TIDMPURP
RNS Number : 8484U
Purplebricks Group PLC
03 August 2020
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014. Upon the publication of
this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public
domain.
3 August 2020
Purplebricks Group plc
("Purplebricks", the "Company" or the "Group")
Annual Results for the year ended 30 April 2020
Resilient FY20 performance and strong trading since housing
market reopened
Purplebricks Group plc (AIM: PURP), a leading UK estate agency
business, announces its results for the year ended 30 April 2020
("FY 2020") and provides an update on strategy and current
trading.
Full Year 2020 2019 Change
Group* GBPm GBPm
-------------------------------- ------ ------ --------
Revenue 111.1 113.8 -2%
Gross profit 67.7 69.4 -3%
Gross profit margin (%) 60.9% 61.0% -10 bps
Operating loss (9.4) (1.5) -527%
Adjusted EBITDA(1) 1.8 6.6 -73%
Cash at year end(2) 31.0 62.8 -
-------------------------------- ------ ------ --------
*Group refers to UK and Canada
Financial and operational results
-- COVID-19 materially impacted trading at year end, business
adapted quickly to remain open and conserve cash
-- UK average revenue per instruction ('ARPI')(3) of GBP1,394, up 12% (2019: GBP1,243)
-- Revenue
- Group revenue down by 2% to GBP111.1m (2019: GBP113.8m)
- UK revenue flat through first 10 months until pandemic and down 11% for full year
- UK instructions down 23% but underpinned by 12% increase in ARPI
-- Adjusted EBITDA
- Group adjusted EBITDA from continuing operations reduced to
GBP1.8m (2019: GBP6.6m) including loss of GBP1.4m from Canada which
was sold post year end
- UK adjusted EBITDA down to GBP4.8m (2019: GBP10.2m) reflecting
impact of suspension of housing market in the last two months of
the financial year
-- Including the results of the discontinued operations in the
US and Australia, the Group's total loss for the year was GBP19.2m
(2019: GBP54.9m)
-- Strong financial position, cash balance of GBP66.0m at 15
July following disposal of the Canadian business and no bank
debt
-- Improved UK marketing spend efficiency at 25.6% of revenue, down 400bps
-- Saved UK customers GBP77m in commission (4)
-- 3.9% (5) market share of instructions, 5.1% (5) share of properties sold by volume
Strategy update and current trading
-- Strategic focus now fully on the UK following disposal of the Canadian business
-- Strategic initiatives being delivered at pace with
significant opportunity for further innovation
-- Continued to see new instructions through the pandemic and
market recovering well since mid-May, supported by Government's
Stamp Duty holiday effective 8 July
-- Highest ever month for instructions in the UK, listing over 7,000 homes in July
-- Clear evidence consumers are starting to shift towards apps and tech-based alternatives
-- Confident in the opportunity to drive leverage and scale by
extending our market and growing value-add revenues
-- Despite market rebounding strongly, outlook for second half of year remains uncertain
Vic Darvey, Chief Executive Officer, commented :
"This year has seen some very difficult market conditions with
political and economic uncertainty dominating the landscape as a
result of both Brexit and the COVID-19 pandemic. But despite all of
this, I'm pleased to say that we saw a resilient performance, with
revenue decline of only 2% across the Group.
This year has seen significant change for the Group, shifting
our strategic focus back to the UK market and ensuring that we have
a strong platform for growth. As a result, we are now emerging
through the COVID-19 pandemic in a very strong position.
We exited the US and Australian markets, recently disposed of
our Canadian business, and we've sharpened our focus on instilling
financial discipline and operational excellence across the
business. Alongside that, we've put in place a new and highly
experienced digital leadership team.
Despite the challenges of COVID-19, our strategic initiatives
are being delivered at pace to accelerate our digital and data
capabilities, and with a very healthy net cash balance of GBP66m,
I'm confident that we can take advantage of the changing
landscape.
The Group is encouraged by the early signs of the housing market
rebounding well following the lifting of the lockdown and the
Government's Stamp Duty holiday.
We strongly believe that, in the current market, technology led
estate agency is starting to emerge as the winning model and there
is clear evidence that consumers are increasingly shifting towards
apps and tech-based alternatives. With our strengthened leadership
team and balance sheet, we are in a strong position to accelerate
our model, extend our market share and grow our value-add
revenues."
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. FY
20 APMs are presented including the effects of adopting IFRS 16
(see note 2). As IFRS 16 was adopted using the modified
retrospective approach, prior year comparatives have not been
restated. Adjusted EBITDA is defined as Operating profit, adding
back depreciation, amortisation, share based payment charges and
exceptional items.
2. Cash position as at 15 July 2020 was GBP66.0m
3. ARPI: Average revenue per instruction equates to total fee
income divided by the number of instructions published in the
year
4. Fees paid by customers who sell with Purplebricks vs typical
commission of 1.3% including VAT
5. Source: Independent research from TwentyCi dated June
2020
------
Analyst presentation
Vic Darvey, CEO and Andy Botha, CFO are streaming a video
presentation via webcast at 09:00am today followed by a live
Q&A session for analysts and investors.
The video webcast link is available via the registration page
below. A replay will also be available on the Purplebricks website
following the Q&A session.
https://webcasting.brrmedia.co.uk/broadcast/5f11be1f4c167c1215797da7
Annual Report and Accounts
T he Company's Annual Report and Accounts 2020 will be available
on the website of the Company at
https://www.purplebricksplc.com/investors/latest_results later today
and is due to be posted to shareholders on or around 11
September 2020 along with the Company's Notice of Annual General
Meeting which is expected to take place on 8 October 2020.
Enquiries
Purplebricks +44 (0)20 7466 5000
Vic Darvey, Chief Executive Officer investors@purplebricks.com
Andy Botha, Chief Financial Officer
Zeus Capital (NOMAD) + 44 (0)20 3829 5000
Daniel Harris, Nick Cowles
Citi +44 (0) 207 986 4000
Stuart Field, Robert Farrington
Peel Hunt +44 (0)20 7418 8900
Dan Webster, George Sellar
Buchanan +44 (0)20 7466 5000
David Rydell, Jamie Hooper, Kim van Beeck
About Purplebricks
Purplebricks is a leading estate agency business, based in the
UK. Purplebricks combines highly experienced and professional Local
Property Experts 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.
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.
Chairman's statement
It has been a year of significant transition for Purplebricks,
as we have sought to build on our exceptional six-year growth story
and create a more mature organisation. An organisation that can
offer even better service and greater transparency to our
customers, while delivering the technology and propositions our
people need to stay ahead of the competition and sell more
homes.
Above all, this has been a year in which we have focused
strongly on our core strategy - simplifying what we do and
supporting our people, while improving our structures and
processes. This has been achieved by strengthening our leadership
and culture. I am grateful to Vic Darvey and his executive team for
the way they are leading the next phase for Purplebricks,
especially against an extraordinary and difficult backdrop as the
COVID-19 crisis hit during the last few weeks of our financial
year.
Focused on our core operations
Unsurprisingly, this had an impact on FY 2020 performance, and
contributed to Group revenue from continuing operations being down
2.4% to GBP111.1m (2019: GBP113.8m) and an operating loss of
GBP9.4m (2019: GBP1.5m). Ongoing consumer uncertainty during the
year and the lockdown from March, impacted our UK revenue, down
10.7% to GBP80.5m. Our Canada business, which was disposed of in
July 2020, contributed GBP30.6m of revenue in its first full year
of ownership, while our exits from the Australian and US markets
have allowed us to concentrate on our key operations.
Having already worked through a period of internal change during
the year, I am immensely proud of the way our management team
handled the business disruption due to COVID-19. They did
everything that could have been expected of them - making the tough
decision to put people on furlough, supporting our self-employed
partners and, where possible, reinventing the way we do business
with our customers by building on things we were doing anyway.
As we come out of lockdown, Purplebricks colleagues are back in
people's houses, where appropriate and with full PPE, keeping our
people and customers safe.
Board priorities and changes
The Board continues to ensure that the Group's ambitions are
managed against risks, with sustainable growth at the heart of our
business. It is our responsibility to ensure we have a cohesive
team and culture - so that our people and management are free to
get on with developing the commercial side of the business with our
full support.
Mike Wroe, who was our Senior Independent Director, stepped down
from the Board in December 2019, and I would like to thank him for
the service he has given to the Company. I am delighted to say that
Simon Downing has taken on the role of Senior Independent Director
on the Board. We will seek to recruit a new non-executive director
to the Board, and to appoint a new chair to our Audit
Committee.
Following the recent change in ownership at Axel Springer, the
company that owns a 26.5% stake in Purplebricks, they have
nominated a new representative on our Board to replace Dr Andreas
Wiele. Dr Stephanie Caspar joined the Board on 27 July and I look
forward to working with her in the months ahead.
The Board appointed Vic Darvey as Chief Executive Officer in May
2019 to lead the business for the next phase of development, and to
take the Company forward. I am pleased with the progress he has
made during the year in strengthening the leadership, the
appointment of an Executive Leadership Team, and beginning the
transition to a digitally led, performance-based culture.
Since the end of the reporting period, in early May 2020, James
Davies resigned as Chief Financial Officer after three years with
Purplebricks. I would like to wish James every success for the
future, while also warmly welcoming Andy Botha as our new Chief
Financial Officer. Andy joins us from online travel group Secret
Escapes and has an excellent track record in growing digital
businesses. He also brings a strong understanding of the UK hybrid
property market from his time spent with both Zoopla and
PrimeLocation.
Canada disposal
As recently announced, on 15 July 2020 we completed the sale of
our Canadian operations for cash proceeds of CAD$60.5m (GBP35m).
This disposal simplifies our investment case and enables Vic and
his senior leadership team to focus on investing in the UK market,
where we believe there is significant opportunity to generate
shareholder value.
Committed to high standards of governance
Following the management and operational changes this year, our
progress on the Corporate Governance agenda was slow, but the Board
remains committed to achieving high standards in our governance
infrastructure appropriate to our increasing size and profile.
The Company continues to follow the Quoted Companies Alliance
Corporate Governance Code ("QCA Code") and is committed to
complying with the QCA Code or providing a clear explanation of any
areas where we do not.
Distribution policy
The Board has agreed that it is too early to consider returning
capital to investors at this time, due to retained losses within
our reserves and the need to focus our financial resources on
future opportunities. However, as we build a more mature business
with a strong strategy and relatively low fixed overheads, I
believe we can generate the consistent profits and cash needed to
make an appropriate distribution to investors in the coming years.
It is the intention of the Board that we will then move to a
progressive dividend policy as the business develops and we realise
our potential.
Outlook
To do that, we need to continue our journey to becoming the best
known and most respected Estate Agent in the UK. When we entered
the market six years ago, there were many competitors, but we have
built a strong position. Our growth has enabled us to keep average
costs down and, crucially, to build a market-leading platform.
