Purplebricks sees further revenue surge but losses to continue

The company’s adjusted operating loss for the year to the end of April jumped to £21.3m from £5.1m a year earlier as revenue doubled to £93.7m from £46.7m. Losses at the EBITDA level increased from £4.5m to £19.6m.

Marketing costs more than doubled to £42.1m from £18.2m and administration and establishment expenses jumped to £35.2m from £13.6m. At the end of the year the company had 630 UK-based 'local property experts', down from 650 LPEs at the half-year stage.

Chairman Paul Pindar said he expected revenue this year to be in the range of £165m to £185m and for Purplebricks to have more than 10% of the UK estate agency market in the medium term.

Purplebricks offers property owners the chance to cut their selling costs by doing more of the work themselves and paying a lower fixed fee instead of a percentage of the selling price. The company, backed by high-profile investor Neil Woodward, is seeking to expand in a UK property market that is short of supply with weak transaction levels.

Purplebricks has operations in the UK, which is by far its biggest market, Australia and the US and is moving into Canada. It raised £100m by selling 11.5% to German publisher Axel Springer in March and warned annual revenue would be less than expected.

Pindar said “We continue to grow and outperform what is a tough UK market, and thereby increasing our market share. We believe our unrivalled net cash position, flexible low cost business model and brand strength supports our long term potential, albeit at the expense of lower near-term growth, against tough comparatives.”

He said the company had various initiatives under way that should boost growth as the current financial year elapses. After the investment from Axel Springer, Purplebricks has £153m in cash which it said was a war chest, which had helped with a faster rollout in the US than previously forecast.

House broker Peel Hunt highlighted that was that while the current trading backdrop is mixed, management was continuing to invest in its customer offering and technology as it pushes for further market share gains on all frontiers.

Combined with softer near-term market conditions in the UK and Australia, Peel Hunt now expects a group loss before tax of £41.5m for the 2019 financial year, down from previous expectation of £3.8m profit and losses to continue in 2020 before profitability is reached in FY21 with a pre-tax profit of £10m, though down from the previous £117m.

Broker Jefferies was rather sceptical: "Purplebricks continues to tell us it sells lots of houses, without backing up that rhetoric with actual figures. Sold subject to contract does not mean sold. Perhaps more telling is that the number of UK LPEs is now lower than it was six months ago. If the model is the lifeboat for a sinking high street does the lifeboat itself have a leak?"

Looking the decline in the number of UK LPEs, Jefferies added: "It seems odd to us that if Purplebricks really is the lifeboat for a sinking high street why are there fewer people in the boat? Does the lifeboat itself have a leak?"