Purplebricks Group plc
Annual Report
2020
Purplebricks Group plc,
Suite 7, Cranmore Place, Cranmore Drive, Shirley, Solihull, West Midlands B90 4RZ
United Kingdom
Company number 08047368
investors@purplebricks.com
Purplebricks is a leading UK estate agency business.
Our dual-sided model combines highly experienced
and professional agents with innovative digital
technology.
Our continuing focus on people and technology allows
us to provide our customers with exceptional,
innovative and unrivalled service, while saving them
money.
Strategic Report
Highlights
Chairman’s statement
Our business model
Chief Executive’s statement
Financial review
Principal risks and uncertainties
Corporate social responsibility
S172 Statement
Governance
Our Board
Corporate governance statement
Directors’ report
Directors’ remuneration report
Financial Statements
Independent auditor’s report
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
Company Information
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Strategic Report
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
Revenue
£111.1m
2019: £113.8m
Revenue growth
Gross margin
(2.4)%
2019: 55%1
60.9%
2019: 61.0%
Operating loss
Adjusted EBITDA 2
Cash at end of year
£(9.4)m
2019: £(1.5)m
£1.8m
2019: £6.6m
£31.0m
2019: £62.8m
OPERATIONAL HIGHLIGHTS
3.8x
2019: 3.5x
More sales
than the
number two
UK estate
agent 3
UK average revenue
per instruction 4
£1,394
2019: £1,243
Completed
£9.3bn
of UK property
Saving UK customers
£77m
in commission 5
2019: £10.4bn
2019: £77m
1
2019 revenue growth of 55% represents the revenue growth from total operations between FY 2018 and FY 2019.
2 The underlying performance of the Group is monitored internally using a variety of statutory and alternative performance measures (“APMs”), which are not
defined within IFRS. Such measures should be considered alongside the equivalent IFRS measures. For full definitions and reconciliations of APMs, please refer
to note 5 to the financial statements. FY 20 APMs are presented including the effects of adopting IFRS 16 (see note 2). As IFRS 16 was adopted using the
modified retrospective approach, prior year comparatives have not been restated.Adjusted EBITDA is defined as Operating profit, adding back depreciation,
amortisation, share-based payment charges and exceptional items.
3 Source: TwentyCi data.
4 ARPI: Average revenue per instruction equates to total fee income divided by the number of instructions published in the year.
5 Fees paid by customers who sell with Purplebricks vs typical commission of 1.3% including VAT.
Purplebricks Annual Report and Accounts 2020
3
Strategic Report
Strategic Report
CHAIRMAN’S STATEMENT
Strengthening our
leadership and culture
in a period of change
Paul Pindar Chairman
Chairman’s statement
It has been a year of significant transition for Purplebricks, as
possible, reinventing the way we do business with our
customers by building on things we were doing anyway.
we have sought to build on our exceptional six-year growth
As we come out of lockdown, Purplebricks colleagues are
story and create a more mature organisation. An organisation
back in people’s houses, where appropriate and with full PPE,
that can offer even better service and greater transparency to
keeping our people and customers safe.
our customers, while delivering the technology and
propositions our people need to stay ahead of the competition
Board priorities and changes
and sell more homes.
The Board continues to ensure that the Group's ambitions are
Above all, this has been a year in which we have focused
managed against risks, with sustainable growth at the heart of
strongly on our core strategy – simplifying what we do and
our business. It is our responsibility to ensure we have a
supporting our people, while improving our structures and
cohesive team and culture – so that our people and
processes. This has been achieved by strengthening our
management are free to get on with developing the
leadership and culture. I am grateful to Vic Darvey and his
commercial side of the business with our full support.
executive team for the way they are leading the next phase for
Purplebricks, especially against an extraordinary and difficult
backdrop as the COVID-19 crisis hit during the last few weeks
of our financial year.
Focused on our core operations
Unsurprisingly, this had an impact on FY 2020 performance,
and contributed to Group revenue from continuing operations
being down 2.4% to £111.1m (2019: £113.8m) and an operating
loss of £9.4m (2019: £1.5m). Ongoing consumer uncertainty
during the year and the lockdown from March, impacted our
UK revenue, down 10.7% to £80.5m. Our Canada business,
which was disposed of in July 2020, contributed £30.6m of
revenue in its first full year of ownership, while our exits from
the Australian and US markets have allowed us to concentrate
on our key operations.
Having already worked through a period of internal change
during the year, I am immensely proud of the way our
management team handled the business disruption due to
COVID-19. They did everything that could have been expected
of them – making the tough decision to put people on
furlough, supporting our self-employed partners and, where
4
4
Purplebricks Annual Report and Accounts 2020
Purplebricks Annual Report and Accounts 2020
Mike Wroe, who was our Senior Independent Director,
stepped down from the Board in December 2019, and I would
like to thank him for the service he has given to the Company.
I am delighted to say that Simon Downing has taken on the
role of Senior Independent Director on the Board. We will
seek to recruit a new non-executive director to the Board, and
to appoint a new chair to our Audit Committee.
Following the recent change in ownership at Axel Springer,
the company that owns a 26.5% stake in Purplebricks, they
have nominated a new representative on our Board to replace
Dr Andreas Wiele. Stephanie Caspar joined the Board on 27
July and I look forward to working with her in the months
ahead.
The Board appointed Vic Darvey as Chief Executive Officer in
May 2019 to lead the business for the next phase of
development, and to take the Company forward. I am pleased
with the progress he has made during the year in
strengthening the leadership, the appointment of an
Executive Leadership Team, and beginning the transition to a
digitally led, performance-based culture.
Strategic Report
CHAIRMAN’S STATEMENT continued
Since the end of the reporting period, in early May 2020,
Distribution policy
James Davies resigned as Chief Financial Officer after three
years with Purplebricks. I would like to wish James every
success for the future, while also warmly welcoming Andy
Botha as our new Chief Financial Officer. Andy joins us from
online travel group Secret Escapes and has an excellent track
record in growing digital businesses. He also brings a strong
understanding of the UK hybrid property market from his time
spent with both Zoopla and PrimeLocation.
Canada disposal
The Board has agreed that it is too early to consider returning
capital to investors at this time, due to retained losses within
our reserves and the need to focus our financial resources on
future opportunities. However, as we build a more mature
business with a strong strategy and relatively low fixed
overheads, I believe we can generate the consistent profits
and cash needed to make an appropriate distribution to
investors in the coming years. It is the intention of the Board
that we will then move to a progressive dividend policy as the
business develops and we realise our potential.
As recently announced, on 15 July 2020 we completed the sale
of our Canadian operations for cash proceeds of CAD$60.5m
Outlook
(£35m). This disposal simplifies our investment case and
enables Vic and his senior leadership team to focus on
investing in the UK market, where we believe there is
significant opportunity to generate shareholder value.
Committed to high standards of governance
Following the management and operational changes this
year, our progress on the Corporate Governance agenda was
slow, but the Board remains committed to achieving high
standards in our governance infrastructure appropriate to our
increasing size and profile.
The Company continues to follow the Quoted Companies
Alliance Corporate Governance Code (“QCA Code") and is
committed to complying with the QCA Code or providing a
clear explanation of any areas where we do not. You can read
more about our approach in the Governance section of this
report.
To do that, we need to continue our journey to becoming the
best known and most respected Estate Agent in the UK.
When we entered the market six years ago, there were many
competitors, but we have built a strong position. Our growth
has enabled us to keep average costs down and, crucially, to
build a market-leading platform. Market uncertainties remain,
with the continuing impact of COVID-19 and potential
concerns over a no-deal Brexit at the end of 2020. However, I
believe we have the people, technology and functionality to
empower our customers even in a difficult market, and to
further open up the digital opportunities in our industry.
We will continue to build on that platform in the year ahead,
enhancing our digital capabilities to ensure that we are even
easier to do business with, and that we continue to
outperform the market. Part of that success must be building
our market share, and I am confident this will translate into
significant shareholder value. But the key to achieving our
objectives will be keeping things simple and improving our
execution. In short, it’s all about doing what we know best,
and doing it well.
Paul Pindar Chairman
31 July 2020
Purplebricks Annual Report and Accounts 2020
5
Strategic Report
BUSINESS MODEL
Creating a dual-sided,
marketplace, connecting customers with
self-employed agents
Key resources
What makes us different
PEOPLE
We seek a mix of capabilities with an
appropriate balance of real estate and
digital talent
BRAND
With extremely high levels of
brand awareness, our focus is on
brand consideration
TECHNOLOGY
Our digital capabilities enable us to
convert consumer interest and
enhance the customer journey
MANAGEMENT
Enhancing our leadership capabilities
across the business has been a key
focus in FY 2020
FINANCIAL
We are focused on financial
discipline and making considered
investments in the Group
RELATIONSHIPS
Our self-employed agents are
responsible for providing services
to customers on behalf of the
Group
TRUSTED BRAND
HYBRID MODEL
We are the most positively
reviewed estate agent in the UK
We are here for our customers,
with agents on hand to help, and
digital services available 24/7
VALUE PROVIDER
We offer our customers convenient,
accessible, stress-free and
cost-effective services
TRANSFORMING THE
CUSTOMER JOURNEY
THROUGH TECHNOLOGY
We introduce new features,
products and services relevant to
our customers' needs
HIGH PERFORMING
DIGITAL CULTURE
BEST IN INDUSTRY
AGENTS
We drive productivity and integrate
with partners to create cross-selling
opportunities
Our agents are experienced real
estate and lettings agents,
ready to help at every step of
the process
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Purplebricks Annual Report and Accounts 2020
Strategic Report
BUSINESS MODEL continued
Our dual-sided business model offers a differentiated,
technology-led proposition which connects
customers looking to buy, sell or let a property, with
transparent and low, fixed fees, with self-employed
Local Property Experts (LPEs) and Local Lettings
Experts (LLEs) while allowing them to operate and
grow their own independent businesses under the
Purplebricks brand.
