity, agent activity and
other operational activity.
Financial control environment - inaccurate financial information may result in
suboptimal decisions being taken by management and inadequate financial
controls could result in financial loss to the Group.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge this condensed set
of financial statements has been prepared in accordance with IAS 34 Interim
Financial Reporting and that the Half Year Management Report includes a fair
review of the information.
Dominique Highfield
Chief Financial Officer
7 December 2022
Condensed consolidated statement of comprehensive income
For the six months ended 31 October 2022
Six months ended 31 October 2022 Six months ended 31 October 2021 Year ended 30 April 2022
unaudited unaudited audited
£m £m
Note £m
Revenue 34.5 41.3 70.0
5
Cost of Sales (18.3) (15.1) (27.9)
Gross profit 16.2 26.2 42.1
Administrative expenses (17.5) (21.3) (46.3)
Marketing costs (10.4) (14.5) (25.2)
Share of loss of associate - (1.5) (2.3)
Operating loss (11.7) (11.1) (31.7)
Finance income 0.2 0.1 0.2
Finance expense (3.1) (1.9) (3.3)
Loss on ordinary activities before taxation (14.6) (12.9) (34.8)
Taxation on loss on ordinary activities - (7.3) (7.2)
Loss for the period being total comprehensive expense (14.6) (20.2) (42.0)
Loss per share (5)p (7)p (14)p
Basic and diluted
8
The accompanying accounting policies and notes form an integral part of these
condensed financial statements.
All profits, losses and other comprehensive income are attributable to equity
shareholders of the parent.
Condensed consolidated statement of financial position
At 31 October 2022
31 October 31 October 30 April
2022 2021 2022
unaudited unaudited audited
£m £m £m
Non-current assets
Intangible assets 5.7 4.7 5.4
Property, plant and equipment 2.1 1.3 1.5
Investment in associate - 10.0 -
7.8 16.0 6.9
Current assets
Trade and other receivables 7.2 5.1 5.3
Contract assets - accrued income 8.0 6.5 7.7
Contract assets - prepaid cost of sales 8.3 4.3 8.0
Cash and cash equivalents 31.3 58.3 43.2
54.8 74.2 64.2
Total assets 62.6 90.2 71.1
Current liabilities
Trade and other payables (12.4) (7.9) (9.2)
Contract liabilities - deferred income (12.3) (10.2) (9.0)
Borrowings - loan from factor (4.3) - (5.5)
Lease liabilities (0.3) (0.4) (0.2)
Refund liabilities (0.3) (0.5) (0.4)
Provisions (3.3) (4.5) (3.0)
(32.9) (23.5) (27.3)
Net current assets 21.9 50.7 36.9
Total assets less current liabilities 29.7 66.7 43.8
Non-current liabilities
Provisions (0.1) (0.1) (0.1)
Lease liabilities (0.7) (0.1) (0.1)
(0.8) (0.2) (0.2)
Net assets 28.9 66.5 43.6
Equity
Share capital 3.1 3.1 3.1
Share premium 177.4 177.4 177.4
Share-based payments reserve 1.7 2.9 1.8
Retained earnings (153.3) (116.9) (138.7)
Total equity 28.9 66.5 43.6
Condensed consolidated statement of changes in equity
For the six months ended 31 October 2022 - unaudited
Share-based payment reserve
Unaudited Share capital Share premium £m Retained earnings Total
equity
£m £m
£m
£m
1.8 (138.7) 43.6
At 1 May 2022 3.1 177.4
Share-based payment credit - - (0.1) - (0.1)
Transactions with owners - - (0.1) - (0.1)
Loss for the period, being total comprehensive loss - - - (14.6) (14.6)
At 31 October 2022 3.1 177.4 1.7 (153.3) 28.9
For the six months ended 31 October 2021 - unaudited
Unaudited Share-based payment
Share Share reserve Retained Total
capital premium £m earnings equity
£m £m £m £m
At 1 May 2021 3.1 177.4 4.0 (96.7) 87.8
Share-based payment credit - - (1.1) - (1.1)
Transactions with owners - - (1.1) - (1.1)
Loss for the period, being total comprehensive loss - - - (20.2) (20.2)
At 31 October 2021 3.1 177.4 2.9 (116.9) 66.5
For the year ended 30 April 2022 - audited
Audited Share-based payment
Share Share reserve Retained Total
capital premium £m earnings equity
£m £m £m £m
At 1 May 2021 3.1 177.4 4.0 (96.7) 87.8
Share-based payment credit - - (2.2) - (2.2)
Transactions with owners - - (2.2) - (2.2)
Loss for the period, being total comprehensive loss - - - (42.0) (42.0)
At 30 April 2022 3.1 177.4 1.8 (138.7) 43.6
Condensed consolidated statement of cash flows
For the six months ended 31 October 2022
