Purplebricks : Full Year Results 2021

Purplebricks Group plc

Annual Report

2020

Purplebricks is a leading UK estate agency business. Our dual-sided model combines highly experienced and professional agents with innovative digital technology.

Our continuing focus on people and technology allows us to provide our customers with exceptional, innovative and unrivalled service, while saving them money.

Strategic Report

Highlights	3
Chairman's statement	4
Our business model	6
Chief Executive's statement	8
Financial review	11
Principal risks and uncertainties	16
Corporate social responsibility	18
S172 Statement	21
Governance
Our Board	23
Corporate governance statement	25
Directors' report	29
Directors' remuneration report	31
Financial Statements
Independent auditor's report	34
Consolidated statement of comprehensive income	41
Consolidated statement of financial position	42
Company statement of financial position	43
Consolidated statement of changes in equity	44
Company statement of changes in equity	45
Consolidated statement of cash flows	46
Company statement of cash flows	47
Notes to the financial statements	48
Company Information	94

Strategic Report

HIGHLIGHTS

FINANCIAL HIGHLIGHTS
Revenue	Revenue growth	Gross margin
£111.1m	(2.4)%	60.9%
2019: £113.8m	2019: 55%1	2019: 61.0%

Operating loss	Adjusted EBITDA2	Cash at end of year
£(9.4)m	£1.8m	£31.0m
2019: £(1.5)m	2019: £6.6m	2019: £62.8m

OPERATIONAL HIGHLIGHTS
3.8x	More sales	UK average revenue
than the	per instruction 4
2019: 3.5x	number two	£1,394
agent 3
	UK estate
		2019: £1,243
Completed	Saving UK customers
£9.3bn	£77m
of UK property	in commission 5
2019: £10.4bn	2019: £77m

1. 2019 revenue growth of 55% represents the revenue growth from total operations between FY 2018 and FY 2019.
2. The underlying performance of the Group is monitored internally using a variety of statutory and 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 5 to the financial statements. FY 20 APMs are presented including the effects of adopting IFRS 16 (see note 2). As IFRS 16 was adopted using the modified retrospective approach, prior year comparatives have not been restated.Adjusted EBITDA is defined as Operating profit, adding back depreciation, amortisation, share-based payment charges and exceptional items.
3. Source: TwentyCi data.
4. ARPI: Average revenue per instruction equates to total fee income divided by the number of instructions published in the year.
5. Fees paid by customers who sell with Purplebricks vs typical commission of 1.3% including VAT.

Purplebricks Annual Report and Accounts 2020 3

Strategic Report

CHAIRMAN'S STATEMENT

Strengthening our leadership and culture in a period of change

Chairman's statement

It has been a year of significant transition for Purplebricks, as we have sought to build on our exceptional six-year growth story and create a more mature organisation. An organisation that can offer even better service and greater transparency to our customers, while delivering the technology and propositions our people need to stay ahead of the competition and sell more homes.

Above all, this has been a year in which we have focused strongly on our core strategy - simplifying what we do and supporting our people, while improving our structures and processes. This has been achieved by strengthening our leadership and culture. I am grateful to Vic Darvey and his executive team for the way they are leading the next phase for Purplebricks, especially against an extraordinary and difficult backdrop as the COVID-19 crisis hit during the last few weeks of our financial year.

Focused on our core operations

Unsurprisingly, this had an impact on FY 2020 performance, and contributed to Group revenue from continuing operations being down 2.4% to £111.1m (2019: £113.8m) and an operating loss of £9.4m (2019: £1.5m). Ongoing consumer uncertainty during the year and the lockdown from March, impacted our UK revenue, down 10.7% to £80.5m. Our Canada business, which was disposed of in July 2020, contributed £30.6m of revenue in its first full year of ownership, while our exits from the Australian and US markets have allowed us to concentrate on our key operations.

Having already worked through a period of internal change during the year, I am immensely proud of the way our management team handled the business disruption due to COVID-19. They did everything that could have been expected of them - making the tough decision to put people on furlough, supporting our self-employed partners and, where

Paul Pindar Chairman

possible, reinventing the way we do business with our customers by building on things we were doing anyway.

