Purplebricks says it has £100m net cash to exercise “relentless innovation” and benefit from an industry shake-out that will ”expose undercapitalised traditional and online competitors.”
In a trading statement covering the six months to the end of October, the agency says it now has 74 per cent share of the UK online/hybrid market; its UK revenue shot up by 39 per cent to £48.3m and what it calls “UK ancillary revenue” is up 25 per cent.
However it more than doubled its losses to £27.3m from a year earlier; and in the six month period under review it spent a huge £39m on marketing.
It says it completed on £5.4 billion of UK property in that six month period - in the same time a year ago, it completed on £4.6 billion worth.
Dramatically, it claims that in October (despite a slowdown reported by many rival agencies) it saw a 35 per cent growth in instructions in the UK compared to the previous month.
Group revenue over the six months - therefore including Purplebricks' international activities in the US, Canada and Australia - shows a 75 per cent rise to £70.1m. The company says it's on course to achieve full year revenues of between £165m and £185m.
These figures are stronger than some observers predicted but nonetheless show losses rising and in any case refer to a period well before the high-profile collapse of Emoov and a series of damaging headlines about the online agency sector.
Purplebricks' global chief executive Michael Bruce told shareholders: "Our UK business continues to make good progress, with strong sales growth, market share gains and a step-up in both profitability and positive cashflow. It is this strength that will see Purplebricks emerge stronger from the ongoing industry shakeout, which is expected to continue to expose undercapitalised traditional and online competitors.
"Following Axel Springer's investment in March, we are already seeing how shared knowledge and best practice across the business can benefit the entire Group.
"Purplebricks has led industry change and through our strategy of relentless innovation will continue to do so. We are always looking to improve the customer experience and with over £100m of net cash, we are uniquely placed to do so, investing in technology and first class people. We remain confident that our UK success will be replicated internationally and that we will deliver substantial value for our shareholders.”
He says the outlook for the company suggests it will, in his words, “continue to outperform the industry, demonstrating an ability to grow strongly and win share in challenging market conditions.”
He says that having now launched in phase one target states in the US, “early indications show brand recognition and consideration are growing strongly.”
Bruce continues: “We are confident, with new marketing creative launching in the new year, that we will see a step up in instructions from our most recently added DMAs, which are yet to generate a meaningful contribution. Our near term strategy remains focused on maximising operational delivery, which will drive further revenue over time.”
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Whenever any agent adds up the value of homes they have sold I always think.... what small and important number are they hiding.
In this case I guess its......PROFIT.
ITS THE OLD
PROFITS SANITY TURNOVER IS VANITY ROUTINE.
This article is one of the best crafted pieces of marketing and spin I have ever read in our industry! If you just read the large increase in turnover the apparent £100m available for innovation and the increased market share you would be suckered into believing this company is a success.
The reality in the small print is that they have doubled their losses!
They are burning money just like Emoov did to try and get to profitability.
A model which isn’t sustainable in our industry especially if the market takes a downturn. Can’t wait to read this same report in 12 months time.
Nothing more than hype and PR to try and keep shareholders onboard.
In my opinion, the the best crafted pieces of marketing and spin are the plethora of fabricated reasons conjured up by High Street agents to justify their exorbitantly high fees. The archaic High Street model is in the dock and the court of public opinion will judge you.
The indicators showed that Purplebricks maybe would be manipulating it's books. To early to tell but from this it looks as if they are painting a grim picture brightly. He usually mentions Australia, and the US is brought into this statement with less vigour. Not good at all this report for Purplebricks.
The key phrase in all of that is ..... "the agency says" and that, in my very humble opinion is where the spin stops in its tracks if anyone reading it has an ounce of common sense to be able to read between the lines.
It not really a business unless its making some sort of profit - until that point its nothing more that an unpaid debt and some clever accounting.
I rest my case. Thank you.
Institutions can see right through b****hit...........as I write the PB share price is down a further 9.6% this morning to £1.356....Axel Springers losses are now well over £80 million in less than a year.......:)
So peering through the treacle what you see is a fatally flawed business model. £100M would be better spent on the homeless this Christmas, an irony that will be lost on the Bruce
Well crafted spin article!!! Laughable really. Why are investors still pouring money into this failing company!!! You would think that after the fiasco with Emoov in the last couple of weeks they would be running for the hills.
For a kick off the share price of of PB has fallen from 320p in Jan 2018 to 154p in recent days, so that speaks volumes about the value of the company. And Neil Woodford's fortunes with his other top companies he has invested in such as a major housebuilder Keir have seen the share price drop by over 25% in the last week.
Also Axel Springer paid 125M for 37,722,221 PB shares at a cost of 125M, so £3.07p a share – now 8 months later they are getting £1.50p a share – they are going to be very upset, as that is only 63M.
Also, at start of year when share price was £3.22p a share Michael Bruce’s shares were worth 33.218,147 x £3.22p = £106M – now same shares worth £49M so he is not poor on paper but the second he or Neil Woodford tries to sell the price will get hit further.
Neil Woodford whose investors holds 88,446,245 shares had in Jan £265M – now worth £132M.
If Woodford sells more than 0.75% of a share this triggers an automatic red flag at the Alternative Investment market AIM, so he is unlikely to do this.