Six months ended 31 Six months ended 31
October 2022 unaudited October 2021 Year ended
30 April 2022
£m unaudited
audited
£m
£m
(14.6) (20.2) (42.0)
Loss for the period after taxation
Adjustments for: 1.6 1.2 2.6
Amortisation of intangible assets
Depreciation of tangible fixed assets 0.5 0.4 0.9
Impairment of intangible assets - 0.1 0.1
Impairment of goodwill - 2.6 2.6
Share-based payment credit (0.1) (1.1) (2.2)
Increase in provisions 0.3 3.9 3.7
(Decrease)/increase in refund liabilities (0.1) 0.5 0.4
Interest income (0.2) (0.1) (0.2)
Share of loss of associate - 1.5 2.3
Impairment of associate - - 9.2
Taxation charge - 7.3 7.2
Operating cash outflow before changes in (12.6) (15.4)
working capital (3.9)
Movement in trade and other receivables (2.6) 0.2 (4.9)
Movement in trade and other payables 3.2 (4.8) (4.7)
Movement in deferred income 3.3 (4.6) (5.8)
Net cash outflow from operating activities (8.7) (13.1) (30.8)
(0.1) (0.4) (1.2)
Investing activities
Purchase of property, plant and equipment
Development expenditure capitalised (1.5) (1.4) (3.1)
Purchase of intangible assets (0.4) (0.7) (1.0)
Interest income 0.2 0.1 0.2
Net cash outflow from investing activities (1.8) (2.4) (5.1)
Financing activities
Net advances from factor (1.2) - 5.5
Payments against lease liabilities (0.2) (0.2) (0.4)
Net cash outflow from financing activities (1.4) (0.2) 5.1
Net decrease in cash and cash equivalents (11.9) (15.7) (30.8)
Cash and cash equivalents at beginning of the period 43.2 74.0 74.0
Cash and cash equivalents at the end of the period 31.3 58.3 43.2
Notes to the condensed financial statements for the six months ended 31
October 2022
1. General information
Purplebricks Group plc (the "Company") is a public company limited by shares
which is listed on the Alternative Investment Market of the London Stock
Exchange. The Company is incorporated in the United Kingdom and registered in
England and Wales. The address of the Company's registered office is Suite 7,
First Floor, Cranmore Place, Cranmore Drive, Shirley, Solihull, West Midlands
B90 4RZ. The Company is primarily involved in the estate agency business.
The information for the year ended 30 April 2022 does not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. A copy of the
statutory accounts for that year has been delivered to the Registrar of
Companies. The auditors reported on those accounts: their report was
unqualified, did not draw attention to any matters by way of emphasis and did
not contain a statement under section 498(2) or (3) of the Companies Act 2006.
2. Summary of significant accounting policies
2.1 Basis of preparation and consolidation
The annual financial statements of Purplebricks Group plc will be prepared in
accordance with United Kingdom adopted International Financial Reporting
Standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared under the historical cost
convention subject to recognising certain financial instruments at fair value
and in accordance with United Kingdom adopted International Accounting
Standard 34 "Interim Financial Reporting".
The accounting policies adopted are consistent with those of the previous
financial period (see pages 86 to 95 of the Annual Report 2022). The Annual
Report 2022 is available at:
https://www.purplebricksplc.com/investors/results-reports-presentations/
(https://www.purplebricksplc.com/investors/results-reports-presentations/)
The Group typically experiences a seasonal slowdown in activity during the
December holiday period, with an increase in activity in Spring.
During H2 22, the Group amended its methodology for accounting for revenue and
associated contract assets and liabilities, as set out in note 2.5 to the FY22
ARA. The H1 23 and FY22 comparative income statement and balance sheet
reflects this methodology. The H1 22 income statement and balance sheet
comparatives have not been restated for this change in approach, as the
Directors have assessed that the impact on the reported results and net assets
position would be immaterial, and therefore that such a restatement would not
significantly impact on the economic decisions of users of the condensed
consolidated financial statements.