Market uncertainties remain, with the continuing impact of COVID-19
and potential concerns over a no-deal Brexit at the end of 2020.
However, I believe we have the people, technology and functionality
to empower our customers even in a difficult market, and to further
open up the digital opportunities in our industry.
We will continue to build on that platform in the year ahead,
enhancing our digital capabilities to ensure that we are even
easier to do business with, and that we continue to outperform the
market. Part of that success must be building our market share, and
I am confident this will translate into significant shareholder
value. But the key to achieving our objectives will be keeping
things simple and improving our execution. In short, it's all about
doing what we know best, and doing it well.
Paul Pindar
Chairman
31 July 2020
Chief Executive's statement
In a year that has seen political and economic uncertainty,
followed by an unprecedented lockdown of the housing market
alongside much of the UK and Canada's economic activity, our strong
and differentiated business model has been vital to Purplebricks'
overall performance in our two markets. We have set out a new
strategy this year, invested in our people and platforms, and I
firmly believe we can continue to use technology to significantly
reduce the cost of moving home and to provide a better service to
customers.
The COVID-19 crisis, which impacted our performance at the end
of the financial year, has sharpened our focus on what technology
can do for our business and we continue to believe that our
differentiated, technology-led proposition will drive clear
business model advantages and significant opportunities to scale.
As consumer expectations evolve, especially in a post-COVID-19
environment, we anticipate that the hybrid model will continue to
displace traditional agents as consumers look to more virtual ways
of doing business.
Strengthening and restructuring the business
I am pleased with everything we have achieved this year,
particularly our work towards driving operational excellence. We
have done a lot to stabilise the business - controlling costs and
improving our financial discipline - and have moved our culture
further towards digital innovation and continuous improvement. In
turn, we have become more performance driven and made significant
changes to our organisational structure. All that meant we were
stronger as we entered the COVID-19 crisis and we are now even
better-placed for the future.
Reflecting these changes and helped by the diversity of revenues
across two key markets, I'm satisfied with our performance this
year and optimistic for the future, despite a challenging market
that has seen some of our competitors' revenues fall considerably.
Meanwhile, our exits from the US and Australian markets are now
complete and the associated costs were well within the guided
range.
Multiple levers help UK revenue in weakened market
We continue to maintain clear brand leadership in the UK, with
awareness of the brand now at 97%. I was also delighted to see that
we were one of the Top 20 most relevant brands in the UK in the
annual Superbrands(R) insight survey, putting us in the company of
other leading consumer brands such as Google, Amazon, Netflix and
PayPal.
Despite the impacts of Brexit and then COVID-19 on trading
conditions, we have focused on growing our basket size and
improving our average revenue per instruction (ARPI) over the last
year. Overall, instructions were 23% down year on year, but our
revenue was down just over 10%. This is due to an improved focus on
ancillary attachment and other adjacent opportunities, such as
mortgages and conveyancing, which resulted in our ARPI increasing
12% to GBP1,394, up from GBP1,243 last year.
We made an operating loss in the year of GBP9.4m, up from a loss
of GBP1.5m in 2019, resulting from the fall in revenue as the
business was impacted by a declining market and COVID-19. Our
market share of UK listings for the financial year was 3.9%, and
our share of the number of properties sold was 5.1% of the total
market.
Impacts of COVID-19
What we couldn't have predicted, even at our Half Year results,
was the arrival of the COVID-19 crisis, the devastating
consequences for our communities and local economies, and the
continuing impact of social distancing restrictions in our
marketplace even as lockdown eases.
At the start of the crisis, we managed to pivot the organisation
very quickly to smart working in both our markets, as consumers
moved towards virtual valuations and viewings, and buying and
selling homes online became even more important. Unlike most of our
competitors, we remained open for business throughout the crisis,
offering people a safe way to move home, in spite of the
challenging market conditions, using both our desktop service and
mobile app.
During this period, we successfully reduced a number of our
costs to reflect lower levels of market activity, with the UK
Coronavirus Job Retention Scheme and the Canada Emergency Wage
Subsidy deployed in respect of 50% of our employees in both the UK
and Canada. In addition, the Board and Executive Team voluntarily
reduced their salaries by 20%. Our variable cost model has proved
to be a significant advantage during this period - we have lower
overheads than most of our competitors, and we can flex up and down
with the market over time to manage demand.
We also created a fund of up to GBP2.2 million to provide
support payments to our self-employed agents, many of whom operate
as limited companies, so were unable to furlough or claim through
the self-employed income support scheme. I have been proud to stand
shoulder to shoulder with all of our people through this difficult
period and, if nothing else, the COVID-19 crisis has served to
further unify our Team as we work together to respond to the
challenges.
I'm confident that the work we have done this year, particularly
in early 2020, will ensure we are more than ready to compete in the
post-COVID-19 market, as restrictions ease but don't go away.
What's very clear at the moment is that social distancing measures
will be in place for the foreseeable future and consumer risk
tolerance will continue to reduce. As a result, Purplebricks
remains well positioned as consumers continue to shift towards apps
and technology-based solutions when buying and selling a home.
Innovating to create the estate agent of the future
We continue to focus on delivering a step-change to our customer
experience and ensure that the buying and selling process becomes
personalised and friction free for both our customers and our
agents on the ground.
Over the last year, we have continued to invest in technology
and in building out our engineering capability. We've restructured
our teams to accelerate our ability to deliver, with dedicated
squads focused on improving the customer experience and delivering
greater automation and efficiency for our agents.
With nearly 70% of our customers using Purplebricks through a
mobile device, we've also increased our resources in mobile to
deliver a more personalised experience for our customers. The App
now has a 4.5 star approval rating in the App Store (based on over
27,000 ratings) and we continue to work hard to improve our overall
customer experience. I'm pleased to announce that we've also
recently teamed up with Amazon so that Purplebricks' customers can
now interact with Alexa to answer a range of questions about the
sale of their home.
Enhancing our performance through leadership, culture and
service
It's important that we continue to recruit and retain the best
talent in the industry. As a result, we have spent a significant
amount of time this year ensuring that we have the right capability
and structure to deliver our strategy. Over the last 12 months, we
have reviewed and restructured our Field operations, helping us
create the right structure for success with clear leadership and
the right target operating model to ensure greater performance in
the Field. We have also introduced a new leadership team in the UK
with a significant range of experience across a number of publicly
quoted and privately-owned digital businesses.
We continue to evolve our culture and to understand how we can
introduce more lean and agile processes across the business to
ensure that our contact centre, central functions and Field
operations work better together.
I would like to take this opportunity to thank all of our people
across the business for their incredible work in what has been an
extraordinary and very tough year. The changes we have made have
resulted in the recruitment of several excellent people from within
our organisation to new roles, as well as key external hires who
have brought in market leading, best in class, digital approaches
to what we do. We end the year in a much stronger position with a
very clear purpose and a strong focus on continuously improving the
service we provide to our customers.
Evolving our pricing model
We have a business model that is based on value. It's unrivalled
in the marketplace and offers consumers the opportunity to sell
their homes for a fair, fixed fee. This single-minded proposition
has got us to where we are today and created a business model that
has resulted in Purplebricks becoming the largest estate agency
brand in the UK. However, we also recognise that, to extend our
market leadership, we'll need to evolve our pricing. That means
looking at different pricing strategies to reduce the up-front fee
and splitting the payment between listing and completion.
Following an in-depth pricing study in the first half of the
year, we had hoped to pilot a new pricing structure in early 2020,
but the lockdown has delayed this to the autumn. I believe reducing
the level of the upfront fee will widen the market opportunity
significantly, although a fixed fee element will remain a critical
part of our success, as hybrid adopters remain more motivated to
sell their homes. Reducing the upfront fee will reduce the barrier
for many customers in instructing us - while higher fees on
completion will allow our LPEs to earn more from each sale,
ensuring our self-employed model will not only remain sustainable
but become more attractive to the best talent in the industry.
Transforming our processes and technology
Over the last 12 months we've made significant investments in
both our people and our technology to improve the level of service
we provide to our customers. We've introduced the World Class
Manager training programme as well as a Contact Centre School,
helping to increase productivity.
We've invested in further technology to ensure customers have a
choice of channel to communicate with us including the deployment
of a new omni-channel customer engagement platform and virtual
valuations and viewings.
Our focus on innovation and service improvement continues to be
reflected in the feedback we receive from customers. We are still
the most positively reviewed estate agent in the UK with nearly
75,000 independent reviews on Trustpilot. We have also achieved a
consistently high score of 4.6/5 with Feefo and retained their
'Gold Trusted Service' award in 2020 for the second year
running.
Sale of Canadian business
While performance in our Canadian business has been improving
over the last 12 months, maintaining a strong market share in
Quebec and experiencing positive growth in English Canada, we
announced on 15 July 2020 that we had completed the sale of our
Canadian operations to the Desjardins Group. This disposal further
simplifies the business and will allow us to focus management time
and resources on delivering growth in our core UK market. We wish
the team at DuProprio and Purplebricks Canada the very best in
their new venture - and I'd like to thank them personally for the
collaboration and mutual sharing of knowledge and expertise over
the last couple of years.
Looking ahead
I'm optimistic about the future of our business, notwithstanding
the macro environment, which remains uncertain. I expect our number
of listings in the year to fall, but I think we can continue to
mitigate the challenging market conditions with an operating
platform and strategy that give us multiple levers we can utilise
to grow our business.
Whatever happens next, trust will be important. I was delighted
to see a big jump in perceptions around value and trust in
Purplebricks earlier this year.
The longer-term effects of the COVID-19 crisis may temper
enthusiasm for moving home, but I believe we will see a slow and
solid recovery over the next 12 months. It is also possible that
there could be short to medium-term implications for the
competitive landscape. What we are seeing at the moment, is that
people are already starting to use technology in a different way
with virtual valuations and viewings being considered by a much
wider audience.
What we have demonstrated through the crisis is that we can
leverage our operating model successfully, maximise the opportunity
and increase our market share, even in the toughest of
circumstances. I believe our hybrid model will be able to deliver
better service and flexibility to customers in a changed
environment, and our virtual capabilities will play a key role in
this.
Vic Darvey
Chief Executive Officer
31 July 2020
Chief Financial Officer's report
Financial review
The Group delivered a resilient financial performance through
the majority of FY 2020, despite the ongoing challenges in the
market. However the overall results for the year were impacted by
the COVID-19 crisis which affected our ability to operate in the
final two months of the year.
During FY 2020 we refocused the business on the UK and Canadian
markets, invested in our senior leadership team, restructured and
repurposed our Field agent teams and invested in our Digital team
and platforms. We also improved our financial discipline around
capital allocation and marketing execution.
We exited the year with a strong cash position and balance sheet
to support the next phase of our growth in the UK market.
