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Purplebricks UK profits jump but Oz and US continue to haemorrhage cash

Latest results for the past six months to 31st October 2018 show increasing revenue and profits in the UK and record numbers of LPEs.

Nigel Lewis

Purplebricks has revealed increased profits and turnover in the UK over the past six months but overall its worldwide performance has been dragged into the red by ongoing losses in Australia and the US.

In the UK it has switched to a new accounting system that has boosted its results, but using like-for-like comparisons revenues are up by 22% to £48.3 million and profits by 39% to £31.2 million. This is a gross profit margin of 64.6% on house sales worth £5.4 billion.

Its share of the hybrid market remains at 74%, although this is likely to increase significantly following the collapse of eMoov, which took place after Purplebricks accounting period ended. New instructions increased by 20% to 38,600 and the company now has 851 Local Property Experts in the UK with another 72 currently working through its training programme.

michael bruce“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,” says Michael Bruce, its group CEO (left).

“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.”

Overseas performance

But the galloping performance of its UK business has been offset by ongoing problems in Australia and early-days performance in the US, both of which operated at a loss during the past six months.

This includes an operating loss of £10.2 million in Oz created in part by a 9% dip in new instructions. Referring to severe problems with its business model and the management of its LPE teams recently in Oz, Purplebricks says “lessons have been learned”.

“While reporting strong growth in Australia, the underlying performance was held back by market conditions and some operational issues, which we have taken steps to correct with changes to the team, customer proposition and business model,” the company says.

The US made an operating loss of £20.5 million, reflecting the huge costs the company is incurring as it tries to expand quickly across the US. These losses in the US and Australia dragged its group figures into the red, making a £25.6 million operating loss on revenues of £70.1 million.

December 13, 2018

One comment

  1. I am not sure profits are up by 31.2M as you state in your article, if you look you look at the PB financials freely available on: –

    https://pbinvestmedia.s3.amazonaws.com/uploads/presentation/media_url/83/Interim_announcement_final.pdf

    Or bottom of the Purple Bricks website, it states that in the last 6 months the UK arm of PB made a ‘gross profit’ of 22.5M, but then when ‘administrative costs of 9M and marketing costs of 10.1M are subtracted it made an actual profit before tax of only 3.2M on a turnover of 39.9M for the period.

    So your article stating that there was a 22.5M profit is possibly misleading, maybe it should have said in last 6 months PB made a trading loss of 8.6M as the group, after all it is just one trading company.

    The Australia arm in the last 6 months made a ‘gross profit’ of 3.6M, minus administrative costs of 3.0M, minus marketing costs of 5.7M, making a loss before tax of minus 5.1M.

    The USA arm in the past 6 months made a ‘gross profit’ of 0.1M, minus administrative costs of 3.8M and marketing costs of 2.5M, making a loss of 6.13M.

    So my point here is that if an estate agent said they had made a 10M gross profit in the last 6 months, and then subtracted from this gross profit, other big ticket costs like, television advertising the cost of staff, in fact all the costs related to the organisation and this came to 12M, are they making a gross profit of 10M or a real loss of 2M?

    I like Purple Bricks as they have galvanised the world of estate agency, but this is all against a back drop of the company share price of Purple Bricks falling from over 320p in Jan 2018 to 154p in recent days.

    And Neil Woodford’s mixed fortunes with his other top companies he has invested in such as a major construction giant Keir which has seen its share price drop by over 25% in the last week.

    Also Axel Springer paid 125M for 12.5% of the company in March 2018, and that share is now worth around 64M, and of course Michael Bruce’s shares and Neil Woodford’s funds have been heavily impacted.

    What may be a bigger factor coming into focus is if the pay upfront/online model becomes a NO GO as the general public and trading standards think Emoov and Tepilo clients were unwittingly 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.

    This might bring pressure on Purple Bricks to have to offer a 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.

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