2.2 Going concern
In adopting a going concern basis for the preparation of the financial
statements, the Directors have made appropriate enquiries and have considered
the Group's business activities, cash flows and liquidity position and the
Group's principal risks and uncertainties.
The Directors have taken into account reasonably possible future economic
factors in preparing and reviewing trading and cash flow forecasts covering
the period to 31 December 2023, being over 12 months from the date of these
condensed financial statements. This assessment has recognised the loss and
cash outflow in FY22 and H1 23, and the actions management has taken to date
and has planned in H2 23. The Directors are of the view that the plans in
place, which include cost reduction measures to protect long term profits and
cash generation, are realistic and achievable.
This assessment has taken into consideration sensitivity analysis with regard
to the forecast volume of instructions and the steps which could be taken to
further mitigate costs if required. Mitigations available are consistent with
cost control and cash preservation actions taken in FY21 in response to
Covid-19 and include a reduction in marketing expenditure and reductions in
expenditure on the Group's contact centre and support functions to match
demand levels. Since the Group has not made commitments to carbon emission
reductions which have a significant cost implication, the impact of climate
change has not had a significant effect on the forecasts considered.
In satisfying themselves that the going concern basis is appropriate, the
Directors have considered three sensitivities:
i) a scenario of a downside sensitised fall in revenues of 10% versus
expectations resulting from a decrease in instruction volumes which is in
excess of the Directors' realistic expectations;
ii) an outflow at the higher bound of the range that is considered
reasonably possible in respect of the provision for Housing Act 2004
compliance issues as set out in note 3.1; and
iii) a reverse stress test to identify a scenario which would bring the
Group's cash position to zero at the end of the assessment period to 31
December 2023. The reverse stress test indicates that a 39% reduction in
activity versus forecast, with no mitigating actions taken whatsoever would be
required to reduce cash to zero within the assessment period.
Given the Group's cash position of £31.3m at 31 October 2022, the Group
expects to maintain a position of sufficient liquidity throughout the forecast
period to at least 31 December 2023, in both the base and in each of the
sensitised scenarios. The level of liquidity available means that the Group
has the flexibility to address any reasonably possible change in costs, and
the Group does not anticipate the need to seek further sources of finance in
the foreseeable future. The Directors consider that, given the levers
available to the business to control cash outflow, a scenario in which the
Group runs out of liquidity within the assessment period is not reasonably
possible.
In light of the Group's current liquidity and the results of the sensitivity
testing conducted, the Directors are satisfied that the Company, and the Group
as a whole, has adequate resources to continue in operational existence for
the foreseeable future. Accordingly, the condensed financial statements have
been prepared on the going concern basis.
2.3 Adoption of new and revised accounting standards
There are no IFRSs or IFRIC interpretations that are effective for the first
time for the financial period beginning 1 May 2022 that are expected to have a
material impact on the Group.
The new standards, amendments to standards and interpretations which have been
issued, but are not effective for the financial period beginning 1 May 2022
have not been early adopted. The Directors anticipate that the adoption of
these standards and interpretations in future periods will have no material
effect on the financial statements of the Group.
2.4 Tax
Taxes on income in the interim period are accrued using the effective tax rate
which is expected to apply to the Group for the year ending 30 April 2023,
using rates substantively enacted by 31 October 2022, as required by IAS 34
Interim Financial Reporting.
3. Critical accounting estimates and judgements
In the application of the Group's accounting policies, the Directors are
required to make judgements (other than those involving estimations) that have
a significant impact on the amounts recognised in the financial statements and
to make estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates
and associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Key sources of estimation uncertainty
In the view of the Directors, the areas of estimation uncertainty that may
have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the financial period are detailed
below.
3.1 Provision for legal claims in relation to registration of tenancy
deposits
During FY22, the Company became aware of process issues in how it had been
communicating with tenants on behalf of landlords in relation to the
registration of tenancy deposits. In response, the Board sought independent
third-party assurance and advice in relation to the end-to-end process and
controls in the lettings business, including compliance with applicable laws
and regulations. This included forensic analysis of the processes to identify
current risks, errors or failings in the end-to-end processes and recommended
areas for improvement.
The Board then agreed and implemented a number of process and control
enhancements, including in the processes around timely registration of
deposits, and provision of prescribed information and other information to
tenants appropriately in light of their individual circumstances. The Company
has also now concluded the process of ensuring that customers have been
contacted with appropriate information.
