Purplebricks Group plc
Annual Report 2017
Contents
Company information
Highlights
Chairman’s statement
Strategic report
Customer case studies
Directors’ report
Independent auditor’s report to the members of Purplebricks Group plc
Consolidated statement of comprehensive income
Consolidated statement of financial position
Company statement of financial position
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated statement of cash flows
Company statement of cash flows
Notes to the financial statements
5
6
8
11
18
22
28
29
30
31
32
34
36
37
38
Purplebricks Group plc Annual Report 2017 / 3
I would like to thank all of our people for their hard work,
dedication, commitment and absolute belief in our customers
and our brand. They have created thousands of brand
advocates in an industry that is often talked about, criticised
and disliked. I would also like to thank our customers who have
embraced what we are trying to achieve and have actively
helped and supported us in our journey to date.
Michael Bruce
CEO
Purplebricks Group plc Annual Report 2017 / 4
ContentsPaul Pindar Company Information
Directors
M P D Bruce
J R Davies
W E Whitehorn
P R M Pindar
N S Discombe
Registered company number
08047368
Registered and head office
Solicitor to the Company
Auditor to the Company
Suite 7
Cranmore Place
Cranmore Drive
Shirley
West Midlands
B90 4RZ
Norton Rose Fulbright LLP
3 More London Riverside
London
SE1 2AQ
Grant Thornton UK LLP
Chartered Accountants and Statutory Auditor
The Colmore Building
20 Colmore Circus
Birmingham
B4 6AT
Nomad/Broker
Zeus Capital Ltd
41 Conduit Street
London
W1S 2YQ
Purplebricks Group plc Annual Report 2017 / 5
Highlights
Revenue up
151%
Gross profit up
144%
to £46.7m (2016: £18.6m)
to £25.8m (2016: £10.6m)
Average revenue
per instruction
£1,088
(April 2016: £901)
Group Cash
Balance
£71.3 m
(2016: £30.5m)
Financial Highlights
• Revenue increased by 151% to £46.7m (2016:£18.6m)
• Gross profit increased by 144% to £25.8m (2016:£10.6m)
• The Group cash balance increased to £71.3m (2016:£30.5m)
• Average revenue per instruction increased by 21% to £1,088 (2016:£901)
• Operating profit for the UK of £0.2m (2016:£11.9m loss)
• Australia revenue of £3.5m (2016:£nil) ahead of the UK at the same stage in its development with Adjusted EBITDA losses
of £6.1m (2016:£nil), after normalising income per instruction.
• Adjusted EBITDA(*1) losses for the UK became an Adjusted EBITDA profit of £1.7m in the year (2016:£9.7m loss)
• Adjusted EBITDA(*1) pre marketing costs for the UK company increased to £16.0m profit (2016:£3.2m loss)
• The Group loss before tax decreased to £6.1m (2016:£11.9m)
• The basic and diluted loss per share reduced to £0.01 (2016:£0.12)
Purplebricks Group plc Annual Report 2017 / 6
*1 defined as the loss from operating activities excluding amortisation of intangibles, share based
payment charges, fundraising costs, fair values on derivatives and depreciation
Highlights
Local Property
Experts increased
by 156%
to 525 (2016: 205)
UK sold and
completed on
£5.80 bn
(2016: £2.77 bn)
Group instructions
5,770
In April 2017
Conversion to
Instruction to sale
83%
(2016: £77%)
Operational Highlights
• The number of Local Property Experts grew by 156% to 525 across the Group (2016: 205) at the year end
• Every Local Property Experts’ business to be granted share options on a long term incentive scheme
• The value of property sold and completed by the UK in the year was £5.80bn (2016:£2.77bn)
• The pipeline of property sold subject to contract stood at £3.69bn (2016:£1.69bn)
• The UK Company recorded 5,497 instructions in April 2017 (April 2016: 2,827)
• The Group recorded 5,770 instructions in April 2017 (April 2016: 2,827)
• The UK monthly run rate of sales agreed increased to 4,979 in May 2017 (May 2016: 2,386)
• The Group monthly run rate of sales agreed increased to 5,171 in May 2017 (May 2016: 2,386)
• Conversion from instruction to sale was 83% (2016: 77%)
• Online market share increased to 72% (2016: 62%)
• Most reviewed estate agent in the UK with over 20,000 Trustpilot reviews
• Monthly UK website visits has increased to 2.50m in April 2017 (April 2016: 1.23m)
• Announced intention to launch Purplebricks in America
Revenue
Gross profit
Gross profit %
2017
2016
£m
H1
18.7
10.4
£m
H2
28.0
15.4
£m
H1
7.2
4.1
£m
H2
11.4
6.5
55.5%
55.0%
56.4%
57.0%
Loss from operating activities
(2.8)
(3.2)
(6.4)
(5.5)
Depreciation and amortisation
Share based payment
Fundraising costs
0.2
0.4
-
0.4
0.5
-
0.1
0.3
-
-
0.3
1.5
2017
£m
FY
46.7
25.8
55.3%
(6.0)
0.6
0.9
-
2016
£m
FY
18.6
10.6
56.9%
(11.9)
0.1
0.6
1.5
Adjusted Earnings before interest, tax,
depreciation and amortisation and share based
payment charges
(2.2)
(2.3)
(6.0)
(3.7)
(4.5)
(9.7)
Purplebricks Group plc Annual Report 2017 / 7
Chairman’s statement
Paul Pindar
We believe that there is a significant
opportunity for our business model to
make a meaningful and lasting impact
on the US real estate market.
It is our first full year as an
AIM listed company and we
are pleased to announce
that Purplebricks is leading
significant change in the
estate agency market.
Summary
It is our first full year as an AIM listed company and we are
pleased to announce that Purplebricks is leading significant
change in the estate agency market.
During the year, we continued to focus heavily on building our
brand awareness, growing our number of Local Property Experts
(“LPEs”), evolving our technology, growing internationally in
Australia and shortly launching into the US, and most
importantly advancing on our strong reputation for customer
service. We have made excellent progress on all fronts.
We continue to attract and retain top quality LPEs across all
areas of the country. Our strategy of creating an “ultra local”
presence has materially advanced with the recruitment of a
further 320 LPEs, an increase of 156% over the corresponding
financial year. This additional expertise is providing essential
capacity to meet the continued burgeoning demand from our
customers. More and more highly skilled estate agents are
choosing to join Purplebricks because of our strong reputation
and growing market share.
We have continued to invest in high impact marketing with our
“commisery” campaign resonating and hitting home with
prospective customers. Brand awareness is high and continues
to grow alongside our “best in class customer service”. As the
most positively reviewed estate agent in the UK we are proud
to have grown our reviews on independent review site,
Trustpilot, from 5,700 at the end of the last financial year to over
20,000, an increase of 251%. Our average rating has increased
Purplebricks Group plc Annual Report 2017 / 8
from 9.4 to 9.5 out of 10. Our customer advocacy continues to
blossom despite our rapid growth.
Financials
Trading momentum has been strong throughout the year, with
total revenues of £47m representing an increase of 151% on the
prior year. The UK has continued to advance with £43.2m of
revenue, whilst Australia contributed £3.5m ($6m AUD) in the
period following its launch in September 2016. I am pleased to
report that the UK made an adjusted EBITDA profit of £1.7m for
the full year whilst Australia made an adjusted EBITDA loss of
£6.1m and our new US entity a £0.1m loss. Group losses from
operating activities reduced to £6.0m from £11.9m the year
before demonstrating clear progress whilst continuing to
expand internationally. The operating leverage of our low fixed
cost business model is now fully apparent with the UK
demonstrating EBIT profit at both the operating level and at
the adjusted EBITDA level.
Net cash at the year end was £71.3m as a result of the
fundraising activities undertaken, the acquisition of a lettings
business and also the marked step up in revenue generated
during this year. Net assets at 30 April 2017 were £75.4m (2016:
£28.1m) with net current assets standing at £66.5m (2016:
£27.5m).
Australia
In our last Annual Report, we announced an intention to launch
in Australia. In September 2016, we officially launched in
Queensland and Victoria. In January 2017, we launched in New
Chairman’s statement
Paul Pindar
South Wales and in March and April, we launched in Perth and
Adelaide respectively.
We have had some significant early success and momentum is
growing. We committed to an investment of £10m over a two
year period with the majority of the investment being in this
financial year. We made an adjusted EBITDA loss of £6.1m in
the period, or £5.4m at constant currency.
We have recently launched our “commisery” marketing
campaign in Australia and, like the UK, we will review our
marketing spend, momentum and market share. If we consider
it necessary to invest further to grow market share and
continue momentum we may choose to do so.
We have added to the strength of the team with the recent
appointment of an Operations Director, Deborah Lee, who
was formerly at Capita Plc.
US launch
We have recently announced our intention to launch the
Purplebricks proposition into the US, a $70bn market. We
successfully raised £48.8m, net of fees of £1.2m via a placing
on 22 February 2017.
Our market research indicates that our compelling model
comprising of high quality customer service allied to a fair,
more competitive fee structure and technology that enables
sales to progress 24 hours a day will appeal in a market where
sellers are currently charged a commission of around 6% to
sell their home.
We are excited about our launch and will provide more details
in due course on launch dates, regions and service offering.
We have a superb management team who are working on our
plan with a view to execution in the second half of 2017.
Similarly to the UK and Australia, we will launch regionally,
with California being the first state, and adapt our timing and
offering to the momentum of each market.
As announced at that time, the Directors consider expansion
of the Company’s business and the Purplebricks brand into the
US real estate market to be the next logical step in the
Company’s expansion. The US is one of the world’s largest real
estate markets and we estimate that total real estate
commission income in the US is in the range of c.US$70 billion
annually (compared with US$4.3 billion in the United
Kingdom).
The Group believes that the Purplebricks platform and business
model is scalable and can adapt to the US market. Given the
many comparable trends, sentiment and similarities between
the property markets in the US, the UK and Australia, the
Group’s expansion strategy will be shaped significantly by the
Group’s experience with its successful UK and more recent
Australian operations. Although the Group initially intends to
strategically roll out across a defined number of US states, the
US as a whole represents a material opportunity for future
growth in the long term.
We believe that there is a significant opportunity for our
business model to make a meaningful and lasting impact on
the US real estate market. It is intended that, initially, the Group
will strategically roll out in a defined number of US states,
launching in the second half of 2017, before rolling out more
widely across other states. The initial expansion into the US is
to be funded from the net proceeds of the Placing and will be
led by US Chief Executive Office, Eric Eckardt, supported by
Founder and Group CEO Michael Bruce and his brother and
co-founder Kenny Bruce. Eric has more than 20 years of
experience in real estate and finance technology.
The Group will look to attract some of the most experienced
real estate agents in the US property industry who want to run
their own business, as many of Purplebricks’ existing LPEs do.
The Directors believe that real estate agents in the US will want
to become LREEs (Local Real Estate Experts), given the
compelling customer proposition and the benefits of the
Purplebricks model. The Purplebricks model should allow
agents to spend more time focusing on looking after
customers and selling homes, rather than a significant
proportion of their time being taken up prospecting for the
next listing. This is possible because a sustained marketing and
advertising campaign is intended to drive listing appointments
to the LREEs. The Purplebricks platform and business model is
designed to result in improved LPE productivity which provides
LREEs the opportunity to earn more revenue than they would
as a traditional real estate agent.
The Group’s technology should help to ensure that Purplebricks
deliver a high quality service to customers. The Purplebricks
platform will, once rolled out, provide US customers, LPEs,
Listing Agents and Buying Agents with a reliable means of
engaging in the process of buying and selling real estate at all
times of the day and night. The platform is accessible 24 hours
a day, seven days a week with the click of a button. Buyers,
Purplebricks Group plc Annual Report 2017 / 9
Chairman’s statement
Paul Pindar
The Purplebricks model is
intended to empower LREEs,
Listing Agents and Buying
Agents to be more productive
and for the customer’s journey
to be more convenient,
transparent and cost effective.
sellers, LREEs, Listing Agents and Buying Agents will be able to
safely and securely communicate with one another through
the Purplebricks platform or, if they wish, communicate with
Purplebricks. The Purplebricks model is intended to empower
LREEs, Listing Agents and Buying Agents to be more productive
and for the customer’s journey to be more convenient,
transparent and cost effective.
The recruitment and training of local LREEs and the adaptation
of the Purplebricks platform and business model for the US will
be coupled with an advertising and marketing strategy built
upon the Group’s successful brand led strategies in the UK and
Australia. The Directors consider advertising and marketing to
have played a significant part in the growth of the Group’s
existing business, with Purplebricks having become the most
recognised real estate agency brand in the UK property market
in less than three years.
Board and people
Our strong results would not have been possible without the
enthusiasm and commitment shown by our colleagues this
year. On behalf of the Board, I would like to thank them
sincerely for their hard work in growing our business whilst
maintaining our strong culture of customer service.
We recently announced the departure of Neil Cartwright, our
CFO, through ill health. Neil has been a great force within the
team and will be sadly missed. We also announced the
appointment of James Davies as Neil’s replacement. James has
a strong track record and comes highly recommended and
Purplebricks Group plc Annual Report 2017 / 10
after strong competition for his services. Our Board continues
to be supported by a very strong management team.
Dividend
As a young and fast growing Group with a substantial market
opportunity, we intend to focus our financial resources on
realising our potential in full. As we progress our strategy and
our financial performance, we will look to move to a
progressive dividend policy in future years.
The year ahead
After a successful first financial year as a public company we
are pleased with the investments we have made, the growth
of our technology and LPE numbers, the engagement our
marketing has generated, the increased awareness of our
brand and our success so far in Australia and intended launch
into the US. We look forward with considerable optimism and
are pleased to report that the year has started well, with more
and more customers choosing our full service hybrid agency
model.
Paul Pindar
Chairman
28 June 2017
Strategic Report
Principal activity and strategy
The principal activity of the business is estate agency.
At the core of our strategy is a commitment to our customers
and our people.
We will continue to offer an exceptional experience by:
• selecting and training Local Property Experts that enhance
our culture and core values and have the desire and
motivation to build their own business;
• building upon our market leading technology that helps Local
Property Experts be more productive and which delivers a
much more convenient, transparent and cost effective
service for our customers;
• creating marketing and advertising that interests, engages
and inspires consumers to want to book a free valuation from
Purplebricks and ensures that our messaging is clear and
transparent to enable consumers to swiftly instruct us to sell
their home;
• building upon our customer service and product offering by
growing our Data Sales Unit and introducing new products
and services that are relevant to our customers’ needs
throughout their journey;
• maintaining a progressive and fun working environment
where our people care about our customers, our brand and
our business and can grow personally and professionally, and
• building a strong, sustainable and profitable business, which is
respected by all stakeholders for its professional conduct and
making good on its promises.
Our strategy for growth is based upon the above core
commitments.
Increase our footprint of Local Property Experts
We are extremely privileged to have secured some of the best
people in our industry who have a strong desire to be part of a
business that is changing the way people think about estate
agents and estate agency. They are passionate about customer
experience, giving customers that “light bulb moment” where
they have met an estate agent, who has promised a service,
delivered on that service, sold their house and saved them lots
of money.
Our Local Property Experts are entrepreneurial, ambitious to
grow their territory and to meet the demand which continues
to grow for our hybrid offering. As a result we are accelerating
our recruitment programme and increasing our footprint of
experts across the UK in order to grow our share of instructions
in local markets. We are finding that more and more talented,
professional estate agents want to be part of what
Purplebricks is seeking to achieve. The pool of applicants
continues to grow and as a result the number of people
suitable to represent the Purplebricks brand is increasing. Our
main focus though is on maintaining that first class, driven
quality of individual. We are pleased to report that the industry
has a large number of high quality people to choose from.