What we do
Creating value for…
EMPLOYEES & AGENTS
We employ over 400 people
and 900 self-employed agents
across our operations in the UK
£27.5m
Paid to our people, including
COVID-19 support
BRAND
Marketing is a central element
of the Purplebricks strategy and
has helped us build our brand
£28.8m
Spent on marketing and
advertising
CUSTOMERS &
SUPPLIERS
Providing transparent value-for-
money services to customers and
paying all suppliers in line with
their terms of payment
£77m
Savings by our customers
INVESTORS
The Group’s financial strength
allows us to execute our strategy
and invest in the business
£31.0m
Cash at the year end
STAKEHOLDERS
We are committed to our model of
self-employed agents, supporting
our local community and reducing
our environmental impacts
up to £2.2m
COVID-19 support fund
made available for LPEs
Risk management
How our risks are
managed and
mitigated is critical to
our long-term success
Governance
We are committed to
improving standards of
governance, and high
standards of integrity
and business ethics
Market dynamics
We are able to
leverage our business
model effectively, even
in an uncertain market
Purplebricks Annual Report and Accounts 2020
7
Strategic Report
Strategic Report
CHIEF EXECUTIVE’S STATEMENT
Building on our
operating platform
and strategy to grow
the business
Vic Darvey Chief Executive Officer
Chief Executive’s statement
In a year that has seen political and economic uncertainty,
followed by an unprecedented lockdown of the housing
market alongside much of the UK and Canada’s economic
activity, our strong and differentiated business model has
been vital to Purplebricks’ overall performance in our two
markets. We have set out a new strategy this year, invested in
our people and platforms, and I firmly believe we can continue
Reflecting these changes and helped by the diversity of
revenues across two key markets, I’m satisfied with our
performance this year and optimistic for the future, despite a
challenging market that has seen some of our competitors’
revenues fall considerably. Meanwhile, our exits from the US
and Australian markets are now complete and the associated
costs were well within the guided range.
to use technology to significantly reduce the cost of moving
Multiple levers help UK revenue in weakened market
home and to provide a better service to customers.
We continue to maintain clear brand leadership in the UK,
The COVID-19 crisis, which impacted our performance at the
with awareness of the brand now at 97%. I was also delighted
end of the financial year, has sharpened our focus on what
to see that we were one of the Top 20 most relevant brands in
technology can do for our business and we continue to believe
the UK in the annual Superbrands® insight survey, putting us
that our differentiated, technology-led proposition will drive
in the company of other leading consumer brands such as
clear business model advantages and significant opportunities
Google, Amazon, Netflix and PayPal.
to scale. As consumer expectations evolve, especially in a
post-COVID environment, we anticipate that the hybrid model
will continue to displace traditional agents as consumers look
to more virtual ways of doing business.
Strengthening and restructuring the business
I am pleased with everything we have achieved this year,
particularly our work towards driving operational excellence.
We have done a lot to stabilise the business – controlling costs
and improving our financial discipline – and have moved our
culture further towards digital innovation and continuous
improvement. In turn, we have become more performance
driven and made significant changes to our organisational
structure. All that meant we were stronger as we entered the
COVID-19 crisis and we are now even better-placed for the
future.
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Purplebricks Annual Report and Accounts 2020
Despite the impacts of Brexit and
then COVID-19 on trading
conditions, we have focused on
growing our basket size and
improving our average revenue
per instruction (ARPI) over the
last year. Overall, instructions were
23% down year on year, but our
revenue was down 11%. This is due
to an improved focus on ancillary
attachment and other adjacent
opportunities, such as mortgages
and conveyancing, which resulted
in our ARPI increasing 12% to £1,394,
up from £1,243 last year.
ARPI
UP
12%
TO
£1,394
SHARE OF
NO. OF HOUSES
SOLD
5.1%
Strategic Report
CHIEF EXECUTIVE’S STATEMENT continued
We made an operating loss in the year of £9.4m, up from a
Innovating to create the estate agent of the future
loss of £1.5m in 2019, resulting from the fall in revenue as the
business was impacted by a declining market and COVID-19.
Our market share of UK listings for the financial year was, 3.9%1
and our share of the number of properties sold was 5.1%1 of the
total market.
Impacts of COVID-19
We continue to focus on delivering a step-change to our
customer experience and ensure that the buying and selling
process becomes personalised and friction free for both our
customers and our agents on the ground.
Over the last year, we have continued to invest in technology
and in building out our engineering capability. We’ve
restructured our teams to accelerate our ability to deliver, with
What we couldn’t have predicted, even at our Half Year
dedicated squads focused on improving the customer
results, was the arrival of the COVID-19 crisis, the devastating
experience and delivering greater automation and efficiency
consequences for our communities and local economies, and
for our agents.
the continuing impact of social distancing restrictions in our
marketplace even as lockdown eases.
With nearly 70% of our customers using Purplebricks through
a mobile device, we’ve also increased our resources in mobile
At the start of the crisis, we managed to pivot the organisation
to deliver a more personalised experience for our customers.
very quickly to smart working in both our markets, as
consumers moved towards virtual valuations and viewings,
The App now has a 4.5 star approval rating in the App Store
(based on over 25,000 ratings)2 and we continue to work hard
and buying and selling homes online became even more
to improve our overall customer experience. I’m pleased to
important. Unlike most of our competitors, we remained open
announce that we’ve also recently teamed up with Amazon so
for business throughout the crisis, offering people a safe way
that Purplebricks’ customers can now interact with Alexa to
to move home, in spite of the challenging market conditions,
answer a range of questions about the sale of their home.
using both our desktop service and mobile app.
During this period, we successfully reduced a number of our
Enhancing our performance through leadership,
costs to reflect lower levels of market activity, with the UK
Coronavirus Job Retention Scheme and the Canada
Emergency Wage Subsidy deployed in respect of 50% of our
employees in both the UK and Canada. In addition, the Board
and Executive Team voluntarily reduced their salaries by 20%.
Our variable cost model has proved to be a significant
advantage during this period – we have lower overheads than
most of our competitors, and we can flex up and down with
the market over time to manage demand.
culture and service
It’s important that we continue to recruit and retain the best
talent in the industry. As a result, we have spent a significant
amount of time this year ensuring that we have the right
capability and structure to deliver our strategy. Over the last
12 months, we have reviewed and restructured our Field
operations, helping us create the right structure for success
with clear leadership and the right target operating model to
ensure greater performance in the Field. We have also
We also created a fund of up to £2.2 million to provide support
introduced a new leadership team in the UK with a significant
payments to our self-employed agents, many of whom
range of experience across a number of publicly quoted and
operate as limited companies, so were unable to furlough or
privately-owned digital businesses.
claim through the self-employed income support scheme. I
have been proud to stand shoulder to shoulder with all of our
people through this difficult period and, if nothing else, the
COVID-19 crisis has served to further unify our Team as we
work together to respond to the challenges.
I’m confident that the work we have done this year,
particularly in early 2020, will ensure we are more than ready
to compete in the post-COVID market, as restrictions ease but
don’t go away. What’s very clear at the moment is that social
distancing measures will be in place for the foreseeable future
and consumer risk tolerance will continue to reduce. As a
result, Purplebricks remains well positioned as consumers
continue to shift towards apps and technology-based
solutions when buying and selling a home.
We continue to evolve our culture and to understand how we
can introduce more lean and agile processes across the
business to ensure that our contact centre, central functions
and Field operations work better together.
I would like to take this opportunity to thank all of our people
across the business for their incredible work in what has been
an extraordinary and very tough year. The changes we have
made have resulted in the recruitment of several excellent
people from within our organisation to new roles, as well as
key external hires who have brought in market leading, best in
class, digital approaches to what we do. We end the year in a
much stronger position with a very clear purpose and a strong
focus on continuously improving the service we provide to our
customers.
1 Source: Independent research from TwentyCi dates June 2020
2 App Store rating as at 30 June 2020
Purplebricks Annual Report and Accounts 2020
9
Strategic Report
CHIEF EXECUTIVE’S STATEMENT continued
Evolving our pricing model
Sale of Canadian business
We have a business model that is based on value. It’s
While performance in our Canadian business has been
unrivalled in the marketplace and offers consumers the
improving over the last 12 months, maintaining a strong
opportunity to sell their homes for a fair, fixed fee. This single-
market share in Quebec and experiencing positive growth in
minded proposition has got us to where we are today and
English Canada, we announced on 15 July 2020 that we had
created a business model that has resulted in Purplebricks
completed the sale of our Canadian operations to the
becoming the largest estate agency brand in the UK.
Desjardins Group. This disposal further simplifies the business
However, we also recognise that, to extend our market
and will allow us to focus management time and resources on
leadership, we’ll need to evolve our pricing. That means
delivering growth in our core UK market. We wish the team at
looking at different pricing strategies to reduce the up-front
DuProprio and Purplebricks Canada the very best in their new
fee and splitting the payment between listing and
venture - and I’d like to thank them personally for the
completion.
collaboration and mutual sharing of knowledge and expertise
Following an in-depth pricing study in the first half of the year,
we had hoped to pilot a new pricing structure in early 2020,
but the lockdown has delayed this to the autumn. I believe
Looking ahead
over the last couple of years.
reducing the level of the upfront fee will widen the market
opportunity significantly, although a fixed fee element will
remain a critical part of our success, as hybrid adopters remain
more motivated to sell their homes. Reducing the upfront fee
will reduce the barrier for many customers in instructing us –
while higher fees on completion will allow our LPEs to earn
more from each sale, ensuring our self-employed model will
not only remain sustainable but become more attractive to
the best talent in the industry.
Transforming our processes and technology
Over the last 12 months we’ve made significant investments in
both our people and our technology to improve the level of
service we provide to our customers. We’ve introduced the
World Class Manager training programme as well as a Contact
Centre School, helping to increase productivity.
I'm optimistic about the future of our business,
notwithstanding the macro environment, which remains
uncertain. I expect our number of listings in the year to fall,
but I think we can continue to mitigate the challenging
market conditions with an operating platform and strategy
that give us multiple levers we can utilise to grow our
business.
Whatever happens next, trust will be important. I was
delighted to see a big jump in perceptions around value and
trust in Purplebricks earlier this year.
The longer-term effects of the COVID-19 crisis may temper
enthusiasm for moving home, but I believe we will see a slow
and solid recovery over the next 12 months. It is also possible
that there could be short to medium-term implications for the
competitive landscape. What we are seeing at the moment, is
that people are already starting to use technology in a
We’ve invested in further technology to ensure customers
different way with virtual valuations and viewings being
have a choice of channel to communicate with us including
considered by a much wider audience.
the deployment of a new Omni Channel customer
engagement platform and virtual valuations and viewings.