A provision of £2.8m for potential future claims which could arise under the
Housing Act 2004, and for associated professional fees remained at 30 April
2022 after utilisation against professional fees in respect of third party
advice and assurance and claims settled in FY22. This amount reflected
estimates in respect of the rate at which current and former tenants will make
claims, and the average level of payment made in respect of successful claims,
including legal support costs.
The ultimate level of financial exposure is dependent on the claim rate, the
level of penalty applied in respect of successful claims and the future legal
fees incurred to support claims management. To date, a low volume of claims
has been experienced. However, we would note the significant period in which
those affected are able to bring a claim.
The provision is especially sensitive to the claim rates, which were assessed
at 30 April 2022 at 9.9% for current tenants and 2.0% for former tenants.
The board assesses that, absent any significant change in claim rates, or in
other relevant circumstances, maintaining the provision at 31 October 2022 in
line with the 30 April 2022 level balances the low level of claims incurred to
date with the remaining risk in the current and former tenant populations, and
reflects the best estimate of total potential future claims rate expected from
the remaining population as at 31 October 2022.
The Board has challenged and debated the process, key judgements and
assumptions associated with the provision and is satisfied that it is
appropriate, recognising the significant uncertainty and degree of estimation
involved in calculating this provision.
A 10% change in the claim rates, to 10.9% or to 8.9%, would increase or
decrease the provision by £0.3m. The Directors assess that a reasonably
possible range around claim rate and level of financial penalty applied in
respect of successful claimants could result in the financial liability being
in the range of £0.2m to £5.1m. Claims experience to date would indicate an
outcome towards the lower end of the range. While the Board feel it is highly
unlikely, a very high claim rate causing an outcome higher than £5.1m remains
possible.
3.2 Contingent liability for potential penalties in relation to
non-compliance with regulation
As a result of the Board's commitment to raising standards across the
business, increased focus and resources have been directed at compliance
reviews during H1 23. As a result of initial findings from an internal
review, the Company is of the view that it has identified instances of
non-compliance with regulation. The Board has approved remedial actions to
be implemented at pace. The Company has also engaged a third-party firm to
review a selection of recent case files and intends to retain an external
expert to conduct an audit of the Company's compliance once remedial work has
been completed.
Should any relevant regulatory authority issue a fine in respect of this
matter, the fine and associated costs could range from being below de minimis
to being material.
At the balance sheet date and the date of this half year report the Company is
unable to reliably estimate the financial impact of any potential fine and
therefore, in accordance with IAS 37.14, discloses a contingent liability in
respect of these matters in note 10.
Other sources of estimation uncertainty
Other areas of estimation uncertainty are detailed below:
3.3 Measurement of intangible assets
The Group recognises an intangible asset in respect of software developed in
house. This software is a key part of the Group's operating model and value
proposition. Management is required to estimate the proportion of the total
costs of the Group's Digital team which relates to the creation of intangible
assets which meet the criteria for capitalisation in IAS 38.
The overall cost of this team is material and a significant change in this
estimate could have a significant effect on the value of costs capitalised.
The impact of a change to this estimate could result, at the most extreme,
i.e. in a scenario where either no development team costs are capitalised, or
where they are capitalised in full, in a decrease of £0.7m or increase of
£1.4m in administrative expenses in the current period.
3.4 Revenue recognition
Service period
Instruction revenue is recognised over the estimated period between
instruction and completion or withdrawal of the property from sale, or, in
future, to the point at which a customer requests a refund under the Group's
(withdrawn as of July 2022) Money Back Guarantee product. This period is the
"service period" and the Directors are therefore required to estimate the
average total service period, taking into account historical experience in
addition to current and possible future economic conditions and factors. At
each reporting date, this estimation includes an assessment of the future
service period in respect of instructions on hand at the year end.
As at 31 October 2022, the key factors which the Directors have taken account
of in developing their view of the likely future service period has been the
level of demand from potential purchasers on the housing market in the UK
and the length of time property transactions are taking to complete. The
high level of demand from potential purchasers, which has not been matched by
availability of properties listed by sellers, has led to an average shortening
of the time between instruction and sale agreed in FY22 and into H1 23.
The Directors assess that the delays within the process between sale agreed
and completion, which were experienced in the latter part of 2021 due to high
levels of transactions, particularly in advance of the expiry of the stamp
duty land tax holidays, have now passed and the process has returned to normal
as transaction levels have reduced. As a result, the Directors assess that
time between sale agreed and completion is likely to reflect normal levels.