Build upon our market leading technology
Bringing together first class Local Property Experts and industry
leading technology is the foundation upon which the
Purplebricks business has been created. We are very proud of
our technology and indeed the work we are doing to introduce
new and innovative features that set us apart from anyone else
in the industry. The recent release of the Purplebricks buyers
App has proven remarkably successful. Our App has now been
downloaded by 110,000 selling and buying customers. We have
added further resource to the App team and will be
introducing new and innovative features during the course of
this year. We continue to ensure that everything we do makes
the process even more integrated, convenient, effective and
transparent. We have already revolutionised the way sellers
and buyers communicate throughout the process and continue
to build on the work we have started.
We continue to add advanced changes and new features that
are engaging, informative, supportive for our customers and
which make our LPEs more productive. We are also focused on
engaging ways of increasing revenue with targeted and timely
technology driven cross sales opportunities. There are smarter,
more effective ways of selling some products and services with
the use of our technology platform.
We have increased our technology team and are starting to
become a hub of technical interest for developers across
the UK.
Create engaging marketing and advertising
Advertising has always been a central element of the
Purplebricks Group plc strategy. We continue to work hard to
grow our brand and the progress in just three years has been
outstanding. Purplebricks Group plc continues to lead the front
of mind awareness (amongst all estate agents) for people
thinking of selling their home according to The Nursery, one of
the UK’s leading independent research and planning agencies*.
* Based on 1,131 respondents in a survey
Purplebricks Group plc Annual Report 2017 / 11
Strategic Report
Continued
We continue to grow brand recognition across all TV and radio
advertising compared with a year ago. We are confident that
the team has built upon their early success with the
introduction of their new campaign, which launched in May
2017. Our new campaign titled “commisery” will continue and
will focus on the misery a person feels when they have paid a
commission and got nothing more for it.
Our above the line marketing is complemented by brand and
generic pay-per-click activity which is predominantly provided
by Google and Bing. We are also looking at better ways of
using social media in a targeted way to drive more activity
amongst sellers. We continue to test and refine marketing
campaigns with Rightmove, which we hope will raise further
awareness and recognition and create opportunities for
customers to experience our service.
In addition to paid activities we continue to drive efficiencies in
our valuation conversion funnel and to analyse trends amongst
our database of hundreds of thousands of sellers and buyers in
order to ensure that our key messages are resonating with
consumers. Our User Experience (UX) specialists have proved
invaluable at helping us achieve greater conversions across our
website and through the “book a valuation” funnel. We have
added to the team to continue to build on the great work that
has been started and the results we are seeing. We also make
use of PR as part of our strategy of driving home our messaging
and how we wish our brand to be best represented.
We will continue to create marketing and advertising that
interests, engages and inspires consumers to want to book a
free valuation from Purplebricks and ensure that our messaging
is clear and transparent to enable consumers to swiftly instruct
us to sell their home.
Central Property Team and Data Sales
Our Central Property Team and Data Sales Team continue to
grow as activity grows as part of our strategy to increase
valuations and drive down the cost per acquisition of every
customer. They play an important part in generating valuation
opportunities and growing other revenue streams. Every day
we generate thousands of data points from people registering
with Purplebricks, arranging a viewing direct, online or via the
property portals and from buyers making offers and agreeing
sales. We are steadily increasing revenue generating
opportunities from data and as our people develop and we
place them into dedicated product and service streams, we will
start to see the unit make a significant financial contribution.
Purplebricks Group plc Annual Report 2017 / 12
Introduce new products and services
We believe that a major part of selling is being in the right
place at the right time. Our model of combining people and
technology places us in the best possible position to be in the
right place at the right time. As a result we want to be able to
offer customers relevant additional products and services that
complement their journey of selling, buying or letting. We
continue to look at new and smarter ways of supporting our
customers with much more convenient, easy, accessible, stress
free and cost effective products and services. We will add new
products and services once we are satisfied that they add value
for our customers and will be delivered with the Purplebricks
culture and ethos. We want to create lifetime value for our
customers and everything we do as part of our strategy is
working towards this.
Our culture is our business
Our people create our culture and our technology and our
people deliver it. As a starting point the founders wanted to
create a Purplebricks that cared about its people, that had a
progressive and fun working environment and as a
consequence our people cared about our customers, our brand
and our business and they could grow personally and
professionally. We have achieved these founding principles to
date and continue to ensure that the same principles are
applied as we scale.
Following our listing, the businesses of our founding Local
Property Experts as well as a number of employees have been
awarded share options in Purplebricks Group plc that will vest
in part each year and in full over the coming years. We intend
to extend awarding of share options to more LPEs’ businesses
and employees with the objective of everyone having some
form of reward for their efforts in growing our business into the
future in accordance with our admission document.
We have created a strong brand advocacy within our growing
business and our customers. We work in a progressive and fun
environment where, despite a strong desire to grow their
business, our people have a tremendous degree of
camaraderie, togetherness and a collective brand advocacy
that is extremely hard to replicate. The foundations begin for
everyone with the recruitment programme and training
methodology and continue through the heart of the business.
Strategic Report
Chief Executive’s Statement
Review of the year
This has been a very successful year in the early development
of the Purplebricks model and brand. We continue to go from
strength to strength and have materially grown our national
footprint and have built a growing brand awareness and
reputation for delivering customers a more convenient,
transparent and cost effective service. Customers continue to
respond to our hybrid model, having sold properties in the UK
this financial year worth £5.80 billion and agreed a further
£3.69 billion of sales that are currently in our pipeline, sold
subject to contract. Our company is now in a strong position
to become the Number one estate agent in the UK for listings
and sales.
UK
In the UK, the average number of monthly instructions
continues to grow despite traditional operators reporting a
slowdown in activity. If we compare April 2016 with this year
we achieved 2,670 more instructions in the month which
represents an increase of over 94% taking the total to 5,497
instructions for April 2017. We are winning share from the
traditional estate agents and have increased our share of the
“non-traditional” market from 62% to 72% by April 2017.
We are also enjoying continued success at selling the
properties we take to the market in the UK. The monthly run
rate in May 2016 was 2,386. I am pleased to report that this
monthly run rate has increased to 4,979 in May 2017. This
represents an increase of 108% compared with a year ago. Our
conversion from instruction to sale is currently 83%. We have
increased our revenue per instruction to £1,035.
We believe we are the most visited estate agency website in
the UK. Our customers benefit from this extensive traffic with
increased competition amongst purchasers. Our website
visits increased to 2.5m per month and page views rose to
14.4m per month. Unique visitors also increased to 1.3m per
month and the “book a free valuation” funnel conversion rose
by 86.0%. In a recent Which! Report they concluded that
“online agents” sell properties 38 days faster than traditional
estate agents and reduced the price on the properties they
sold less than traditional estate agents. Purplebricks was
considered the best at selling for more than the asking price
amongst all “online agents” and equally as successful as
traditional estate agents. Purplebricks also reduced their
asking prices by 5% or more significantly fewer instances than
traditional and online estate agents.
Our on-going strength in trading is heavily dependent on our
success in continuing to attract and retain first class,
professional, experienced and highly motivated Local Property
Experts (“LPEs”). Winning more instructions and selling more
properties in a business with a strong customer focused
culture is highly attractive to professional entrepreneurial LPEs
who are running their own businesses and are working hard to
quickly build a local, scalable, profitable, business. We are really
pleased to be considerably ahead of plan, finishing the year
with 448 LPEs, a year on year increase of over 118%. We have
built a much stronger, scalable recruitment and training
infrastructure which enables us to recruit and train many more
LPEs going forward.
Purplebricks Group plc Annual Report 2017 / 13
Strategic Report
Chief Executive’s Statement
Marketing has also been a key element to the success and
future growth of the business. During the year Ed Hughes
(formerly of comparethemarket) replaced Joby Russell who
took up the role of Chief Marketing Officer (“CMO”) in Australia.
Ed has advanced the development of our marketing strategy
and team. We introduced the “commisery” campaigns which
have been very successful and extremely well received by
customers. We have introduced localised versions to Australia
in May 2017 and have shot a number of new commercials
(“Commisery stage 2”) that aired in the UK from May 2017.
Our investment in marketing has helped drive the growth of
our brand recognition, valuations, instructions, sales and
revenue. We firmly believe that we have hit upon a campaign,
have developed a plan and built a team that can materially
change the market share and future financial performance of
the business. We also firmly believe that we must grasp the
opportunity to make Purplebricks the most successful estate
agent ever in the UK and build upon that success in Australia
and thereafter in the US. The business, team and infrastructure
are in the best place they have ever been to capitalise.
We committed to spending a further £1.5m in marketing during
the course of H2 2017 and as a result the business has grown
further, faster. We will continually review marketing spend to
make the most of the opportunities that present themselves.
Culturally we have a strong focus on customer support which is
testament to the number of houses we are selling, the speed
at which they are transacting through the legal process and the
level of concentrated help customers receive where issues
arise with any aspect of their sale. We are proud of the
dedicated, focused support we provide whenever it is required.
It is to the distinct advantage of the customer and the process
that we are focused on a completion not on a commission.
We recruited Lee Wainwright in March 2017 as Head of
Operations, who was formerly an extremely successful
Divisional Managing Director for Countrywide Plc for over 16
years. Lee will be responsible for the Central Property Experts,
Post Sales Support, Data Sales, Concierge team and the
Conveyancing Sales Team. They are all central based
departments that play a key role in delivery of our service and
selling additional products and services. Lee will help drive
enhanced service levels and growth in revenue from
these teams.
Our advancement with technology continues at pace with
Purplebricks Group plc Annual Report 2017 / 14
new, innovative and progressive work being completed on our
UK, Australian and US technology. Our 80 strong development
team work tirelessly to create tools to better help customers
through the process and to help LPEs deliver a more seamless
service. We will be further enhancing the functionality of our
App, our search facility and the journey for buyers amongst the
many other features we are developing for sellers and LPEs. We
are building and progressing our technology in the UK and
Australia and will have a team in the US.
Customer reviews
We continue to be the most customer reviewed estate agent
in the UK on independent review site Trustpilot. We are very
proud of the feedback we receive which is testament to the
culture, commitment and widespread appeal of our full service
hybrid model, demonstrating that we offer not just a
competitive flat fee but also superior customer service. We are
rated Excellent, averaging 9.5 out of 10 from over 20,000
customer reviews. We recognise that from time to time we will
receive a small proportion of negative reviews and as a result
we ensure that every customer is contacted and we do
everything we can to provide them with a swift resolution and
an excellent customer experience thereafter.
We request a review from a customer once a sale is agreed but
they are free to choose to leave reviews at any stage of the
selling process. This is carried out via a link with Trustpilot. We
do not offer any form of incentive, we merely provide a link
and request the customer completes a review. We receive
significantly more reviews than any other estate agent
(traditional, online or hybrid) because we give our customers
the opportunity to share their experience publicly and
immediately. I am extremely grateful to everyone in the
business for this fantastic achievement and for the brand
advocacy they are creating.
Australia
We are excited by the progress we are making and the
opportunity that exists in Australia. Ryan Dinsdale and the
management team have worked tirelessly to progress our
model, recruit and train our people, steer a path through the
state by state regulatory framework and grow the business
with the same customer centric principles as the UK business.
We are saving our customers on average over $12,000AUD and
have been rated “excellent” by independent review site
Trustpilot with an average customer score of 9.6 from over 500
reviews. We are confident that the introduction of our
Strategic Report
Chief Executive’s Statement continued
We are saving our customers on average over $12,000AUD and
have been rated “excellent” by independent review site Trustpilot.
“commisery” advertising campaign in Australia will resonate
and materially advance our growing performance.
America
The plans for launch into the American market are moving at
pace and we remain on target to enter the market in the
second half of 2017. We have further strengthened the
management team with the appointment of Jonathan Adler as
Chief Marketing Officer to work alongside James Kydd and Phil
Felice who has been appointed as Senior Vice President Sales
to work alongside Kenny Bruce.
Jonathan was formerly Managing Director of VCCP
International and Global CEO for Hogarth & Ogilvy and Phil has
been Head of US Sales for Altisource – Hubzu and Vice
President of Business Development for Realogy. Jonathan has
a deep understanding of US marketing and Phil a long history
of industry sales experience at every level. They will no doubt
prove superb additions to the management team.
Further details on our plans will be announced when it is the
right time commercially to do so.
Thank you
I would like to thank all of our people for their hard work,
dedication, commitment and absolute belief in our customers
and our brand. They have created thousands of brand
advocates in an industry that is often talked about, criticised
and disliked. I would also like to thank our customers who
have embraced what we are trying to achieve and have
actively helped and supported us in our journey to date.
Without belief in what we promise to deliver (and do deliver)
we could not grow our business in quite the same way. Their
advocacy of our products, services and brand is truly
remarkable.
Finally I would like to thank the support and encouragement
we receive from our shareholders. They have invested in
creating a strong and thriving business that is changing the
estate agency industry forever and for the better. We are
working tirelessly to deliver enduring returns for our
shareholders.
The future
There has been a significant amount of debate around the
property market and what the future holds with uncertainty
over BREXIT, a slowdown in the number of sellers and buyers,
tax changes and even a general election. As we have reported
in the past, whilst we will continue to monitor trends in the
market we have not seen a slowdown in activity and our
strategy is predicated on winning market share rather than
market growth. Our business model was built with low fixed
overheads and a focus on variable costs to provide greater
flexibility and agility to protect against any changes in the
market.
It has been a great year for our customers, our people and the
industry with the shift in consumer attitude away from
expensive commission to a transparent fixed fee full estate
agency service. Our people have risen to the public and
Purplebricks Group plc Annual Report 2017 / 15
Strategic Report
Chief Executive’s Statement continued
professional challenges that have come their way and have
done a remarkable job of advancing this extraordinary journey
for a young, fast growing business. We are on track to be the
most successful estate agent in UK history. We approach the
future with confidence.
Key performance indicators (KPIs)
The following KPIs are the tools used by management to
monitor the performance of the Group, in addition to the more
traditional income statement, statement of financial position
and cash flow analysis reviewed at regular Board meetings.
Financial KPIs
Revenue growth
2017
2016
151% 448%
Operating loss* as a percentage of revenue (10.0%)
(52.6%)
Non-financial KPIs
Number of LPEs
Monthly website visits
525
205
2.50m 1.23m
*Pre amortisation of intangibles and share based payment charges and IPO.
Revenue growth is closely monitored to ensure we grow so as
to cover our fixed costs as quickly and as efficiently as possible
and consume as little capital as possible, whilst pursuing a high
growth strategy.
The regular monitoring of the operating margin percentage
helps us ensure that the focus on growth is not at the expense
of profitability in the short and medium term.
Principal risks and uncertainties
Risk management is an important part of the management
process for the Group. Regular reviews are undertaken to
assess the nature of risks faced, the magnitude of the risk
presented to business performance and the manner in which
the risk may be mitigated. Where controls are in place, their
adequacy is regularly monitored.
Mitigation: The Group keeps a close eye on market conditions
and the broader economy. Our cost base is flexible and able to
react quickly and effectively to changes in market conditions.
People
Potential impact: An experienced and knowledgeable
workforce is required to service clients’ needs. The market for
skilled staff remains competitive and a failure to recruit and
retain experienced staff could impact on the Group’s ability to
develop and deliver solutions.
Mitigation: Providing existing staff with relevant training, great
rewards, effective marketing and an effective software
platform is a key priority for the business. Recruiting and
developing new employees, when required, is undertaken by
experienced staff to ensure the correct calibre of individual is
identified.
Reputational and quality
Potential impact: The quality of references obtained from
existing users of Purplebricks’ platform is an important part of
the decision making process for a potential client seeking to
instruct the Group.
Mitigation: The Group strives to maintain its reputation as the
best estate agency combined with great value for money and
monitors its Trustpilot reviews on a real time daily basis.
