Purplebricks : Full Year 2022 Results

02 August 2022

Purplebricks Group plc

("Purplebricks", the "Company" or the "Group")

Annual Results for the year ended 30 April 2022

Purplebricks Group plc (AIM: PURP), the UK's leading tech-led estate agency business, announces its results for the year ended 30 April 2022 ("FY22") and outlines its performance recovery plan following a year of transformation.

Summary performance		FY22		FY21	%
		£m		£m	change
Group		70.0
Revenue			90.9	(23)%
Gross profit		42.1		57.7	(27)%
Gross profit margin %		60.1%		63.5%	(340)bps
Adjusted EBITDA1		(8.8)		12.0	-
Operating (loss)/profit		(31.7)		8.2	-
(Loss)/profit from total operations2		(42.0)		6.8	-
Cash and cash equivalents		43.2		74.0	(42)%
KPIs		63.0
Total fee income3			87.1	(28)%
Instructions4		40,141		58,043	(31)%
Average revenue per instruction5		£1,568		£1,501	4%

Helena Marston, CEO, commented:

"Last year's financial performance was significantly impacted by the challenges resulting from the implementation of our new operating model and investment in marketing that did not deliver the expected results, alongside a housing market which played against us. Nevertheless, our performance was not good enough.

"I have today set out my plan to improve the performance of the business. Central to our plans are initiatives which we expect to drive higher instructions, grow revenues, reset our cost base and raise standards.

"We have already taken decisive action. We have completed a substantial cost-reduction programme, retrained all our field agents to raise standards and improve conversion, increased our prices and removed the Money Back Guarantee, adopted a more targeted sales and marketing plan, and dramatically overhauled our processes and procedures. We are also assessing additional revenue streams including our new mortgage proposition which we expect to launch by the end of this financial year.

"I am convinced that the potential for Purplebricks is huge. We have a proposition which is more relevant and valuable for our customers, as well as a brand which is the best known in the industry. I'm confident that the actions we are taking this year will set us on a clear path towards a return to sustainable, profitable growth."

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Summary points

• Instructions down 31% to 40,141 (FY21: 58,043), compounded by supply issues in the housing market, but average revenue per instruction ("ARPI") increased by 4% to £1,568, driven by higher average fees
• Revenue down 23% to £70.0m (FY21: £90.9m), reflecting lower instruction volumes and partially offset by a reduction in deferred income
• Gross profit margin of 60.1% (FY21: 63.5%) reflecting lower instruction volumes and increase in fixed cost base following transition to employed model
• Adjusted EBITDA loss of £8.8m (FY21: profit of £12.0m) driven by lower activity, reduced gross margin following transition to new operating model and increased marketing costs
• Provision of £3.6m relating to potential claims arising from previously announced lettings issues
• Loss from total operations of £42.0m2 (FY21: profit of £6.8m)
• Cash and cash equivalents at 30 April 2022 of £43.2m (30 April 2021: £74.0m), reflecting the adjusted EBITDA loss, lower instruction volumes and a number of one-off and non-recurring items.

Focused recovery plan to drive positive cashflow and return to profitability and growth

• Cost reduction programme will deliver £13m in year cost savings, equivalent to a 16% reduction in the operating cost base
• New performance management programme and improved training has improved living room conversion by 11% compared with FY22
• New sales and marketing initiatives implemented to focus field on core customer segments, to be supported by highly targeted and effective marketing
• Pricing changes implemented on 11 July and the removal of the Money Back Guarantee, which failed to deliver the expected increase in instructions
• Exploring additional revenue opportunities to capitalise on our brand and provide protection in a downturn market - mortgage offer expected to launch by the end of the financial year.

