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Purplebricks Group Plc

Purplebricks Group Plc Results elicit revenue upgrade

Purplebricks Group Plc (LON:PURP) results for the year end to 30 April 2017 reveal:

Group revenue increased 151% to £46.7m (Zeus forecast: £45.0m) with Purplebricks UK revenue rising 132% to £43.2m (Zeus forecast: £41.7m) and Purplebricks Australia of £3.5m (Zeus forecast: £3.3m);

Group adj EBITDA pre marketing rose 4x to £13.7m (Zeus forecast: £11.2) with Purplebricks Australia contributing a £2.3m loss (Zeus forecast: £2.8m) and the UK unit generating adj EBITDA of £16.1m (Zeus forecast: £15.6m).

The Group adjusted EBITDA was £4.5m loss (Zeus forecast: £6.8m loss), with the UK generating a £1.7m profit (Zeus forecast: £1.6m profit), the Australian unit a £6.1m loss (Zeus forecast: £6.8m) in its first year and Purplebricks USA £0.1m start up loss (Zeus forecast: £1.0m).
Management has provided new guidance for the year to April 2018: UK revenue of £80m, Australian revenue of £12m and increased UK marketing spend in the first half of FY18e of £3.5m to c £10.1m (1H17: £6.6m).

Zeus’ view
Purplebricks UK, Australia and USA have beaten our expectations for FY17.

Following new management guidance, our UK revenue forecast rises 11% to £80m and our FY19e revenue forecast rises 6% to £110m. This revenue growth follows an increase in LPEs, which requires an increase in recruitment, training and infrastructure costs, as well as increase in marketing spend. For FY18e our forecast EBIT before marketing costs and SBP rises £2.6m to £33.3m and our adj EBITDA ex share based payments falls £0.7m to £15.0m.

As Purplebricks Australia is progressing slightly ahead of management’s plan, we leave our forecasts which are ahead of guidance unchanged.

Our forecasts continue to assume over £40m P&L investment Purplebricks USA over the next two years. We leave this forecast unchanged.

Valuation
These results confirm that Purplebricks’ business model is performing ahead of plan. Purplebricks UK should be able to generate over £100m in revenue in FY(Apr)19 and generate a 30% EBITDA margin. Purplebricks Australia is developing quicker than the UK and Purplebricks USA has massive potential.

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