Purplebricks Australia sees profitability within next year

Purplebricks Australia sees profitability within next year
Purplebricks Australia sees profitability within next year

The Australian division of Purplebricks has reported an EBITDA loss of £11.8 million ($21.1 million), but with average revenue per listing instruction being up 22% to £3,170 it expects to reach monthly profitability within 12 months.

The group says it was seeing a "seachange" in consumer acceptance.

It has have now facilitated the sale and completion of over $2.1 bn of properties in Australia, $1.76bn of which was in the latest financial year.

There were 4544 listings in the financial year.

The loss was bigger than expected, but the group surprised with fewer agents, that they call local property experts.

"We now expect that Australia will reach monthly profitability within 12 months," the company chairman Paul Pindar advised.

The disruptor claims to have saved Australian's over $36 million in traditional agents commission all the time meeting critical headwinds from within and long established rivals.

"Our business in Australia continues to grow, having only recently completed its first full year in the five key target states.  

"We believe we can create a strong, market leading, profitable business in Australia and will continue to invest in growing our market share," Pindar advised.

The disruptor reported its Australian revenues rose 285% to £13.5 million ($24.1 million) in the year to April.

"Whilst the markets in the UK and Australia have been and continue to be challenging for the industry, with overall transaction volume and sentiment down year on year, we have managed to gain market share, increase revenues and grow customer engagement in all three countries in which we operate," its chief executive Michael Bruce noted. 

"We have made the progress we expected in Australia during this financial year. 

"Revenue has increased by 285% year on year to £13.5m ($24m) and the average revenue run rate has increased by 137%.  

"Average revenue per instruction has increased by 22% to £3,170 ($5680).  

The number of agents sat at 90 although there was a change in strategy during the year to introduce sales associates with a view to increasing the productivity of the lead agents.

A total of 88 sales associates have been recruited.

"Whilst the Australian market overall is challenging for the industry there remains a big opportunity for Purplebricks to capitalise on the significant sea-change in consumer thinking, as they move away from high cost traditional estate agency to saving thousands of dollars and getting great service with Purplebricks. 

"We are investing more in advertising, technology and the advancement of our service in Australia to grow our market share," Bruce said.

Its establishment investment as at 30 April 2018 came to a total of £19.3m ($34.5m) invested by the group in Australia.

Adjusted operating costs increased from £3.9m to £6.7m (70.7%) as the scale of operations increased. 

The loss from operating activities includes the charge of £0.6m (2017: Nil) arising from grant of share options to incentivise and retain Australian employees and agents. 

Marketing costs increased from £3.8m to £11.4m as the business invested in growing market share. 

"This increase of 198.4% compares favourably to the increase in revenue," the accounts noted.

Last December the UK disruptor reported some $1.1 billion of residential real estate – around 2200 homes – had been sold in its first 14 months of operations in Australia.

Australian interim losses more than doubled to £5.1 million as the company ramped up its marketing budget.

The company disclosed as part of its latest interim results that revenue from its Australian business surged to £6.8 million ($11.9 million) for the six months ended October 31.

It was up from £400,000 in the prior corresponding period, when it had only been trading for two months.

Its full-year revenue was forecast to hit £12 million. Its first results were announced last June.

It suggested the percentage market share in Australia as at last October was higher than UK after first anniversary.

It had 105 local property experts across five states.

"We are fast building a brand, with unprompted brand awareness reaching 10%, a level which it took the UK two years to reach.

"Our aim is to replicate the success that Purplebricks is having in the UK," he advised.

The five states were New South Wales, Victoria, Queensland, South Australia and Western Australia.

As at last December Purplebricks charged a flat sales fee of £2,708 ($4,500AUD) everywhere other than New South Wales where it charged £3,309 ($5,500 AUD) which includes professional photography, marketing and advertising on platforms Domain.com.au and RealEstate.com.au, as well as the Purplebricks Australia website. 

Given the role of auctions in the Australian property market, Purplebricks offers an additional auction facility with a top-up fee, which includes an auctioneer and all viewings held by a local agent or their experienced viewing assistant.

 

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

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