On balance, at 31 October 2022, the Directors have assessed that the period
used in calculating contract liabilities in respect of deferred income is in
line with that used at 30 April 2022. Therefore, the service period estimate
has had no significant effect on the amount of revenue recognised in the
period.
In estimating the future service period, the Directors have adopted a best
estimate approach, taking into account available evidence. An increase of 10%
or decrease of 3% in the service period has been assessed as reasonably
possible boundaries for this assumption. Such changes in the assumption would
have resulted in an increase of £1.3m or decrease in deferred income of
approximately £0.4m respectively.
4. Alternative performance measures
The Group makes use of a number of alternative performance measures in
assessing the performance of the business. The definition and relevance of
each of these is set out below. The Group believes that these measures, which
are not considered to be a substitute for or superior to IFRS measures,
provide stakeholders with helpful additional information on the performance of
the Group.
Adjusted EBITDA
Definition
Profit or loss from operating activities, adding back depreciation,
amortisation, share-based payment charges/credits and exceptional items. This
measure also excludes results of associates.
Relevance to strategy
The adjusted measure is considered relevant to assessing the performance of
the Group against its strategy and plans. The rationale for excluding certain
items is as follows:
- Depreciation: a non-cash item which fluctuates depending on the timing
of capital investment. We believe that a measure which removes this volatility
improves comparability of the Group's results period on period.
- Amortisation: a non-cash item which varies depending on the timing of
and nature of acquisitions, and on the timing of and extent of investment in
internally generated intangibles such as software. We believe that a measure
which removes this volatility improves comparability of the Group's results
period on period. Where applicable, impairment of intangible assets is also
excluded as an exceptional item.
- Share-based payment charges/credits: a non-cash item which varies
significantly depending on the share price at the date of grants under the
Group's share option schemes, and depending on the assumptions used in valuing
these awards as they are granted. We believe that a measure which removes this
volatility improves comparability of the Group's results period on period and
also improves comparability with other companies which typically do not
operate similar share-based payment schemes.
- Exceptional items: these items represent amounts which result from
unusual transactions or circumstances and of a significance which warrants
individual disclosure. We believe that adjusting for such exceptional items
improves comparability period on period. See note 7 for further detail of
amounts disclosed as exceptional in the year.
- Results of associates: while the Group exercises some influence over
these results, it is unable to fully control them. The Group monitors the
performance of its associate Homeday separately from the UK segment.
Reconciliation
See segmental reporting in note 6.
Adjusted operating costs
Definition
Adjusted operating costs are administrative expenses, adjusted by adding back
depreciation, amortisation and share-based payment charges/credits and
exceptional items.
Relevance to strategy
The adjusted measure is considered relevant to assessing the performance of
the Group against its strategy and plans. The rationale for excluding
depreciation, amortisation, share-based payment charges/credits and
exceptional costs from this measure is consistent with that set out above in
the Adjusted EBITDA section.
Reconciliation
See segmental reporting in note 6.
5. Revenue
Revenue by contract type
H1 22 Year ended 30
H1 23 April 2022
unaudited unaudited audited
£m £m £m
Instructions 24.0 26.6 45.3
Conveyancing 5.8 8.8 14.1
Lettings 2.0 3.0 5.4
Other 2.7 2.9 5.2
Total Revenue 34.5 41.3 70.0
6. Segmental reporting
The Group's trade is managed as a single division, providing services relating
to the sale and letting of properties; however, management reports to the
Board (the Board being the Chief Operating Decision Maker (CODM)) using
geographical segments. The financial information reviewed by the Board is
materially the same as that reported under IFRS and in H1 23 falls under one
geographic location: the UK.
The Group's share of the results of its associate Homeday, which is based in
Germany, is presented in the comparative table within the arising on
consolidation column, along with amortisation of intangibles arising on
consolidation. Since the impairment of associate, as described above, there
is no net impact of Homeday in H1 23.
Adjusted EBITDA is a key profit measure used by the CODM in making strategic
decisions.
