What is new: Purplebricks Plc (LON:PURP) results for the year to 31 March 2018 are remarkably close to Zeus Capital forecasts and average consensus expectations.
* Group revenue rose 101% to £93.7m (Zeus expected £94.5m; Bloomberg consensus was £94.5m in a range of £93.0m to £97.8m)
Group gross margin at 56.1%, up 80bps (Zeus estimate: 55.4%)
Group adj PBT of £21.4m (14% below Zeus estimate: £24.8m)
* UK revenue rose 81% to £78.1m (0.3% above Zeus estimate of £77.9m)
Gross profit margin of 57.7% (120bp above Zeus estimate of 56.5%);
Adj PBT rose 491% to £6.5m (150% above Zeus estimate of £2.6m)
* Australian revenue rose 285% to £13.5m (0.3% above Zeus estimate of £13.3m)
Gross margin was 46.2% (450bp below Zeus estimate of 50.7%)
Adj PBT cont’ was a £11.8m loss (31% above Zeus estimate of £9.0m)
* North America cont’ £16.0m loss (13% below Zeus estimate of £18.4m)
Revenues were £2.0m (Zeus estimate was £3.2m)
* Group revenues expected for FY19 to be in the range of £165-185m, with medium term expectation of exceeding 10% UK market share; Bloomberg Consensus expectations are currently £140m to £223m
Outbook refers to continuing investment into team, technology and processes, and [Purplebricks’] £153m war chest for global growth, following the strategic investment by Axel Springer [supporting] Purplebricks’ goal to build a modern global estate agency business.”
Zeus’ view: Purplebricks has delivered FY(Mar)18 revenue growth of 101% (we expected 102% growth), while incurring a total loss before tax of which was 13% less than we had forecast.
We have re-set our forecasts for FY(Mar)19E to fit management guidance: the UK will deliver a sustainable growing profit; Australia be close to monthly profitability and investment in North America responsible for the Group loss for FY19E of c.£40m (was £15.3m), which reflects lower revenues of £170m (was £223m).
Valuation considerations: In our opinion, EV/revenue is a sensible valuation metric, given Purplebricks’ business model. Group revenue guidance implies growth of 76% to 97% this year, supporting an EV/revenue multiple significantly under 10x..
Commenting on the results, Michael Bruce, Purplebricks plc Group Chief Executive, said: “We have doubled revenues in tough markets, taking market share as we continue to win over consumers to the modern way of buying and selling property. As the latest independent UK research by TwentyCi released July 2018 shows, we sell more of our properties and complete faster than any of the top 10 largest agencies in the country, saving consumers thousands of pounds in the process.
We are confident that Purplebricks’ market leadership will continue, given the strength of its brand, the continuing investment into team, technology and processes and our £153m war chest for global growth, following the strategic investment by Axel Springer. Purplebricks’ goal to build a modern global estate agency business demonstrates unrivalled ambition and, in just four years, huge progress. We look forward to the years ahead with excitement and confidence.”