What we have demonstrated through the crisis is that we can
leverage our operating model successfully, maximise the
opportunity and increase our market share, even in the
toughest of circumstances. I believe our hybrid model will be
able to deliver better service and flexibility to customers in a
changed environment, and our virtual capabilities will play a
key role in this.
Our focus on innovation and service improvement continues
to be reflected in the feedback we receive from customers.
We are still the most positively reviewed estate agent in the
UK with nearly 75,000 independent reviews on Trustpilot1. We
have also achieved a consistently high score of 4.6/5 with
Vic Darvey Chief Executive Officer
Feefo and retained their 'Gold Trusted Service' award in 2020
31 July 2020
for the second year running.
1
Trustpilot data at end July 2020.
10
Purplebricks Annual Report and Accounts 2020
Strategic Report
Strategic Report
FINANCIAL REVIEW
Financial performance
impacted by
challenging market
and COVID-19
Andy Botha Chief Financial Officer
Financial review
The Group delivered a resilient financial performance
through the majority of FY 2020, despite the ongoing
challenges in the market. However the overall results for the
year were impacted by the COVID-19 crisis which affected our
ability to operate in the final two months of the year.
During FY 2020 we refocused the business on the UK and
Canadian markets, invested in our senior leadership team,
Our gross profit margin remained steady at 61% (2019: 61%),
with gross profit from continuing operations of £67.7m down
2.5% (2019: £69.4m).
Adjusted operating costs (see definition in note 5) of the
continuing operations increased by 29% to £37.1m (2019:
£28.7m). Conversely, marketing costs, which were largely
focused on our two core markets, reduced by 16% to £28.8m
(2019: £34.1m). Overall this highlights our ability to manage
our variable costs quickly, and dial up and down in response to
restructured and repurposed our Field agent teams and
the market.
invested in our Digital team and platforms. We also improved
our financial discipline around capital allocation and
marketing execution.
Operating costs increased through an investment in our
management team capacity and capability, an increase in the
capacity and responsiveness of our contact centre, and our
We exited the year with a strong cash position and balance
Digital teams to deliver improvements to both our customer
sheet to support the next phase of our growth in the UK
facing solutions and our internal processes. Following the
market.
Summary of financial performance
Overall Group revenues from continuing operations of £111.1m
were down 2.4% in the year (2019: £113.8m) against the
backdrop of a challenging market in the UK and Canada due
to ongoing political and economic uncertainty, and the
impact of COVID-19 which effectively closed the housing
market towards the end of the period. Due to COVID-19, at 30
adoption of IFRS 16, lease costs have been replaced by
depreciation and interest in FY 20.
Adjusted EBITDA (see definition in note 5) was £1.8m, down
73% (2019: £6.6m). Given the challenges experienced towards
the end of this year, we are pleased with the results of both
the UK and Canada businesses, which are set out individually
later in the section. The Group made an operating loss of
£9.4m (FY 19: £1.5m) including share of joint venture
losses.
Including the results of the discontinued operations in
the US and Australia, the Group’s total loss for the year was
April 2020 there was higher than usual uncertainty regarding
£19.2m (2019: £54.9m).
the impact of the timing and profile of recovery from the crisis
on the UK housing market. Based on available information,
we have estimated that the future service period in respect of
instructions on hand at 30 April 2020 will be approximately
35% longer than at prior year. This has led to an increase in
the proportion of revenue deferred at the year end in the
UK. Based on the timing and extent of the lockdown in
Canada, we have assessed that no significant increase in the
future service period existed as at 30 April 2020.
The business responded swiftly to the accelerating impacts of
the COVID-19 pandemic. Due to the high degree of flexibility
in our cost base we were able to adjust our operating model
and cash-burn accordingly, while still remaining open for
business. We continue to have a robust balance sheet and a
strong cash position with £31.0m on the balance sheet as at
the year-end (2019: £62.8m).
Purplebricks Annual Report and Accounts 2020
11
Strategic Report
FINANCIAL REVIEW continued
GROUP – continuing operations
Extract of Consolidated statement of Comprehensive Income
and Group Alternative Performance Measures1
For the year ended 30 April
Revenue
Cost of sales
Gross profit
Gross profit margin
Adjusted operating costs
Marketing costs
Adjusted EBITDA
Depreciation and amortisation
Adjusted operating (loss) / profit
Share-based payment charge
Exceptional operating costs
Share of results of Joint Venture
Operating loss
UK
Extract of Consolidated statement of Comprehensive Income
and Group Alternative Performance Measures1
For the year ended 30 April
Revenue
Cost of sales
Gross profit
Gross profit margin
Adjusted operating costs
Marketing costs
Adjusted EBITDA
Depreciation and amortisation
Adjusted operating profit
Share-based payment credit / (charge)
Exceptional operating costs
Operating (loss) / profit
2020
£m
111.1
(43.4)
67.7
60.9%
(37.1)
(28.8)
1.8
(6.1)
(4.3)
(0.7)
(1.6)
(2.8)
(9.4)
2020
£m
80.5
(28.9)
51.6
64.1%
(26.2)
(20.6)
4.8
(3.5)
1.3
0.1
(1.6)
(0.2)
2019
£m
113.8
(44.4)
69.4
61.0%
(28.7)
(34.1)
6.6
(4.4)
2.2
(2.7)
(0.5)
(0.5)
(1.5)
2019
£m
90.1
(33.3)
56.8
63.0%
(19.9)
(26.7)
10.2
(2.3)
7.9
(2.1)
(0.5)
5.3
Change
(2.4)%
(2.3)%
(2.5)%
(10) bps
29.3%
(15.5)%
(72.7)%
38.6%
(295.5)%
(74.1)%
220.0%
460.0%
(526.7)%
Change
(10.7)%
(13.2)%
(9.2)%
110 bps
31.7%
(22.8)%
(52.9)%
52.2%
(83.5)%
(1,047.6)%
220.0%
(1,037.7)%
1
The underlying performance of the Group is monitored internally using a variety of statutory and alternative performance measures (“APMs”), which are not
defined within IFRS. Such measures should be considered alongside the equivalent IFRS measures. FY 20 APMs are presented including the effects of
adopting IFRS 16 (see note 2). As IFRS 16 was adopted using the modified retrospective approach, prior year comparatives have not been restated. For full
definitions and reconciliations of APMs, please refer to note 5 to the financial statements.
12
Purplebricks Annual Report and Accounts 2020
Strategic Report
FINANCIAL REVIEW continued
KPIs
The directors use key performance indicators (KPIs) to assess performance of the business against the Group’s strategy. The
strategy is built around: efficiently attracting good quality customers to our website; gaining market share; and providing
customers with choice to enable revenue per instruction to increase. Cost-effective marketing and a controllable operating
cost base are the ingredients to a sustainably profitable business.
NEW USERS
AVERAGE REVENUE PER
INSTRUCTION
COST PER
INSTRUCTION
MARKETING AS A
PERCENTAGE OF REVENUE
represents the number of
equates to total fee income
represents total marketing
represents the total
new unique visitors to the
divided by the number of
costs, including portal costs,
marketing costs, including
website in the year
instructions published in the
divided by instructions
portal costs, as a percentage
year
of total revenue
UK KPIs
Unique visitors (m)
Instructions
Average revenue per instruction (“ARPI”)
Cost per instruction (“CPI”)
Marketing costs as a % of revenue
2020
13.1
53,680
£1,394
£383
25.6%
2019
13.5
69,892
£1,243
£382
29.6%
Change
(3)%
(23)%
12%
-
(400)bps
The onset of COVID-19 had a material impact on trading at the
Adjusted operating costs (see definition in note 5) were up
end of the year. This, combined with a very challenging
32% to £26.2m (FY 2019: £19.9m). These costs reflect further
property market, resulted in UK revenue falling 11% while we
investment in the UK business, particularly the Digital team
experienced a 23% reduction in the number of
(where costs are only partly capitalised, based on the activity
instructions. This reduction was partially offset by a 12%
undertaken).
increase in average revenue per instruction (ARPI) to £1,394
(FY 2019: £1,243).
Due to COVID-19, at 30 April 2020 there was higher than usual
uncertainty regarding the impact of the he timing and
profile of recovery from the crisis on the UK housing
market. Based on available information, we have
estimated that the future service period in respect of
Marketing costs were £20.6m (FY 2019: £26.7m), down 23%
year on year, reflecting our ability to effectively manage
marketing spend in line with the market. Marketing cost per
instruction (“CPI”) was £383, marginally up from £382 in FY
2019.
Adjusted EBITDA for the year (see definition in note 5) was
instructions on hand at 30 April 2020 will be approximately
down by 53% to £4.8m (FY 2019: £10.2m).
35% longer than at prior year. This has led to an increase in
the proportion of revenue deferred at year end. For context, a
10% increase or decrease in the estimated service period
would have increased or decreased deferred income by
around £1.8m respectively.
Depreciation and amortisation was £3.5m, up from £2.3m in
FY 2019, predominantly reflecting the increase in
capitalised development costs from prior years as well as the
adoption of IFRS 16 at 1 May 2019 (without restatement of FY
2019), which led to an additional £0.3m of depreciation of
Revenue was split 53:47 between instruction and ancillary
right-of-use lease assets. Adjusted EBITDA has also benefited
revenue respectively (FY 2019: 56:44). This further shift in the
from the reclassification of £0.3m of rental payments under
year towards ancillary revenue becoming a greater proportion
IFRS 16.
of our revenue is a result of our continued commitment to
delivering value-add, complementary products to our
customers.
The majority of cost of sales is represented by the earnings of
self-employed Local Property Agents (LPEs). UK gross profit
margin for the year was 64.1% up 110 bps from the prior year,
reflecting price increases in the year.
Share-based payments gave rise to a credit in the year of
£0.1m, compared to a charge of £2.1m in the prior year. This
movement reflects a significant credit in the current year
arising from the reversal of charges taken in previous years as
options held by leavers lapsed on their leaving the business.
Overall, the UK made an operating loss of £0.2m (FY 19: profit
of £5.3m).
Regrettably, the Group incurred a fine from HMRC for
historical breaches of certain aspects of the UK’s anti-money
laundering legislation. We have since improved our anti-
money laundering controls.