During the period, no customer contributed 10% or more of the Group's revenues
(H1 22: none). The following is an analysis of the Group's revenue and results
by reporting segment:
UK and Total
H1 23 - six months ended 31 October 2022 - unaudited £m
Revenue 34.5
Cost of sales (18.3)
Gross profit 16.2
Gross profit margin (%) 47.0%
Administrative expenses (17.5)
Marketing expenses (10.4)
Operating loss (11.7)
Reconciliation to adjusted EBITDA
Operating loss (11.7)
Depreciation and amortisation 2.1
Share-based payments credit (0.1)
Exceptional items 1.3
Adjusted EBITDA (8.4)
Reconciliation of administrative expenses to adjusted operating costs
Administrative expenses (17.5)
Depreciation and amortisation 2.1
Share-based payments credit (0.1)
Exceptional items 1.3
Adjusted operating costs (14.2)
UK Arising on consolidation Total
H1 22 - six months ended 31 October 2021 - unaudited £m £m £m
Revenue 41.3 - 41.3
Cost of sales (15.1) - (15.1)
Gross profit 26.2 - 26.2
Gross profit margin (%) 63.4% - 63.4%
Administrative expenses (18.6) (2.7) (21.3)
Marketing expenses (14.5) - (14.5)
Share of results of associate - (1.5) (1.5)
Operating loss (6.9) (4.2) (11.1)
Reconciliation to adjusted EBITDA
Operating loss (6.9) (4.2) (11.1)
Depreciation and amortisation 1.6 - 1.6
Share-based payments credit (1.1) - (1.1)
Share of results of associate - 1.5 1.5
Exceptional items 5.6 2.7 8.3
Adjusted EBITDA (0.8) - (0.8)
Reconciliation of administrative expenses to adjusted operating costs
Administrative expenses (18.6) (2.7) (21.3)
Depreciation and amortisation 1.6 - 1.6
Share-based payments credit (1.1) - (1.1)
Exceptional items 5.6 2.7 8.3
Adjusted operating costs (12.5) - (12.5)
For the year ended 30 April 2022
UK Arising on consolidation Total
Year ended 30 April 2022 - audited £m £m £m
Revenue 70.0 - 70.0
Cost of sales (27.9) - (27.9)
Gross profit 42.1 - 42.1
Gross profit margin (%) 60.1% - 60.1%
Administrative expenses (50.1) 3.8 (46.3)
Marketing expenses (25.2) - (25.2)
Share of results of associate - (2.3) (2.3)
Operating loss (33.2) 1.5 (31.7)
Reconciliation to adjusted EBITDA
Operating loss (33.2) 1.5 (31.7)
Depreciation and amortisation 3.4 0.1 3.5
Share-based payments credit (2.2) - (2.2)
Share of results of associate - 2.3 2.3
Exceptional items 23.2 (3.9) 19.3
Adjusted EBITDA (8.8) - (8.8)
Reconciliation of administrative expenses to adjusted operating costs
Administrative expenses (50.1) 3.8 (46.3)
Depreciation and amortisation 3.4 0.1 3.5
Share-based payments credit (2.2) - (2.2)
Exceptional items 23.2 (3.9) 19.3
Adjusted operating costs (25.7) - (25.7)
All assets and liabilities, and all cash flows, relate to the UK in all
periods presented.
7. Exceptional items
Exceptional items in H1 23 total £1.3m (H1 22 £8.3m). These items are
summarised by nature in the table below.
Six months Six months Year ended
ended 31 ended 31
October 2022 October 2021 30 April 2022
£m £m £m
Restructuring costs 1.1 2.0 3.5
Provision for claims - 3.6 3.6
Impairment - 2.7 11.9
Post-employment benefits of former CEO and CFO 0.2 - 0.3
Exceptional items 1.3 8.3 19.3
The main components of costs of the restructuring costs above were:
- costs relating to a strategic review of the business of £0.2m (H1 22:
£nil, FY22: £nil);
- costs relating to a committed redundancy exercise of £0.4m (H1 22:
£nil, FY22: £nil), representing expected future redundancy and settlement
costs in respect of an exercise which had been communicated to those
individuals at risk of redundancy by 31 October 2022;
- retention payments to individuals becoming employed of £0.1m (H1 22:
£0.7m, FY22: £1.6m);
- termination payments to individuals not retained under a restructuring
programme undertaken during H1 23 of £0.4m (H1 22: £nil, FY22: £nil);
- consultancy costs for support in the design of the employed model,
including of the commission structure of £nil (H1 22: £0.6m, FY22: £0.9m);
- costs of contractors and project-specific employees working within the
project team of £nil (H1 22: £0.2m, FY22: £0.3m); and
- creation of learning and development materials and onboarding
materials, and costs of training meetings and roadshows of £nil (H1 22:
£0.5m, FY22 £0.7m).