Summary of financial performance
Overall Group revenues from continuing operations of GBP111.1m
were down 2.4% in the year (2019: GBP113.8m) against the backdrop
of a challenging market in the UK and Canada due to ongoing
political and economic uncertainty, and the impact of COVID-19
which effectively closed the housing market towards the end of the
period. Due to COVID-19, at 30 April 2020 there was higher than
usual uncertainty regarding the impact of the timing and profile of
recovery from the crisis on the UK housing market. Based on
available information, we have estimated that the future service
period in respect of instructions on hand at 30 April 2020 will be
approximately 35% longer than at prior year. This has led to an
increase in the proportion of revenue deferred at the year end in
the UK. Based on the timing and extent of the lockdown in Canada,
we have assessed that no significant increase in the future service
period existed as at 30 April 2020.
Our gross profit margin remained steady at 61% (2019: 61%), with
gross profit from continuing operations of GBP67.7m down 2.5%
(2019: GBP69.4m).
Adjusted operating costs (see definition in note 4) of the
continuing operations increased by 29% to GBP37.1m (2019:
GBP28.7m). Conversely, marketing costs, which were largely focused
on our two core markets, reduced by 16% to GBP28.8m (2019:
GBP34.1m). Overall this highlights our ability to manage our
variable costs quickly, and dial up and down in response to the
market.
Operating costs increased through an investment in our
management team capacity and capability, an increase in the
capacity and responsiveness of our contact centre, and our Digital
teams to deliver improvements to both our customer facing solutions
and our internal processes. Following the adoption of IFRS 16,
lease costs have been replaced by depreciation and interest in FY
2020.
Adjusted EBITDA (see definition in note 4) I was GBP1.8m, down
73% (2019: GBP6.6m). Given the challenges experienced towards the
end of this year, we are pleased with the results of both the UK
and Canada businesses, which are set out individually later in the
section. The Group made an operating loss of GBP9.4m (2019:
GBP1.5m) including share of joint venture losses. Including the
results of the discontinued operations in the US and Australia, the
Group's total loss for the year was GBP19.2m (2019: GBP54.9m).
The business responded swiftly to the accelerating impacts of
the COVID-19 pandemic. Due to the high degree of flexibility in our
cost base we were able to adjust our operating model and cash-burn
accordingly, while still remaining open for business. We continue
to have a robust balance sheet and a strong cash position with
GBP31.0m on the balance sheet as at the year-end (2019:
GBP62.8m).
GROUP - continuing operations
Extract of Consolidated Statement
of Comprehensive Income and Group
Alternative Performance Measures(1) 2020 2019 Change
For the year ended 30 April GBPm GBPm %
-------------------------------------- ------- ------- ---------
Revenue 111.1 113.8 (2.4)
Cost of sales (43.4) (44.4) (2.3)
------- ------- ---------
Gross profit 67.7 69.4 (2.5)
Gross profit margin 60.9% 61.0% (10) bps
Adjusted operating costs (37.1) (28.7) 29.3
Marketing costs (28.8) (34.1) (15.5)
------- ------- ---------
Adjusted EBITDA 1.8 6.6 (72.7)
------- ------- ---------
Depreciation and amortisation (6.1) (4.4) 38.6
------- ------- ---------
Adjusted operating (loss) / profit (4.3) 2.2 (295.5)
Share-based payment charge (0.7) (2.7) (74.1)
Exceptional operating costs (1.6) (0.5) 220.0
Share of results of joint venture (2.8) (0.5) 460.0
------- ------- ---------
Operating loss (9.4) (1.5) (526.7)
------- ------- ---------
UK
Extract of Statement of Comprehensive
Income and Alternative Performance
Measures(1) 2020 2019 Change
For the year ended 30 April GBPm GBPm %
--------------------------------------- ------- ------- ----------
Revenue 80.5 90.1 (10.7)
Cost of sales (28.9) (33.3) (13.2)
------- ------- ----------
Gross profit 51.6 56.8 (9.2)
Gross profit margin 64.1% 63.0% 110 bps
Adjusted operating costs (26.2) (19.9) 31.7
Marketing costs (20.6) (26.7) (22.8)
------- ------- ----------
Adjusted EBITDA 4.8 10.2 (52.9)
Depreciation and amortisation (3.5) (2.3) 52.2
------- ------- ----------
Adjusted operating profit 1.3 7.9 (83.5)
Share-based payment credit / (charge) 0.1 (2.1) (1,047.6)
Exceptional operating costs (1.6) (0.5) 220.0
------- ------- ----------
Operating (loss) / profit (0.2) 5.3 (1,037.7)
------- ------- ----------
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. FY 20 APMs are
presented including the effects of adopting
IFRS 16 (see note 2). As IFRS 16 was adopted
using the modified retrospective approach,
prior year comparatives have not been restated.
Key Performance Indicators :
The directors use key performance indicators (KPIs) to assess
performance of the business against the Group's strategy. The
strategy is built around: efficiently attracting good quality
customers to our website; gaining market share; and providing
customers with choice to enable revenue per instruction to
increase. Cost-effective marketing and a controllable operating
cost base are the ingredients to a sustainably profitable
business.
New users represents the number of unique visitors to the website in the year.
Average revenue per instruction equates to total fee income
divided by the number of published instructions.
Cost per instruction represents total marketing costs, including
portal costs, divided by instructions.
Marketing as a percentage of revenue represents the total
marketing costs, including portal costs, as a percentage of total
revenue.
UK KPIs 2020 2019 Change
%
--------------------------------- --------- --------- -------------
Unique visitors (m) 13.1 13.5 (3)
Instructions 53,680 69,892 (23)
Average revenue per instruction
("ARPI") GBP1,394 GBP1,243 12
Cost per instruction (CPI) GBP383 GBP382 -
Marketing as a % of revenue 25.6% 29.6% (400) bps
The onset of COVID-19 had a material impact on trading at the
end of the year. This, combined with a very challenging property
market, resulted in UK revenue falling 11% while we experienced a
23% reduction in the number of instructions. This reduction was
partially offset by a 12% increase in average revenue per
instruction (ARPI) to GBP1,394 (2019: GBP1,243).
Due to COVID-19, at 30 April 2020 there was higher than usual
uncertainty regarding the impact of the timing and profile of
recovery from the crisis on the UK housing market. Based on
available information, we have estimated that the future service
period in respect of instructions on hand at 30 April 2020 will be
approximately 35% longer than at prior year. This has led to an
increase in the proportion of revenue deferred at year end. For
context, a 10% increase or decrease in the estimated service period
would have increased or decreased deferred income by around GBP1.8m
respectively.
Revenue was split 53:47 between instruction and ancillary
revenue respectively (2019: 56:44). This further shift in the year
towards ancillary revenue becoming a greater proportion of our
revenue is a result of our continued commitment to delivering
value-add, complementary products to our customers.
The majority of cost of sales is represented by the earnings of
self-employed Local Property Agents (LPEs). UK gross profit margin
for the year was 64.1% up 110 bps from the prior year, reflecting
price increases in the year.
Adjusted operating costs (see definition in note 4) were up 32%
to GBP26.2m (2019: GBP19.9m). These costs reflect further
investment in the UK business, particularly the Digital team (where
costs are only partly capitalised, based on the activity
undertaken).
Marketing costs were GBP20.6m (2019: GBP26.7m), down 23% year on
year, reflecting our ability to effectively manage marketing spend
in line with the market activity. Marketing cost per instruction
("CPI") was GBP383, marginally up from GBP382 in FY 2019.
Adjusted EBITDA for the year (see definition in note 4) was down
by 53% to GBP4.8m (2019: GBP10.2m).
Depreciation and amortisation was GBP3.5m, up from GBP2.3m in FY
2019, predominantly reflecting the increase in capitalised
development costs from prior years as well as the adoption of IFRS
16 at 1 May 2019 (without restatement of FY 2019), which led to an
additional GBP0.3m of depreciation of right-of-use lease assets.
Adjusted EBITDA has also benefited from the reclassification of
GBP0.3m of rental payments under IFRS 16.
Share-based payments gave rise to a credit in the year of
GBP0.1m, compared to a charge of GBP2.1m in the prior year. This
movement reflects a significant credit in the current year arising
from the reversal of charges taken in previous years as options
held by leavers lapsed on their leaving the business. Overall, the
UK made an operating loss of GBP0.2m (FY 19: profit of
GBP5.3m).
Regrettably, the Group incurred a fine from HMRC for historical
breaches of certain aspects of the UK's anti-money laundering
legislation. We have since improved our anti-money laundering
controls.
Exceptional items
Exceptional items include amounts that management believes it is
necessary to present separately in order to show a more comparable
view of the underlying performance of the business. Total
exceptional items this year were costs of GBP1.6m (2019: GBP0.5m,
badged as "non-recurring costs") and comprised:
i) Costs of a fundamental restructure of the sales and
operational functions, primarily involving rationalisation of the
network of self-employed LPEs, as described in the business model,
of GBP1.2m.
ii) Costs of supporting the network of independent LPEs in
response to the COVID-19 crisis of GBP0.4m.
Each of these items is expected to continue into FY 2021 and the
relevant costs will be presented consistently next year. The Board
expects the aggregate costs of each of these items to be material
across the two years.
Canada
Extract of Statement of Comprehensive 2019
Income and Alternative Performance from acquisition
Measures(1) 2019 on 6 July
2020 Proforma Change 2018
For the year ended 30 April GBPm GBPm % GBPm
-------------------------------------- ------- ---------- ------- ------------------
Revenue 30.6 29.7 3.0 23.7
Cost of sales (14.5) (13.8) 5.1 (11.1)
------- ---------- ------- ------------------
Gross profit 16.1 15.9 1.3 12.6
(90)
Gross profit margin (%) 52.6% 53.5% bps 53.2%
Adjusted operating costs (9.3) (8.6) 8.1 (7.2)
Marketing costs (8.2) (8.4) (2.4) (7.4)
------- ---------- ------- ------------------
Adjusted EBITDA (1.4) (1.1) 27.3 (2.0)
Depreciation and amortisation (1.0) (0.9) 11.1 (0.8)
------- ---------- ------- ------------------
Adjusted operating loss (2.4) (2.0) 20.0 (2.8)
Share-based payment credit /
(charge) (0.3) (0.4) (25.0) (0.4)
Exceptional operating costs - - - -
------- ---------- ------- ------------------
Operating loss (2.7) (2.4) 12.5 (3.2)
------- ---------- ------- ------------------
Canada KPIs 2019
from
acquisition
on 6
2019 Change July
2020 Proforma % 2018
--------------------------------- ------- ---------- ------- -------------
Instructions 31,906 37,819 (15.6) 32,626
Average revenue per instruction GBP883 GBP747 18.2 GBP691
("ARPI")
Marketing cost per transaction GBP257 GBP206 24.8 GBP227
Marketing costs as a % of (150)
revenue 26.8% 28.3% bps 31.2%
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. FY
20 APMs are presented including the effects of adopting IFRS 16
(see note 2). As IFRS 16 was adopted using the modified
retrospective approach, prior year comparatives have not been
restated.