Availability of funding
Potential impact: In order to grow the business and become
profitable the Group needs access to funding. Without
sufficient capital the Group will be unable to meet its ambitious
targets.
Mitigation: The Group has continued fundraising activities as a
result of the flotation and prior investment rounds and has
sufficient headroom in respect of its working capital
requirements and its forecasts, even when applying lower case
sensitivities to the forecast.
The risks considered to be particularly important at the current
time are set out below:
Economic
Potential impact: As an estate agency the Group’s fortunes are
closely intertwined with those of the housing market and the
broader economy as a whole.
Financial
Potential impact: Inaccurate financial information may result in
sub-optimal decisions being taken by management and staff.
Inadequate internal controls may fail to prevent the Group
suffering a financial loss.
Mitigation: The systems of internal controls deployed within
Purplebricks Group plc Annual Report 2017 / 16
Strategic Report
Chief Executive’s Statement continued
We are really pleased
to be considerably
ahead of plan, finishing
the year with 448 LPEs,
a year on year increase
of over 118%
the Group are designed to prevent financial loss. Controls are
strongest in areas where management considers the potential
exposure to the Group of material loss or misstatement to be
at its greatest, such as revenue recognition and cash collection.
The adequacy and effectiveness of internal controls are
reviewed regularly.
New entrants to market
Potential impact: The Group operates in a sector where there
are a number of competitors.
Mitigation: To counter the threat of competitors seeking to win
business from us the Group aims to invest in the development
of technology and branding to ensure that the Group becomes
the market leader in the estate agency sector.
Overseas risk
Potential impact: The Group is entering overseas markets.
Mitigation: The Group continues to seek out the best advice
possible and hire the best people possible whilst remaining
well funded to face these challenges with confidence.
Integration risk
Potential impact: The Group may acquire additional companies
and will need to integrate them.
Mitigation: The Group continues to seek out the best advice
possible and hire the best people possible whilst remaining
well funded to face these challenges with confidence.
Future developments
We expect future developments in estate agency to see a
migration away from the high street as a highly fragmented
market consolidates by virtue of the ease and simplicity that
Purplebricks and its technology brings. We expect Purplebricks
Group plc to remain at the forefront of this change in the
industry landscape, creating and building on a market
leadership position.
Approved and signed on behalf of the Board
Michael Bruce
Director
28 June 2017
James Davies
Director
28 June 2017
Purplebricks Group plc Annual Report 2017 / 17
Customer Case Study
Carol John Goodman - London
How did you find your Local Property Expert?
Charles Haward was brilliant. We were selling my mum’s old
house and had rented it out for a few years. We had a difficult
tenant who didn’t want to move and whenever Charles went
round there, she cried. Charles handled it all very professionally
and tried to comfort her. He really went above and beyond, he
is such a caring person. He treated the tenant with a great deal
of respect in what was a difficult situation.
I remember he was going to a wedding one Saturday and he
still replied to my text from the wedding. I felt like Charles was
a friend.
Would you recommend Purplebricks?
I’ve already recommended Purplebricks to people that I work
with and I would 100% recommend the service to anyone
because my experience has been so good.
How did you hear about Purplebricks?
What do you think the best part of Purplebricks is?
I’d seen some signs locally and also saw the TV adverts. I don’t
really like high street agents and working compressed hours
means I need an agent that is available after working hours.
The 24 hour service and knowing my Local Property Expert
Charles was there for me. I feel like I’ve made a new friend as
well, a friend that I really love!
What made you want to sell with Purplebricks?
What does Purplebricks mean to you?
Convenience and transparency. I needed to sell my house
outside of working hours, when I haven’t got work on my mind
– even at midnight.
Purplebricks means a lot to me. I have 24 hour access to my
own Local Property Expert, who is like a friend. I saved myself
lots of money and I’m completely happy with the service.
Did you get any other valuations from high street agents?
If so, what price?
I didn’t go to anyone else because as soon as I booked the
valuation, someone called me within an hour. I was so
impressed that I made up my mind there and then.
If I had gone to a high street agent, I think I would have paid
between 1 and 2 percent in commission.
How easy did you find Purplebricks?
I found the website very easy to navigate. The second person
who saw the house was interested and it was a very quick
process. I could see all the messages the buyer was sending to
me and I liked that, I liked that I could do things whenever I
wanted to.
Would you use Purplebricks again?
Yes. Purplebricks doesn’t charge as much as other agents but
you still get at least the same service as a high street agent –
but things happen 24 hours a day.
Purplebricks Group plc Annual Report 2017 / 18
Customer Case Study
Aaron Parray - London
Nicola Corten-Southern sold customer Aaron Parry’s house
within 45 minutes. She said:
“I had another customer who was looking for a house in
Ilkeston and I knew Mr Parry’s property was perfect for them.
The second it went live, I called them. They viewed within half
an hour as they lived round the corner and immediately made
an offer at full asking price - £10,000 over what Mr Parry had
wanted for his house. This was 45 minutes from the advert
going live to offer accepted - and left a five star Trustpilot
review for Purplebricks!”
How did you hear about Purplebricks?
TV adverts – I’ve also seen the boards knocking about all over
the country as I work all over the UK. They’re everywhere at the
minute.
What made you want to sell with Purplebricks?
The set fee – then my Local Property Expert Nicola came round
and I was completely sold and happy with everything.
How easy did you find Purplebricks?
It was really easy, the easiest thing I’ve dealt with. When I have
dealt with other estate agents in the past, it was stressful but
this way is so simple!
Would you use Purplebricks again?
Oh yes, definitely. Purplebricks would be the first place I
would go.
How did you find your Local Property Expert?
Nicola was excellent, she was always available. Even at 9pm at
night she got back to me when I called. She had a good
knowledge of everything. I was going to put my house on the
market for less than what I sold it for but Nicola advised that I
could achieve more – she said the house was beautiful and
knew what similar properties in the area had sold for - and I’m
so glad she did now. She’s made some money for me and my
family and helped us get the next house we wanted.
Would you recommend Purplebricks?
Yeah definitely, 100%.
What do you think the best part of Purplebricks is?
The ease of everything, from booking the valuation online to
the contact from Nicola. There was nothing difficult about it at
all, it was so easy. I thought selling would be a long, drawn-out
process and would be really stressful, but it all happened within
a few days! Within an hour of Nicola being round, I was live on
the market and we had a viewing. The best part is having direct
contact with our buyer instead of going through the estate
agent and never hearing back from them!
How much would you have paid in commission?
I bought this house a couple of years ago and the high street
agent’s fee was approximately 2%. That’s more than double
what I paid with Purplebricks – I saved £2,551 using them.
Did you have any valuations with traditional high street
agents?
No.
What was the main difference you found using
Purplebricks compared to using a traditional agent?
The cost, the ease and the lack of stress.
What did you think when the offer came in so quickly?
I was gobsmacked and didn’t know what to think. I thought it
might take months before it sold, and I’d have ages to find
somewhere. I received an offer within 30 minutes of going live
and negotiated the sale and everything was agreed within 45
minutes. Suddenly I had to find somewhere! Luckily we found
one pretty quickly round the corner so it wasn’t hard.
Purplebricks Group plc Annual Report 2017 / 19
Customer Case Study
Hayley Heathcote - London
Property sold?
I just sold two properties with Purplebricks. My rental property,
in which my firstborn was born in and also my family home, so
it was important that I got it right.
There are lots of purely online and high street estate agents out
there. Purplebricks is the bridge between the high street and
online. There’s a great person behind the move.
I’ve gone through high street agents before and Purplebricks is
so much better. Other agents don’t always return calls, they can
be quite rude. I found everyone at Purplebricks to be very
helpful and polite.
What do you think the best part of Purplebricks is?
Purplebricks is very transparent and simple. Everything is there
on the platform. I like to have control! I also liked that it was
accessible 24/7. I can get hold of someone quickly. There are no
queues, no waiting on the telephone. I wouldn’t have the
patience to wait so this really suited me.
How easy did you find Purplebricks?
The whole process with Purplebricks was very simple. At first I
was worried, because I wasn’t a technology person, but I
couldn’t fault the experience. In fact, even this morning, I
wanted to swap one of my photos, so I went in at 7am –
before a high street agent would be open – clicked on the
picture and changed it. It was live on Rightmove straightaway.
How did you hear about Purplebricks?
Through online search. I Googled “estate agents” and Purplebricks
came up as a cheap option, with great reviews and scores.
Would you use Purplebricks again?
Yes – I’ve used them twice.
What made you want to sell with Purplebricks?
I chose Purplebricks because of the low cost and their review
scores. I wouldn’t have chosen them if this hadn’t been the
case, as these two things were very important to me.
Did you get any other valuations from high street agents?
If so, what price?
I did for the rental property. It was valued by a high street agent
and was overvalued by £15k at £175k. I do a lot of research
myself so knew this was unrealistic.
They were overfamiliar and pushy to the point of
uncomfortable. Even after marketing with Purplebricks they text
negative comments about Purplebricks and offered me a deal
to go with them for a reduced cost. It was all a bit much.
Matthew valued up to £165k and I put it on at a sensible £160k. I
didn’t bother for the family home.
What was the main difference you found using
Purplebricks compared to using a traditional agent?
Purplebricks Group plc Annual Report 2017 / 20
How did you find your Local Property Expert?
I’ve worked with Matthew Loach and David Grieves. I found
Matthew to be polite, accessible, honest and knowledgeable. I
also found David very friendly and approachable. They were
always available.
Would you recommend Purplebricks?
Yes – I already have and my recommendation would be based
on control, price and ease.
How much would you have paid in commission?
I saved a couple of thousand pounds, which is a family holiday
or a year’s worth of activities for the kids.
What does Purplebricks mean to you?
On a personal note, Purplebricks is helping me get my
dream home for my family so my children can have the life
they deserve.
Customer Case Study
Maggie Hutchison- London
How did you hear about Purplebricks?
I saw the TV adverts and also the boards that were up.
What made you want to sell with Purplebricks?
I had the view of Purplebricks that they just put houses on the
market and that was it. I filled out a form on the website and
Local Property Expert Gary Anderson came round to do a
valuation. He explained that Purplebricks does everything a
normal estate agent does but you don’t pay commission – so I
thought ‘why not’?
Did you get any other valuations from high street agents?
If so, what price?
Yes. A high street agent in Muswell Hill called Tatlers who
wanted to charge me a 2% commission on my house. My house
has sold subject to contract for £1.25m – so this would have
been £25,000.
How easy did you find Purplebricks?
I was a bit apprehensive at first about using the platform but
Gary talked me through everything and talked to the people
who had made offers. I used him more than I used the website.
It was great to have options, someone who is always available
and a platform that made things happen.
and a chat. He didn’t seem to be in a rush. We had a bit of
banter, fixed on a price and I said I would think about it. When I
was ready, I called Gary back, he came over, took photos, drew
up the property advert and put it online.
My house went on the market on the 20 March. We held an
open day on 1 April (I always remember the date because it
was April Fool’s Day!) 10 people came to view, we had 2 offers
and I accepted an offer on 3 April. That’s 10 days in total – well
done Purplebricks!
I also chose to pay for the accompanied viewings service as I
didn’t know how emotional I’d be about selling. The house sale
has happened very quickly.
Would you recommend Purplebricks?
Yes. Everything’s doable with the blend of people, the
Purplebricks platform and email. Everything happens so quickly.
I’ve recommended Purplebricks to friends already because
they do everything that a traditional agent does, only better
and cheaper.
What do you think the best part of Purplebricks is?
You just deal with one person throughout. I can call Gary right
now and he’ll answer promptly and I like that continuity. I also
think Purplebricks is very flexible. I called Gary out of working
hours and if he didn’t answer straight away, he’d always return
my call. You can get hold of people whenever you want them.
Another selling point is the cost – it is a substantially lower
price than other agents. Gary didn’t push me into anything – he
was there when I was ready and he was very helpful.
What was the main difference you found using
Purplebricks compared to using a traditional agent?
Professional service. Friendly Local Property Expert who had 20
plus years of experience. No commission.
What does Purplebricks mean to you?
Purplebricks guided me through what could have been a very
emotional experience - selling the family home. Gary was very
professional, he was always there, I felt very supported and
even when I asked him silly questions I was never made to
feel silly.
How did you find your Local Property Expert?
I’ve been in my house for 27 years. My husband died 8 years ago,
the kids have moved away and the house suddenly seemed a
bit big. Gary came round to value the house. We had a coffee
Have you saved yourself from commisery?
To quote the words of the TV ad, there was no commisery for
me, just great service!
Purplebricks Group plc Annual Report 2017 / 21
Directors’ Report
The directors present their report and the audited financial statements for the year ended 30 April 2017
Business review
Shareholder name
Number of shares % holding
A comprehensive analysis of the Group’s future developments,
performance and KPIs is contained in the Strategic report.
Information on the financial risk management strategy of the
Group and Company and of the exposure of the Group and
Company to currency risk, interest rate risk, credit risk, capital
risk and liquidity risk is set out in note 21 to the accounts.
Post Balance Sheet events
There were no post Balance Sheet events which require
reporting.
Dividend
No dividends were paid in the year and there are none
recommended (2016:£nil).
Employees
The Group’s policy of providing employees with information
about the Group has continued and regular meetings are held
between management and employees to allow exchanges of
information and ideas. The Group continues to consider ways
to encourage the involvement of employees in the Group’s
performance. The Group gives every consideration to
applications for employment by disabled persons where the
requirements of the job may be adequately filled by a disabled
person. Where existing employees become disabled, it is the
Group’s policy wherever practicable to provide continuing
employment under similar terms and conditions and to provide
training, career development and promotion wherever
appropriate.
Substantial shareholdings
At 26 June 2017, being the latest practicable date prior to the
publication of this annual report, the Company had been
notified of the following interests amounting to 3% or more of
the voting rights in the issued share capital of the Company.
Purplebricks Group plc Annual Report 2017 / 22
Woodford Investment
Management LLP
M P D Bruce and wife
Old Mutual Global
Investors (UK) Ltd
Capital Research
P R M Pindar and wife
K F C Bruce
76,353,302
37,662,591
28.22%
13.92%
31,109,017
18,503,954
10,827,227
10,000,000
11.50%
6.84%
4.00%
3.70%
Paul Pindar neither purchased nor sold any shares during the
current year (2016: 300,000 Ordinary shares in the Company on
26 January 2016 at 78.16p per share) and Michael Bruce neither
purchased nor sold any shares during the current year (2016:
320,000 Ordinary shares in the Company on 26 January 2016 at
78.00p per share). Isabel Bruce sold 3,666,667 Ordinary shares in
the Company on 16 March 2017 at 300.00p per share. Neil
Cartwright sold 1,000,000 shares on 16 March 2017 at 300.00p
per share. Will Whitehorn sold 250,000 Ordinary shares on 16
March 2017 at 300.00p per share. Nicholas Discombe sold
1,600,000 shares at 300.00p on 19 April 2017.
In addition to this, the following Directors held shares in the
Company:
Shareholder name
Number of shares % holding
Nick Discombe and wife
Will Whitehorn
4,812,788
838,269
1.78%
0.31%
The directors who held office during the financial year are set
out below:
M P D Bruce
J R Davies (appointed 4 May 2017)
N R Cartwright (resigned 4 May 2017)
P R M Pindar*
N S Discombe*
W E Whitehorn*
* Denotes non-executive directors
Founder & Chief Executive Officer - Michael Bruce
Michael has been the driving force behind the development of
Purplebricks alongside his brother Kenny. He is a qualified
Directors’ Report
Continued
solicitor who has owned and run his own law firms before
acquiring Burchell Edwards Estate Agents in 2006. The
business was grown to include estate agency, lettings,
mortgages and their own dedicated law firm. Michael was
Chief Executive until 2010 whereupon he became Chairman of
the business. The business, including the law firm, was sold to
Connells Group (part of Skipton Building Society) in November
2011 as a result of Michael and Kenny Bruce, his brother,
wishing to pursue the Purplebricks Group plc model. As
founder of the business and initial major investor, Michael has
been the Chief Executive Officer of Purplebricks Group plc
since its inception, working alongside Kenny who, as Sales
Director, heads the Company’s sales efforts.
was as Chief Executive Officer of Witness Systems Inc.