Trading update and guidance

• Volumes and revenue in the first quarter of FY23 showed an improved trajectory compared with the second half of FY22, with c.11,000 net instructions and revenue of c.£16m. Given that we implemented changes throughout the first quarter, this improvement does not yet reflect the full run rate of the action already taken
• Supply dynamics in the UK housing market likely to remain challenging for remainder of the year and the macroeconomic environment is increasingly uncertain
• Recovery plan alongside sales and marketing actions expected to deliver FY23 revenue in the range of £67.5-£72.5m, driven by instruction growth in the second half of the year and further improvement in
  ARPI
• Positive cash generation expected in early FY24 and retain significant headroom in cash resources

Notes:

• The underlying performance of the Group is monitored internally using a number of alternative performance measures ("APMs"), which are not defined within IFRS. Such measures should be considered alongside the equivalent IFRS measures. For full definitions and reconciliations of APMs, please refer to note 4. Adjusted EBITDA is defined as operating profit, adding back depreciation, amortisation, share-based payment charges / credits, results of associates and exceptional items.
  2 Includes a provision of £3.6m relating to potential claims arising from process issues within our lettings business, a charge of £2.7m relating to impairment of goodwill and other intangible assets in the lettings business, a charge of £9.2m relating to impairment of investment in Homeday and a charge of £7.2m arising from derecognition of deferred tax assets in FY22.
  3 Total fee income is a KPI used by management to track income from current activity levels. Total fee income is a non-IFRS measure and represents fees receivable for instructions and mortgage referrals and conveyancing fees due in relation to completed transactions.
  4 Instructions represents instructions net of refunds.
  5 Average revenue per instruction (ARPI) equates to total fee income, divided by instructions. 6 Source: Rightmove.

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Results presentation and conference call

Helena Marston, Chief Executive Officer, and Steve Long, Chief Financial Officer are streaming a live video presentation of results via webcast at 9.00am today followed by a Q&A session for analysts and investors.

The video webcast link is via the webcast registration pageand on the website. A replay will also be available on the Purplebricks website later today here.

A short interview with Helena Marston, CEO, discussing the results and plans to improve the performance of the business can be found here.

Enquiries
Purplebricks
Helena Marston, Chief Executive Officer
Steve Long, Chief Financial Officer	[e-mail]
Fiona O'Nolan, Equitory, Investor Relations	+44	(0)7710 440158
Zeus (Nominated Adviser & Broker)
Daniel Harris, James Hornigold (Investment Banking)	+44	(0)20 3829 5000
Ben Robertson (Corporate Broking)
MHP Communications
Peter Hewer	+44	(0)7709 326261
Alan Tovey	+44	(0)7833 437044

Forward-looking statements

This announcement includes statements that are, or may be considered to be, "forward-looking statements". By their nature, such statements involve risk and uncertainty since they relate to future events and circumstances. Results may, and often do, differ materially from forward-looking statements previously made. Any forward-looking statements in this announcement reflect management's view with respect to future events as at the date of this announcement. Except as required by law or by the AIM Rules of the London Stock Exchange, the Company undertakes no obligation to publicly revise any forward-looking statements in this announcement following any change in its expectations to reflect subsequent events or circumstances.

About Purplebricks

Purplebricks is a leading technology-led estate agency business, based in the UK. Purplebricks combines highly experienced and professional Local Property Partners and innovative technology to help make the process of selling, buying or letting more convenient, transparent and cost effective. Purplebricks shares are traded on the London Stock Exchange AIM market.

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Chairman's statement

While our operations have changed considerably over the course of the last eight years, that has also brought with it considerable challenges. The recent financial and performance challenges now require a swift and decisive response, which we are working through. To deliver for shareholders and other stakeholders, we need to improve performance and focus our strategy on where our model has most appeal.

Since the year end we have taken swift actions to reduce our cost base, improve our marketing disciplines, improve targeting of customer segments by our field teams and introduce better processes and controls. That's how we can ensure we continue to delight customers and build a dynamic platform for our future growth. Crucially, any improvements we make have to be delivered consistently wherever we work, making the best use of our great people and our industry-leading technology. That's why we have placed a huge focus on transforming our business model this year, with a simplified customer proposition and - most significantly - a redesigned employed operating model for our field sales force.