Canada achieved revenue growth overall, despite the COVID-19
crisis having a significant effect on the last 2 months of the
year.
In Quebec, we experienced a challenging and competitive
environment but delivered a healthy profitable performance.
In the Rest of Canada ("ROC"), our continued marketing efforts
have driven an increase in our brand awareness and an increase in
revenues despite a challenging underlying market pre COVID-19, and
the effects of the crisis in the last 2 months of the year.
In ROC we operate a number of service offerings which have
allowed us to target different sections of the market. Focus on
these new products, including a focus on generating buy-side
revenues, has led to us servicing a lower number of overall
clients, but at significantly higher ARPI.
A targeted reduction in marketing spend as the effect of the
COVID-19 crisis became apparent has led to a slight reduction in
marketing spend year on year. Canadian wage subsidy during COVID-19
crisis has offset wages and salaries by around GBP0.7m, allowing us
to retain staff during this period.
On 15 July 2020 the Group completed the sale of its Canadian
business, being all Canadian subsidiaries and the entire Canada
segment, to the Desjardins Group, a Canadian cooperative financial
group. Cash proceeds were $60.5m Canadian Dollars (GBP35m).
Consideration is subject to adjustments for completion working
capital and completion debt which will be calculated in due
course.
Closure of operations in the US and Australia
Throughout the closure processes in both countries, the wind-up
of operations has been conducted in a responsible manner to protect
the Purplebricks brand and respect commitments made to customers
and business partners, while minimising costs where possible within
these broader reputational parameters. The closures have now been
commercially completed, with only certain legal formalities
outstanding. The cash costs of closure have been at the higher end
of the Group's H1 guidance of GBP10.5 - GBP13m, however these are
inclusive of the cash costs of pre-closure announcement trading
losses and working capital positions unwinding. The results of the
US and Australia are set out within the segmental analysis at note
6.
Homeday joint venture
During the year the Group invested a further EUR 5.0m (GBP4.6m)
in Homeday.de via its joint venture with Axel Springer. As a result
of the conversion of previously existing convertible loans from JV
HoldCo to Homeday, JV HoldCo's shareholding in Homeday increased in
the year from 26% to 54%, and JV HoldCo therefore took control of
Homeday. As part of the provisional fair value accounting for this
acqusition, JV HoldCo revalued both its previous shareholding and
the convertible loans to fair value immediately before conversion.
This revaluation has led to a gain in JV HoldCo, of which the
Purplebricks' 50% share is GBP2.6m. Purplebricks' share of
Homeday's underlying losses for the year was GBP5.3m. After
accounting for amortisation of intangibles arising on acqusition of
GBP0.1m, this means that our net share of the JV HoldCo result for
the year was a loss of
GBP2.8m. Further detail is set out in note 9.
The Group has no further obligation to provide funding to
Homeday.de, and no further investment is expected at this
stage.
Tax
The Group reported a net tax credit of GBP1.7m (2019: GBP1.3m in
respect of the continuing group). This amount is comprised
primarily of a GBP1.8m deferred tax credit relating to the UK and
Canadian businesses, less a GBP0.1m current tax charge relating to
the UK. Deferred tax assets continue to be recognised in full in
the UK and Canada, based on expectations of sufficient taxable
profits being available for utilisation of these assets in future.
No tax impact is recognised in relation to either losses arising
during the year or previously unrecognised losses of prior years,
relating to the discontinued US and Australian businesses, as the
closure of the relevant companies means there is no prospect of
utilisation of their tax losses against future taxable profits.
Statement of financial position
The Group has a strong financial position to support its current
activities and future growth, including a cash balance of GBP31.0m
(30 April 2019: GBP62.8m). Net assets of GBP82.1m were GBP21.6m
lower than the comparable figure (30 April 2019: GBP103.7m) mostly
as a result of the total comprehensive loss for the year of
GBP19.3m, which includes the final losses in respect of the US and
Australia. Trade receivables and payables and contract assets and
liabilities are all reduced year on year, primarily reflecting the
closure of the US and Australian businesses, as well as timing of
creditor payments. Deferred income in the UK is reduced due to
lower transaction volumes, partly offset by a longer service
period.
Cash flow
Operating cash flow was an outflow of GBP24.0m (2019: GBP49.1m).
Within this, continuing operations accounted for an outflow of
GBP10.9m (2019: inflow of GBP9.9m) and for discontinued operations
an outflow of GBP13.1m (2019: outflow of GBP59.0m). The FY 2020
outflow from continuing operations is caused by marketing
investment into the Canada business and working capital timing
effects in the UK. Capital expenditure and financing items
represented an outflow of GBP7.8m (2019: GBP41.2m), with an
additional GBP4.6m investment being made in Homeday.de (2019:
GBP27.3m in relation to our Canadian acquisition and GBP14.3m in
Homeday.de). Total cash outflows for the period were GBP31.8m
(2019: GBP90.3m), of which continuing operations comprised GBP18.7m
and discontinued operations comprised GBP13.1m. There are no
further contractual commitments to invest further into
Homeday.de.
Approved and signed on behalf of the Board
Andy Botha
Chief Financial Officer
31 July 2020
Consolidated statement of comprehensive income
for the year ended 30 April 2020
2020 2019
Note GBPm GBP0m
--------------------------------------------- ----- ------- ---------
Revenue 5 111.1 113.8
Cost of sales (43.4) (44.4)
------- ---------
Gross profit 67.7 69.4
------- ---------
Administrative and establishment expenses (45.5) (36.3)
Marketing costs (28.8) (34.1)
Share of results of joint
venture (2.8) (0.5)
------- ---------
Operating loss (9.4) (1.5)
------- ---------
Finance income 0.5 0.8
Finance expense (4.3) (4.2)
------- ---------
Loss on ordinary activities before taxation (13.2) (4.9)
Taxation on loss on ordinary activities 1.7 1.3
------- ---------
Loss from continuing
operations (11.5) (3.6)
Loss from discontinued operations (7.7) (51.3)
Loss for the year (19.2) (54.9)
------- ---------
Items that may be reclassified subsequently to profit
and loss:
Exchange differences on translation of foreign
operations (0.1) (0.1)
------- -------
Total other comprehensive
income (0.1) (0.1)
Total comprehensive loss (19.3) (55.0)
------- ---------
Earnings per share
Basic and diluted loss
per share - continuing
operations 8 (4p) (1p)
Basic and diluted loss
per share - total 8 (6p) (18p)
The accompanying accounting policies and notes form an integral
part of these financial statements.
Comparative figures have not been restated for the adoption of
IFRS 16 at 1 May 2019 - see note 2.
Comparatives have been restated to show separately the results
of continuing and discontinued operations - see note 2.2
All losses and other comprehensive income are attributable to
equity shareholders of the parent.
Consolidated Statement of Financial Position
At 30 April 2020
Restated*
2020 2019
Note GBPm GBPm
--------------------------------------- ---- ----- -------- -------
Non-current assets
Goodwill 19.5 19.5
Intangible assets 19.2 21.9
Property, plant and equipment 3.5 2.0
Investment in joint venture 9 12.5 10.7
Deferred tax asset 9.0 7.1
63.7 61.2
-------- -------
Current assets
Tax receivable 0.1 1.2
Trade and other receivables 10.2 11.4
Contract assets - accrued income 5.3 9.7
Contract assets - prepaid cost
of sales 5.3 6.3
Cash and cash equivalents 31.0 62.8
51.9 91.4
-------- -------
Total Assets 115.6 152.6
-------- -------
Current liabilities
Trade and other payables (11.8) (25.0)
Contract liabilities - deferred
income (14.6) (19.4)
Provisions (0.4) -
Borrowings (0.1) -
Lease liabilities (0.7) -
(27.
6) (44.4)
-------- -------
24.
Net current assets 3 47.0
-------- -------
Total assets less current liabilities 88.0 108.2
Non-current liabilities
Borrowing (0.1) -
Deferred tax liabilities (4.4) (4.5)
Lease liabilities (1.4) -
-------- -------
(5.
9) (4.5)
-------- -------
Net assets 82.1 103.7
-------- -------
Equity
Share Capital 3.1 3.0
Share premium 177.4 177.4
Share-based payments reserve 6.9 8.6
Foreign exchange reserve (1.8) (0.5)
Retained earnings (103.5) (84.8)
Total Equity 82.1 103.7
-------- -------
*See note 2.2
Consolidated Statement of Changes in Equity
For the year ended 30 April 2020
Share-based Foreign
Share Share payment exchange Retained Total
Capital Premium reserve reserve Earnings Equity
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- --------- --------- ------------ ---------- ---------- --------
At 1 May 2019 3.0 177.4 8.6 (0.5) (84.8) 103.7
Exercise of options 0.1 - (0.4) - 0.4 0.1
Tax in respect of share
options - - - - 0.2 0.2
Share-based payment
charge - - (1.3) - - (1.3)
Transactions with owners 0.1 - (1.7) - 0.6 (1.0)
--------- --------- ------------ ---------- ---------- --------
Loss for the year - - - - (19.3) (19.3)
Exchange differences
on translation of foreign
operations - - - (1.3) - (1.3)
--------- --------- ------------ ---------- ---------- --------
Total comprehensive
loss - - - (1.3) (19.3) (20.6)
--------- --------- ------------ ---------- ---------- --------
At 30 April 2020 3.1 177.4 6.9 (1.8) (103.5) 82.1
--------- --------- ------------ ---------- ---------- --------
For the year ended 30 April 2019
Share-based Foreign
Share Share payment exchange Retained Total
Capital Premium reserve reserve Earnings Equity
GBPm GBPm GBPm GBPm GBPm GBPm
--------- --------- ------------ ---------- ---------- --------
At 1 May 2018 3.0 176.4 4.6 (0.4) (33.4) 150.2
Exercise of options - 1.0 (0.3) - 0.3 1.0
Tax in respect of share
options - - - - 3.2 3.2
Share-based payment
charge - - 4.3 - - 4.3
Transactions with owners - 1.0 4.0 - 3.5 8.5
--------- --------- ------------ ---------- ---------- --------
Loss for the year - - - - (54.9) (54.9)
Exchange differences
on translation of foreign
operations - - - (0.1) - (0.1)
--------- --------- ------------ ---------- ---------- --------
Total comprehensive
loss - - - (0.1) (54.9) (55.0)
--------- --------- ------------ ---------- ---------- --------
At 30 April 2019 3.0 177.4 8.6 (0.5) (84.8) 103.7
--------- --------- ------------ ---------- ---------- --------
Consolidated Statement of Cash Flows
For the year ended 30 April 2020
2020 2019
Note GBPm GBPm
-------------------------------------------------- ----- ---------- ----------
Loss for the year after taxation (19.2) (54.9)
Adjustments for:
Amortisation of intangible assets 4.1 3.7
Depreciation of tangible fixed assets 1.7 0.8
Impairment of intangible assets 0.5 -
Impairment of tangible fixed assets 0.6 -
Share-based payment (credit)/charge (1.3) 4.3
Gain on lease modification (0.1) -
Credit to loss provision ( 0.4) -
Increase in provisions 0.4 -
Interest income (0.5) (0.8)
Interest expense 0.2 0.1
Share of result of joint venture 9 2.8 0.5
Taxation (1.7) (1.1)
Operating cash outflow before changes
in working capital (12.9) (47.4)
Movement in trade and other receivables 7.0 (6.6)
Movement in trade and other payables (14.2) 4.9
Movement in deferred income (4.8) 1.1
---------- ----------
Cash utilised in operations (24.9) (48.0)
---------- ----------
Taxation received / (paid) 1.0 (1.0)
Interest paid (0.1) (0.1)
Net cash outflow from operating activities (24.0) (49.1)
---------- ----------
Investing activities
Purchase of property, plant and equipment (0.8) (1.1)
Development expenditure capitalised (2.1) (2.6)
Purchase of intangible assets (0.1) (0.7)
Interest income 0.5 0.7
Investment in joint venture (4.6) (11.2)
Acquisition of subsidiary net of cash
acquired - (27.3)
Net cash flow outflow from investing activities (7.1) (42.2)
---------- ----------
Financing activities
Lease interest payments (0.1) -
Payments against lease liabilities (0.9) -
Proceeeds from external borrowings 0.3 -
Repayments of external borrowings (0.1) -
Proceeds from issue of shares 0.1 1.0
Net cash (outflow)/inflow from financing
activities (0.7) 1.0
---------- ----------
Net decrease in cash and cash equivalents (31.8) (90.3)
Effect of foreign exchange rates - 0.3
Cash and cash equivalents at beginning
of year 62.8 152.8
Cash and cash equivalents at the end of
the year 31.0 62.8
---------- ----------
Cash flows relating to discontinued operations are presented
within note 6.