(NASDAQ – WITS) which was sold for just over US$1 billion in
cash in June 2007. Since this time, he has, as Chairman, worked
with seven companies leading them to successful exits. Prior
to his role at Witness Systems, Nick spent five years with Apax
backed Eyretel which in 2003 was merged with Witness
Systems. At Eyretel as Chief Executive Officer, Nick led the
expansion of the global organisation and in 2000 the successful
initial public offering on the London Stock Exchange. He has
been an investor in Purplebricks Group plc since early 2014. Nick
acted as chairman of Purplebricks Group plc from October 2014
but, with effect from Admission, he became the Senior
Non-Executive Director of the Company.
Chief Financial Officer – James Davies
Independent Non-Executive Director - William Whitehorn
James joined Purplebricks Group plc in May 2017 from William
Hill plc, having been Chief Financial Officer of its digital
business since 2015. Prior to William Hill, James was a divisional
Chief Financial Officer at Kingfisher plc and was deputy to the
Group Finance Director of UBM plc for three years. Before this
James spent five years in the UK M&A team at Deutsche Bank
and eight years in the technology team at Close Brothers
Corporate Finance. James started his career within the TMT
team at Deloitte in London where he qualified as a chartered
accountant.
Non-executive Chairman - Paul Pindar
Paul joined Capita plc in 1987, initially as Finance Director, then
Managing Director in 1991 and Chief Executive in 1999. He was
the third-longest serving FTSE 100 CEO when he stood down
in 2014. He joined Capita after advising on the £0.3m
management buyout (MBO) while working for 3i Group plc.
When he joined Capita, it had 33 employees and annual
revenue of £1.3 million. When he left the business in February
2014, Capita had more than 62,000 employees and a market
capitalisation of £7.5 billion. Since June 2014 he has served as
Chairman of Independent Clinical Services following its
acquisition by TowerBrook. Paul has also been a non-executive
director of retailer Debenhams Plc, Chairman of the NSPCC’s
Corporate Development Board and Chairman of Great
Ormond Street Hospital’s Corporate Partnerships Board. Paul
was also an early investor in Purplebricks.
Senior Non-Executive Director - Nick Discombe
Nick acts as Chairman/advisor with portfolio companies for a
small number of private equity or growth capital backed
businesses around the world. Nick’s last executive position
Will is a highly experienced director. For many years he held a
number of senior board roles within the Virgin Group. For over
20 years he was the Brand Development and Corporate Affairs
Director and helped grow the Virgin brand globally, acting as
spokesman for Sir Richard Branson and co-ordinating branding,
marketing PR and current affairs across the whole group of
investments and businesses. He was also President of Virgin
Galactic for nearly five years. He is currently Senior Non-
Executive Director at GVC Holdings plc and Deputy Chairman
of Stagecoach Group plc having been a Non-Executive Director
for the previous 4 years. He has been an investor in and
Non-Executive Director of Purplebricks since March 2013.
Purplebricks Group plc Annual Report 2017 / 23
Directors’ Report
Remuneration Report
Details of options to purchase Ordinary shares in the Company granted to the executive directors are set out below.
M P D Bruce
N R Cartwright
Class of
share
Ordinary
Ordinary
Interest at
end of year
2,430,551
2,858,994
Class of
share
Ordinary
Ordinary
Interest at
start of year
2,430,551
757,492
Details of share based payments are included in the notes to the accounts.
Scheme interests and Outstanding Share awards
Director name
Description
Date of grant
Interest 1
May 2016
Options
granted
during the
year
Options
exercised
during the
year
Outstanding
Interest at 30
April 2017
M P D Bruce
EMI and
unapproved
options
06/11/2015
2,430,551
M P D Bruce
EMI Options
07/08/2015
-
N R Cartwright
EMI Options
09/01/2015
695,990
N R Cartwright
EMI Options
10/07/2015
1,245,159
N R Cartwright
EMI and
unapproved
Options
06/11/2015
917,845
The share price was 295.25p on 30 April 2017.
-
-
-
-
-
-
-
695,990
1,245,159
2,430,551
-
-
-
160,353
757,492
Research and development
Statement of directors’ responsibilities
The Group undertakes a continuous programme of
development expenditure, as part of its commitment to
lead change in estate agency. Development expenditure is
capitalised only when the end product is technically and
commercially feasible and when sufficient resource is
available to complete the development, as disclosed in note
12 to the accounts. All other research and development
expenditure is recognised in the Statement of
Comprehensive Income as an expense as disclosed in note 6
to the accounts.
The Company has a qualifying indemnity insurance policy in
respect of Directors’ and Officers’ liability.
The directors are responsible for preparing the Strategic Report
and Directors Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the financial statements in accordance
with International Financial Reporting Standards (IFRSs) as
adopted by the European Union. Under company law the
directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs and profit or loss of the company and group for that
period. In preparing these financial statements, the directors
Purplebricks Group plc Annual Report 2017 / 24
Directors’ Report
Continued
are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether applicable IFRSs have been followed,
subject to any material departures disclosed and
explained in the financial statements;
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the company will continue in business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the company’s transactions and disclose with reasonable
accuracy at any time the financial position of the company
and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the company and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors confirm that:
• so far as each director is aware, there is no relevant
audit information of which the company’s auditor is
unaware; and
• the directors have taken all the steps that they ought
to have taken as directors in order to make
themselves aware of any relevant audit information
and to establish that the company’s auditor is aware
of that information.
The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Auditor
Grant Thornton UK LLP was appointed as auditor and is
willing to continue in office. In accordance with s489(4) of
the Companies Act 2006 a resolution for their reappointment
will be proposed at the forthcoming Annual General Meeting.
Corporate Governance
The Board is committed to achieving high standards of
corporate governance, integrity and business ethics. Under
the AIM Rules the Company is not required to comply and
has not complied with the provisions of the new edition of
UK Corporate Governance Code issued by the Financial
Reporting Council in 2014 (the Code).
Whilst the Code has not been applied, the Board has taken
into consideration the QCA Corporate Governance Code for
Small and Mid-Size Quoted Companies produced by the
Quoted Companies Alliance, and taken steps to apply the
principles of the Code in so far as it can be applied
practically, given the size of the Company and the nature of
its operations. The Board has established an audit committee
(the Audit Committee), a remuneration committee (the
Remuneration Committee) and a nomination committee (the
Nomination Committee).
The Audit Committee is chaired by Paul Pindar, its other
member is Nick Discombe. James Davies will be entitled to
attend and observe meetings of the Audit Committee. The
Audit Committee has primary responsibility for monitoring
the quality of internal controls and ensuring that the financial
performance of the Company is properly measured and
reported on. It receives and reviews reports from the
Company’s management and auditor relating to the interim
and annual accounts and the accounting and internal control
systems in use throughout the Company. The Audit
Committee meets at least three times a year and has
unrestricted access to the Company’s auditor.
The Remuneration Committee is chaired by Nick Discombe,
its other member is William Whitehorn. The Remuneration
Committee reviews the performance of the Executive
Directors and makes recommendations to the Board on
matters relating to their remuneration and terms of
employment. The Remuneration Committee also makes
recommendations to the Board on proposals for the granting
of share options and other equity incentives pursuant to any
share option scheme or equity incentive scheme in operation
from time to time. The remuneration and terms and
conditions of appointment of the Non-executive Directors of
the Company are set by the Board.
The Nomination Committee is chaired by Paul Pindar, its other
member is Nick Discombe. Michael Bruce is entitled to attend
and observe meetings of that committee. The Nomination
Committee assists the Board in discharging its responsibilities
relating to the composition of the Board, performance of Board
members, induction of new directors, appointment of
Purplebricks Group plc Annual Report 2017 / 25
Directors’ Report
Continued
committee members and succession planning for senior
management. The Nomination Committee is responsible for
evaluating the balance of skills, knowledge, diversity and
experience on the Board, the size, structure and composition of
the Board, retirements and appointments of additional and
replacement directors and makes appropriate
recommendations to the Board on such matters. The
Nomination Committee prepares a description of the role and
capabilities required for a particular appointment. The
Nomination Committee meets at least twice a year and
otherwise as required.
Remuneration Committee
Nick Discombe chairs the Remuneration Committee which also
comprises William Whitehorn. The committee held one
meeting before the end of the financial year, primarily to ratify
awards and sanction invitations made prior to the AIM
admission under the share options schemes.
The Non-Executive directors do not have any personal interest
in the matters to be decided by the committee, or any
potential conflicts of interest arising from cross-directorships or
day to day involvement in the running of the Company. The
Executive directors and other senior personnel may be invited
to attend meetings when appropriate to provide advice.
However, no director will be present or take part in discussions
concerning their remuneration.
Remuneration policy
The Company’s policy is that the remuneration package of the
Executive Directors should be sufficiently competitive to
attract, retain and motivate those directors to achieve the
Company’s objectives without making excessive payments. The
Board determines the terms and conditions of the Non-
Executive directors.
Basic salary and benefits
Base salaries will be reviewed annually by the Remuneration
Committee, and adjusted where appropriate to reflect
performance, changed responsibilities and/or market
conditions.
Service contracts and letters of appointment
The Company’s policy is for all of the Executive Directors to
have twelve month rolling service contracts. All Non-Executive
Directors are salaried and are appointed for an initial term of
three years from Admission to AIM which took place on 17
Purplebricks Group plc Annual Report 2017 / 26
December 2015. They are not eligible for bonuses, pension
benefits, share options or other benefits, save where
compulsory by law. The Directors are indemnified to the full
extent permitted by statute. Executive and Non-Executive
Directors Remuneration is detailed in note 7 to these financial
statements.
Long term equity incentive plan
It is expected that some grants shall be made to the Executive
Directors, staff, and a number of LPEs’ companies in the coming
year to align theirs and shareholders’ interests ever more
closely.
Corporate Social Responsibility
Equality, Diversity and Rights
Purplebricks Group plc maintains a strong commitment to
equality and opportunity in our employment policies and
practices in the workplace. Through our recruitment and
selection processes we seek to attract and retain a diverse and
talented workforce. As prescribed by law, we commit that no
existing or potential employee will receive less favourable
treatment due to their race, creed, nationality, colour, ethnic
origin, sexual orientation, gender, gender reassignment, marital
status, membership of a trade union, disability, or any other
criteria. Whilst the Company does not have a specific human
rights policy, it does have policies such as Equal Opportunities,
Modern Slavery and Anti-bribery that adhere to internationally
agreed human rights principles.
Environment
Purplebricks Group plc is committed to minimising the
environmental impact of its business operations and seeks to
actively manage its carbon footprint. As an online business with
very limited physical infrastructure and a marketing model that
is largely paperless, the Company has a much reduced
environmental impact as compared to traditional real estate
agencies. As a relatively new and fast-growing Company we
will be constantly reviewing our business model and operations
to limit the impact we and our customers make in the course
of our business in areas such as energy efficiency, waste,
recycling, emissions, transport and printing.
Health and Safety
The effective management of health and safety across our
business is an integral part of our broader business
administration requirements. As the business grows we are
Directors’ Report
Continued
committed to ensuring appropriate assessment and suitable
control of the health and safety risks arising from our work
activities for our employees, our customers and our partners.
Charitable and Philanthropic activity
An important part of the Purplebricks Group plc culture and
ethos is to give back to the public and local communities
through the commitment of time, resources and fundraising
activities. Our employees are active in raising money or
supporting fundraising activities for a wide range of causes
both local and national.
Any member of staff can nominate a local project for the
foundation to support. The final projects are chosen by the
Foundation Committee, made up of members of the
management team and chaired by James Kydd. The Foundation
Committee meets periodically.
Approved and signed on behalf of the Board
Michael Bruce
Director
28 June 2017
James Davies
Director
28 June 2017
Purplebricks Group plc Annual Report 2017 / 27
Independent auditor’s report
to the members of Purplebricks Group plc
prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion, based on the work undertaken in the course of
the audit:
• the information given in the Strategic Report and Directors’
Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements.
• the Strategic Report and Directors’ Report has been prepared
in accordance with applicable legal requirements.
Matter on which we are required to report under the
Companies Act 2006
In the light of the knowledge and understanding of the group
and parent company and its environment obtained in the
course of the audit, we have not identified any material
misstatements in the Strategic Report and Directors’ Report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if,
in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
David White
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Birmingham
28 June 2017
We have audited the financial statements of Purplebricks
Group plc for the year ended 30 April 2017 which comprise the
consolidated statement of comprehensive income, the
consolidated and parent company statements of financial
position, the consolidated and parent company statements of
changes in equity, the consolidated and parent company
statements of cash flow, and the related notes. The financial
reporting framework that has been applied in their preparation
is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as
regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we
might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement on pages 24 and 25, the directors are responsible for
the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility is
to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s Ethical Standards for
Auditor.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is
provided on the Financial Reporting Council’s website at www.
frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state
of the group’s and of the parent company’s affairs as at 30
April 2017 and of the group’s loss for the year then ended;
• the group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly
Purplebricks Group plc Annual Report 2017 / 28
Consolidated statement of comprehensive income
for the year ended 30 April 2017
Revenue
Cost of sales
Gross profit
Administrative and establishment expenses
Marketing costs
Loss from operating activities
Loss from operating activities before adjustments:
Share based payment charge
Amortisation of intangibles
Fundraising costs including Initial Public Offering
Loss from operating activities
Finance income
Fair value movement in respect of derivatives
Loss on ordinary activities before taxation
Taxation on loss on ordinary activities
Loss for the year
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Total other comprehensive income
Total comprehensive loss
Losses per share
Basic and diluted loss per share
Note
6
8
12
17
9
2017
£
46,706,078
(20,857,938)
25,848,140
2016
£
18,603,679
(8,011,976)
10,591,703
(13,639,927)
(9,604,541)
(18,218,845)
(12,924,002)
(6,010,632)
(11,936,840)
(4,694,190)
(9,777,815)
(917,089)
(399,353)
(596,647)
(101,309)
-
(1,461,069)
(6,010,632)
(11,936,840)
55,430
(104,317)
35,009
-
(6,059,519)
(11,901,831)
3,054,190
-
(3,005,329)
(11,901,831)
116,370
116,370
-
-
(2,888,959)
(11,901,831)
10
(1p)
(12p)
The accompanying accounting policies and notes form an integral part of these financial statements.
All losses and other comprehensive income relate to continuing operations and are attributable to equity shareholders of the parent.
Purplebricks Group plc Annual Report 2017 / 29
Consolidated statement of financial position
at 30 April 2017
Non-current assets
Property, plant and equipment
Intangible assets
Goodwill
Deferred tax asset
Current assets
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Deferred income
Derivative financial instruments
Net current assets
Total assets less current liabilities
Non-current liabilities
Deferred tax liabilities
Net assets
Equity
Share capital
Share premium account
Share based payment reserve
Foreign exchange reserve
Retained earnings
Total equity
Note
11
12
13
9
15
16
16
17
9
18
19
2017
£
718,492
2,757,053
2,605,979
3,086,950
9,168,474
4,865,196
71,330,300
76,195,496
(7,302,467)
(2,306,512)
(104,317)
(9,713,296)
2016
£
217,386
370,847
-
-
588,233
2,970,258
30,476,386
33,446,644
(5,211,353)
(760,358)
-
(5,971,711)
66,482,200
27,474,933
75,650,674
28,063,166
(243,534)
-
75,407,140
28,063,166
2,705,009
74,900,826
693,537
116,370
2,402,591
25,887,400
330,968
-
(3,008,602)
(557,793)
75,407,140
28,063,166
These financial statements were approved and authorised for issue by the Board of directors on the 28 June 2017 and were signed
on its behalf by:
Michael Bruce
Director
Company Registration Number 08047368
James Davies
Director
The accompanying accounting policies and notes form an integral part of these financial statements.