A charge of £0.2m in H1 23 relates to post-employment benefits of the former
CFO. In FY22, post-employment benefits amounted to £0.3m in respect of our
former CEO, Vic Darvey
Other items recognised as exceptional in prior periods were:
At H1 22 and FY22, a provision of £3.6m for potential future claims which
could arise under the Housing Act 2004, as described in note 3.1.
At H1 22 and FY22, impairment of the carrying value of the goodwill and other
intangible assets relating to the acquisition of BFL Property Management
Limited (BFL) in March 2017, in light of the process issues identified in the
lettings business, resulting in a charge of £2.7m.
In FY22, impairment in full of the Group's investment in its associate Homeday
in light of underperformance against forecast, partly as a result of the
challenging macro-economic environment and residential property market in
Germany, which saw a significant market downturn in 2022, resulting in a
charge of £9.2m.
All exceptional items are presented within administrative expenses in the
consolidated income statement.
8. Earnings per share
Six months ended Six months ended 31 October 2021 Year ended
31 October 2022 30 April 2022
Loss from total operations £m (14.6) (20.2) (42.0)
Weighted average number of shares in issue ('000) 306,806 306,806 306,806
Loss per share for total operations (£) - basic (0.05) (0.07) (0.14)
Potentially dilutive shares unissued at reporting date ('000) 896 3,757 4,218
Effective potentially dilutive shares at reporting date ('000) - - -
Loss per share for total operations (£) - diluted (0.05) (0.07) (0.14)
Where applicable, diluted loss per share from continuing operations is
presented as equal to the basic loss per share as a loss cannot be diluted.
The number of shares in issue at each of 31 October 2022, 30 April 2022 and 31
October 2021 was 306,806,039.
9. Related party transactions
On 2 August 2022 Paul Pindar, Non-Executive Chairman, purchased 2,500,000
ordinary shares of £0.01 each in the share capital of the Company
("shares") at a price of 14.76p per share.
Between the 12(th) & 16(th) of August Paul Pindar purchased 1,537,000
shares at a weighted average price of 16.96p per share.
On 24 August 2022, Paul Pindar purchased 1,000,000 shares at a price of
£14.75p per share.
On 5 August 2022 Helena Marston, Chief Executive Officer, purchased 629,585
shares at an average price of 15.90p per share.
On 15 August 2022, 800,000 awards over shares in the Company were granted to
Helena Marston, Chief Executive Officer, along with 650,000 awards to Steve
Long, Chief Financial Officer, under the Purplebricks Performance Share Plan.
The awards to Steve Long will lapse as of his date of leaving in H2 23.
On 3 November 2022, 1,000,000 awards over shares in the Company were granted
to Dominique Highfield, Chief Financial Officer under the Purplebricks
Performance Share Plan.
The Group has a contract for payroll services with IRIS Software Group, of
which the Group's Non-Executive Director Elona Mortimer-Zhika is Chief
Executive Officer. Costs of £38,000 were incurred in the period (H1 22:
£38,000), of which £nil (H1 22: £6,000) remains unpaid at the period end.
Amounts are charged on an arms-length basis.
10. Contingent liabilities
As set out in note 3.2, during H1 23 the Company has become aware of instances
of non-compliance with regulation. Should any relevant regulatory
authority issue a fine in respect of this matter, the potential fine and
associated costs could range from being below de minimis to being material.
At the balance sheet date and the date of this half year report the Company is
unable to reliably estimate the financial impact of a fine and therefore, in
accordance with IAS 37.14, discloses a contingent liability in respect of
these matters.
Independent Review Report to Purplebricks Group Plc
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
October 2022 which comprises the condensed consolidated statement of
comprehensive income, the condensed consolidated statement of financial
position, the condensed consolidated statement of changes in equity, the
condensed consolidated statement of cash flows for the half-year ended on that
date and related notes 1 to 10.
We have read the other information contained in the half-yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the AIM Rules of the London
Stock Exchange.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted International Accounting
Standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
International Accounting Standard 34 "Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 October 2022 is not prepared, in
all material respects, in accordance with United Kingdom adopted International
Accounting Standards 34 and the AIM Rules of the London Stock Exchange.
Use of our report
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" issued by the
Financial Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the Company, for our review work, for this report, or for the conclusions
we have formed.
Jeffreys Henry LLP
Statutory Auditor
7 December 2022
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