Notes to the Condensed Financial Statements
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.
These condensed financial statements are presented in British
Pounds, which is the currency of the primary economic environment
in which the Company operates and are presented in GBP million.
2. Summary of significant accounting policies
2.1 Basis of preparation and consolidation
These condensed financial statements have been prepared on the
going concern basis under the historical cost convention as
modified by the revaluation of certain financial assets and
liabilities (including derivative instruments) at fair value.
The financial information set out in this announcement does not
constitute the Company's statutory accounts, within the meaning of
section 430 of the Companies Act 2006, for the years ended 30 April
2020 or 2019, but is derived from those accounts. While the
financial information included within this announcement has been
prepared in accordance with the recognition and measurement
criteria of IFRS, it does not comply with the disclosure
requirements of IFRS. Statutory accounts for 2019 have been
delivered to the Registrar of Companies and those for 2020 will be
delivered following the Company's Annual General Meeting. The
auditors have reported on those accounts; their reports were
unqualified and did not contain statements under section 498(2) or
(3) of the Companies Act 2006. The auditors have consented to the
publication of the Preliminary Announcement.
2.2 Restatement
Discontinued operations
A discontinued operation is a component of the entity which the
Group has decided to close, or which has been disposed of or which
is classified as held for sale and which represents a separate
major line of business or geographical area of operations. The
results of discontinued operations are presented separately in the
statement of comprehensive income and statement of cash flows. In
2020, the results of the US and Australian operations have been
classified as discontinued operations. The comparative figures
included in the statement of comprehensive Income and statement of
cash flows in respect of the year ended 30 April 2019 have been
restated accordingly.
Presentation of contract assets
In the current year, contract assets, being accrued income and
prepaid cost of sales, are presented separately on the face of the
statement of financial position. Comparative amounts have also been
separately presented, with a corresponding reduction in the amounts
shown as trade and other receivables. No restatement of total
amounts has occurred.
2.3 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 trading and cash flow forecasts
covering the period to 31 August 2021. This assessment was carried
out initially without taking account of the cash inflow arising
from the sale of the Group's Canadian business, but did take into
consideration sensitivity analysis with regard to the forecast
volume of instructions, the variable nature of significant elements
of the Group's cost base and steps which could be taken to further
mitigate costs if required. Mitigations include a reduction in
marketing expenditure and reductions in expenditure in the Group's
contact centre and support functions.
In satisfying themselves that the going concern basis is
appropriate, the directors also took into account recent practical
experience and steps which were taken with regard to cost control
and cash preservation due to the COVID-19-related macro-economic
conditions leading up to and following the year-end. Even in the
situation of a severe downside sensitised fall in revenues that is
in excess of the directors' realistic expectations, and before
taking any such mitigating actions, the Group expects to maintain a
position of liquidity throughout the forecast period to 31 August
2021.
The subsequent cash inflow from the sale of the Group's Canadian
business, of $61.5m Canadian Dollars (c.GBP36m), received on 17
July 2020 (subject to further post-closing adjustments, as referred
to in note 10) has further enhanced the Group's year-end cash
position of GBP31.0m.
Based on the Group's forecasts, the Directors are satisfied that
the Company, and the Group as a whole, have adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, the financial statements have been prepared on the
going concern basis.
2.4 New accounting standards adopted in the year
2.4.1 Implementation of IFRS 16 leases
The Group has adopted IFRS 16 Leases in these financial
statements from 1 May 2019, using the modified retrospective
approach.
IFRS 16 introduces new or amended requirements with respect to
lease accounting. It introduces significant changes to lessee
accounting by removing the distinction between operating and
finance lease, requiring the recognition of a right-of-use asset
and a lease liability at commencement for all leases, except for
short-term leases and leases of low value assets. In contrast to
lessee accounting, the requirements for lessor accounting have
remained largely unchanged.
The Group is not party to any leases where it acts as a
lessor.
Details of the Group's accounting policies under IFRS 16 are set
out below, followed by a description of the impact of adopting IFRS
16.
Accounting policies under IFRS 16 leases
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets. For these leases, the Group
recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental
borrowing rate.
The lease liability is presented as a separate line in the
consolidated statement of financial position and is subsequently
measured by increasing the carrying amount to reflect interest on
the lease liability (using the effective interest method) and by
reducing the carrying amount to reflect the lease payments
made.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
- the lease term has changed, in which case the lease liability
is remeasured by discounting the revised lease payments using a
revised discount rate.
- a lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease payments
using a revised discount rate.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, and any initial direct costs, less
lease payments made at or before the commencement day. They are
subsequently measured at cost less accumulated depreciation and
impairment losses.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. The
depreciation starts at the commencement date of the lease. The
Group does not have any leases that include purchase options or
transfer ownership of the underlying asset.
The right-of-use assets are presented within the same line item
as that within which the corresponding underlying assets would be
presented if they were owned - for the Group this is property,
plant and equipment.
For short-term leases (lease term of 12 months or less) and
leases of low-value assets (such as office equipment), the Group
has opted to recognise a lease expense on a straight-line basis as
permitted by paragraph 6 of IFRS 16. This expense is presented
within administrative and establishment expenses in the statement
of consolidated income.
Other costs associated with leases, such as maintenance and
insurance, are expensed as incurred.
Approach to transition
The Group has applied IFRS 16 using the modified retrospective
approach, without restatement of the comparative figures.
In respect of those leases the Group previously treated as
operating leases, the Group has elected to measure its right-of-use
assets arising from property leases using the approach set out in
IFRS 16.C8(b)(i). Under IFRS 16.C8(b)(i) right-of-use assets are
calculated as if IFRS 16 applied at the lease commencement date but
discounted using the incremental borrowing rate at the date of
initial application. The incremental borrowing rate represents the
rate of interest that the Group would have had to pay to borrow the
funds necessary to obtain an asset of similar value to the
right-of-use asset in a similar economic environment, over a
similar term, with similar security.
The Group's weighted average incremental borrowing rate applied
to lease liabilities as at 1 May 2019 is 6.4%.
As a practical expedient, the Group has relied on the previous
identification of leases under IAS 17 for all contracts that
existed on the date of initial application.
Impact on lessee accounting
IFRS 16 changes how the Group accounts for leases previously
classified as operating leases under IAS 17, which were off-balance
sheet.
Applying IFRS 16, for all leases (except as noted above), the
Group now recognises right-of-use assets and lease liabilities in
the consolidated statement of financial position, initially
measured at the present value of the future lease payments as
described above.
Lease incentives (e.g. rent-free periods) are recognised as part
of the measurement of the right-of-use assets and lease liabilities
whereas under IAS 17 they resulted in the recognition of a lease
incentive liability, amortised as a reduction of rental expenses on
a straight-line basis.
Under IFRS 16, right-of-use assets will be tested for impairment
in accordance with IAS 36 Impairment of Assets. This replaces the
previous requirement to recognise a provision for onerous lease
contracts.
Under IFRS 16 the Group recognises depreciation of right-of-use
assets and interest on lease liabilities in the consolidated income
statement, whereas under IAS 17 operating leases previously gave
rise to a straight-line expense in other operating expenses.
Under IFRS 16 the Group separates the total amount of cash paid
for leases that are on consolidated statement of financial position
into a principal portion (presented within financing activities)
and interest (presented within operating activities) in the
consolidated statement of cash flows. Under IAS 17, operating lease
payments were presented as operating cash outflows.
Areas of judgement
Significant judgements applied in the adoption of IFRS 16
included determining the lease term for those leases with
termination or extension options and determining an incremental
borrowing rate where the rate implicit in a lease could not be
readily determined.
Where the Group's leases include termination options, the
right-of-use assets and lease liabilities assume these are not
exercised. None of the leases in place at 1 May 2019 included
extension options.
Financial Impact
The application of IFRS 16 to leases previously classified as
operating leases under IAS 17 resulted in the recognition of
right-of-use assets and lease liabilities. Operating lease
incentives previously recognised as liabilities have been
derecognised and factored into the measurement of the right-to-use
assets and lease liabilities.
The table below sets out the adjustments recognised at the date
of initial application of IFRS 16.
GROUP As previously Impact As restated
reported of IFRS at 1 May
at 30 April 16 2019
2019
GBPm GBPm GBPm
------------------------------- ------------- -------- -----------
Non-current assets
Property, plant and equipment 2.0 2.2 4.2
Total impact on assets 2.2
------------- -------- -----------
Current liabilities
Trade and other payables (25.0) 0.1 (24.9)
Lease liabilities - (1.0) (1.0)
Non-current liabilities
Lease liabilities - (1.3) (1.3)
Total impact on
liabilities (2.2)
------------- -------- -----------
Impact on retained -
earnings
============= ======== ===========
Of the total right-of-use assets of GBP2.2m recognised at 1 May
2019, GBP2.1m related to leases of property and GBP0.1m to leases
of other equipment.