Purplebricks Group plc Annual Report 2017 / 30
Company statement of financial position
at 30 April 2017
Non-current assets
Property, plant and equipment
Intangible assets
Investment in subsidiaries
Deferred tax asset
Current assets
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Deferred income
Derivative financial instruments
Net current assets
Total assets less current liabilities
Net assets
Equity
Share capital
Share premium account
Share based payment reserve
Retained earnings
Total equity
Note
11
12
14
9
15
16
16
17
18
19
2017
£
564,388
1,614,191
3,573,691
2,892,592
8,644,862
11,244,813
69,941,358
81,186,171
(6,436,426)
(1,821,434)
(104,317)
(8,362,177)
2016
£
217,386
370,847
-
-
588,233
2,970,258
30,476,386
33,446,644
(5,211,353)
(760,358)
-
(5,971,711)
72,823,994
27,474,933
81,468,856
28,063,166
81,468,856
28,063,166
2,705,009
74,900,826
693,537
3,169,484
2,402,591
25,887,400
330,968
(557,793)
81,468,856
28,063,166
The parent Company profit for the year was £3,172,757 (2016: Loss £11,901,831)
These financial statements were approved and authorised for issue by the Board of directors on 28 June 2017
and were signed on its behalf by:
Michael Bruce
Director
Company Registration Number 08047368
James Davies
Director
The accompanying accounting policies and notes form an integral part of these financial statements.
Purplebricks Group plc Annual Report 2017 / 31
Consolidated statement of changes in equity
for the year ended 30 April 2017
Share
capital
Share
premium
account
Share based
payment
reserve
Foreign
exchange
reserve
At 1 May 2016
2,402,591
25,887,400
330,968
£
£
£
Issue of shares
Cost of share issue
Exercise of options
227,273
49,772,726
-
(1,209,639)
-
-
75,145
450,339
(554,520)
Share based payment charge
-
-
917,089
Transactions with owners
302,418
49,013,426
362,569
Loss for the year
Exchange differences on
translation of foreign operations
Total comprehensive loss
-
-
-
-
-
-
-
-
-
Retained
earnings
Total
equity
£
£
(557,793)
28,063,166
-
-
49,999,999
(1,209,639)
554,520
525,484
-
917,089
554,520
50,232,933
(3,005,329)
(3,005,329)
£
-
-
-
-
-
-
-
116,370
-
116,370
116,370
(3,005,329)
(2,888,959)
At 30 April 2017
2,705,009
74,900,826
693,537
116,370
(3,008,602)
75,407,140
The accompanying accounting policies and notes form an integral part of these financial statements.
Purplebricks Group plc Annual Report 2017 / 32
Consolidated statement of changes in equity
for the year ended 30 April 2016
Share
capital
£
Share
premium
account
Share based
payment
reserve
Retained
earnings
£
£
£
Total
equity
£
At 1 May 2015
17,658
12,298,268
105,016
(8,026,657)
4,394,285
Issue of shares
Exercise of options
Exercise of warrants
Redemption of shares
Share premium cancellation
Costs of IPO charged to share
premium account
Share based payment charge
Transfer on exercise of options
Bonus share issue
252,051
34,748,659
138
123
(89)
-
-
-
-
25,056
91,947
-
(19,000,000)
(143,820)
-
-
-
-
-
-
-
-
596,647
-
-
-
-
19,000,000
-
-
(370,695)
370,695
2,132,710
(2,132,710)
-
-
35,000,710
25,194
92,070
(89)
-
(143,820)
596,647
-
-
Transactions with owners
2,384,933
13,589,132
225,952
19,370,695
35,570,712
Loss for the year
Total comprehensive loss
-
-
-
-
-
-
(11,901,831)
(11,901,831)
(11,901,831)
(11,901,831)
At 30 April 2016
2,402,591
25,887,400
330,968
(557,793)
28,063,166
The accompanying accounting policies and notes form an integral part of these financial statements.
Purplebricks Group plc Annual Report 2017 / 33
Company statement of changes in equity
for the year ended 30 April 2017
Share
capital
£
Share
premium
account
Share based
payment
reserve
Retained
earnings
£
£
£
Total
equity
£
At 1 May 2016
2,402,591
25,887,400
330,968
(557,793)
28,063,166
Issue of shares
Cost of share issue
Exercise of options
227,273
49,772,726
-
(1,209,639)
-
-
-
-
75,145
450,339
(554,520)
554,520
Share based payment charge
-
-
917,089
-
49,999,999
(1,209,639)
525,484
917,089
Transactions with owners
302,418
49,013,426
362,569
554,520
50,232,933
Profit for the year
Total comprehensive loss
-
-
-
-
-
-
3,172,757
3,172,757
3,172,757
3,172,757
At 30 April 2017
2,705,009
74,900,826
693,537
3,169,484
81,468,856
The accompanying accounting policies and notes form an integral part of these financial statements.
Purplebricks Group plc Annual Report 2017 / 34
Company statement of changes in equity
for the year ended 30 April 2016
Share
capital
£
Share
premium
account
Share based
payment
reserve
Retained
earnings
£
£
£
Total
equity
£
At 1 May 2015
17,658
12,298,268
105,016
(8,026,657)
4,394,285
Issue of shares
Exercise of options
Exercise of warrants
Redemption of shares
Share premium cancellation
Costs of IPO charged to share
premium account
Share based payment charge
Transfer on exercise of options
Bonus share issue
252,051
34,748,659
138
123
(89)
-
-
-
-
25,056
91,947
-
(19,000,000)
(143,820)
-
-
-
-
-
-
-
-
596,647
-
-
-
-
19,000,000
-
-
(370,695)
370,695
2,132,710
(2,132,710)
-
-
35,000,710
25,194
92,070
(89)
-
(143,820)
596,647
-
-
Transactions with owners
2,384,933
13,589,132
225,952
19,370,695
35,570,712
Loss for the year
Total comprehensive loss
-
-
-
-
-
-
(11,901,831)
(11,901,831)
(11,901,831)
(11,901,831)
At 30 April 2016
2,402,591
25,887,400
330,968
(557,793)
28,063,166
The accompanying accounting policies and notes form an integral part of these financial statements.
Purplebricks Group plc Annual Report 2017 / 35
Consolidated statement of cash flows
for the year ended 30 April 2017
Cash flows from operating activities
Loss for the year after taxation
Adjustments for:
Amortisation of intangible assets
Depreciation
Loss on disposal of fixed assets
Share based payment charge
Fundraising costs
Non-designated foreign exchange forward contracts
Deferred taxation
Operating cash outflow before changes in working capital
Movement in trade and other receivables
Movement in trade and other payables
Movement in deferred income
Net cash outflow from operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Development expenditure capitalised
Purchase of intangible assets
Acquisition of subsidiary net of cash acquired
Net cash outflow from investing activities
Cash flow from financing activities
Issue of shares
Costs of issue of shares
Net cash flow from financing activities
Net increase in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents at beginning of year
Cash and cash equivalents at the end of the year
2017
£
2016
£
(3,005,329)
(11,901,831)
399,353
166,320
1,868
917,089
-
104,317
(3,054,190)
(4,470,572)
(1,706,903)
1,574,291
1,546,154
(3,057,030)
(585,583)
991
(1,421,927)
(194,595)
(3,295,189)
(5,496,303)
50,525,483
(1,209,639)
49,315,844
40,762,511
91,403
30,476,386
71,330,300
101,309
61,159
-
596,647
1,461,069
-
-
(9,681,647)
(2,224,175)
4,158,614
650,428
(7,096,780)
(215,338)
-
(334,263)
-
-
(549,601)
35,117,885
(1,604,889)
33,512,996
25,866,615
-
4,609,771
30,476,386
The accompanying accounting policies and notes form an integral part of these financial statements.
Purplebricks Group plc Annual Report 2017 / 36
Company statement of cash flows
for the year ended 30 April 2017
Cash flows from operating activities
Loss for the year after taxation
Adjustments for:
Amortisation of intangible assets
Depreciation
Share based payment charge
Non-designated foreign exchange forward contracts
Fundraising costs
Deferred taxation
Operating cash inflow/(outflow) before changes in working capital
Movement in trade and other receivables
Movement in trade and other payables
Movement in deferred income
Net cash outflow from operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Development expenditure capitalised
Purchase of intangible assets
Purchase of investment in subsidiary
Net cash outflow from investing activities
Cash flow from financing activities
Issue of shares
Costs of issue of shares
Net cash flow from financing activities
2017
£
2016
£
3,172,757
(11,901,831)
373,178
148,013
917,089
104,317
-
(2,892,592)
1,822,762
(8,274,552)
1,200,072
1,061,076
(4,190,642)
(495,977)
959
(1,421,927)
(194,595)
(3,548,691)
(5,660,231)
50,525,484
(1,209,639)
49,315,845
101,309
61,159
596,647
-
1,461,069
-
(9,681,647)
(2,224,175)
4,158,614
650,428
(7,096,780)
(215,338)
-
(334,263)
-
-
(549,601)
35,117,885
(1,604,889)
33,512,996
Net increase in cash and cash equivalents
39,464,972
25,866,615
Cash and cash equivalents at beginning of year
Cash and cash equivalents at the end of the year
30,476,386
69,941,358
4,609,771
30,476,386
The accompanying accounting policies and notes form an integral part of these financial statements.
Purplebricks Group plc Annual Report 2017 / 37
Notes to the financial statements
forming part of the financial statements
1. General information
Purplebricks Group plc is a public company limited by shares registered in England and Wales. The address of the Company’s registered
office is Purplebricks Group plc, Suite 7, First Floor, Cranmore Place, Cranmore Drive, Shirley, Solihull, West Midlands, B90 4RZ. The
Company is primarily involved in the estate agency business.
On 29 March 2016 Purplebricks Group plc incorporated a wholly owned subsidiary, Purplebricks Australia PTY Ltd, a Company registered
in Australia. On 10 March 2017, Purplebricks Group plc incorporated a wholly owned subsidiary Purplebricks Inc, a company registered in
the United States.
On 24 March 2017 the Group acquired 100 per cent of the issued share capital of BFL Property Management Limited. BFL Property
Management Limited (“BFL”) is a property management company and was acquired to complement the existing mainly organically
created property management business in the Group and professionalising it with a skilled team and their processes.
The recently acquired entity BFL has a year-end reporting date of 31 December however is consolidated for the year ended 30 April 2017
using detailed management accounts. BFL’s reporting date will be amended to ensure it is coterminous with the Group for future periods.
2. Summary of significant accounting policies
The principal accounting policies are set out below.
Basis of preparation
The Company’s financial statements have been prepared and approved by the directors in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union and those parts of the Companies Act 2006 that apply to companies
reporting in accordance with IFRSs.
The consolidated financial statements have been prepared under the historical cost convention subject to recognising certain financial
instruments at fair value.
The Company has taken advantage of section 408 of the Companies Act and not included its own income statement in these financial
statements.
Going concern
The financial statements have been prepared on a going concern basis. The Group’s forecasts and projections, taking account of
reasonably possible changes in trading performance that may arise as a result of current economic conditions and other risks faced
by the Group show that the UK Company is likely to become more profitable and cash generative during the year ended April 2018.
The Group achieving profitability and cash generation is likely to be delayed by virtue of international expansion in Australia which will
reduce cash due to loans. At the financial year-end the Company reported cash balances of £71.3 million. The directors have performed
sufficient sensitivity analysis to be satisfied that the going concern basis of preparation is appropriate. The operational gearing of the
Company is such that it only reinforces the confidence of the directors.
The directors have prepared a monthly forecast to 30 June 2018 on the basis that the growth aspirations are achieved which show that
the Group can operate with its existing resources.
Accordingly, the directors believe that it is appropriate to adopt the going concern basis of accounting in preparing the
financial statements.
Purplebricks Group plc Annual Report 2017 / 38
Notes to the financial statements
forming part of the financial statements
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries) made up to 30 April 2017. The Company controls an entity when the Group is exposed to, or has rights to, variable returns
through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date that control ceases.
Profit or loss and each component of other comprehensive income are attributable to the owners of the Company. Total comprehensive
income of the subsidiaries is attributable to the owners of the Company.
Accounting policies of subsidiaries which differ from Group accounting policies are adjusted on consolidation. All intra-group
transactions, balances, income and expenses are eliminated on consolidation.
Business combinations and goodwill
Acquisitions of subsidiaries are accounted for using the acquisition method. The consideration transferred in a business combination is
measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities
incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the
acquiree. Acquisition-related costs are recognised in profit and loss as incurred.
Goodwill is measured as the excess fair value of the consideration transferred over the fair value of the identifiable net assets acquired. If
the total of consideration transferred, and previously held interest measured is less than the fair value of the net assets of the subsidiary
acquired, the difference is recognised directly in profit or loss as a bargain purchase gain.
Goodwill is capitalised as an intangible asset and is not amortised but tested for impairment annually and when there are any indications
that its carrying value is not recoverable. As such, goodwill is stated at cost less any provision for impairment in value. For impairment
testing purposes, goodwill is allocated to cash-generating units (‘CGUs’). If a subsidiary undertaking is subsequently sold, goodwill arising
on acquisition is taken into account in determining the profit or loss on sale.
Functional and presentation currency
The individual financial statements of each group company are presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purposes of the consolidated financial statements, the results and financial position of
each group company are expressed in Sterling, which is the functional currency of the Company, and the presentation currency for the
consolidation.
Foreign currencies
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the
income statement for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are
included in the income statement for the period except for differences arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is
also recognised directly in equity.
Segmental reporting
The Group trade is managed as a single division, providing services relating to the sale of properties however management report to the
Board using geographical segments, being UK, Australia and USA. The financial information reviewed by the Board is materially the same
as that reported under IFRS.
Purplebricks Group plc Annual Report 2017 / 39
Notes to the financial statements
continued
Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added
tax and other sales taxes. The following criteria must also be met before revenue is recognised:
Rendering of services
Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage
of completion of the contract when all of the following conditions are satisfied:
• the amount of revenue can be measured reliably;
• it is probable that the Group will receive the consideration due under the contract;
• the stage of completion of the contract at the end of the reporting period can be measured reliably, and;
• the costs incurred and the costs to complete the contract can be measured reliably.
Fees earned on instruction of residential property are accounted for over time as the Group’s obligations are completed. Where the
Group’s obligations have not been completed fees are recorded as deferred income and presented within liabilities.
Conveyancing fees are accounted for on completion of the service being provided, being legal completion of the transaction. This may
lead to the recognition of accrued income.
Fees earned under lettings contracts are recognised on a straight-line basis over the term of the agreement and/or at the point of
delivery of the service as appropriate.
Accompanied viewings revenue is recognised when its receipt is assured over the period in which the company fulfils its obligations.
During the year, no one customer contributed greater than 10% of the Group’s revenues. (2016: none)
Pension benefits
The Group does not operate a pension scheme nor is it required to implement a contributory pension scheme under auto enrolment
until July 2017.
Taxation
Current tax
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive
income or directly in equity. Current income tax assets and liabilities comprise those obligations to, or claims from, fiscal authorities
relating to the current or prior reporting periods that remain unpaid at the reporting date. Current tax is payable on taxable profit, which
differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted
or substantively enacted by the end of the reporting period.