Purplebricks Annual Report and Accounts 2020
13
Strategic Report
FINANCIAL REVIEW continued
Exceptional items
Exceptional items include amounts that management
believes it is necessary to present separately in order to show a
more comparable view of the underlying performance of the
business. Total exceptional items this year were costs of £1.6m
(FY2019: £0.5m, badged as "non-recurring costs") and
comprised:
Canada
Extract of statement of comprehensive income and Alternative
Performance Measures1
For the year ended 30 April
Revenue
Cost of sales
Gross profit
Gross profit margin
Adjusted operating costs
Marketing costs
Adjusted EBITDA
Depreciation and amortisation
Adjusted operating loss
Share-based payment charge
Exceptional operating costs
Operating loss
Canada KPIs
Total transactions
Average revenue per instruction (“ARPI”)
Marketing cost per transaction
Marketing costs as a % of revenue
i) Costs of a fundamental restructure of the sales and
operational functions, primarily involving
rationalisation of the network of self-employed
LPEs, as described in the business model, of £1.2m
ii) Costs of supporting the network of independent LPEs in
response to the COVID-19 crisis of £0.4m
Each of these items is expected to continue into FY 2021 and
the relevant costs will be presented consistently next year. The
Board expects the aggregate costs of each of these items to
be material across the two years.
2019
Proforma
£m
29.7
(13.8)
15.9
Change
3.0%
5.1%
1.3%
53.5%
(100) bps
(8.6)
(8.4)
(1.1)
(0.9)
(2.0)
(0.4)
-
(2.4)
8.1%
(2.4)%
27.3%
11.1%
20.0%
(25.0%)
-
12.5%
2019
from
acquisition on
6 July 2018
£m
23.7
(11.1)
12.6
53.2%
(7.2)
(7.4)
(2.0)
(0.8)
(2.8)
(0.4)
-
(3.2)
2019
Proforma
37,819
£747
£206
28.3%
Change
(15.6)%
18.2%
24.8%
(150) bps
2019
from
acquisition on
6 July 2018
32,626
£691
£227
31.2%
2020
£m
30.6
(14.5)
16.1
52.5%
(9.3)
(8.2)
(1.4)
(1.0)
(2.4)
(0.3)
-
(2.7)
2020
31,906
£883
£257
26.8%
Canada achieved revenue growth overall, despite the COVID-
A targeted reduction in marketing spend as the effect of the
19 crisis having a significant effect on the last two months of
COVID-19 crisis became apparent has led to a slight reduction
the year.
In Quebec, we experienced a challenging and competitive
environment but delivered a healthy profitable performance.
In the Rest of Canada (“ROC”), our continued marketing efforts
have driven an increase in our brand awareness and an
increase in revenues despite a challenging underlying market
pre COVID-19, and the effects of the crisis in the last 2 months
of the year.
In ROC we operate a number of service offerings which have
allowed us to target different sections of the market. Focus on
these new products, including a focus on generating buy-side
revenues, has led to us servicing a lower number of overall
clients, but at significantly higher ARPI.
in marketing spend year on year. Canadian wage subsidy
during COVID-19 crisis has offset wages and salaries by around
£0.7m, allowing us to retain staff during this period.
On 15 July 2020 the Group completed the sale of its Canadian
business, being all Canadian subsidiaries and the entire
Canada segment, to the Desjardins Group, a Canadian
cooperative financial group. Headline consideration
was $60.5m Canadian Dollars (£35m) adjusted for working
capital and debt, to be verified in line with completion
accounts in due course. Part of the proceeds were allocated
to the repayment of intra-Group debt owed to Purplebricks
Group plc.
1
The underlying performance of the Group is monitored internally using a variety of statutory and alternative performance measures (“APMs”), which are not
defined within IFRS. Such measures should be considered alongside the equivalent IFRS measures. For full definitions and reconciliations of APMs, please
refer to note 5 to the financial statements. FY 20 APMs are presented including the effects of adopting IFRS 16 (see note 2). As IFRS 16 was adopted using the
modified retrospective approach, prior year comparatives have not been restated. The pro forma period reflects the results of Canada pre acquisition from 1
May 2019 and this information has therefore not been extracted from the audited statement of comprehensive income.
14
Purplebricks Annual Report and Accounts 2020
Strategic Report
FINANCIAL REVIEW continued
Closure of operations in the US and Australia
Statement of financial position
Throughout the closure processes in both countries, the wind-
The Group has a strong financial position to support its current
up of operations has been conducted in a responsible manner
activities and future growth, including a cash balance of
to protect the Purplebricks brand and respect commitments
£31.0m (30 April 2019: £62.8m). Net assets of £82.1m were
made to customers and business partners, while minimising
£21.6m lower than the comparable figure (30 April 2019:
costs where possible within these broader reputational
£103.7m) mostly as a result of the total comprehensive loss for
parameters. The closures have now been commercially
the year of £19.3m, which includes the final losses in respect of
completed, with only certain legal formalities
the US and Australia. Trade receivables and payables and
outstanding. The cash costs of closure have been at the
contract assets and liabilities are all reduced year on year,
higher end of the Group’s H1 guidance of £10.5 - £13m,
primarily reflecting the closure of the US and Australian
however these are inclusive of the cash costs of pre-closure
businesses, as well as timing of creditor payments. Deferred
announcement trading losses and working capital positions
income in the UK is reduced due to lower transaction
unwinding. The results of US and Australia are set out within
volumes, particularly following the closure of the housing
the segmental analysis at note 7.
market in March 2020, partly offset by a longer service period.
Homeday joint venture
Cash flow
During the year the Group invested a further EUR 5.0m
Operating cash flow was an outflow of £24.0m (2019: £49.1m).
(£4.6m) in Homeday.de via its joint venture with Axel
Within this, continuing operations accounted for an outflow of
Springer. As a result of the conversion of previously existing
£10.9m (2019: inflow of £9.9m) and for discontinued operations
convertible loans from JV HoldCo to Homeday, JV HoldCo's
an outflow of £13.1m (2019 19: outflow of £59.0m). The FY 2020
shareholding in Homeday increased in the year from 26% to
outflow from continuing operations is caused by marketing
54%, and JV HoldCo therefore took control of Homeday. As
investment into the Canada business and working capital
part of the provisional fair value accounting for this acqusition,
timing effects in the UK. Capital expenditure and financing
JV HoldCo revalued both its previous shareholding and the
items represented an outflow of £7.8m (2019: £41.2m), with an
convertible loans to fair value immediately before conversion.
additional £4.6m investment being made in Homeday.de
This revaluation has led to a gain in JV HoldCo, of which the
(2019: £27.3m in relation to our Canadian acquisition and
Purplebricks’ 50% share is £2.6m. Purplebricks’ share of
£14.3m in Homeday.de). Total cash outflows for the period
Homeday's underlying losses for the year was £5.3m. After
were £31.8m (2019: £90.3m), of which continuing operations
accounting for amortisation of intangibles arising on
comprised £18.7m and discontinued operations comprised
acquisition of £0.1m, this means that our net share of the JV
£13.1m. There are no further contractual commitments to
HoldCo result for the year was a loss of £2.8m. Further detail is
invest further into Homeday.de.
set out in note 19.
The Group has no further obligation to provide funding to
Homeday.de, and no further investment is expected at this
stage.
Tax
The Group reported a net tax credit of £1.7m (FY 2019: £1.3m in
respect of the continuing group). This amount is comprised
primarily of a £1.8 m deferred tax credit relating to the UK and
Canadian businesses, less a £0.1 m current tax charge relating
to the UK. Deferred tax assets continue to be recognised in
full in the UK and Canada, based on expectations of sufficient
taxable profits being available for utilisation of these assets in
future. No tax impact is recognised in relation to either losses
arising during the year or previously unrecognised losses of
prior years, relating to the discontinued US and Australian
businesses, as the closure of the relevant companies means
there is no prospect of utilisation of their tax losses against
future taxable profits.
Approved and signed on behalf of the Board
Andy Botha, Chief Financial Officer
31 July 2020
Purplebricks Annual Report and Accounts 2020
15
Strategic Report
PRINCIPAL RISKS AND UNCERTAINTIES
PRINCIPAL RISKS AND UNCERTAINTIES
Introduction
Risk management is integral to the way we manage the Group and the heads of each business function monitor and report on their most
significant risks on a continuing basis. All risks are consolidated, shared and reviewed by the senior management team and the Board, who
agree on the principal risks. We seek to manage identified risks, rather than eliminate them, so as to provide reasonable mitigation against
material misstatements or loss within the business. The Board reviews the risks facing the business on a quarterly basis to determine the
level of risk that can be accepted in pursuit of the Group’s strategic goals. Assessing the nature of these risks, the level of risk they present to
business performance, and the manner in which these risks may be mitigated is critical for the success of our business over the long term.
As the business grows and evolves, the Board regularly reviews its risk appetite and governance structure to ensure it is appropriate.
The principal risks facing the business, along with details of the potential impact, any movement in severity of risk since last year, and the
ways in which we aim to mitigate them are set out below:
Description and impact
1. COVID-19 pandemic
The UK Government's advice to refrain from selling properties
and enforced social distancing in the UK and Canada resulted
Change from
prior year Monitoring and mitigation
NEW
The Group acted swiftly, followed government guidelines and
ensured the safety of staff, agents and customers was made a
priority.
in a significantly reduced level of new instructions.
Marketing and non-essential spend was stopped during the
The duration and severity of any restriction of trade caused by
the pandemic will determine the extent of any adverse impact
on overall business activity, cashflow and profits.
2. Macro-economic
The Group derives a material share of its revenues from the UK
and Canada. The Group is largely dependent on the
macroeconomic conditions in the UK as well as being exposed
period of lockdown to manage costs and preserve cash to
ensure the business emerges strongly once restrictions are
lifted.
The Group has made use of the Coronavirus Job Retention
Scheme and other government support to offset some of its
staff costs during the period and preserve team roles to the
fullest extent possible.
Additionally, we created an LPE support fund dedicated to
supporting our self-employed agents (Local Property Experts)
in the event they did not have access to government support
(see Financial review for further details).
The local market conditions in our UK and Canadian markets
are closely monitored and reported on, and the macro
economic conditions of the countries we operate in are under
close review.
to changes in macroeconomic conditions internationally.
The Group has a flexible, scalable cost base, which enables it
As an estate agency the Group’s fortunes are closely linked
with those of the housing market and the broader economy as
a whole in the countries in which we operate.
Economic uncertainty, such as that created in the UK by Brexit,
can adversely affect the Group’s performance.
to react quickly and effectively to changes in market
conditions (as demonstrated during the COVID-19 pandemic).