The impact on trade and other payables relates to the previously
recognised creditor in respect of rent-free periods.
COMPANY As previously Impact As restated
reported of IFRS at 1 May
at 30 April 16 2019
2019
GBPm GBPm GBPm
------------------------------ ------------- -------- -----------
Non-current assets
Property, plant and equipment 0.8 0.7 1.5
Deferred tax asset 6.1 - 6.1
------------- -------- -----------
Total impact on assets 0.7
------------- -------- -----------
Current liabilities
Trade and other payables (13.6) 0.1 (13.5)
Lease liabilities - (0.3) (0.3)
Non-current liabilities
Lease liabilities - (0.5) (0.5)
Total impact on liabilities (0.7)
------------- -------- -----------
Impact on retained earnings -
============= ======== ===========
The table below presents a reconciliation from operating lease
commitments disclosed at 30 April 2019 to lease liabilities
recognised at 1 May 2019.
Group Company
GBPm GBPm
------------------------------------------- ----- -------
Operating lease commitments disclosed
under IAS 17 at 30 April 2019 4.5 1.5
Short-term and low value lease commitments (0.1) -
straight-line expensed under IFRS
16
Effect of discounting (0.3) (0.1)
Service charges included in 30 April
2019 lease commitments (1.8) (0.5)
----- -------
Lease liabilities recognised at 1
May 2019 2.3 0.9
Consolidated income statement Impact
The application of IFRS 16 resulted in a decrease in other
operating expenses and an increase in depreciation and interest
expense compared to IAS 17.
During the year, the Group impaired right-of-use assets relating
to leases held in the US and Australia of GBP0.6m
During the year ended 30 April 2020, in relation to leases under
IFRS 16 the Group recognised the following amounts in the
consolidated income statement:
Group Company
GBPm GBPm
---------------------------------- ----- -------
Depreciation 0. 6 0.3
Impairment of right-of-use assets 0.6 -
Interest expense 0.1 -
Short term and low value lease 0.1 -
expense
Under IAS 17, the equivalent amounts would have been
Group Company
GBPm GBPm
----------------- ------ --------
Depreciation - -
Interest expense - -
Lease expense 0.9 0.3
Cash flow statement Impact
Cash flows related to repayment of interest are presented within
operating cash flows. Cash flows related to repayment of lease
liabilities are presented within financing cash flows.
Total cash outflows under leases were GBP1.0m.
Previously, all cash flows relating to the Group's lease
portfolio were presented within operating cash flows.
Consolidated statement of financial position Impact
The table below presents a reconciliation of right-of-use assets
from 1 May 2019 to 30 April 2020
GROUP Property Other Total
GBPm GBPm GBPm
-------- ----- -----
Recognised on adoption of
IFRS 16 on 1 May 2019 2.1 0.1 2.2
Additions 0.7 - 0.7
Lease modification 0.1 - 0.1
Depreciation (0.6) - (0.6)
Impairment (0.6) - (0.6)
FX on retranslation - - -
-------- ----- -----
30 April 2020 1.7 0.1 1.8
-------- ----- -----
COMPANY Property Other Total
GBPm GBPm GBPm
-------- ----- -----
Recognised on adoption of
IFRS 16 on 1 May 2019 0.7 - 0.7
Additions 0.1 - 0.1
Lease modification 0.1 - 0.1
Depreciation (0.3) - (0.3)
-------- ----- -----
30 April 2020 0.6 - 0.6
-------- ----- -----
The table below presents a reconciliation of lease liabilities
from 1 May 2019 to 30 April 2020.
GROUP Property Other Total
GBPm GBPm GBPm
-------- ----- -----
Recognised on adoption of
IFRS 16 on 1 May 2019 2.2 0.1 2.3
Additions 0.7 - 0.7
Lease modification - - -
Repayments of liabilities (0.9) - (0.9)
FX on retranslation - - -
-------- ----- -----
30 April 2020 2.0 0.1 2.1
-------- ----- -----
COMPANY Property Other Total
GBPm GBPm GBPm
-------- ----- -----
Recognised on adoption of
IFRS 16 on 1 May 2019 0.8 - 0.8
Additions 0.1 - 0.1
Lease modification 0.1 - 0.1
Repayments of liabilities (0.2) - (0.2)
-------- ----- -----
30 April 2020 0.8 - 0.8
-------- ----- -----
2.5 Provisions
Provisions for legal claims are recognised when the group has a
present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be
required to settle the obligation, and the amount can be reliably
estimated.
Provisions are not recognised for future operating losses. Where
there are a number of similar obligations, the likelihood that an
outflow will be required in settlement is determined by considering
the class of obligations as a whole. A provision is recognised even
if the likelihood of an outflow with respect to any one item
included in the same class of obligations may be small.
Provisions are measured at the present value of management's
best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount rate
used to determine the present value is a pre-tax rate that reflects
current market assessments of the time value of money and the risks
specific to the liability.
2.6 Exceptional items
Exceptional items (referred to last year as "non-recurring
items") represent amounts which result from unusual transactions or
circumstances which warrant individual disclosure due to their
nature and also significance. The identification of these items is
judgmental and this judgment is made at Board level. We believe
that adjusting for such items improves comparability period on
period.
These amounts are adjusted from alternative performance measures
in order to present an alternative perspective on the results of
the Group. Exceptional items are not expected to recur regularly or
cyclically.
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.
Estimates
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 next financial year are detailed below:
3.1 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 are required to
estimate the time and related value attributable to the element of
the development team that relates to the creation and build of
intangible assets which meet the criteria for capitalisation in IAS
38. The 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, ie in a scenario where either no development
team costs are capitalised, or where they are capitalised in full,
in a decrease of GBP3.6m or increase of GBP2.1m in administrative
and establishment expenses in the current year.
3.2 Measurement of deferred tax assets
The Group has potential deferred tax assets, principally in the
form of tax losses and possible tax deductions relating to the
exercise of share-based payments. Deferred tax assets are only
recognised to the extent it is probable that sufficient future
taxable income will be available against which the losses and
deductions can be utilised.
The recognition of deferred tax assets is dependent upon the
estimation of future taxable profits in the territories that the
group operates within. The decision to recognise deferred tax
assets is made after taking into account forecasts of future
taxable profits, sensitised for downside risk. If the estimated
future taxable profits were to change materially, either positively
or negatively, this could have a material impact on the tax charge
or credit recognised in the income statement. Depending on the
length of the forecast period and the scale of the downside
reduction applied, the value of the recognised deferred tax asset
could range from 0% to 100% of the balance recognised being
GBP7.1m.
3.3 Revenue recognition
Instruction revenue is recognised over the estimated period
between instruction and completion or withdrawal of the property
from sale ("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 period end.
As at 30 April 2020, the directors have taken account of the
impact of the COVID-19 crisis on the housing market in the UK in
developing their view of the likely future service period. The
directors assessed, as at 30 April, that in the UK, due to lockdown
measures in place in March and April, the future service period in
respect of instructions on hand at 30 April 2020 could reasonably
be considered to be significantly longer than has historically been
the case. While we are in the very early stages of seeing the
impact of COVID-19, based on evidence to date, the directors have
adopted an estimated service period which is approximately 35%
longer than at prior year in calculating contract liabilities in
respect of deferred income as at 30 April. An increase or decrease
of 10% in the estimated service period would have resulted in an
increase or decrease in deferred income of approximately GBP1.8m
respectively.
Significant uncertainty at the reporting date, as to the timing
and profile of recovery from lockdown measures and the wider impact
of COVID-19 on the UK economy, means there is a greater degree of
subjectivity in estimating the future service period than would be
the case in a "steady state" scenario and the directors have
adopted a best estimate approach, taking into account available
evidence. Should the UK housing market recover to pre-crisis levels
subsequent to the reporting date, there would be a reasonable
expectation that the service period would move closer to the
historical norm for future reporting periods.
The terms of the UK's future trading relationship with the EU
following Brexit remain uncertain and could have an effect on the
UK property market. Due to the uncertainty of the extent and timing
of any impact on the wider UK economy, it is impractical to
determine any potential, consequential impact on the timing of
revenue recognition in the UK business at the date of this report
and no such estimate has been made.
Judgements
The following are the critical judgements, apart from those
involving estimations (which are presented separately above), that
the directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the financial statements.
3.4 Revenue recognition
The Group provides services for instruction fees, including fees
receivable up front and fees receivable at completion of sale. The
Group has taken a judgement that under IFRS 15 the Performance
Obligation relating to these fees is discharged over time (between
instruction and completion) rather than at a point in time. An
alternative judgement that fees should be recognised at a point in
time would have a material impact on both deferred income and
revenue for the current year.
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 underlying performance
of the Group.
Adjusted EBITDA
Definition
Profit or loss from operating activities, adding back
depreciation, amortisation, share-based payment charges and
exceptional items.
Relevance to strategy
The adjusted measure is considered relevant to assessing the
underlying 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: 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 at 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.
Reconciliation
Please see segmental reporting in note 6.
Adjusted operating costs
Definition
Adjusted operating costs are administrative and establishment
expenses, adjusted by adding back depreciation, amortisation and
share-based payment charges and exceptional items.
Relevance to strategy
The adjusted measure is considered relevant to assessing the
underlying performance of the Group against its strategy and plans.
The rationale for excluding depreciation, amortisation, share-based
payments charges and exceptional costs from this measure is
consistent with that set out above in the "Adjusted EBITDA"
section.
Reconciliation
Continuing Group (2019 restated) 2020 2020 2019
IFRS 16 IAS 17 IAS 17
basis basis basis
GBPm GBPm GBPm
---------------------------------- --------- -------- --------
Administrative expenses (45.5) (45.5) (36.3)
Depreciation & amortisation 6.1 5.5 4.4
Share-based payment charge 0.7 0.7 2.7
Exceptional items 1.6 1.6 0.5
--------- -------- --------
Adjusted operating costs (37.1) (37.7) (28.7)
--------- -------- --------
UK 2020 2019 2020
IFRS 16 IAS 17 IAS 17
basis basis basis
GBPm GBPm GBPm
------------------------------------- --------- -------- --------
Administrative expenses (31.2) (31.2) (24.8)
Depreciation & amortisation 3.5 3.2 2.3
Share-based payment (credit)/charge (0.1) (0.1) 2.1
Exceptional items 1.6 1.6 0.5
--------- -------- --------
Adjusted operating costs (26.2) (26.5) (19.9)
--------- -------- --------
Adjusted operating profit/loss
Definition
Profit or loss from operating activities, adding back share-
based payment charges, share of results of joint venture and
exceptional items.
Relevance to strategy
The adjusted measure is considered relevant to assessing the
underlying performance of the Group against its strategy and plans.
The rationale for excluding share-based payments charges from this
measure is consistent with that set out above in the "Adjusted
EBITDA" section.