Deferred tax
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and
liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill or on the initial recognition
of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit on initial recognition.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates and laws that are expected to apply to their respective
period of realisation, provided those rates are enacted or substantively enacted by the end of the reporting period.
Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary difference will
Purplebricks Group plc Annual Report 2017 / 40
Notes to the financial statements
continued
be able to be utilised against future taxable income. This is assessed based on the Group’s forecast of future operating results, adjusted
for significant non-taxable income and expenses and specific limits on the use of any unused tax loss or credit.
Deferred tax liabilities are always provided for in full, deferred tax assets and liabilities are offset only when the Group has a right and
intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are
recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or
equity, respectively.
Property, plant and equipment
Property, plant and equipment are held at cost less accumulated depreciation and impairment charges.
Depreciation is calculated to write off the cost of property, plant and equipment less the estimated residual value on a straight-line basis
over the expected useful economic life of the assets concerned. Estimated residual values are revised annually.
The annual rates used are:
• computer equipment – over 3 years
• fixtures and fittings – over 5 years
Investments in subsidiaries
Investments in subsidiaries are stated at cost less any provision for impairment.
Leases
In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the
risks and rewards related to the ownership of the leased asset. The related asset is recognised at the time of the inception of the lease
at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental payments, if any are to be borne
by the lessee.
All other leases are treated as operating leases. Payments under operating lease agreements are recognised as an expense on a straight
line basis over the period of the lease. Associated costs, such as maintenance and insurance, are expensed as incurred. The Group does
not act as a lessor.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, together with other short-term, highly liquid deposits which are not subject to any
risk of changes in value.
Internally developed intangible assets
Expenditure on research activities is recognised as an expense in the period in which it is incurred and is only incurred in respect of the
Group’s software platform.
An internally generated intangible asset arising from the Group’s development activity is recognised in the statement of financial
position when the Group can demonstrate the following:
• the technical feasibility of completing the intangible asset so that it will be available for use or sale.
• its intention to complete the intangible asset and use or sell it.
• its ability to use or sell the intangible asset.
Purplebricks Group plc Annual Report 2017 / 41
Notes to the financial statements
continued
• how the intangible asset will generate probable future economic benefits.
• the availability of adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset.
• its ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when
the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised,
development expenditure is recognised in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and
accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
The annual rates used are:
• computer software – straight line over 3 years
Amortisation is included within administrative expenses.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value
at the acquisition date (which is regarded as their cost). See note 13 for details of these assets.
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
The annual rates used are:
• customer relationships – straight line over 5 years
• patents and trademarks – straight line over 18 months
Impairment
The carrying amount of the Group’s assets including property, plant and equipment and intangibles other than goodwill is reviewed at
each year end date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable
amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset
(or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-
generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss where it relates to an amount charged to
profit or loss.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
Purplebricks Group plc Annual Report 2017 / 42
Notes to the financial statements
continued
or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised
immediately in profit or loss.
Financial assets
The Group has financial assets in the loans and receivables category. Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market. After initial recognition at fair value these are measured at amortised
cost using the effective interest method, less provision for impairment. The Group’s trade and other receivables fall into this category of
financial instruments.
Trade and other receivables are reviewed for impairment on an individual basis when they are past due at the year-end date or when
objective evidence is received that a third party will default or that a receivable will be impaired.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees
and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual
arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. The only equity instrument
applicable to the Company is its issued share capital.
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities at amortised cost’.
Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration that may be paid by an acquirer as
part of a business combination to which IFRS 3 applies, (ii) held for trading, or (iii) it is designated as at FVTPL.
A financial liability other than a financial liability held for trading or contingent consideration that may be paid by an acquirer as part of a
business combination may be designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is
evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information
about the grouping is provided internally on that basis; or
• it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and
Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The
net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the ‘other gains and
Purplebricks Group plc Annual Report 2017 / 43
Notes to the financial statements
continued
losses’ line item in the income statement.
Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risk using foreign
exchange forward contracts. Further details of derivative financial instruments are disclosed in note 17.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their
fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a
financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is
more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets
or current liabilities.
Share based payments
The equity settled share option programme allows employees and LPEs to acquire shares of the Company. The fair value of options
granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured using the Black-
Scholes model at grant date and spread over the period during which the employees become unconditionally entitled to the options.
The expense is allocated over the vesting period based on the best available estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. A
deferred tax asset is recognised over the vesting period.
Share based payments reserve
This comprises the cumulative share based payment charge recognised in profit or loss in relation to equity-settled options.
3. Critical accounting estimates and judgments
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from
these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised. Information about significant areas of estimation and critical judgments that
have the most significant impact on the financial statements are described in the following notes:
Estimates
Measurement of intangible assets
In testing for impairment of intangible assets, management has made certain assumptions concerning the future development of the
business that are consistent with the annual budget and business plan. Should these assumptions regarding the growth in profitability
be unfounded then it is possible that intangible assets included in the statement of financial position could be impaired. Management
is confident that this will not be the case and conservatively amortises the intangible asset over three years, a realistic timescale for
software code to become superseded by future releases. Accordingly, when assessing the recoverable value attributable to intangible
assets, management has estimated cash flows attributable to existing businesses and extrapolated forward budgets for the financial
year ending 30 April 2018.
Measurement of trade receivables
Management assess the likely recoverability of amounts invoiced to customers on the creditworthiness of its credit partners and the
age of debts at the period end. The directors consider the carrying amount of trade receivables approximates to their fair value.
Purplebricks Group plc Annual Report 2017 / 44
Notes to the financial statements
continued
Share based payments
The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted.
The estimate of fair value is measured using the Black-Scholes model. The use of a valuation model such as this involves making certain
assumptions around the inputs into the model. There is also uncertainty around the number of shares likely to vest and the model
therefore takes into account management’s best estimate of this.
Revenue recognition
There is no significant judgment involved in revenue recognition other than disclosed elsewhere in this Annual Report.
Judgments
Intangible assets
Development expenditure is recognised on the statement of financial position when certain criteria are met, as described more fully
in the accounting policy on the treatment of research and development expenditure. Management estimate the amount of time
spent by software engineers in developing intangible assets and capitalise a proportion of their time accordingly. After capitalisation,
management monitors whether the recognition requirements continue to be met and whether there are any indicators that the asset
may be impaired, as discussed above.
Deferred tax
The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Group’s future taxable
income against which the deferred tax assets can be utilised. In addition, significant judgment is required in assessing the impact of any
legal or economic limits or uncertainties. The Group has significant tax losses but does not anticipate sufficient taxable profits to arise in
the immediate future in order to fully utilise all of these losses within a short-term time horizon, and as a result the directors’ judgement
is that a deferred tax asset of £3,086,950 for the Group and £2,892,592 for the company should be recognised based on sensitised
forecasts which take a risk adjusted view of the future certainty of profits depending on the level of maturity of each country’s model.
Intangibles arising on business combinations
The assets acquired on acquisition of BFL have been recognised at fair value in accordance with IFRS including the recognition of
intangible assets being customer relationships and patents and trademarks. In attributing value to intangible assets arsing on acquisition,
management has made certain assumptions in terms of cash flows attributable to intellectual property and customer relationships. The
key assumptions relate to the trading performance of the acquired business and discount rates applied to calculate the present value
of future cash flows. The directors consider the resulting valuation to be a reasonable approximation as to the value of the intangibles
acquired. See note 13 for details.
Purplebricks Group plc Annual Report 2017 / 45
Notes to the financial statements
continued
4. New and revised IFRSs in issue but not yet effective
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards
have been issued but are not yet effective and have not been applied early by the Group.
Management anticipates that the following pronouncements relevant to the Group’s operations will be adopted in the Group’s
accounting policies for the first period beginning after the effective date of the pronouncement, once adopted by the EU:
• IFRS 16 Leases (effective 1 January 2019)
• IFRS 9 Financial Instruments (effective 1 January 2018)
• IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)
• Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (effective 1 January 2017)
• Amendments to IAS 7: Disclosure Initiative (effective 1 January 2017)
• Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions (effective 1 January 2018)
• Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (effective 1 January 2018)
• Annual improvements to IFRS 2014-2016 Cycle – Relating to IFRS 1 First time adoption of IFRS and IAS 28 Investment in associates and
joint ventures (effective 1 January 2018)
• Annual improvements to IFRS 2014-2016 Cycle – Relating to IFRS 12 Disclosure of interest in other entities (effective 1 January 2018)
• IFRIC Interpretation 22 Foreign currency transactions and advance considerations (effective 1 January 2018)
• Amendments to IAS 40: Transfers of investment property (effective 1 January 2018).
There are other standards in issue which are not considered applicable and are not expected to have an impact on the Group and have
therefore not been included in the list above. Both, in particular, IFRS 15 and IFRS 16 are expected to require amendments for operating
leases and revenue recognition. Management are undertaking an exercise to determine the impact on results and have not yet
quantified this.
Purplebricks Group plc Annual Report 2017 / 46
Notes to the financial statements
continued
5. Segmental reporting
The Group trade is managed as a single division, providing services relating to the sale of properties however management report to the
Board using geographical segments. The financial information reviewed by the Board is materially the same as that reported under IFRS
and falls under the three geographic locations it owns a Company in: UK, Australia and the US. During the year, no customer contributed
10% or more of the Group’s revenues (2016: none).
The following is an analysis of the Group’s revenue and results by reporting segment:
Revenue
Cost of sales
Gross profit
Gross profit margin
Administrative expenses
Marketing costs
Operating profit/(loss)
Year ended 30 April 2017
UK
£
Australia
£
43,187,653
3,518,425
(18,946,018)
(1,911,920)
24,241,635
1,606,505
56%
46%
US
£
-
-
-
-
Total
£
46,706,078
(20,857,938)
25,848,140
55%
(9,659,191)
(14,386,154)
(3,914,890)
(65,846)
(13,639,927)
(3,805,491)
(27,200)
(18,218,845)
196,290
(6,113,876)
(93,046)
(6,010,632)
Depreciation and amortisation
549,726
15,949
-
565,675
EBITDA
Share based payments
Adjusted EBITDA
746,016
(6,097,927)
(93,046)
(5,444,957)
917,089
-
-
917,089
1,663,105
(6,097,927)
(93,046)
(4,527,868)
Purplebricks Group plc Annual Report 2017 / 47
Notes to the financial statements
continued
Revenue
Cost of sales
Gross profit
Gross profit margin
Administrative expenses
Marketing costs
Operating loss
Depreciation and amortisation
EBITDA
Share based payments
Fund raising costs
Adjusted EBITDA
UK
£
18,603,679
(8,011,976)
10,591,703
57%
(9,604,541)
(12,924,002)
(11,936,840)
162,468
(11,774,372)
596,647
1,461,069
(9,716,656)
Year ended 30 April 2016
Australia
£
-
-
-
-
-
-
-
-
-
-
-
-
US
£
-
-
-
-
-
-
-
-
-
-
-
-
Total
£
18,603,679
(8,011,976)
10,591,703
57%
(9,604,541)
(12,924,002)
(11,936,840)
162,468
(11,774,372)
596,647
1,461,069
(9,716,656)
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 2.
Segment assets and liabilities by location
Total assets
UK
Australia
US
Total
Total liabilities
UK
Australia
US
Total
Purplebricks Group plc Annual Report 2017 / 48
2017
£
2016
£
90,095,560
34,034,877
2,911,678
-
-
-
93,007,238
34,034,877
2017
£
8,709,709
8,907,832
93,046
17,710,587
2016
£
5,971,711
-
-
5,971,711
Notes to the financial statements
continued
6. Loss from operating activities
Loss from operating activities for the year has been arrived at after charging:
Auditor’s remuneration:
Audit of Group and Company financial statements
Audit of subsidiaries
Audit related assurance services
Amounts received by auditor and their associates in respect of:
Taxation compliance
Taxation advisory
Transaction advisory services
Depreciation and other amounts written off property, plant & equipment:
Owned, in respect of continuing activities
Amortisation of development costs
Amortisation of software
Amortisation of other intangibles
Aggregate charge against income in respect of research and development costs not
eligible for capitalisation
Rentals payable under plant and machinery operating leases
Leasehold property rentals
2017
£
51,000
19,120
1,500
21,000
4,436
-
166,320
369,896
3,282
26,175
473,976
23,979
199,807
2016
£
-
32,000
-
2,500
-
97,825
61,159
101,309
-
-
520,786
15,108
74,209
The aggregate charge in respect of research and development represents the total cost incurred during the year, less amounts
capitalised in accordance with IAS 38: Intangible Assets.
Purplebricks Group plc Annual Report 2017 / 49
Notes to the financial statements
continued
7. Staff costs
The average number of persons employed by the Group during the year was as follows:
Sales and marketing
Technical
Administration
The aggregate payroll costs of the persons employed by the Group, including directors, were as follows:
Wages and salaries
Social security costs
Share based payment charge
The average number of persons employed by the Company during the year was as follows:
Sales and marketing
Technical
Administration
The aggregate payroll costs of the persons employed by the Company, including directors, were as follows:
Wages and salaries
Social security costs
Share based payment charge
Purplebricks Group plc Annual Report 2017 / 50
2017
No
181
42
16
239
2017
£
2016
No
81
18
4
103
2016
£
8,122,909
3,983,829
771,105
805,537
435,478
596,647
9,699,551
5,015,954
2017
No
169
38
4
211
2016
No
81
18
4
103
2017
£
6,321,831
613,050
805,737
7,740,618
2016
£
3,983,829
435,478
596,647
5,015,954
Notes to the financial statements
continued
The following table provides details of remuneration paid to directors:
Salaries or fees, including bonuses
Employer's national insurance
Share based payment charge
2017
£
365,000
56,027
178,803
599,830
2016
£
625,791
80,959
468,135
1,174,885
The highest paid director received remuneration of £242,141 (2016:£383,188) during the year.
No director had a material interest in any contract in relation to the business of the Group.
In addition to the 5 directors (2016: 5), 8 senior management (2016: 6) are also considered to be key management personnel.
The following table provides details of remuneration paid to key management personnel, being 13 individuals (2016: 11 individuals).
Salaries or fees, including bonuses and employer’s national insurance
Share based payment charge
The remuneration of the Directors for the years ended 2017 and 2016 was as follows:
2017
£
1,088,152
386,910
1,475,062
2016
£
1,105,412
596,647
1,702,059
Salary
& Fees
2017
£000s
Taxable
benefits
Annual
Bonuses
Long term
incentives
2017
£000s
2017
£000s
2017
£000s
Pension
2017
£000s
150
125
30
30
30
365
-
-
-
-
-
-
-
-
-
-
-
-
92
87
-
-
-
179
-
-
-
-
-
-
Total
2017
£000s
242
212
30
30
30
544
Executive directors
M P D Bruce
N R Cartwright
Non-executive directors
P R M Pindar
N S Discombe
W E Whitehorn
Total
Purplebricks Group plc Annual Report 2017 / 51
Notes to the financial statements
continued
Salary
& Fees
2016
£000s
Taxable
benefits
2016
£000s
Annual
Bonuses
Long term
incentives
2016
£000s
2016
£000s
Pension
2016
£000s
163
125
59
40
52
18
18
36
511
-
-
-
-
-
-
-
-
-
75
-
7
32
-
-
-
-
145
133
102
6
82
-
-
-
114
468
-
-
-
-
-
-
-
-
-
Total
2016
£000s
383
258
168
78
134
18
18
36
1,093
Executive directors
M P D Bruce
N R Cartwright
K F C Bruce
J R Kydd
M J Farrow
Non-executive directors
P R M Pindar
N S Discombe
W E Whitehorn
Total
Purplebricks Group plc Annual Report 2017 / 52
Notes to the financial statements
continued
8. Share based payments
The Company operates an HMRC approved executive management incentive plan (EMI), an employee share ownership plan (ESOP) and
a licensee share option plan (LSOP).
