End of Year Results Presentation 16Th June 2016 Today’S Agenda
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I can honestly say the service I received from Emma and Purplebricks was fantastic. It was exactly what I had hoped for - the personal service of the high street (better in fact) but also far more convenient, not to mention a fraction of the price. Caitlin McLoughlin End of Year Results Presentation 16th June 2016 Today’s agenda 1. Business Highlights - Michael Bruce 2. Financial Highlights - Neil Cartwright 3. Strategic Overview - Michael Bruce 4. Summary No. 1 Winner Winner Shortlisted Shortlisted Startups 100 List Tech Business of the Year 2015 Innovative Company of the Year Innovative Business of the Year 2015 Business of the Year 2014 2 1. Highlights 3 Business Highlights Revenue up 448% Local Property Experts Every Local Property Sold and Current SSTC increased by Expert to be granted completed on share options pipeline 159% on a long term £2.766 bn £1.697 bn to 205 (2015: 79) incentive scheme (2015: £832m) Ended year with Current monthly rate Conversion from Average period of sales agreed of instruction to to exchange of 2,827 sale agreed over contracts instructions 2,386 1 2 in April 2016 (May 2016) 77% 56 days Online market share Most reviewed estate Currently over Intention to launch increased to agent in the UK with over Purplebricks in 3 4 1.23m 62% 5,800 monthly visits to our Australia (2015: 41%) reviews on Trustpilot website (2015: 0.44m) a £3.3bn market 1Percentage against all instructed properties April 2015 - March 2016. This may represent the minimum conversion assuming those properties still on the market sell hereafter. 2 Source - My Home Move (the largest conveyancing firm in the UK) Period from contracts issued to exchange of contracts. 3Period week ending 5 June 2016. 4Period ending 12 June 2016. 4 2. Financial review 5 Financial Highlights Revenue growth Gross profit Average revenue +448% +427% £30.5m per instruction Cash to £18.6m to £10.6m £901 (2015: £4.6m) (2015: £3.4m) (2015: £2.0m) (2015: £703) 1 1 Adjusted EBITDA Loss before tax The basic and Adjusted EBITDA pre marketing costs increased to diluted loss per share increased to (£9.7m) £3.2m (£11.9m) (2015: (£5.3m)) (£0.12) (2015: (£1.8m)) (2015: (£5.4m)) (2015: (£0.03)) 1Defined by the Group as (loss)/profit before tax, depreciation, amortisation, net non recurring fund raising / IPO costs and share based payment charges. 6 Income statement FY 2016 FY 2015 % Variance • Strong sales growth as a result of: £m £m - National footprint in H2 2016 Revenue 18.6 3.4 +448% - Growth in LPE numbers to 205 by end of April 2016 Cost of sales (8.0) (1.4) +479% Gross Profit 10.6 2.0 +427% • Gross margin of 57% reflecting proportional growth of GP% 56.9% 59.2% instructions in period Sales and marketing costs (12.9) (3.5) +272% • Sales and marketing costs grew at a slower rate than turnover Administration expenses (9.6) (3.9) +142% as we expanded from five regions in FY 2015 to 10 in FY 2016 Loss before tax (11.9) (5.4) +119% • Operational gearing improves: - Adjusted EBITDA pre-sales and marketing costs improved to Depreciation and amortisation 0.1 0.0 +153% £3.2m profit in FY 2016 (FY 2015: £1.8m loss) Share based payments 0.6 0.1 +468% Fundraising costs 1.5 - • One-off fundraising costs of £1.5m included in administration expenses Adjusted EBITDA (9.7) (5.3) +83% Rebased Adjusted (£0.10) (£0.03) EBITDA loss per share (basic and diluted) Notes 1. Adjusted EBITDA is defined by the Group as loss/profit before tax, depreciation, amortisation, net finance costs and Share based payments charge. 2. Certain financial data have been rounded. As a result of this rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data. 7 Revenue growth driven by national rollout and LPE recruitment £M • Revenue growth of 448% to £18.6m (FY 2015: £3.4m) 20 • Strong increase in instructions volume 16 18.6 • Instructions complemented by additional services: 12 Growth of 448% - Accompanied viewings 8 - Premium display upgrade 4 - Energy Performance Certificates (EPCs) 3.4 - Conveyancing 0 FY 2015 FY 2016 - Mortgages • Average revenue recognised per instruction increased by 28.2% to £901* £M in 2016 (2015: £702) 12 • H2 2016 revenue increase of 58.3% to £11.4m vs. H1 2016 (£7.2m) 10 11.4 + 58.3% • Deferred revenue from instructions not live of £780k at April 2016 8 • Completion revenue pipeline £2.5m at April 2016 6 7.2 4 2 0 H1 2016 H2 2016 * Average revenue per instruction is calculated on estate agency sales revenue including conveyancing completions over the number of recognised instructions. 