Reconciliation
Please see segmental reporting in note 6.
5. Revenue
Revenue by contract type
2020 2019
GBPm GBPm
Continuing operations
Instructions 65.6 69.3
Conveyancing 16.7 17.9
Other (Lettings and Brokerage) 28.8 26.6
111.1 113.8
------ ------
Discontinued operations
Instructions 3.6 14.1
Conveyancing 1.8 2.0
Other (Lettings and Brokerage) 0.7 6.6
------ ------
Total revenue 117.2 136.5
------ ------
6. Segmental reporting
The Group trade is managed as a single division, providing
services relating to the sale and letting of properties, however
management report 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 falls under the four geographic locations:
the UK, Canada, Australia and the US. During the year, no customer
contributed 10% or more of the Group's revenues (2019: none).
On 7 May 2019, the Company announced that it was exiting the
Australian market, and on 3 July 2019, the Company announced its
withdrawal from the US market. In each case the business was put
into an orderly rundown ahead of closure. The segmental analysis
includes recharges between segments. Certain of these recharges are
of costs which are not classified as discontinued. These are
adjusted in the tables below. The operating losses of discontinued
segments are reconciled to the net loss relating to discontinued
activities within this note.
The following is an analysis of the Group's revenue and results
by reporting segment:
Arising Adjustment Arising Adj.
on for Continuing on for Discont.
Year ended UK Canada consol. recharges operations Aus. US consol. recharges activities Total
30 April 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------ ------ ------- ---------- ---------- ------- ----- ------- --------- ---------- ------
Revenue 80.5 30.6 - - 111.1 1.5 4.6 - - 6.1 117.2
Cost of sales (28.9) (14.5) - - (43.4) (2.2) (2.2) - - (4.4) (47.8)
--------------- ------ ------ ------- ---------- ---------- ------- ----- ------- --------- ---------- ------
Gross profit 51.6 16.1 - - 67.7 (0.7) 2.4 - - 1.7 69.4
Gross profit
margin (%) 64.1% 52.5% - - 60.9% (46.7%) 52.2% - - 27.9% 59.2%
Administrative
expenses (31.2) (10.6) (1.6) (2.1) (45.5) (3.4) (4.8) - 2.1 (6.1) (51.6)
Marketing
expenses (20.6) (8.2) - - (28.8) (1.2) (2.0) - - (3.2) (32.0)
Share of
results
of joint
venture - - (2.8) - (2.8) - - - - - (2.8)
--------------- ------ ------ ------- ---------- ---------- ------- ----- ------- --------- ---------- ------
Operating
(loss)/profit (0.2) (2.7) (4.4) (2.1) (9.4) (5.3) (4.4) - 2.1 (7.6) (17.0)
=============== ====== ====== ======= ========== ========== ======= ===== ======= ========= ========== ======
Reconciliation to adjusted EBITDA
Operating
(loss)/profit (0.2) (2.7) (4.4) (2.1) (9.4) (5.3) (4.4) - 2.1 (7.6) (17.0)
Depreciation
& amortisation 3.5 1.0 1.6 - 6.1 0.5 0.3 - - 0.8 6.9
Share-based
payments (0.1) 0.3 - 0.5 0.7 (0.7) (0.8) - (0.5) (2.0) (1.3)
Share of
results
of joint
venture - - 2.8 - 2.8 - - - - - 2.8
Exceptional
items 1.6 - - - 1.6 - - - - - 1.6
--------------- ------ ------ ------- ---------- ---------- ------- ----- ------- --------- ---------- ------
Adjusted EBITDA 4.8 (1.4) - (1.6) 1.8 (5.5) (4.9) - 1.6 (8.8) (7.0)
=============== ====== ====== ======= ========== ========== ======= ===== ======= ========= ========== ======
Reconciliation of administrative expenses to adjusted operating
costs
Administrative
expenses (31.2) (10.6) (1.6) (2.1) (45.5) (3.4) (4.8) - 2.1 (6.1) (51.6)
Depreciation
& amortisation 3.5 1.0 1.6 - 6.1 0.5 0.3 - - 0.8 6.9
Share-based
payments (0.1) 0.3 - 0.5 0.7 (0.7) (0.8) - (0.5) (2.0) (1.3)
Exceptional
items 1.6 - - - 1.6 - - - - - 1.6
--------------- ------ ------ ------- ---------- ---------- ------- ----- ------- --------- ---------- ------
Adjusted
operating
costs (26.2) (9.3) - (1.6) (37.1) (3.6) (5.3) - 1.6 (7.3) (44.4)
=============== ====== ====== ======= ========== ========== ======= ===== ======= ========= ========== ======
Reconciliation of operating loss)/profit to adjusted operating
(loss)/profit
Operating
(loss)/profit (0.2) (2.7) (4.4) (2.1) (9.4) (5.3) (4.4) - 2.1 (7.6) (17.0)
Share-based
payments (0.1) 0.3 - 0.5 0.7 (0.7) (0.8) - (0.5) (2.0) (1.3)
Share of
results
of joint
venture - - 2.8 - 2.8 - - - - - 2.8
Exceptional
items 1.6 - - - 1.6 - - - - - 1.6
--------------- ------ ------ ------- ---------- ---------- ------- ----- ------- --------- ---------- ------
Adjusted
operating
profit /
(loss) 1.3 (2.4) (1.6) (1.6) (4.3) (6.0) (5.2) - 1.6 (9.6) (13.9)
=============== ====== ====== ======= ========== ========== ======= ===== ======= ========= ========== ======
Year ended 30 April 2019
Arising Adjustment Adjustment
on for Continuing for Discontinued
UK Canada consolidation recharges operations Australia US recharges activities Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 90.1 23.7 - - 113.8 11.4 11.3 - 22.7 136.5
Cost of sales (33.3) (11.1) - - (44.4) (7.4) (4.8) - (12.2) (56.6)
--------------- ------ ------ ------------- ---------- ---------- --------- ------ ---------- ------------ ------
Gross profit 56.8 12.6 - - 69.4 4.0 6.5 - 10.5 79.9
Gross profit
margin
(%) 63.0% 53.2% - - 61.0% 35.1% 57.5% - 46.3% 58.5%
Administrative
expenses (24.8) (8.4) (1.0) (2.1) (36.3) (10.7) (16.1) 2.1 (24.7) (61.0)
Marketing
expenses (26.7) (7.4) - - (34.1) (12.1) (24.5) - (36.6) (70.7)
Share of
results
of joint
venture - - (0.5) - (0.5) - - - - (0.5)
--------------- ------ ------ ------------- ---------- ---------- --------- ------ ---------- ------------ ------
Operating
profit/(loss) 5.3 (3.2) (1.5) (2.1) (1.5) (18.8) (34.1) 2.1 (50.8) (52.3)
=============== ====== ====== ============= ========== ========== ========= ====== ========== ============ ======
Reconciliation to adjusted EBITDA
Operating
profit/(loss) 5.3 (3.2) (1.5) (2.1) (1.5) (18.8) (34.1) 2.1 (50.8) (52.3)
Depreciation &
amortisation 2.3 0.8 1.3 - 4.4 - - - - 4.4
Share-based
payments 2.1 0.4 - 0.2 2.7 0.9 0.9 (0.2) 1.6 4.3
Share of
results
of joint
venture - - 0.5 - 0.5 - - - - 0.5
Non-recurring
acquisition
costs 0.5 - - - 0.5 - - - - 0.5
Adjustment to
present
adjusted
EBITDA as if
IFRS
16 had been
applied
in the year
--------------- ------ ------ ------------- ---------- ---------- --------- ------ ---------- ------------ ------
Adjusted EBITDA 10.2 (2.0) 0.3 (1.9) 6.6 (17.9) (33.2) 1.9 (49.2) (42.6)
=============== ====== ====== ============= ========== ========== ========= ====== ========== ============ ======
Reconciliation of administrative expenses to adjusted operating costs
Administrative
expenses (24.8) (8.4) (1.0) (2.1) (36.3) (10.7) (16.1) 2.1 (24.7) (61.0)
Depreciation &
amortisation 2.3 0.8 1.3 - 4.4 - - - - 4.4
Share-based
payments 2.1 0.4 - 0.2 2.7 0.9 0.9 (0.2) 1.6 4.3
Non-recurring
acquisition
costs 0.5 - - - 0.5 - - - - 0.5
--------------- ------ ------ ------------- ---------- ---------- --------- ------ ---------- ------------ ------
Adjusted
operating
costs (19.9) (7.2) 0.3 (1.9) (28.7) (9.8) (15.2) 1.9 (23.1) (51.8)
=============== ====== ====== ============= ========== ========== ========= ====== ========== ============ ======
Reconciliation of operating profit / (loss) to adjusted operating
profit / (loss)
Operating
profit
/ (loss) 5.3 (3.2) (1.5) (2.1) (1.5) (18.8) (34.1) 2.1 (50.8) (52.3)
Share-based
payments 2.1 0.4 - 0.2 2.7 0.9 0.9 (0.2) 1.6 4.3
Share of
results
of joint
venture - - 0.5 - 0.5 - - - - 0.5
Non-recurring
acquisition
costs 0.5 - - - 0.5 - - - - 0.5
--------------- ------ ------ ------------- ---------- ---------- --------- ------ ---------- ------------ ------
Adjusted
operating
profit /
(loss) 7.9 (2.8) (1.0) (1.9) 2.2 (17.9) (33.2) 1.9 (49.2) (47.0)
=============== ====== ====== ============= ========== ========== ========= ====== ========== ============ ======
2020 2019
GBPm GBPm
-------------------------- ------- ------
Non-current assets
UK 69.0 77.2
Canada 5.7 4.5
------- ------
Continuing operations 74 .7 81.7
Australia - 0.1
US - 0.2
------- ------
Discontinued activities - 0.3
Consolidation adjustments (11.0) (20.8)
------- ------
Total 63.7 61.2
------- ------
2020 2019
GBPm GBPm
-------------------------- ------- ------
Total assets
UK 113.6 228.9
Canada 13.0 9.9
------- ------
Continuing operations 126.6 238.8
Australia - 5.0
US - 4.6
------- ------
Discontinued activities - 9.6
Consolidation adjustments (11.0) (95.8)
------- ------
Total 115.6 152.6
------- ------
2020 2019
GBPm GBPm
-------------------------- ----- ------
Total liabilities
UK 22.0 28.1
Canada 13.1 7.2
----- ------
Continuing operations 35.1 35.3
Australia - 32.6
US - 49.0
----- ------
Discontinued activities - 81.6
Consolidation adjustments (1.6) (68.0)
----- ------
Total 33.5 48.9
----- ------
The Australia and US operations represent in their entirety the
segments as disclosed above. The operating losses of discontinued
segments are reconciled to the net loss relating to discontinued
activities as follows:
2020 2019
GBPm GBPm
------------------------------------------------------ ----- -------
Operating loss relating to discontinued segments (7.6) (50.8)
Net finance expense relating to discontinued segments (0.1) (0.3)
Tax charge relating to discontinued segments - (0.2)
----- -------
Loss from discontinued operations (7.7) (51.3)
----- -------
Cashflows relating to discontinued operations were as
follows:
2020 2019
GBPm GBPm
---------------------------------------------------- ------ ------
Operating cash inflow / (outflow) before changes in
working capital
Continuing operations (2.5) 8.8
Discontinued operations (10.4) (56.2)
------ ------
(12.9) (47.4)
------ ------
Changes in working capital, interest and taxation
paid
Continuing operations (10.9) 9.9
Discontinued operations (13.1) (59.0)
------ ------
Net cash outflow from operating activities (24.0) (49.1)
------ ------
Investing activities
Continuing operations (7.1) (42.0)
Discontinued operations - (0.2)
------ ------
(7.1) (42.2)
------ ------
Financing activities
Continuing operations (0.7) 1.0
Discontinued operations - -
------ ------
(0.7) 1.0
------ ------
7. Exceptional items
2020 2019
GBPm GBPm
---------------------------------- ------------------- -------------------
Exceptional items 1.6 0.5
Exceptional items comprise:
i. Costs of a fundamental restructuring of the customer service
and sales functions of the UK business, primarily reflecting
changes to the network of independent LPEs as described in the
business model, of GBP1.2m
ii. Costs of supporting the network of independent LPEs in
response to the COVID-19 crisis of GBP0.4m
These items have been identified as exceptional because they are
(i) the first instance of such costs being incurred in the group's
history and (ii) they are not expected to recur regularly or
cyclically.