3. Competition
The success of the Group is dependent on maintaining scale
The Group's investment in marketing, service and technology
has delivered a scalable, well-known and trusted brand.
through market share while operating in a competitive sector
We will continue to invest in our brand and in our innovative
where there are many alternatives for the customer and the
platforms to maintain a competitive advantage
potential for new entrants.
The actions of competitors, and/or our own inaction, could
have a significant and adverse impact on performance.
Risks which have been assessed as more significant year on year
Risks which have been assessed as less significant year on year
Risks where significance is unchanged year on year
16
Purplebricks Annual Report and Accounts 2020
Strategic Report
PRINCIPAL RISKS AND UNCERTAINTIES continued
Description and impact
4. Brand reputation
The Group has established an identifiable and respected brand
which could be damaged by factors such as unethical or
Change from
prior year Monitoring and mitigation
The Group actively monitors its brand sentiment and net
promoter scores to ensures its marketing and services reflect
customer needs.
unlawful activity, poor customer service, negative customer
The Group strives to maintain its reputation for being a
reviews or negative press.
Customers considering instructing Purplebricks could see
positive references from existing customers as an important
part of their decision-making. As such, a failure to either
deliver a professional service to existing customers or elicit
positive reviews could impact our ability to grow.
5. People
The Group’s success is dependent on the quality of its
management, operational teams and agents.
Our failure to attract, retain and develop the required skills and
continue to evolve our culture could result in an impact on the
delivery of our service to customers and our strategic goals.
6. Compliance with laws and regulations
The Group operates in a sector with an evolving legal and
regulatory environment and monitors developments to ensure
trusted estate agency service provided at a fixed fair price
and monitors its customer feedback, both direct and
through third party providers, on a real time daily basis.
We have recently recruited a Chief People Officer to drive
the people agenda and culture change programme.
We aim to provide competitive commission packages and
flexible working practices to attract Local Property Experts.
We have created a strong employee brand, and invest in the
recruitment, development and retention of our teams to
maintain employee engagement and loyalty.
We operate ongoing monitoring of developments within the
industry, embedding any changes within our systems and
processes.
legal, regulatory and ethical compliance. Failure to do so
The Board and Audit Committee are regularly updated
would adversely impact the Group's reputation and operations.
about changes to the regulatory environment and any
As referred to in the Financial Review section of this report,
particular challenges these may create.
during the year the Group incurred a fine from HMRC for
historical breaches of certain aspects of the UK’s anti-money
laundering legislation.
7. Business model
The estate agency services we provide are performed by a
network of self-employed agents who are independent of the
Group. Any failure by the agents to comply with applicable
laws and regulations in respect of their own business activities
could be detrimental to them and the wider Group.
8. Cyber security and protection of data
The Group’s website and IT environments could be the target
of cyber-attacks, which could result in significant operational
disruption and/or data loss.
Non-compliance with legal or other regulatory requirements
relating to customer data security and data privacy in the
course of our business activities, could result in significant
Ongoing improvements to controls and processes have been
made with regard to anti-money laundering checking to
prevent recurrences.
A restructure of the field teams in early 2020 provided a
robust performance management and operating structure
for agents and territory owners. In addition, the Group has a
dedicated management team in place to manage and
support its self-employed agents, while the Group’s
Compliance Team monitor adherence to laws and
regulations.
The Group’s dedicated Technology Team monitors the
resilience of our IT systems on an ongoing basis to ensure
that customers and their data are protected.
Regular penetration testing and Distributed Denial of Service
(DDoS) are undertaken across the Company’s IT estate and
the Technology Team is alert to the technical abilities of
hackers.
reputational or financial damage to the Group.
GDPR legislation is considered as part of every digital
9. Financial controls
Inaccurate financial information may result in sub-optimal
decisions being taken by management and inadequate
financial controls could result in financial loss to the Group.
development to ensure we embed compliance within the
Group's processes. Further, all staff receive training on
security, data protection and compliance matters.
The systems of internal controls deployed within the Group
are designed to prevent financial loss, and improvements
continue to be made in the control environment and
procedures.
Controls are strongest in areas where management
considers the potential exposure to the Group of material
loss or misstatement to be at its greatest, including areas
such as bank accounts, cash collection and revenue
recognition.
Purplebricks Annual Report and Accounts 2020
17
Strategic Report
CORPORATE SOCIAL RESPONSIBILITY
CORPORATE SOCIAL RESPONSIBILITY
At Purplebricks, we recognise the impact we have on the
communities we work in and the responsibility this brings,
and we work hard to integrate key Environmental, Social and
Governance (ESG) elements into what we do. Our responsible
approach to business is backed by our ‘Purple Promises’ and is
focused on three core areas: our people and culture; our
communities; and the environment.
People and culture
We have invested in the skills of our customer-facing teams,
developing two new training programmes. We introduced
‘World Class Managers’ – a programme for all leaders in our
Contact Centre to give them a strong basic grounding in what
good leadership looks like. We also put our Central Property
Team through our ‘Call Centre School’. More than 160 of our
employees have attended at least one of these programmes
during the year, and we have improved our contact centre
retention rate.
We have created a strong brand advocacy within the business
Employee engagement
and among our customers. This collective desire to grow the
business has always been a pillar of the Purplebricks culture.
Our Purple Promises
• We focus on people, not just property;
• We go the extra mile for every customer, every time;
• We treat everybody fairly and with respect; and
•
If we say we will do something, we do it.
Engaging with our employees and self-employed agents has
always been a priority for the business. We operate and
actively encourage an open culture where all employees have
ready access to the senior leadership team. This is facilitated
by a very active internal social network, regular Q&A video
sessions with the Senior Leadership team, and detailed insight
into the changes and improvements in the business provided
by the service leads. We surveyed our employees in
September 2019 and employee wellness was identified as high
on the list of priorities to address.
As the business evolves its enhanced digital service offering,
Health, safety and wellbeing
We are committed to the highest standards of health and
safety in our work activities for our employees, our customers,
and our partners. In a business environment where social
distancing and concerns over the transmission of COVID-19
are likely to remain for some time, we will ensure that our
people have access to the appropriate PPE for as long as is
needed. We will also make use of our enhanced technology
platform to provide ways of working that keep safety in mind
at all times.
We actively promote and support the wellbeing of all our
employees. As part of our partnership with Team GB, they
have helped us launch a company-wide wellness programme,
with the aim of educating, supporting and empowering our
people to perform at their best as part of ‘Team PB’ (Team
Personal Best). Details of this initiative are on the following
page.
Gender breakdown as at 30 April 2020
we are determined to ensure our culture and values align to
those of a high-performing digital business. Our people are
integral to improving the professionalism and performance of
the Group across all our operations. That’s why, at the end of
the financial year, we appointed our first Chief People Officer,
who will be responsible for all aspects of our People strategy –
from recruiting and retaining the best talent in the industry,
to ensuring we have the structure in place to deliver a high
performing culture.
Diversity and inclusion
We maintain a strong commitment to equality and
opportunity in our employment policies and our practices in
the workplace. Through our recruitment and selection
processes, we seek to attract and retain a diverse and talented
workforce. One of the areas of focus for our new Chief People
Officer will be to ensure diversity and inclusion is at the top of
our strategic agenda, as we recognise that we need to be
doing more as a business to support and promote wider
diversity across the organisation.
Developing our people
Having the right people with the relevant skills will be vital to
us achieving our House Strategy. The focus of our training
and development activity during the year has been primarily
on induction training for our new Central Property Team
members and our new Local Business Partners.
18
Purplebricks Annual Report and Accounts 2020
Strategic Report
CORPORATE SOCIAL RESPONSIBILITY continued
Supporting our people through COVID-19
The speed and impact of the COVID-19 crisis took us all by
surprise, but as an organisation we were able to respond
quickly and take immediate measures to protect the business
and our colleagues, using the Government’s furlough scheme
to protect the employment and income of many of our
employees. However, with a self-employed agent model,
more than 600 of our Local Property Experts, many of whom
operate as limited companies, were unable to access the
Coronavirus Job Retention Scheme. We responded to this
issue by creating a fund of up to £2.2 million to provide
support payments through this difficult period.
CASE STUDY
Getting fit and
ready for the future
Purplebricks is immensely proud of
its links with Team GB – an association
that will continue up to and beyond the
rescheduled Olympic Games in 2021. As well as playing
a key role in our external advertising and marketing
campaigns, Team GB has helped us launch a company-
wide wellness programme, with the aim of educating,
supporting and empowering our people to perform at
their best as part of ‘Team PB’.
The programme takes a holistic approach to discussing
health and wellbeing topics alongside the factors that
impact performance in pressurised, demanding
environments. The focus is on helping people with
physical and mental wellbeing - through a range of
topics like advice on nutrition, exercise, goal setting -
helping our people achieve their personal best in both
their work and personal lives. We ran a half day launch
event in Solihull in November 2019, with the help of
Team GB athletes, and have followed this up with
sessions at our workplaces that are designed to be
informative, exciting, interactive and have an element
of ‘fun’ – making use of short selfie videos made by
athletes to catch our employees’ attention.
Case study image
[Pull our case study – LPE support]
CASE STUDY
Supporting our agents in the field
At Purplebricks, we are proud to stand side-by-side
with our people and support them, even when times
are tough. The COVID-19 crisis has had a particular
impact on those who are self-employed working
through a limited company. That’s why we committed
to help our Local Property Experts (LPEs) by
establishing a dedicated fund of up to £2.2m at the
beginning of the crisis.
This fund has proved to be a lifeline for many of our
LPEs, including Jane and Hugh Harkin, a married
couple who run a Local Property Company in
Lanarkshire. They had to take care of their young
granddaughter because their daughter is a nurse at
Monklands General Hospital, and was asked to work
on the COVID ward. This signalled a change of
priorities for the Harkin family – Jane continued
working to help customers, supported by an incentive
and top-up payment, while Hugh has also been
supported financially, with his key role focusing on
social media and engaging customers virtually.
Supporting our communities
An important part of the Company’s culture and ethos is to
give back to the public and local communities in which we
operate 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, including Bookmark Reading
Charity.
Purplebricks Annual Report and Accounts 2020
19
Strategic Report
CORPORATE SOCIAL RESPONSIBILITY continued
Managing our environmental impacts
As an online business with an extremely lean physical infrastructure and a marketing model that is largely paperless, our impact on the
environment is relatively low for our industry. However, across our operations we remain committed to minimising our environmental
impact and to actively managing our carbon footprint.