The vesting conditions for schemes 1, 2 and 4 are based on length of service with 25% of the options vesting on or after the 12 month
anniversary of the employee’s start date and a further 6.25% vesting every three months thereafter so that options vest in full on the 48
month anniversary of the employee’s start date.
The vesting conditions for schemes 5, 6, 7, 8 and 9 are based on future service from the date of grant with 25% of the options vesting on
or after the 12 month anniversary of the grant and a further 6.25% vesting every three months thereafter so that options vest in full on
the 48 month anniversary of the employee’s or the licensee’s (where applicable) grant date.
Details of the total number of shares under option at the year end and conditions on qualification and exercise are set out below:
Grant
Date
Scheme
No.
Employees
entitled
Number
of options
Vesting
conditions
14
11
2
11
403,328
Length of service
1,257,505
Length of service
0
Length of service
388,441
Length of service
Exercise
price (p)
Earliest
exercise
date
Expiry
£0.01
09/01/2015
09/01/2025
£0.13
10/07/2015
10/07/2025
£0.13
07/08/2015
07/08/2025
£0.13
23/09/2015
10/08/2025
Type
EMI
EMI
EMI
EMI
68
5,329,500
Length of service
ESOP/LSOP
£1.29
29/06/2017
29/06/2026
287
3,405,000
Length of service
ESOP/LSOP
£1.25
05/12/2017
05/12/2026
3
1,600,000
Length of service
ESOP/LSOP
£1.40
04/01/2018
04/01/2027
212
2,246,000
Length of service
ESOP/LSOP
£3.10
05/03/2018
05/03/2027
09/01/2015
10/07/2015
07/08/2015
10/08/2015
29/06/2016
05/12/2016
04/01/2017
05/03/2017
1
2
3
4
6
7
8
9
The Company operates an unapproved executive incentive plan. The vesting conditions are based on length of service with 25% of
the options vesting on or after the 12 month anniversary of the employee’s start date and a further 6.25% vesting every three months
thereafter so that options vest in full on the 48 month anniversary of the employee’s start date. Details of the total number of shares
under option at the year end and conditions on qualification and exercise under unapproved rules are set out below:
Grant
Date
06/11/2015
Employees
entitled
Number
of options
Vesting
conditions
Exercise
price (p)
Earliest
exercise
date
Expiry
8
5,085,739
Length of service
£0.01
06/11/2016
06/11/2025
Purplebricks Group plc Annual Report 2017 / 53
Notes to the financial statements
continued
7,121,414 share options were exercised during the year (2016: 9,000,660). The number and weighted average exercise price of share
options are as follows:
2017
Weighted average
exercise price
2017
Number of options
(number)
2016
Weighted average
exercise price
2016
Number of options
(number)
Outstanding at beginning of year
£0.04
14,256,430
Bonus issue
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at end of the year
Exercisable at end of the year
-
£1.62
£0.07
-
£1.04
£0.05
-
12,580,500
(7,121,414)
-
19,715,516
2,364,068
£0.01
£0.01
£0.09
£0.11
£0.13
£0.04
£0.06
42,637
4,573,874
18,802,984
(9,000,660)
(162,405)
14,256,430
3,141,298
The weighted average remaining contractual life of the options is 9.1 years (2016: 9.2 years).
Options outstanding at 30 April 2017 for schemes 1 and 5 have an exercise price of £0.01 (2016:£0.01). The weighted average remaining
contractual life of the options is 8.4 years (2016: 9.4 years).
Options outstanding at 30 April 2017 for schemes 2 and 4 have an exercise price of £0.13 (2016:£0.13) following the redenomination of the
shares and admission to AIM. The weighted average remaining contractual life of the options is 8.3 years (2016: 8.9 years).
Options outstanding at 30 April 2017 for scheme 6 have an exercise price of £1.29 (2016: nil). The weighted average remaining contractual
life of the options is 9.2 years. (2016: nil)
Options outstanding at 30 April 2017 for scheme 7 have an exercise price of £1.25 (2016: nil). The weighted average remaining contractual
life of the options is 9.7 years. (2016: nil)
Options outstanding at 30 April 2017 for scheme 8 have an exercise price of £1.40 (2016: nil). The weighted average remaining contractual
life of the options is 9.7 years. (2016: nil)
Options outstanding at 30 April 2017 for scheme 9 have an exercise price of £3.10 (2016: nil). The weighted average remaining contractual
life of the options is 9.9 years. (2016: nil)
Purplebricks Group plc Annual Report 2017 / 54
Notes to the financial statements
continued
Fair value assumptions of share based payments
The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted.
The estimate of fair value is measured using the Black-Scholes model. Details of the fair value of share options granted in the period and
the prior period, together with the assumptions used in determining the fair value are summarised below.
Weighted average share price at date of grant
Weighted average exercise price
Weighted average contractual life (years)
Weighted average expected volatility
Weighted average risk free interest rate
30 April 2017
30 April 2016
£1.62
£1.62
10
27%
1.5%
£0.15
£0.09
10
27%
1.5%
Total weighted average fair value of options granted
£20,333,905
£1,664,100
The volatility assumption, measured at the standard deviation of expected share price movements, is based on a review of volatility
used by listed companies in the same sector.
Charge to the income statement
The charge to profit or loss, included with administrative expenses, comprises:
Share based payment charge
2017
£
2016
£
917,089
596,647
Purplebricks Group plc Annual Report 2017 / 55
Notes to the financial statements
continued
9. Taxation
Current tax expense
UK corporation tax for the current year
Total current tax
Deferred tax
Deferred tax for prior year
Deferred tax for the current year
Total deferred tax
Taxation credited to the income statement
Reconciliation of effective tax rate
2017
2016
£
-
-
1,852,996
1,201,194
3,054,190
3,054,190
£
-
-
-
-
-
-
The current tax charge for the period is lower than (2016: higher than) the average standard rate of corporation tax in the UK during the
period of 20.00% (2016: 20.00%). The differences are explained below.
2017
£
2016
£
Loss before taxation from continuing operations
(6,059,519)
(11,901,831)
Tax using the average UK Corporation tax rate of 20.00% (2016: 20.00%)
(1,211,904)
(2,380,366)
Effects of:
Expenses deductible for tax purposes
Attributable to lower tax rates in overseas jurisdictions
Exercise of EMI options
Tax losses for which no deferred tax asset was recognised
Adjustments in respect of income tax of prior years
Timing differences recognised
Recognition of previously unrecognised deferred tax assets
Total tax in income statement
441,797
603,668
(1,400,000)
498,144
-
-
-
1,882,222
(1,852,996)
(34,041)
399,286
(3,054,190)
-
-
-
-
The Directors are not aware of any material changes to Corporation tax rates in the jurisdictions it operates in other than in the UK
where the rate will drop to 19.00% (2016: 20.00%).
Corporation losses carried forward for the group for the period ending 30/04/2017 are £36,624,678 (2016:£25,774,144).
Purplebricks Group plc Annual Report 2017 / 56
Notes to the financial statements
continued
Deferred tax asset
Deferred tax asset movement
At 1 May
Acquisition of subsidiaries
Credit to the profit and loss account
At 30 April
Analysis of deferred tax asset
Depreciation less than that of capital allowances
Short term temporary differences
Losses
Intangibles
Derivative financial instruments
Analysis of deferred tax liabilities
Depreciation in excess of capital allowances
Intangible assets
Group
2017
£
-
(210,774)
3,054,190
2,843,416
15,032
499
3,020,149
32,493
18,777
3,086,950
(36,972)
(206,562)
(243,534)
Company
2017
£
-
-
2,892,592
2,892,592
5,799
-
2,835,871
32,145
18,777
2,892,592
-
-
-
2016
£
-
-
-
-
-
-
-
-
-
-
-
-
-
2016
£
-
-
-
-
-
-
-
-
-
-
-
-
-
A proportion of the total recognisable deferred tax assets in the UK and in Australia have not been recognised in deferred tax due to
insufficient certainty that there will be appropriate profits available in the near future to utilise them. The unrecognised element of these
deferred tax elements is £14.74 million in the UK and £5.01 million in Australia. See note 22 for further analysis of deferred taxation.
Purplebricks Group plc Annual Report 2017 / 57
Notes to the financial statements
continued
10. Losses per share
Loss £
Weighted average number of shares
Losses per share (£)
Basic and
diluted
2017
(3,005,329)
249,811,478
Basic and
diluted
2016
(11,901,831)
101,194,640
(0.01)
(0.12)
During the prior year the Company issued bonus shares prior to its admission to the Alternative Investment Market (AIM) on a 108.2747
for 1 basis.
Diluted loss per share is equal to the basic loss per share as a result of the Group recording a loss for the year, which cannot be diluted.
The table below reconciles the weighted average number of shares:
Weighted average number of shares 2016
Weighted average issue of new shares and exercise of options
Weighted average number of shares 2017
101,194,640
148,616,838
249,811,478
Purplebricks Group plc Annual Report 2017 / 58
Notes to the financial statements
continued
11. Property, plant and equipment
Group
Cost
Balance at 1 May 2015
Additions
Disposals
Balance at 30 April 2016
Additions
Acquired on acquisition of subsidiary
Disposals
Balance at 30 April 2017
Depreciation
Balance at 1 May 2015
Charge for the year
Accumulated depreciation on disposal
Balance at 30 April 2016
Charge for the year
Balance at 30 April 2017
Net book value
At 30 April 2017
At 30 April 2016
Computer
equipment
Furniture and
fittings
Motor Vehicles
£
£
81,750
130,673
(63)
212,360
469,162
-
(962)
2,164
84,665
-
86,829
116,421
60,751
-
680,560
264,001
(20,508)
(48,927)
63
(69,372)
(130,053)
(199,425)
481,135
142,988
(199)
(12,232)
-
(12,431)
(35,648)
(48,079)
215,922
74,398
£
-
-
-
-
-
22,054
-
22,054
-
-
-
-
(619)
(619)
21,435
-
Total
£
83,914
215,338
(63)
299,189
585,583
82,805
(962)
966,615
(20,707)
(61,159)
63
(81,803)
(166,320)
(248,123)
718,492
217,386
Purplebricks Group plc Annual Report 2017 / 59
Notes to the financial statements
continued
Computer
equipment
Furniture and
fittings
£
£
81,750
130,673
(63)
212,360
428,785
(962)
640,183
(20,508)
(48,927)
63
(69,372)
(124,590)
(193,962)
446,221
142,988
2,164
84,665
-
86,829
67,192
-
154,021
(199)
(12,232)
-
(12,431)
(23,423)
(35,854)
118,167
74,398
Total
£
83,914
215,338
(63)
299,189
495,977
(962)
794,204
(20,707)
(61,159)
63
(81,803)
(148,013)
(229,816)
564,388
217,386
Company
Cost
Balance at 1 May 2015
Additions
Disposals
Balance at 30 April 2016
Additions
Disposals
Balance at 30 April 2017
Depreciation
Balance at 1 May 2015
Charge for the year
Accumulated depreciation on disposal
Balance at 30 April 2016
Charge for the year
Balance at 30 April 2017
Net book value
At 30 April 2017
At 30 April 2016
Purplebricks Group plc Annual Report 2017 / 60
Notes to the financial statements
continued
12. Intangible assets
Group
Cost
Balance at 1 May 2015
Internally developed additions
Balance at 30 April 2016
Additions
Internally developed
Acquired on acquisition of subsidiary
Disposals
Balance at 30 April 2017
Amortisation and impairment
Balance at 1 May 2015
Amortisation for the year
Balance at 30 April 2016
Amortisation for the year
Balance at 30 April 2017
Net carrying value
Balance at 30 April 2017
Balance at 30 April 2016
Internally
generated
intangible
£
179,520
334,263
513,783
-
194,595
1,421,927
-
-
1,935,710
(41,627)
(101,309)
(142,936)
(369,896)
(512,832)
-
-
(1,931)
192,664
-
-
-
(3,282)
(3,282)
Capitalised
software
Patents and
trademark
Customer
relationships
£
-
-
-
£
-
-
-
-
-
£
-
-
-
-
-
100,000
1,070,968
-
-
Total
£
179,520
334,263
513,783
194,595
1,421,927
1,170,968
(1,931)
100,000
1,070,968
3,299,342
-
-
-
-
-
-
(5,555)
(5,555)
(20,620)
(20,620)
(41,627)
(101,309)
(142,936)
(399,353)
(542,289)
1,422,878
189,382
94,445
1,050,348
2,757,053
370,847
-
-
-
370,847
The internally generated intangible asset relates to capitalised development costs in respect of the customer facing Purplebricks
software platform.
Amortisation and impairment
Intangible assets are amortised over their useful economic lives. In the case of the internally developed intangible asset, amortisation
is charged on a straight line basis over three years. The useful economic life of the brand names is 18 months and the customer
relationships are 5 years. Capitalised software is amortised over three years on a straight line basis. The remaining useful lives of each
asset are in keeping with the amortisation policy.
Purplebricks Group plc Annual Report 2017 / 61
Notes to the financial statements
continued
Company
Cost
Balance at 1 May 2015
Internally developed / additions
Balance at 30 April 2016
Additions
Internally developed
Balance at 30 April 2017
Amortisation and impairment
Balance at 1 May 2015
Amortisation for the year
Balance at 30 April 2016
Amortisation for the year
Balance at 30 April 2017
Net carrying value
Balance at 30 April 2017
Balance at 30 April 2016
Internally
generated
intangible
£
179,520
334,263
513,783
-
1,421,927
1,935,710
(41,627)
(101,309)
(142,936)
(369,896)
(512,832)
1,422,878
370,847
Capitalised
software
£
-
-
-
194,595
-
194,595
-
-
-
(3,282)
(3,282)
191,313
-
Total
£
179,520
334,263
513,783
194,595
1,421,927
2,130,305
(41,627)
(101,309)
(142,936)
(373,178)
(516,114)
1,614,191
370,847
The internally generated intangible asset relates to capitalised development costs in respect of the customer facing Purplebricks
software platform.
Amortisation and impairment
Intangible assets are amortised over their useful economic lives. In the case of the internally developed intangible asset, amortisation is
charged on a straight line basis over three years. The remaining useful economic life is two years.
Capitalised software in use is amortised over its useful economic life of five years. The remaining useful economic life is five years.
Purplebricks Group plc Annual Report 2017 / 62
Notes to the financial statements
continued
13. Goodwill
Cost
1 May 2016
Acquisition of subsidiary
At 30 April 2017
Accumulated amortisation
1 May 2016
Charge for the year
At 30 April 2017
Carrying amount
At 30 April 2017
At 30 April 2016
Acquisition of subsidiary
Group
£
-
2,605,979
2,605,979
-
-
-
2,605,979
-
On 24 March 2017 the Group acquired 100 per cent of the issued share capital of BFL Property Management Limited, obtaining control
of BFL Property Management Limited. BFL Property Management Limited is a property management company and was acquired to
complement the existing mainly organically created property management business in the Group and professionalising it with a skilled
team and their processes.
The amounts recognised in respect of the identifiable assets acquired and liabilities are as set out in the table below.
Cash paid
Deferred consideration
Total consideration
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Intangibles – customer relationships
Royalty value of short term use of tradename and inherent IPR
Deferred tax liability
Trade and other payables
Total identifiable net assets
Goodwill
£
3,548,691
25,000
3,573,691
82,805
188,034
253,502
1,070,968
100,000
(210,774)
(516,823)
967,712
2,605,979
Purplebricks Group plc Annual Report 2017 / 63
Notes to the financial statements
continued
On completion of acquisition and at the year end the goodwill was reviewed for impairment and the Group will test annually for
impairment going forward. The recoverable amounts of the goodwill are determined from value in use calculations. The key assumptions
for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct
costs during the period. The discount rate used was 15% and the growth rate used was 2% or less based on the Office for Budget
Responsibility growth forecasts contained within the March 2017 economic and fiscal outlook.