Financial performance

During this period of significant transformation for the Group, our results were impacted by underperformance in the field and the costs and disruption from changing our field workforce to employed, compounded by a shortage of supply in the market. Group revenue from continuing operations was down 23% to £70.0m (FY21: £90.9m), with an operating loss of £31.7m (FY21: profit of £8.2m). We made significant investments in a new marketing campaign and our new operating model, as we moved from a variable to fixed cost base, as well as a number of one-off items including the impairment of our Homeday investment. Lower trading activity in the first half of the year continued into the second half as our field sales force settled into their roles as employed team members and our investments in marketing did not deliver additional instructions, impacting our cash balance, which reduced to £43.2m at the year-end (£74.0m at year end FY21).

Fully employed model

While it caused disruption to our business and trading, has yet to deliver the expected improvement in performance, and incurred some unavoidable one-off costs, I strongly believe that our move to a fully employed model for our field sales force is the right strategy for Purplebricks. For many years, our self- employed field team has delivered great results for our customers, enabling us to grow quickly as a business and respond flexibly to the demands of a highly cyclical industry. However, as Purplebricks matures as an organisation, we need to manage our people, processes and customer experience more consistently, and the new employed model gives us that degree of control.

I believe this change is an important part of Purplebricks' journey, but it was never going to be an easy change to make. That's why the Board and I were impressed with the way it was handled by Helena Marston, in her capacity as Chief People Officer at the time. With a field force of more than 600 people, across a wide set of geographies in the UK, Helena and her team executed the change in a professional and sensitive way - with due regard to both the maintenance of our business operations during the period and the needs of our employees, who have now become colleagues in the truest sense of the word.

We recognise it is a competitive market out there, and that the most successful businesses in the medium to long term will be those that are most responsive and able to provide the best customer service. What's important is that we are now able to focus more clearly on how we build talented sales teams both

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centrally and in local locations, the training and processes we provide, and the consistency of the offer we make to customers wherever they interact with Purplebricks.

Board and senior management changes

The changes this year have also included notable ones at the top of the organisation, and I would like to thank our previous Chief Executive Officer, Vic Darvey, and Chief Financial Officer, Andy Botha, for guiding the business during a period of considerable change and challenge, and for their important work in strengthening the wider Senior Leadership Team at Purplebricks.

As part of that team, first as Chief People Officer, and then Chief Operating Officer, Helena Marston stepped up to the position of Chief Executive Officer in April 2022. I am delighted to welcome Helena to her new role and have every confidence that she is the right person to lead the Company, having already made such an important contribution in her time with Purplebricks.

Steve Long joined as Chief Financial Officer in February 2022, and brings strong commercial, financial and strategic experience to the role, as well as a strong track record in delivering growth in a customer-facing,technology-focused business. I was also delighted to welcome Paul Sexton-Chadwick to the position of Chief Commercial Officer in June 2022, a newly created role that further strengthens the excellent management team we already have in place.

I would also like to welcome Ait Voncke, who joined the Board in July as the Axel Springer representative and would like to thank Stephanie Caspar for her contributions during her tenure.

Board priorities and governance

The Board provides effective leadership in promoting the long-term sustainable success of the Group. It establishes the Group's purpose, values and strategy, ensuring that these are aligned to the culture of the business.

The Board continues to manage the Group's ambitions against risks, while ensuring we are running the business in a responsible way. We have a strong group of Non-Executive Directors who have been engaged in and supported the changes made across the organisation this year. The Board is constantly looking at how we run our business, and how we are pricing and structuring our fees, but it also recognises that our core model is a successful one, and that stability and transparency are essential to our long-term success.

The Board has overseen the appropriate and swift actions taken to address the process issues that became apparent within our lettings business in December 2021. I am confident that all issues are being addressed and that this part of the business has been stabilised. Our new processes are robust and effective, and I am satisfied with the progress made to date to rectify historical instances of non- compliance and the timeline for completion of this work. There is now much greater emphasis from the Board and management on governance. In shaping the Group's strategic direction, the Board has sought to ensure that good governance standards are embedded throughout the organisation. The Board remains committed to achieving high standards in our governance infrastructure, and we continue to adopt the Quoted Companies Alliance Corporate Governance Code (the "QCA Code"). We seek to comply with the QCA Code or provide a clear explanation of any areas where we do not. Information regarding

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