Support to the LPE network during the Covid-19 crisis has
continued into FY21.
Further costs in relation to restructuring other operational
aspects of the UK business are expected continued in FY21, as part
of the same overarching, one-off restructuring programme. The Board
expects the aggregate costs of each of these items to be material
across the two years.
The aggregate amounts accrued but not yet paid in respect of
exceptional charges total GBP0.5m. All amounts are expected to be
paid in cash within 12 months. All amounts disclosed as exceptional
are deductible to tax.
All exceptional items are presented within administration
expenses in the consolidated income statement.
8. Earnings per share
Basic and diluted
------------------------------------------------
2020 2019
--------------------------------------------------------- ----------------------- -----------------------
Total including discontinued operations
--------------------------------------------------------- ----------------------- -----------------------
Loss GBPm (19.2) (54.9)
Weighted average number of shares ('000) 306,389 303,090
Basic loss per share (GBP) (0.06) (0.18)
Potentially dilutive shares unissued
at year end ('000) 9,738 21,827
Total potentially dilutive shares at
reporting date ('000) 316,127 324,917
Loss per share (GBP) - diluted (0.06) (0.18)
----------------------- -----------------------
Diluted loss per share is equal to the basic loss per share as a
result of the Group recording a loss for the year, which cannot be
diluted.
Basic and diluted
------------------------------------------------
2020 2019
--------------------------------------------------------- ----------------------- -----------------------
Continuing operations
--------------------------------------------------------- ----------------------- -----------------------
Loss GBPm (11.5) (3.6)
Weighted average number of shares ('000) 306,389 303,090
Basic loss per share (GBP) (0.04) (0.01)
Potentially dilutive shares unissued
at year end ('000) 9,738 21,827
Total potentially dilutive shares at
reporting date ('000) 316,127 324,917
Loss per share (GBP) - diluted (0.04) (0.01)
----------------------- -----------------------
Diluted loss per share from continuing operations is equal to
the basic loss per share as a loss cannot be diluted.
The table below reconciles the weighted average number of shares
('000):
Weighted average number of shares 2019 303,090
Weighted average issue of new shares under share
option schemes 3,299
-----------------------
Weighted average number of shares 2020 306,389
-----------------------
9. Investment in jointly controlled entity
Group Company
GBPm GBPm
At 1 May 2019 10.7 11.2
------ --------
Equity investments in
the year 4.6 4.6
Share of result for (2.8) -
the year (see below)
------ --------
At 30 April 2020 12.5 15.8
------ --------
In December 2018 Purplebricks Group plc purchased 50% of the
ordinary share capital of Einhundertsiebte "Media"
Vermogensverwaltungsgesellschaft bmH ("JV HoldCo"), a company
incorporated in Germany which held a 26% investment in Homeday GbmH
("Homeday"), another company incorporated in Germany, from AVIV
Group GmbH (then called Funfundachtzigste "Media"
Vermoegensverwaltungsgesellschaft mbH), a wholly owned subsidiary
of Axel Springer SE, a related party of the Company. The other 50%
shareholding in JV HoldCo continues to be held by the Axel Springer
group.
Purplebricks and the Axel Springer group operate JV HoldCo as a
joint venture under a Joint Venture Agreement.
Based in Berlin, Homeday operates homeday.de, a
transaction-based digital real estate platform in Germany that
brings customers together with experienced brokers and supports
them in buying and selling property.
Axel Springer has the right once per year to choose to increase
its investment in JV Holdco beyond 50% by acquiring shares from
Purplebricks at defined points up to 2023 for variable
consideration which is based on the future performance of Homeday
GmbH or a return on investment for Purplebricks.
JV HoldCo and the other shareholders of Homeday entered into an
Investment Agreement and a Shareholders' Agreement. These
agreements set out put and call options under which the remaining
shares of Homeday can be acquired in the future by JV HoldCo. These
agreements included a milestone target set during 2018 which was
achieved in December 2019 and which has led to the acquisition of
Homeday by JV HoldCo during the year (see below).
Current year developments
In August 2019, the Joint Venture Agreement, the Investment
Agreement and the Shareholders' Agreement were amended and restated
in to reflect the progress made by Homeday. Under the amended
Investment Agreement, in September 2019, JV HoldCo provided a
convertible loan to Homeday of EUR10m, funded equally by
Purplebricks and Axel Springer via an equity investment into JV
HoldCo. The EUR5m provided by Purplebricks to JV HoldCo has led to
the increase in investment in the year reflected in the table
above.
In November 2019, Axel Springer invested EUR 10m into JV HoldCo
in the form of a convertible loan. JV HoldCo then invested the same
amount into Homeday in the form of a convertible loan.
Following the achievement of the "AS Capital Increase"
"Milestone" target set during 2018 in December 2019, in March 2020
Axel Springer invested a further EUR 20m into JV HoldCo in the form
of a convertible loan. Purplebricks did not participate in this
round of funding to JV HoldCo. Of this EUR 20m, EUR 5m was invested
into Homeday, along with the conversion of existing convertible
loans with a principal value of EUR 20m held by JV HoldCo, in
exchange for 49,063 newly issued shares of EUR 1 each in Homeday.
The other EUR 15m was lent to Homeday in the form of a loan. These
transactions took the shareholding of JV HoldCo in Homeday to
54.39% and therefore following these transactions JV HoldCo
controls Homeday. JV HoldCo therefore consolidated 100% of the
results of Homeday from 1 January 2020, with Purplebricks
accounting for a 50% share of those results.
Under the amended Shareholders' Agreement, put and call options
exist between JV HoldCo and the other shareholders of Homeday which
may require or allow JV HoldCo to acquire shares held by the other
shareholders, for consideration to be determined with reference to
the performance of Homeday in the calendar years 2022 and 2023. The
potential liabilities of JV HoldCo under these put and call options
has been included in the total consideration calculated at the
point of acquisition of Homeday by JV HoldCo.
Accounting approach
Following the achievement of the AS Capital Increase Milestone
and the additional investment described above, the JV partners
assessed as of the end of December 2019 that the put and call
options that exist between JV HoldCo and the minority shareholders
of Homeday were virtually certain to be exercised on one side or
the other. Therefore JV HoldCo has from 1 January 2020 (the month
following the achievement of the Milestone) applied the anticipated
acquisition method, on the basis that the minority shareholders
will be bought out in the future before access to any dividend
stream or other return and therefore do not have present access to
the economic returns of Homeday, and has fully consolidated the
results of Homeday without any minority interest, but with a
liability to the other shareholders representing the estimated
future amounts payable to them at their eventual exit.
As part of the acquisition accounting process, in accordance
with IFRS3 and IFRS 10, JV HoldCo revalued both its existing 26%
shareholding in Homeday and the convertible loans existing as at
the acquisition date. Based on the provisional fair value
accounting exercise undertaken in the year, gains on these
revaluations amounted to GBP5.2m, of which Purplebricks' share was
GBP2.6m. These gains have been reflected in the income statement of
JV HoldCo and in the share of result shown in the table above. The
overall share of result is net of Purplebricks' share of Homeday's
losses for the period, which amounted to GBP5.3m, and amortisation
of intangible assets arising on acquisition of GBP0.1m. Therefore
the share of net loss which has been accounted for in the year is
GBP2.8m.
As the conversion of Axel Springer's loans to JV HoldCo into
shares in JV HoldCo is not reasonably certain as at 30 April 2020,
the Group's 50% holding in JV HoldCo continues to be accounted for
as a joint venture, under the equity method.
Potential future developments
Under the amended Joint Venture Agreement Purplebricks has the
right, at its discretion, to provide further capital and loan
funding to Homeday through JV HoldCo. Should Purplebricks choose
not to participate in further funding of Homeday through JV HoldCo,
its share in JV HoldCo and thus indirectly in Homeday may decrease
if its joint venture partner decides to exercise its right to
conversion of the convertible loans from AVIV to 107. Media. (in
the limited time window (two weeks per year) in which this is
possible).
Under the amended Joint Venture Agreement Purplebricks has the
right, at its discretion, to provide further funding to JV HoldCo
to put JV HoldCo in a position to meet its purchase price payment
obligations resulting from the put and call options. Should
Purplebricks choose not to participate in such further funding of
Homeday through JV HoldCo, its share in JV HoldCo and thus
indirectly in Homeday may decrease if its joint venture partner
decides to make further investments in Homeday via JV HoldCo on its
own.
There are no significant legal restrictions on the ability of
107. Media to declare or pay cash dividends. However, future
dividends would be dependent on the future trading and cash
generating performance of Homeday.
10. Post balance sheet event
Sale of Canadian business
On 15 July 2020 the Group completed the sale of its Canadian
business, being all Canadian subsidiaries and the entire Canada
segment, to the Desjardins Group, a Canadian cooperative financial
group. Headline consideration was $60.5m Canadian Dollars (GBP35m)
adjusted for working capital and debt, to be verified in line with
completion accounts in due course. Part of the proceeds were
allocated to the repayment of intra-Group debt owed to Purplebricks
Group plc.
The recovery of the non-current intercompany balance shortly
post year end is a non-adjusting post balance sheet event.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR VLLFBBVLLBBV
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