In terms of inward funding, there was an initial investment of £7M, then through share raising they raised 25M and then another 75M when they decided upon the idea of going into other markets in the world.
On top of this they have had positive cash flow (pay upfront model) in 2016, 2017 and 2018 of 18.6M, 46.7M and 93.7M last accounting year (ending in April 2018). Plus the 125M earlier this year from Axel Springer for 12.5% of the company, which after tax and other costs nets down to 100m THE 100m THEY ARE NOW TALKING ABOUT.
So scores on the doors, 7M, 25M, 75M, 125M = 132M money invested in, plus 18.6M, 46.7M, 93.7M, positive cash upfront = 159M Grand total of money = 291M – and still they made 26M loss last financial year (off of 93.7M cash flow in)
And they had a few months ago about 150M cash in the company, which sounds a lot, but a year ago they had 70M cash in the company, and if Axel Springer had not injected 125M, they might be sitting on 25M. 70M to 25M shows they are burning through capital very quickly, yes they have bought other online brands in other parts of the world – but they are generating zero profit, so on a spread sheet they are liabilities rather than assets.
If the pay upfront/online model becomes a NO GO as trading standards think Emoov and Tepilo clients were stung, in the sense that according to WHICH they only converted 35% of instructions to completed sales, but had a fee upfront on most instructions anyway, then PB might have to go no sale no fee which would make their cash flow go from 100% positive to 50% in 18 weeks, ie half stock sells and it takes 18 weeks to get the completion money in - if you are lucky.
Now it may not be smoke and mirrors but saying you have 100M to spend so that makes you untouchable is a dangerous gambit, especially if you have never made profit and your model is based upon cash upfront and in 2019 there will be less instructions for all so declining market, and less upfront fees. Remember also that other financial burden of the online model, you have to pay millions and millions on tv and other media because the second you stop your marketing spend your brand is forgotten and you do not have a single office in the high street. I think that costs and lowering revenues, and the reversals that PB are getting world wide may make them more vulnerable, and if that share price continues to drop - it was once in excess of 500p a share to the original 93p level then things are going to get interesting.
Good input there again Andrew...:)
So where is the profit?????????????
However it more than doubled its losses to £27.3m from a year earlier.
The bigger they are the harder they fall???
As far as I can make out their accumulated losses since listing on AIM is approaching £80m. The majority of current instruction have paid upfront so that money is gone. Bear in mind the £27mlosses this year are for 6 month so it is reasonable to assume year losses to be £50m odd. So to recover they need to sign up 50,000 new upfronters to break even. That’s 8000 per month. Doesn’t seem likely to me!
You have to laugh. You are still making a loss and thinking that throwing £100 million at it will make a difference. Does anyone not realise the Emperor has no clothes on!!!!
High Street Agents
What are you waiting for.
For PB to go out of business??????
Make sure you stick the knoife into the hilt.
Quote against them and kill them off now.
Because most of their properties are overpriced and clients are seriously propagandised against real agents. Not sure I want them!
Taking a look at their numbers I can't see how they can justify what they say. I've spoken to 3 different TOs and the areas they cover are down instruction wise approximately 35% so fees and profit from bolt ons would be down by a similar number you would expect. Unless they have a secret source of income that they haven't disclosed I expect that in the future there could be a class action suit from investors relating to stock manipulation.
Also, they say they have £100m in the bank.... we’ll they had £64m at the end of the previous year, so adding springers £125m to last years £64m = £189m. Lossss were £25m so where is the remaining cash?
Isn’t there an obligation on listed companies to update the city if trading becomes significantly more challenging? My guess is that their current performance is much worse than it was when these figures were produced but even if they aren’t I see a collapse in their future
Anyone keeping track of total losses to date? I think it's over £40m which, without yet finding any real profit, is going to take a loooooong time to payback. The emperor's clothes may be looking a bit threadbare! Interesting also that they focus on 74% online share but don't focus on the growth/size of this market anymore. 2019 looks like it could be a tough year for the purple PR machine.
Its £80m since listing on AIM.
IInterestingly, an anagram of Michael Bruce is 'Cherub Malice'. Cherub being angelic (his public face) and Malice meaning to harm someone. It fits with the two sides of Purple Tricks. Looks like a good deal but there is another side to it.
As for Steve James's comment "He usually mentions Australia..."
Well, that wouldn't be wise Steve, because after one of PB's top directors quit recently (because of upfront price changes etc) more key management has jumped ship so it's not exactly the sort of scenario he would broadcast. There are also growing problems and opposition brewing in America.
Remember what old Abraham Lincoln said... "You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time."
I think we will see this manifest into reality in 2019.
As has been said. To keep trading enormous amounts of money has to be spent on marketing. If the revenues aren't there then they are running on investors money. As the market continues to harden and volumes drop this model will come under serious strain. The money will dry up and......
Why do you guys bang on about massive amounts of money have been spent on marketing and will be the case for its future.
Of course it will be!! Its a brand new concept! How many millions did Amazon spend in the early 2000's and look where they are now!
One day PurpleBricks may become the online mover like Amazon. And if any of you work for PurpleBricks and know their marketing spend, i suggest you do not comment.
This is coming from a 24 year old...
Jai
You were 6 years old.
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