During the year, we engaged a specialist environmental consultancy, Envantage Ltd, to carry out an independent and detailed energy
audit to calculate our energy usage and GHG emissions. Following their audit, we have assigned an energy manager with responsibility
for reviewing and actioning the SECR report recommendations as appropriate. Under SECR, we will continue to monitor our energy
usage and report our emissions intensity each year. More details on our SECR reporting can be found on page 28.
Non-financial information statement
The table below sets out where stakeholders can find information in our Strategic Report that relates to non-financial matters detailed
under Section 414CB of the Companies Act 2006.
Reporting requirement
Where to read more in this report
Environmental matters
CSR statement – environmental policy, impact and greenhouse gas information page 20
Employees
CSR statement – people policies, gender diversity, employee involvement, health & safety pages 18-19
Human rights
Directors’ report – ethical business, supply chain, human rights page 27
Social matters
CSR statement – communities page 19
Anti-bribery and corruption
Directors’ report– anti-bribery and corruption page 27
Business model
Business model pages 6-7
Key risks and uncertainties
Key risks and uncertainties pages 16-17
Non-financial KPIs
KPIs pages, 3 & 13
20
Purplebricks Annual Report and Accounts 2020
Strategic Report
S.172 STATEMENT
HOW WE ENGAGE WITH OUR STAKEHOLDERS
Our unique hybrid, dual-sided business model connects buyers,
1. Strategic review and closure of Australia and US operations
sellers, landlords and renters with our self-employed agents. It
is enabled by our digital platform, but is reliant upon
Purplebricks working with, listening to and responding to all our
stakeholders’ needs. Without a good understanding of their
needs, the business could not deliver a sustainable business for
our shareholders and wider stakeholders.
Directors’ s.172 statement
Section 172 of the Companies Act 2006 requires a director of a
company to act in the way he or she considers, in good faith,
would most likely promote the success of the company for the
benefit of its members as a whole. In doing this s.172 requires
a director to have regard, among other matters, to the:
• likely consequences of any decisions in the long term;
• interests of the company’s employees;
In May 2019 the Board took the decision to close the Australia
operation after experiencing increasingly challenging market
conditions and an unfavourable market outlook. This decision
was taken with wider consideration for the dedicated team
who had worked hard to gain the scale needed to succeed as
well as existing customers. A reduced team was kept in in
place to ensure a professional wind down of the business and
to ensure the business was able to continue to deliver great
outcomes for the remaining customers. At the same time a
strategic review was also undertaken of the business in the US
which was operational in seven states. The review, taking into
consideration the long-term feasibility of delivering growth,
also focused on the concerns of investors as well as the
welfare of our locally employed team and customers. The
Board’s review concluded it would take gtreater management
time and resources to deliver on the US opportunity than the
• need to foster the company’s business relationships with
Company was able to commit and a decision was made in July
suppliers, customers and others;
• impact of the company’s operations on the community and
environment;
• desirability of the company maintaining a reputation for
high standards of business conduct; and
• need to act fairly as between members of the company.
The Board seeks to understand the views and needs of the
Group’s key stakeholders to ensure that we make decisions
with consideration for all our stakeholder groups and
addresses their long-term needs and concerns. Where there
may be competing priorities, these are discussed by the Board
and the commercial, human and broader business impacts
are considered against the longer-term sustainability of the
business. The Board considers its key stakeholders to be its
employees, self-employed agents, customers, shareholders,
suppliers and community. It takes seriously the views of these
stakeholders in setting and implementing our strategy. The
Company takes its environmental responsibilities very
seriously and is committed to reducing the footprint of its
operations. As an online business its operations has a low
impact on the environment. The Company will assess options
to reduce environmental impact in FY 2021. The Directors
consider that they have acted in a way that would promote
the success of the Company for the benefit of its members as
a whole, having regard to matters set out in s.172 (1) of the
Companies Act 2006.
Set out here are some specific examples of how the directors
had regard to the matters set out in s.172 during the year.
2019 to close the business. The Board’s agreed closure plan
was conducted to protect the Purplebricks brand and respect
commitments made to customers and business partners,
while minimising costs within these broader reputational
parameters.
2. Restructure of the LPE Field teams
The new House Strategy shared with Investors in July 2019,
highlighted the need to address the variation in performance
across the Local Property Experts teams and the desire by the
Board to attract the best professionals to these roles through
improved incentivisation. The decision to restructure was
taken carefully, balancing the needs of the self-employed
agents and the longer-term sustainability of the hybrid
business model. The restructure reduced the number of
Territory owners from 120 to 43, put clear leadership and
performance management structures in place and set out to
improve the remuneration of the agents to compete with
their High Street peers.
The following table, in combination with the Corporate
Governance Statement on pages 25-28, sets out how we have
engaged with key stakeholders in FY 2020 and how this has
provided valuable input into the Board's decision making,
both this year and for the longer-term. This engagement sets
the context for our new ‘House strategy’ and our business
model, as detailed on pages 6-7, and has influenced our
commercial approach, capital structure and dividend policy.
Purplebricks Annual Report and Accounts 2020
21
Strategic Report
S.172 STATEMENT continued
Key stakeholders - our approach
Employees
Agents
Customers and regulators
• All employees have an annual
personal appraisal and regular one-to-
• During the year we restructured our
field teams into 42 regions. Our LPEs
• Purplebricks completed over £9.3bn
worth of property in the year.
one meetings with their line manager
were consulted and communicated
Customers are central to all decisions
to monitor performance against an
with through the period of change.
made by the Company and the Board
agreed plan.
The senior leadership team worked
considers the needs of customers
• The Senior Leadership Team holds
monthly Q&A calls with all employees
enabling sharing of information and
gathering of employee feedback.
• An Annual Employee Survey was
undertaken in October 2019 and a
summary provided to the Board.
• Senior management, senior
employees and executive directors are
incentivised through the Company
Performance Share Plan. During the
year 2,461,200 options were granted
under the PSP scheme.
with their regional operators to create
when taking decisions on all aspects
a more engaged and better
of the Companies interactions with
remunerated field team in line with
customer including; technology
the new strategy.
• LPEs have direct access to the same
communication channels of directly
employed staff and actively participate
in Company events, the Senior
employed on the website and app,
standards and behaviours of our self-
employed agents, quality and
availability of post sales service and
reviews of our pricing.
management Q&A and the Annual
• As an approved representative of the
Conference.
FCA we engage with the regulator and
take its views into consideration across
our operation.
For more information on our
For more information see Chief
For more information see Principal
employee policies and employee
Executive Officer’s statement page 9
risks and uncertainties page 17 and
engagement see CSR section
and page 21 above.
Financial Review review page 14.
pages 18-19,
Shareholders
Suppliers and communities
• We hold investor roadshows at the
time of our full year and half year
results, enabling our institutional
• While we have a relatively small
supplier base, Purplebricks is
committed to treating all our
investors to meet with the CEO and
suppliers fairly.
CFO.
• We attend, present and network at
• We endeavour to pay all suppliers in
line with their payment terms and,
investor conferences, enabling direct
where this is not possible, we take
access to our CEO and CFO.
steps to minimize the impact on the
• All recorded results presentations
supplier.
and CEO interviews are made
available online through our investor
website, purplebricksplc.com
• Our advisers provide a mechanism
• At the end of 2019, Purplebricks
became an official partner of Team
GB, providing sponsorship to the
Team and promoting their individual
through which investors can provide
athletes through our TV advertising
feedback to the Company.
campaign.
• The Board receives monthly reports
• Since 2018 we have been a partner of
on investor views, and related
activity, as well as ad hoc updates
the Bookmark Reading Charity,
providing funding and support to help
outside the monthly Board reporting
children develop their reading skills.
as required.
For more information, see
For more information on our
Directors’ Report page 30.
community involvement,
see our CSR section on pages 18-19.
22
Purplebricks Annual Report and Accounts 2020
Governance
BOARD OF DIRECTORS
OUR BOARD
Paul Pindar
Non-Executive
Chairman
Vic Darvey
Chief Executive
Officer
Andy Botha
Chief Financial
Officer
Paul was an early investor in
Vic was appointed Group Chief
Andy joined Purplebricks from online
Purplebricks and became the Group’s
Executive Officer in May 2019, having
travel group Secret Escapes in May
Chairman in December 2015. Since
joined Purplebricks in January 2019 as
2020. He has more than 25 years'
December 2019, he has also chaired
Group Chief Operating Officer.
business experience and brings with
the Audit Committee.
Paul was the third-longest serving
delivery and leadership of cutting-
FTSE 100 CEO when he stood down
edge data-led, customer-focused,
from Capita plc in 2014. When he
commercial innovation. He is a
Vic has a proven record of technology
him an extensive background in M&A,
corporate finance, strategic planning,
investor relations, financial planning &
reporting and risk management.
joined as Finance Director in 1987,
digital leader with more than 20
Andy was previously Group CFO at
after advising on the £0.3 million
years' experience successfully scaling
ZPG, the digital media business that
management buyout (MBO) of the
a number of international consumer
owns and operates some of the UK's
business while working for 3i Group
brands, most recently as Managing
most recognised online brands,
plc, Capita had 33 employees and an
Director of MoneySupermarket.com.
including digital property portal
annual revenue of £1.3 million. Paul
Vic has held leadership roles across a
Zoopla, PrimeLocation, uSwitch and
became Managing Director in 1991
number of highly competitive and
Money.co.uk. This experience has
and Chief Executive in 1999, and when
disruptive businesses, including
seen Andy develop a strong
he left the business in February 2014,
LastMinute.com.
Capita had more than 62,000
employees and a market
capitalisation of £7.5 billion.
Since June 2014, Paul has served as
Chairman of Independent Clinical
Services, following its acquisition by
TowerBrook. In September 2017, Paul
became Non-Executive Chairman of
Literacy Capital plc and is also
Chairman of Bookmark Reading
Charity's Corporate Partnership
Board.
understanding of the UK hybrid
property market. He has also worked
for a number of other publicly quoted
and privately‐owned digital
businesses, including
Lastminute.com, Betfair and
Notonthehighstreet.