The Group has conducted a sensitivity analysis on the impairment test of goodwill and the group of units carrying value. The Group
prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next 3 years and
extrapolates cash flows for the following three years based on an estimated growth rate that does not exceed the average growth rate
for the industry.
At the year end the fair value of goodwill was substantially in excess of its book value.
14. Investment in subsidiaries
Cost
1 May 2016
Acquisition of subsidiary
At 30 April 2017
Accumulated impairment losses
1 May 2016
Impairment charge for the year
At 30 April 2017
Carrying amount
At 30 April 2017
At 30 April 2016
Company
£
-
3,573,691
3,573,691
-
-
-
3,573,691
-
The Group consists of a Parent Company, Purplebricks Group plc, incorporated in the UK and a number of subsidiaries held directly by
Purplebricks Group plc, which operate and are incorporated around the world.
Information about the composition of the Group at the end of the reporting period is as follows:
Name
BFL Property Management Limited
Purplebricks Inc.
Purplebricks Australia PTY Limited
Place of
incorporation
Proportion
of ownership
interest %
Proportion
of voting
power held %
U.K
USA
Australia
100%
100%
100%
100%
100%
100%
The revenues and profits of BFL Property Management Limited were not material in the year ending 30 April 2017.
Purplebricks Group plc Annual Report 2017 / 64
Notes to the financial statements
continued
15. Trade and other receivables
Trade and other receivables
Amounts owed by group undertakings
Prepayments
Accrued income
Accrued interest
Group
2017
£
2016
£
Company
2017
£
2016
£
2,641,402
1,016,815
2,340,501
1,016,815
-
-
7,362,745
1,325,536
1,555,644
898,258
-
362,790
35,009
653,303
888,264
-
-
1,555,644
362,790
35,009
4,865,196
2,970,258
11,244,813
2,970,258
All trade and other receivables are short-term and due in less than one month. The amounts owed by group companies are repayable
on demand. The directors consider that the carrying amount of trade receivables approximates to their fair value. All trade and other
receivables have been reviewed for indications of impairment.
Of the total trade receivables shown above, no amounts (2016:£nil) are past due and none are impaired.
16. Trade and other payables
Trade payables
Other taxation and social security
Amounts owed to group undertakings
Accruals
Deferred income
Group
2017
£
2016
£
Company
2017
£
3,574,276
2,728,709
1,214,738
427,514
2,470,727
1,102,972
-
-
747,903
2016
£
2,728,709
427,514
-
2,513,453
7,302,467
2,306,512
9,608,979
2,055,130
2,114,824
2,055,130
5,211,353
760,358
5,971,711
6,436,426
1,821,434
8,257,860
5,211,353
760,358
5,971,711
All trade and other payables are short-term. The directors consider that the carrying amount of trade and other payables approximates
to their fair value.
Purplebricks Group plc Annual Report 2017 / 65
Notes to the financial statements
continued
17. Derivative financial instruments
The group enters into contracts for foreign exchange forwards in order to secure a protected USD:GBP exchange rate until 29 November
2017.
Foreign exchange forward contracts - carried at fair value
through profit or loss
Balance at start of period
Loss/(gain) in movement in fair value through profit or loss
Balance at end of period
Maturity analysis of foreign exchange forward contracts
Less than 1 year
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
Further details of derivative financial instruments are provided in 21.
Group
2017
£
-
104,317
104,317
2016
£
-
-
-
Company
2017
£
-
104,317
104,317
Group
Company
2017
£
104,317
-
-
-
104,317
2016
£
-
-
-
-
-
2017
£
104,317
-
-
-
104,317
2016
£
-
-
-
2016
£
-
-
-
-
-
Purplebricks Group plc Annual Report 2017 / 66
Notes to the financial statements
continued
18. Share capital
Allotted, issued and fully paid:
Class
Ordinary shares
Number
Nominal Value
2017
£
270,500,911
£0.01p
2,705,009
2,705,009
2016
£
2,402,591
2,402,591
During the year the Company issued a total of 30,241,759 shares of £0.01p each at par, for total consideration of £50,525,483. There were
directly attributable costs associated with these issues of £1,209,639.
The table below summarises the movements in the number of the shares at the beginning and end of the period:
Ordinary shares at 1 May 2016
Shares issued during the year
Ordinary shares at 30 April 2017
19. Share premium
Allotted, issued and fully paid:
Balance at 1 May 2015
Premium arising on issue of equity shares
Exercise of warrants and options
Share premium cancellation
Expenses of issue of equity shares
Bonus share issue
Balance at 30 April 2016
Premium arising on issue of equity shares
Cost of share issue
Balance at 30 April 2017
Ordinary shares
240,259,152
30,241,759
270,500,911
£
12,298,268
34,748,659
117,003
(19,000,000)
(143,820)
(2,132,710)
25,887,400
50,223,065
(1,209,639)
74,900,826
Purplebricks Group plc Annual Report 2017 / 67
Notes to the financial statements
continued
20. Reserves
Share based payment reserve
The share based payment reserve represents all current and prior period share based payment charges less the exercise of share options.
Retained earnings
Retained earnings includes all current and prior period retained profits and losses.
Share premium
The amount paid to the Company by shareholders, in cash or other consideration, over and above the nominal value of shares issued to
them.
Foreign exchange reserve
The foreign exchange reserve records exchange differences arising from the translation of the financial statements of foreign operations.
Upon disposal of foreign operations, the related accumulated exchange differences are recycled to the income statement.
21. Financial instruments
Capital risk management
Capital management objectives are to ensure the Company’s ability to continue as a going concern and to provide a return to
shareholders.
The capital structure of the Company currently consists of cash and equity attributable to equity holders of the Company, comprising
issued capital, reserves and retained earnings as disclosed in the statement of changes in equity. The Company’s Audit Committee
reviews the capital structure as part of its risk analysis. As part of this review, the Committee considers the cost of capital and the risks
associated with each class of capital.
The Company is not subject to externally imposed capital requirements.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
• Cash and cash equivalents
• Trade and other receivables
• Trade and other payables
• Derivative financial instruments
Purplebricks Group plc Annual Report 2017 / 68
Notes to the financial statements
continued
The Group held the following financial assets at each reporting date:
Financial assets
Loans and receivables:
Trade and other receivables: current
Cash and cash equivalents
Group
2017
£
2016
£
Company
2017
£
2016
£
3,539,660
1,414,614
10,591,510
1,414,614
71,330,300
30,476,386
69,941,358
30,476,386
74,869,960
31,891,000
80,532,868
31,891,000
At 30 April 2017 a total of £6m (2016:£nil) was committed to be transferred into a deposit account to be held until December 2017, with
early redemption permitted.
The Group held the following financial liabilities at each reporting date:
Financial liabilities
Held at amortised cost:
Trade and other payables
Held at fair value through profit or loss:
Derivative financial instruments – foreign exchange
forward contracts
Group
2017
£
2016
£
Company
2017
£
2016
£
6,087,729
6,087,729
4,783,839
4,783,839
5,333,454
5,333,454
4,783,839
4,783,839
104,317
-
104,317
-
6,192,046
4,783,839
5,417,969
4,783,839
The derivative was designated as fair value through profit or loss on initial recognition.
Fair value of financial instruments
The fair value of the financial instruments set out above is not materially different to the book value.
It is the policy of the Group to enter into forward foreign exchange contracts to protect foreign currency transactions in USD to reduce
the exposure to the Group. In the current year, the Group has designated certain forward contracts which provide the Group a fixed
exchange rate until 29 November 2017 for a total potential protected amount of $7,602,605. Due to the low complexity of the derivative
contracts, hedge accounting has not been applied and is not considered necessary.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Purplebricks Group plc Annual Report 2017 / 69
Notes to the financial statements
continued
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or
indirectly; and
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable
market data.
During each of the reporting periods, there were no transfers between valuation levels.
Group - Fair Values
Financial liabilities
Forward contract – Level 2
Group
2017
£
104,317
2016
£
-
Company
2017
£
104,317
2016
£
-
Financial risk management
The Group is exposed through its operations to the following financial risks:
• Liquidity risk
• Interest rate risk
• Credit risk
The Group’s policies for financial risk management are outlined below
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk
by maintaining adequate cash reserves and by continuously monitoring both forecast as well as actual cash flows to enable matching
of the maturity profiles of financial assets and liabilities. Sufficient cash is retained to service short-term financing needs. Liquidity risk
is managed through regular senior review of performance versus an integrated profit and loss, balance sheet and cash flow model.
Sensitivities are applied to this model to ensure the Company has early warning of any manifestation of liquidity risk and communicate
any such risk to investors in a timely and accurate manner so as to manage liquidity risk comprehensively and effectively.
The following is an analysis of the contractual undiscounted cash flows payable under financial liabilities. The table includes principal only
cash flows in respect of trade and other payables.
Group
2017
£
2016
£
Company
2017
£
2016
£
Trade payables and accruals due within one month
5,062,455
3,398,839
4,564,624
3,398,839
Trade payables and accruals due within three months
Trade and other payables
Interest rate sensitivity analysis
1,025,274
6,087,729
1,384,550
4,783,389
768,830
5,333,454
1,384,550
4,783,389
Interest rate risk is the risk that the value of the future cash flows of a financial instrument will fluctuate due to changes in market rates.
At the year end date there was no material exposure to movement in interest rates as the Group has no borrowings or other financial
Purplebricks Group plc Annual Report 2017 / 70
Notes to the financial statements
continued
assets or liabilities linked to interest rates.
Foreign currency risk management
Most of the Group’s transactions are carried out in pound sterling (GBP). Exposures to the currency exchange rates arise from the Group’s
overseas sales and purchases, which are primarily denominated in Australian dollars (AUD) for the year ended 30 April 2017. The Group
holds a AUD denominated loan with its Australian subsidiary which is the result of funding early stage losses. The Group anticipates
material losses in US dollars (USD) over the next two years as it starts operating in the US.
To mitigate the Group’s exposure to foreign currency risk, non-GBP cash flows are monitored and forward exchange contracts are
entered into in accordance with the Group’s risk management policies. Generally, the Group’s risk management procedures distinguish
short term foreign currency cash flows (due within 6 months) from longer term cash flows (due after 6 months). Where the amounts to
be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken. Forward
exchange contracts are mainly entered into for significant long-term foreign currency exposures that are not expected to be offset by
other same-currency transactions where adverse foreign exchange movements could be highly material to the Group and there is no
compensating effect from amounts to be received in the immediate term.
The Group does not enter into forward exchange rate contracts to mitigate the exposure to foreign currency risk on the Group’s AUD
loan. The loan carries a commercial rate of interest and is therefore not designated at fair value.
Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts
shown are those reported to key management translated into GBP at the closing rate:
30 April 2017
Financial assets
Financial liabilities
Total exposure
Short-term exposure
Long term exposure
AUD
USD
AUD
USD
132,573
(2,190,672)
(2,058,099)
-
-
-
-
(11,156,109)
(11,156,109)
-
-
-
There were no foreign currency financial assets or liabilities as at 30 April 2016 which exposed the Group to currency risk.
The following table illustrates the sensitivity of the profit and equity in regards to the Group’s financial assets and financial liabilities and
the AUD/GBP exchange rate. It assumes a +/-15% change of the AUD/GBP rate for the year ended 30 April 2017. This percentage has
been determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on
the Group’s foreign currency financial instruments held at each reporting date and also takes into account forward exchange contracts
that offset effects for changes in currency exchange rates.
If GBP had strengthened against the AUD by 15% (2016:nil) then this would have the following impact:
Purplebricks Group plc Annual Report 2017 / 71
Notes to the financial statements
continued
30 April 2017
30 April 2016
Profit/(loss) for the year
AUD
787,286
-
If GBP had weakened against the AUD by 15% (2016:nil) then this would have the following impact:
30 April 2017
30 April 2016
Profit/(loss) for the year
AUD
(1,078,681)
-
Equity
AUD
782,226
-
Equity
AUD
(1,057,984)
-
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis
above is considered to be representative of the Group’s exposure to currency risk.
Credit risk management
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. The
Company’s credit risk is primarily attributable to its trade receivables. Credit risk is managed by monitoring the aggregate amount and
duration of exposure to any one customer depending upon their credit rating. The Company has an excellent history with no trade
receivables written off as irrecoverable. All debtors are due within thirty days.
The credit risk on liquid funds is minimised because the counterparties are UK banks with high credit-ratings assigned by international
credit-rating agencies.
22. Deferred tax assets and liabilities
The provision of a deferred tax asset is based on the future trading forecasts for the Group. A deferred tax asset has been recognised
Purplebricks Group plc Annual Report 2017 / 72
Notes to the financial statements
continued
in respect of trading losses and other temporary differences as the Group does anticipate sufficient taxable profits to arise within the
foreseeable future.
Movement in unprovided deferred tax for the year ended 30 April 2017
Group
Share based payment expense
Tax losses
As at
1 May 2016
Movement
in the year
As at
30 April 2017
£
£
£
140,332
183,418
323,750
3,293,341
16,228,984
19,522,325
3,433,673
16,412,402
19,846,075
The gross value of losses in respect of which the unrecognised deferred tax asset relates is £19,846,075 (2016:£16,632,846).
Company
Share based payment expense
Tax losses
23. Related party transactions
As at 1 May
2016
Movement in
the year
As at
30 April 2017
£
£
£
140,332
183,418
323,750
3,293,341
11,123,026
14,416,367
3,433,673
11,306,444
14,740,117
The directors have taken the exemption from disclosing transactions with Group companies on the grounds that they are all wholly
owned subsidiaries.
Directors’ remuneration and key management personnel disclosures can be found in note 7.
Paul Pindar neither purchased nor sold any shares during the current year (2016: 300,000 Ordinary shares in the Company on 26 January
2016 at 78.16p per share) and Michael Bruce neither purchased nor sold any shares during the current year (2016: 320,000 Ordinary shares
in the Company on 26 January 2016 at 78.00p per share). Isabel Bruce sold 3,666,667 Ordinary shares in the Company on 16 March 2017
at 300.00p per share. Neil Cartwright sold 1,000,000 shares on 16 March 2017 at 300.00p per share. Will Whitehorn sold 250,000 Ordinary
shares on 16 March 2017 at 300.00p per share. Nicholas Discombe sold 1,600,000 shares at 300.00p on 19 April 2017.
24. Contingent liabilities
The Group and Company have no contingent liabilities (2016:£nil).
Purplebricks Group plc Annual Report 2017 / 73
Notes to the financial statements
continued
25. Commitments
Capital commitments, approved by the Board and existing at 30 April 2017 amounted to £nil (2016:£nil). Total commitments under non-
cancellable operating leases are as follows:
Group
Payable:
Within one year
In the second to fifth years
Company
Payable:
Within one year
In the second to fifth years
2017
2016
Land and
buildings
Other
Land and
buildings
Other
£
£
£
£
379,963
617,936
997,899
19,482
5,760
25,242
100,700
302,742
403,442
20,237
28,246
48,483
2017
2016
Land and
buildings
206,334
374,490
580,824
Other
19,482
5,760
25,242
Land and
buildings
100,700
302,742
403,442
Other
20,237
28,246
48,483
Operating leases relate to land, buildings and other assets, such as IT equipment, used to support the operational requirements of
the Company.
26. Ultimate controlling party
There is no ultimate controlling party as no one investor has a majority shareholding.
Purplebricks Group plc Annual Report 2017 / 74
Purplebricks Group plc
Registered number 08047368
Cranmore Place, Cranmore Drive, Shirley, Solihull, West Midlands, B90 4RZ
Head office: 0121 296 4848
www.purplebricks.co.uk
Purplebricks Group plc Annual Report 2017 / 76
ContentsPaul Pindar