8 Gross Profit 59.2% £M 12 56.9% • FY 2016 Gross Profit increased by 427% to £10.6m 10 10.6 8 • H2 2016 Gross Profit increase of 58.5% to £6.5m (H1 2016: £4.1m) 6 4 2 2.0 0 FY 2015 FY 2016 £M 8 57% 56.4% 6 6.5 4 4.1 2 0 H1 2016 H2 2016 Gross profit GM 9 Cost contribution analysis Year ended 30 April (£m) FY 2016 FY 2015 Growth • 2016 administration expenses were £7.4m, an increase of Administration costs 7.4 3.8 95% £3.6m as the company invested in the infrastructure to deliver growth: % of sales 40% 112% - Establishment of Data Sales Unit Sales and marketing costs 12.9 3.5 272% - Bolstering LPE growth and effectiveness % of sales 69% 103% - Enhancing marketing capabilities - Provision of first class technical and development resources Adjustments 2.2 0.1 in house 22.5 7.4 - Office relocation in Solihull • Despite investment, as a percentage of sales these expenses Evolution of administration costs and sales and marketing expenses as a % of sales fell to 40% (2015: 112%) demonstrating operating leverage 220 • Sales and marketing costs as a percentage of sales decreased 200 Administration costs to 69% (2015: 103%) 103% Sales and marketing expenses • Administration costs grew more slowly in H2 2016 crystallising operational gearing 69% 100 112% • Adjustments of £2.2m are: - £1.5m non recurring funding costs 40% - £0.6m (FY 2015: £0.1m) share based payment charges - £0.1m amortisation and depreciation 2015 2016 10 Cash flow statement 2016 2015 • Strong working capital management created distance between £m £m £11.9m loss and £7.1m cash outflow Adjusted EBITDA (9.7) (5.3) • Working capital movements aided by: - Clients paying fees on instruction Movement in working capital 2.6 0.3 - Clients taking advantage of deferred payment option provided Movement in taxation 0.0 0.3 by Close Brothers - Supplier credit facility post listing Net cash flow from operations (7.1) (4.7) • £35m gross funds raised in 2016: Cash flow from investment activities (0.5) (0.2) - £10m in July 2015 via placing - £25m in December 2015 on listing Cash flow from financing activities 35.0 8.1 gross of costs Cash flow from financing activities - (1.5) 0.0 • No corporation tax payments in 2016. Expected to utilise costs of fundraising accumulated losses until 2018 Net increase in cash 25.9 3.2 Cash at beginning of year 4.6 1.4 Cash at 30 April 2016 30.5 4.6 11 Strong balance sheet 2016 2015 £m £m • Strong balance sheet with £30.5m cash as at 30 April 2016 Intangible assets 0.4 0.1 • No debt financing requirement Property, plant and equipment 0.2 0.1 Non current assets 0.6 0.2 • Investment in intangibles represents development work performed: Trade and other receivables 2.9 0.8 - Platform customisation for Scotland Cash and cash equivalents 30.5 4.6 - Provision of Purplebricks App (iOS and Android) Current assets 33.4 5.4 • Trade and other receivables includes: Total assets 34.0 5.6 - Trade debtors £1.0m - Accrued income £0.4m Trade and other payables (5.2) (1.1) Deferred income (0.8) (0.1) • Trade and other payables includes: Total liabilities (6.0) (1.2) - Trade creditors £2.7m • Balance sheet reconstructed prior to admission to AIM in Share capital 2.4 0.0 December 2015 Share premium 25.9 12.3 Share based payments reserve 0.4 0.1 Retained earnings (0.6) (8.0) Shareholders’ funds 28.0 4.4 Equity and liabilities 28.0 4.4 12 FY 2017 Guidance • The UK business will move into profit in the current financial year • LPE numbers as at 30 April 2017 - 360 • No corporation tax payable • Overheads + £1m over 2016 (further investment in Data Sales Unit) • Share based payment charge £1.5m • Australia - separate subsidiary • Likely exercise of options and warrants in 2017 is 7.6m shares 13 3. Strategic Overview 14 The Next Generation Estate Agent LPE Growth Launch in Grow our Australia Brand THE CUSTOMER New Products Build upon & Services Technology Grow Feedback & Customer Support Customer Loyalty & Data Sales Unit 15 Recruiting first class Local Property Experts 16 Increase our LPE footprint Growth of Local Property Experts Growth of Local Property Experts Growth of Local Property Experts Growth of Local Property Experts Growth of Local Property Experts Growth of Local Property Experts Growth of Local Property Experts 250 200 150 100 50 0 Employed LPEs Licenced LPEs Sub licenced LPEs Licenced LPEs Licenced LPEs Licenced LPEs Licenced LPEs Sub licenced LPEs Licenced LPEs Sub licenced LPEs Sub licenced LPEs Sub licenced LPEs Sub licenced LPEs Licenced LPEs Sub licenced LPEs 17 Recruitment and Training Andrew Vass Recruitment & Training Director Regional Recruitment and Training Directors Head of Recruitment Jamie Young Adam Docwra Tom Kirk Jim Harris Debbie Fennell former LPE former LPE former LPE former Countrywide former LPE • Increased the recruitment team • Recruit the best - bulk of LPEs from the most successful corporate and independent estate agents • Quality - most recruits are Branch Valuer, Branch Manager, Senior Branch Manager or Area Manager status • 4 stage recruitment process, 11 day training programme • 245 LPEs by end of June 2016, 98% self-employed 18 Selling houses and supporting customers is what we do Sold and Conversion from Current monthly rate Average period Current SSTC completed on instruction to of sales agreed of to exchange of pipeline £2.766 bn sale agreed over contracts £1.697 bn 1 2,386 2 (2015: £832m) 77% (May 2016) 56 days 1Percentage against all instructed properties April 2015 - March 2016.