GENDER BREAKDOWN OF
OUR BOARD
As at 3 August 2020
Board
17% FEMALE
5:1
Changes in the year:
During the year Michael Bruce stepped
down as Chief Executive Officer on 7
May 2019 and Michael Wroe stepped
down as Non-Executive Director on 12
December 2019. Since the year end
James Davies resigned as Chief
Financial Officer, effective 8 May 2020.
Purplebricks Annual Report and Accounts 2020
23
Governance
BOARD OF DIRECTORS continued
Simon Downing
Senior Independent
Director
Adrian Blair
Independent
Non-Executive
Director
Dr Stephanie
Caspar
Non-Executive
Director
Simon has over 30 years of experience
Adrian joined the Board in April 2018.
Stephanie joined the Board in July
in the technology industry and was
He chairs the Nomination Committee
2020 as the Axel Springer board
the founder of Civica Group, one of
and is a member of the Audit and
member. She joined Axel Springer in
the UK’s largest privately owned
Remuneration Committees.
2013. While she initially served as
software companies. He led the
business from inception to IPO in
2004 and then, three subsequent
private equity backed buyouts, the
most recent sale, in 2017, valuing the
business at over £1 billion.
Adrian is CEO of Receipt Bank, a high
growth global Fintech business
backed by Insight Ventures. Until
2018, he was Global Chief Operating
Officer at Just Eat plc, where he was
responsible for all commercial
In addition to his continuing role as
operations in the UK and in 12
Chairman of Civica, Simon is also
international markets. Over seven
Chairman of Audiotonix, the global
years, he was instrumental in building
market leader in professional audio
Just Eat into one of the most
mixing consoles, Chairman of
successful technology companies in
Edenhouse Solutions, a specialist SAP
Europe. Adrian was part of the team
support and consultancy, and is an
that led Just Eat through its listing on
non-executive director at both
the London Stock Exchange in 2014,
Managing Director of WELT Group,
her responsibilities expanded over
the course of the following years. In
March 2018 Stephanie was appointed
member of the Executive Board at
Axel Springer. In her capacity as
President News Media &
Marketplaces she is responsible for
Axel Springer’s company-wide
technology and data strategy as well
as Axel Springer’s media brands in
Germany (BILD / WELT etc.),
including advertising sales,
distribution and printing business.
Datum Datacentres and Literacy
since when the company has created
She also assumed presidency on the
Capital.
c.£1billion of shareholder value per
board level for Idealo and the AVIV
year, culminating in its promotion to
Group. The AVIV Group is one of the
the FTSE 100 in December 2017.
world’s biggest digital classified
Simon is a graduate engineer, his
early career included a variety of
management roles in the IT industry
Adrian joined Just Eat from Spotify,
and he is a past winner of the UK
where as Director of European
Ernst & Young Technology and IT
Business Development his team
Services Entrepreneur of the Year
forged pioneering partnerships
players, combining Axel Springer’s
digital activities and participations in
real estate, car and generalist
classifieds.
award.
between the music streaming and
Stephanie studied business
mobile device industries. Prior to
administration at the University of
that, he spent six years at Google Inc.
Lüneburg. She began her career as a
in a number of senior commercial
business consultant at McKinsey,
roles across California and London,
followed by various roles at Ebay,
including Head of eCommerce
Director Strategy among others, and
Partnerships, where his team helped
an engagement at
thousands of businesses improve
Immobilienscout24 as member of the
their ROI from AdWords. Before that,
Managing Board. In 2009, she
Adrian was Head of Business
founded digital retailer
Development at Ask Jeeves Inc.,
Mirapodo together with the Otto
where he developed a network of
Group and acted as the company’s
more than 10,000 affiliate websites,
CEO.
helping Ask to become a household
name in the UK prior to its $1.85
billion sale to IAC.
24
Purplebricks Annual Report and Accounts 2020
Governance
CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
Chairman’s introduction
Attendance at Board meetings
While the Company has experienced a period of significant
During the year the Board held 10 scheduled meetings.
challenge and change this year, we remain committed to
Attendance of the Board directors is recorded in the table
achieving high standards of corporate governance, integrity
below:
and business ethics in all our business operations.
The Board continues to apply the 2018 Quoted Companies
Alliance Corporate Governance Code (the “QCA Code”) as the
basis of the group’s governance framework. The directors
Scheduled meetings
Paul Pindar
Michael Bruce 1
acknowledge the role of the 10 principles set out in the QCA
Vic Darvey
Code, and their importance in focusing on the pursuit of
medium to long-term value for shareholders without stifling
the entrepreneurial spirit in which the Company was created.
James Davies 2
Mike Wroe 3
Adrian Blair
The Group’s arrangements for compliance with the QCA Code
Simon Downing
are set out below, as are the activities of our Board
Committees, our remuneration policy and our commitment to
Andreas Wiele 4
Attendance
10
10
0
10
10
6
9
7
10
equality, diversity, the environment and acting responsibly in
1. Michael Bruce resigned his position of CEO on 7 May 2019.
all areas of our business.
Paul Pindar, Chairman
2. James Davies resigned his position as CFO after the year-end FY2020.
3. Mike Wroe stepped down from the Board on 12 December 2019.
4. Dr Andreas Wiele stepped down from the Board on 24 June 2020.
Compliance with the QCA Code
Board committees
The Company is committed to complying with the QCA Code
In accordance with best practice, the Board has established
or providing a clear explanation of any areas in which the
an Audit Committee, a Remuneration Committee, and a
Company's governance structures and practices differ from
Nomination Committee. The terms of reference for each
the expectations set by the QCA Code. Information regarding
committee are set out on our investor website
the Company's compliance with the 10 principles of the QCA
purplebricksplc.com.
code is set out on our investor website purplebricksplc.com.
Audit Committee
The Company’s control environment has developed as the
The Audit Committee has been chaired by Paul Pindar since
business has grown over the last six years. The effectiveness of
Mike Wroe stepped down from the Board in December 2019,
the control environment is monitored as the business evolves,
and its other members are Simon Downing and Adrian Blair.
including in respect of governance regulations that affect our
The Committee meets twice per year and otherwise as
operations in Canada. Following the audit by HMRC of our
required, and it has unrestricted access to the Company's
Customer Due Diligence (CDD) processes and subsequent
auditor. A new Chair of the audit Committee is being sought
fine, the Company has made significant improvements to its
during FY21.
CDD processes and invested in an expanded internal
Compliance team, with further investment to be made in the
next financial year. After the departures of certain members of
the group finance team prior to the year end, the level of
precision of review performed on some of the key areas of
judgement was not consistently at the level we would
expect. While this represented a weakening of the control
environment during this period, we note that this did not have
The Audit Committee has primary responsibility for
monitoring the quality of internal controls and ensuring that
the financial performance of the Company is accurately
measured and reported on. It receives and reviews reports
from the Company's management relating to the interim and
annual accounts and the accounting and internal control
systems in use throughout the Company.
any impact on the accuracy of any of the judgements taken in
The Committee also reviews the content of the annual report
these financial statements. This year we will be expanding the
and provides the information necessary for shareholders to
capacity of the group finance team to enable a robust
assess the Company’s performance, business model and
assessment of judgement areas to be performed and to
strategy.
strengthen the internal control environment more widely. The
Board is committed to continuous monitoring of the
effectiveness of this environment, and to make further
investments where required to target a best practice control
environment.
Purplebricks Annual Report and Accounts 2020
25
Governance
CORPORATE GOVERNANCE STATEMENT continued
Nomination Committee
Directors’ and officers’ insurance provisions
The Nomination Committee is chaired by Adrian Blair, and its
other member is Simon Downing. The Committee meets
once a year and otherwise as required.
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 committee members and succession
planning for senior management.
The 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
The Company has a qualifying indemnity insurance policy in
respect of directors' and officers' liability insurance policy,
which covers directors and officers of the Company defending
civil proceedings brought against them in their capacity as
directors or officers of the Company.
Statement of directors’ responsibilities
The directors are responsible for preparing the strategic report
and directors' report and the financial statements in
accordance with applicable law and regulations.
appointments of additional and replacement directors, and
Company law requires the directors to prepare financial
makes appropriate recommendations to the Board on such
statements for each financial year. Under that law the
matters. It also prepares a description of the role and
capabilities required for a particular appointment.
Remuneration Committee
The Remuneration Committee is chaired by Simon Downing,
and its other member is Adrian Blair. The Committee meets
once a year and otherwise as required.
The Remuneration Committee reviews the performance of
the executive directors and senior management and makes
recommendations to the Board on matters relating to their
remuneration and terms of employment. The 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
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 are
required to:
select suitable accounting policies and then apply them
consistently;
make judgements and accounting estimates that are
reasonable and prudent;
scheme in operation from time to time. The remuneration
state whether applicable IFRSs have been followed, subject
and terms and conditions of appointment of the non-
to any material departures disclosed and explained in the
executive directors of the Company are set by the Board.
financial statements; and
The non-executive directors do not have any personal interest
in the matters to be decided by the Remuneration
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 will take part in discussions concerning their
remuneration.
Details of the level and composition of the Directors’
remuneration are disclosed in the Directors’ remuneration
report on page 32.
Research and development
The Group undertakes a continuous programme of
development as part of its commitment to lead change in the
real estate industry. 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 2.17 to the financial
statements. All other research and development expenditure
is recognised in the statement of comprehensive income as
an expense as disclosed in note 8 to 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 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
Deloitte LLP was re-appointed by shareholders as the Group's
statutory auditor at the Company's Annual General Meeting in
October 2019.
A resolution to reappoint Deloitte LLP will be proposed at the
forthcoming Annual General Meeting.
26
Purplebricks Annual Report and Accounts 2020
Governance
CORPORATE GOVERNANCE STATEMENT continued
Corporate social responsibility
Equality, diversity, and human 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
As a relatively new and fast-growing company, we constantly
review 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.
selection processes we seek to attract and retain a diverse and
In line with current regulations, the Group is required to
talented workforce. As prescribed by law, we are clear that no
disclose its annual UK energy consumption and Greenhouse
existing or potential employee will receive less favourable
Gas (GHG) emissions from SECR regulated sources – see full
treatment due to their race, creed, nationality, colour, ethnic
disclosure below.
origin, sexual orientation, gender, gender reassignment,
marital status, membership of a trade union, disability, or any
other criteria.
While the Company does not have a specific human rights
policy, it does have statements on Equal Opportunities,
Modern Slavery and Anti-bribery and Corruption that adhere
Further details can be found in our corporate responsibility
section on pages 18-19.
