Purplebricks Australian operations admit "some challenges" stunted its growth

Purplebricks shares fell almost 13 percent on Thursday after the company reported its interim results in London overnight.

The Australian operating loss of A$10.2 million in the first half includes one-off costs in connection with the recent restructuring and re-positioning of the business. Some further one-off restructuring costs are also expected in the second half of the year, although it is now expected that second half losses will be below those reported in the first half.

Purplebricks said it had “experienced some challenges in Australia" that had "stunted growth."

Its investment in Australia to date was put at £28 million, almost $A50 million.

It was September 2016 when it officially launched in Queensland and Victoria. In January 2017 it launched in NSW, followed in March and April in Perth and Adelaide respectively.

It reported its Australian operations had experienced "a tough period driven by external and internal factors which stunted growth."

Despite this its revenue growth was 40 percent.

In October there was a 38 percent growth in new instructions compared with September in Australia.

"While reporting strong growth in Australia, the underlying performance was held back by market conditions and some operational issues, which we have taken steps to correct with changes to the team, customer proposition and business model," it told shareholders.

Overall first-half losses have more than doubled at the international online estate agent.

The UK operations of the company are profitable, but globally losses continue to mount, more than doubling from a year ago.

It noted that its international business now makes up 31% of Group revenue,

Purplebricks made a pre-tax loss of £27.3m in the six months to 31 October, up from £11.4m in the equivalent period last year. The company is listed on the AIM junior stock market.

The company said they anticipate profitability within the next year.

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The real estate agency said international group revenue was up 75% to £70.1 million, compared to £40.1 million reported a year previously.

UK revenue increased 39% to £48.3 million, with UK ancillary revenue up 25% in the six months to 31 October.

The tough conditions in the UK market are already claiming casualties, with Purplebricks rivals Emoov and Tepilo going into administration earlier this month.

Michael Bruce, Group CEO, commented Purplebricks would "emerge stronger from the ongoing industry shakeout." 

“Purplebricks has led industry change and through our strategy of relentless innovation will continue to do so.”

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The company reported it makes an average of £1,209 in revenue for each instruction it receives from a UK home seller.

A spokesman said that against this figure are admin costs of 18.5 per cent of revenue, and marketing costs of 28 per cent. So for an average £1,209 coming in from a UK instruction at least £562 of costs would be incurred on average.

The online real estate agent was founded back in 2012. It debuted on the junior AIM market of the London Stock Exchange back in December of 2017.

The firm turned its first ever profit in December 2016, with earnings of £300,000 in the six months to October end.

Since then, Purplebricks has gone on to expand its operations to the U.S and Australia.

Shares in the company are currently trading -10.67% as of 13:06 PM (GMT).

The fall in Purplebricks’ share price has been of the order of 60 percent this year.

Purplebricks changed its business model in Australia its first overseas market, when raising fees and making half the figure payable only on completion of a sale which was a departure from its UK model, where vendors pay whether or not a house sells.

Shareholders were told the underlying Australian results "testify to the challenges in the first few months of the period but are too early to show the benefits of the recent changes in the customer offering and reward for LPEs."

"One such change has been the removal of the salaried position of Local Sales Assistants.

"Combined with other changes the number of monthly instructions required to reach breakeven has been substantially reduced."

Bruce said a similar change in the UK was “not on the agenda”.

Earlier this year Purplebricks said they were unhappy with the negative reporting in the Australian media leading to agents leaving.