As we come out of lockdown, Purplebricks colleagues are back in people's houses, where appropriate and with full PPE, keeping our people and customers safe.

Board priorities and changes

The Board continues to ensure that the Group's ambitions are managed against risks, with sustainable growth at the heart of our business. It is our responsibility to ensure we have a cohesive team and culture - so that our people and management are free to get on with developing the commercial side of the business with our full support.

Mike Wroe, who was our Senior Independent Director, stepped down from the Board in December 2019, and I would like to thank him for the service he has given to the Company. I am delighted to say that Simon Downing has taken on the role of Senior Independent Director on the Board. We will seek to recruit a new non-executive director to the Board, and to appoint a new chair to our Audit Committee.

Following the recent change in ownership at Axel Springer, the company that owns a 26.5% stake in Purplebricks, they have nominated a new representative on our Board to replace Dr Andreas Wiele. Stephanie Caspar joined the Board on 27 July and I look forward to working with her in the months ahead.

The Board appointed Vic Darvey as Chief Executive Officer in May 2019 to lead the business for the next phase of development, and to take the Company forward. I am pleased with the progress he has made during the year in strengthening the leadership, the appointment of an Executive Leadership Team, and beginning the transition to a digitally led, performance-based culture.

4 Purplebricks Annual Report and Accounts 2020

Strategic Report

CHAIRMAN'S STATEMENT continued

Since the end of the reporting period, in early May 2020, James Davies resigned as Chief Financial Officer after three years with Purplebricks. I would like to wish James every success for the future, while also warmly welcoming Andy Botha as our new Chief Financial Officer. Andy joins us from online travel group Secret Escapes and has an excellent track record in growing digital businesses. He also brings a strong understanding of the UK hybrid property market from his time spent with both Zoopla and PrimeLocation.

Canada disposal

As recently announced, on 15 July 2020 we completed the sale of our Canadian operations for cash proceeds of CAD$60.5m (£35m). This disposal simplifies our investment case and enables Vic and his senior leadership team to focus on investing in the UK market, where we believe there is significant opportunity to generate shareholder value.

Committed to high standards of governance

Following the management and operational changes this year, our progress on the Corporate Governance agenda was slow, but the Board remains committed to achieving high standards in our governance infrastructure appropriate to our increasing size and profile.

The Company continues to follow the Quoted Companies Alliance Corporate Governance Code ("QCA Code") and is committed to complying with the QCA Code or providing a clear explanation of any areas where we do not. You can read more about our approach in the Governance section of this report.

Distribution policy

The Board has agreed that it is too early to consider returning capital to investors at this time, due to retained losses within our reserves and the need to focus our financial resources on future opportunities. However, as we build a more mature business with a strong strategy and relatively low fixed overheads, I believe we can generate the consistent profits and cash needed to make an appropriate distribution to investors in the coming years. It is the intention of the Board that we will then move to a progressive dividend policy as the business develops and we realise our potential.

Outlook

To do that, we need to continue our journey to becoming the best known and most respected Estate Agent in the UK. When we entered the market six years ago, there were many competitors, but we have built a strong position. Our growth has enabled us to keep average costs down and, crucially, to build a market-leading platform. Market uncertainties remain, with the continuing impact of COVID-19 and potential concerns over a no-deal Brexit at the end of 2020. However, I believe we have the people, technology and functionality to empower our customers even in a difficult market, and to further open up the digital opportunities in our industry.

We will continue to build on that platform in the year ahead, enhancing our digital capabilities to ensure that we are even easier to do business with, and that we continue to outperform the market. Part of that success must be building our market share, and I am confident this will translate into significant shareholder value. But the key to achieving our objectives will be keeping things simple and improving our execution. In short, it's all about doing what we know best, and doing it well.

Paul Pindar Chairman

31 July 2020

Purplebricks Annual Report and Accounts 2020 5