Given that soaring operating costs caused pre-tax losses to almost double for Purplebricks (PURP) last year, it is unsurprising that the online estate agency has announced plans to close its beleaguered US operations. In true Purplebricks style, the underperforming Stateside business may have grown revenue sixfold, but operating losses more than doubled following an acceleration in marketing spending and the opening of an East Coast office. The decision follows May’s announcement that it would exit the Australian market as returns were insufficient to justify continued investment amid falling property prices.
The group will focus on continuing to gain market share in the UK and Canada. UK instructions were up 9 per cent and revenue per instruction rose 6 per cent, as more ancillary products and services were sold. Despite marketing costs growing by a quarter, the business booked a £5.3m operating profit, more than double the prior year. Newly appointed chief executive Vic Darvey said future marketing spending in the UK would remain “steady”.
In Canada – a market the group entered via its 2018 acquisition of DuProprio – revenue grew 8 per cent to £23.7m. However, marketing as a percentage of sales grew to 31.1 per cent, from 18.1 per cent, which meant the business swung to an adjusted cash loss of £2.1m. Mr Darvey said he was confident the Canadian operations would avoid the fate of its North American cousin. The group was “embryonic” in its thinking and positioning in the US, said Mr Darvey, whereas DuProprio had been in operation for 18 years and had a 20 per cent market share in Quebec.
Analysts at house broker Zeus Capital expect adjusted pre-tax profits of £4.5m and EPS of 1.2p for the year to April 2020, compared with a £0.4m loss and EPS of 0.2p the prior year.
| PURPLEBRICKS (PURP) | ||||
| ORD PRICE: | 95.6p | MARKET VALUE: | £0.29bn | |
| TOUCH: | 94.9-95.9p | 12-MONTH HIGH: | 338p | LOW: 89p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 34p* | NET CASH: | £63m | |
| Year to 30 Apr | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 3.4 | -5.4 | -357 | nil |
| 2016 | 18.6 | -11.9 | -12.0 | nil |
| 2017 | 46.7 | -6.1 | -1.0 | nil |
| 2018 (restated) | 87.8 | -29.2 | -11.0 | nil |
| 2019 | 137 | -55.6 | -18 | nil |
| % change | +56 | +90 | +64 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £43m, or 14p a share | ||||