UK energy consumption and Greenhouse Gas
disclosure
to internationally agreed human rights principles. These
The Companies Act 2006 (Strategic Report and Directors'
statements are set out on our investor website
Report) Regulation 2018 requires Purplebricks Group PLC to
purplebricksplc.com
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
disclose annual UK energy consumption and Greenhouse Gas
(GHG) emissions from SECR regulated sources. Energy and
GHG emissions have been independently calculated by
Envantage Ltd for the reporting period 1 May 2019 to 30 April
2020.
committed to ensuring appropriate assessment and suitable
Reported energy and GHG emissions data is compliant with
control of the health and safety risks arising from our work
SECR requirements and has been calculated in accordance
activities for our employees, our customers and our partners.
with the GHG Protocol and SECR guidelines. Energy and GHG
emissions are reported from buildings and transport where
operational control is held – this includes electricity, natural
gas, and business travel in company-owned or grey-fleet
vehicles. The table below details the regulated SECR energy
and GHG emission sources for the current reporting period
1 May 2019 to 30 April 2020 and details a comparison against
last year 1 May 2018 to 30 April 2019.
Charitable and philanthropic activity
Giving back to the public and local communities in which we
operate is an important part of the Company's culture and
ethos. We do this through the commitment of time and
resources, and through our employees’ fundraising activities.
They are active in raising money or supporting fundraising
activities for a wide range of causes both locally and nationally.
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 extremely limited physical infrastructure and a marketing
model that is largely paperless, the Company has a much-
reduced environmental impact when compared to traditional
real estate agencies.
Purplebricks Annual Report and Accounts 2020
27
2020
2019
Change
216,767
505,149
289,853
492,786
422,344
354,351
1,011,769
1,269,481
39.9
129.1
95.2
69.3
238.3
83.1
2.87
90.6
108.0
78.4
84.8
283.3
88.5
3.20
(56)%
19.6%
(18.2)%
(20.3)%
(56)%
19.6%
21.6%
(18.2)%
(15.9)%
(6.1)%
(10.4)%
Governance
CORPORATE GOVERNANCE STATEMENT continued
Energy (kWh)
Natural Gas
Electricity
Transport
Total Energy (kWh)
Emissions (tCO2e)
Natural Gas
Electricity - location-based
- market based
Transport
Total SECR emissions1
Intensity metric
£m turnover
tCO2e per £m turnover
1 location-based emissions only
Purplebricks is committed to reducing its environmental
impact and contribution to climate change. During the
reporting period, detailed building and transport energy
audits were commissioned through Envantage Ltd to identify
potential energy-saving opportunities.
While the opportunities identified are not significant,
Purplebricks takes its impact on the environment seriously
and has since identified an Energy Manager to review
environmental initiatives as appropriate, beginning with the
creation of an energy-saving action plan to identify areas of
the business where energy can be saved and implement
measures and strategies to achieve these savings.
Data records and methodology
Metered kWh consumption taken from supplier or landlord
invoices is reported where possible. An exception to this is the
energy consumption at Cranmore Drive, which has been
calculated using manual meter readings. Where no data was
available, energy consumption has been estimated against
CIBSE industry benchmarks from CIBSE Guide F. Equivalent
GHG emissions have been calculated using conversion factors
published by BEIS in 2019 and reported using both location
and market-based methods.
Transport emissions have been calculated based on mileage
expense claim records, applying the average UK split between
petrol and diesel vehicles to estimate relative fuel usage.
Mileage per fuel type was converted into equivalent GHG
emissions using the most recent emissions factors published
by BEIS in 2019, and then divided by the gross Calorific Value
to deduce kWh consumption.
28
Purplebricks Annual Report and Accounts 2020
Governance
DIRECTORS' REPORT
The directors present their annual report on the affairs
of the Group, together with the financial statements
and auditor's report for the year ended 30 April 2020.
The corporate governance statement set out on pages 25-28
The subsequent cash inflow from the sale of the Group’s
forms part of this report.
Business Review
A comprehensive analysis of the Group's business, strategy, as
well as future developments and outlook, is contained in the
strategic report and Chief Executive's statement. The
business review, details of the Group's performance and KPIs
are set out in the Chief Executive's statement and Financial
review. Principal risks and uncertainties are presented on
pages 16 and 17.
Financial risk management objectives and policies
The Group uses financial instruments, comprising cash,
invoice factoring and various items such as trade debtors and
trade creditors that arise directly from operations. The main
risks arising from the Group's financial instruments are
liquidity risk, interest rate risk, credit risk and foreign currency
risk. Detailed information regarding the Group's exposure to
financial risks as well as the financial risk management
strategy used to reduce these risks is set out in note 27 to the
financial statements.
Going concern
In adopting a going concern basis for the preparation of the
financial statements, the directors have made appropriate
enquiries and have considered the Group's business activities,
cash flows and liquidity position as set out on pages 8 and 9
and in note 27 to the financial statements, and the Group's
principal risks and uncertainties as set out on pages 16 and
17.
The directors have taken into account reasonably
possible future economic factors in preparing trading and
Canadian business, of $61.5m Canadian Dollars (c.£36m),
received on 17 July 2020 (subject to further post-closing
adjustments, as referred to in note 31) has further enhanced
the Group’s year-end cash position of £31.0m.
Based on the Group's forecasts, the directors are satisfied that
the Company, and the Group as a whole, have adequate
resources to continue in operational existence for the
foreseeable future. Accordingly, the financial statements have
been prepared on the going concern basis.
Post balance sheet events
On 15 July 2020 the Group completed the sale of its Canadian
business, being all Canadian subsidiaries and the entire Canada
segment, to the Desjardins Group, a Canadian cooperative
financial group. Headline consideration was $60.5m Canadian
Dollars (£35m) adjusted for working capital and debt, to be
verified in line with completion accounts in due course. Part of
the proceeds were allocated to the repayment of intra-Group
debt owed to Purplebricks Group plc.
Engagement with customers and suppliers
For details of how the Group engages with customers and
suppliers, please refer to the Section 172 statement on pages
21-22.
Research and development
During FY2020, the Group’s development of its web-based IT
platform continued to increase the services available to
customers and support the work of our people at the centre
and in the field. Total expenditure in the period recognised in
the income statement was £3.5m with a further £2.1m
capitalised (2019: expenditure of £3.5m and capitalisation of
cash flow forecasts covering the period to 31 August 2021. This
£2.6m).
assessment was carried out initially without taking account of
the cash inflow arising from the sale of the Group’s Canadian
business, but did take into consideration sensitivity analysis
with regard to the forecast volume of instructions, the variable
nature of significant elements of the Group’s cost base and
steps which could be taken to further mitigate costs if
required. Mitigations include a reduction in marketing
expenditure and reductions in expenditure in the Group’s
contact centre and support functions.
In satisfying themselves that the going concern basis is
appropriate, the directors also took into account recent
practical experience and steps which were taken with regard
to cost control and cash preservation due to the COVID-19-
related macro-economic conditions leading up to and
following the year-end. Even in the situation of a severe
downside sensitised fall in revenues that is in excess of the
directors’ realistic expectations, and before taking any such
mitigating actions, the Group expects to maintain a position of
liquidity throughout the forecast period to 31 August 2021.
Purplebricks Annual Report and Accounts 2020
29
Governance
DIRECTORS’ REPORT continued
Dividend
Subsidiaries
No dividends were paid in the year and there are none
Information about the subsidiaries is provided at note 18 to
recommended (FY 2019: £nil).
the financial statements.
Political donations
Investor relations
In line with the Company’s policy, neither the Company nor
Primary responsibility for effective communication with
the Group made any political donations during the year.
shareholders lies with the Chairman, while the Board as a
Disclosure of information to auditor
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 to make themselves aware of any relevant
audit information and to establish that the Company's auditor
is aware of that information.
Employees
The Group's policy of providing employees with information
about the Group continues and regular meetings are held
between management and employees to allow exchanges of
information and ideas. As the Group grows, the Group
continues to consider ways to encourage the further
whole is committed to maintaining good communications
with the market based on the mutual understanding of
objectives of the Group.
The Chairman, Chief Executive Officer and Chief Financial
Officer engage in regular dialogue with institutional
shareholders to develop an understanding of their views. This
is communicated back to, and discussed with, the Board. The
Investor Relations function also provides regular reports to the
Board on related matters, issues of concern to investors, and
analysts' views and opinions. The Company endeavours to
answer all queries raised by shareholders promptly.
Presentations given to analysts and investors covering the
annual and half year results, along with all results and other
regulatory announcements as well as further information for
investors, are included on the investor relations section of the
Company's website at www.purplebricksplc.com. Additional
shareholder information is also set out on page 94.
involvement of employees in the Group's performance.
Shareholders are able to contact the Company through the
The Group gives every consideration to applications for
employment made 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.
Company Secretary or Investor Relations. Simon Downing, our
Senior Independent Director, serves as an additional point of
contact for shareholders should they feel that any concerns
are not being addressed properly through the normal
channels. He may be contacted through the Company
Secretary.
Shareholders are also encouraged to participate in the
Company's Annual General Meeting, at which the Chairman
presents the key highlights of the Group's performance. The
Further details on employee engagement can be found in the
Board will be available at the 2020 Annual General Meeting to
corporate responsibility section on page 18-19.
answer questions from shareholders.
Substantial shareholdings
At 6 July 2020, the Company had been notified in accordance with the Disclosure and Transparency Rules of the FCA, or was aware, that
the following held, or were beneficially interested in, 3% or more of the voting rights in the Company's shares at that date:
Shareholder name
Axel Springer SE
Jupiter Asset Management
JNE Partners
Seneca Investment Managers
Inflection Point
Hargreaves Lansdown Asset Management
Paul & Sharon Pindar
Number of shares
% shareholding
81,384,638
50,409,958
22,620,000
18,227,367
14,670,000
12,363,475
10,827,227
26.53%
16.43%
7.37%
5.94%
4.78%
4.03%
3.53%
30
Purplebricks Annual Report and Accounts 2020
Governance
DIRECTORS’ REPORT continued
Directors’ remuneration report
The Remuneration Committee sets the overall policy on
Service contracts and letters of appointment
remuneration and other terms of employment of directors.
The Committee aims to ensure the remuneration package of
the executive directors should be sufficiently competitive to
attract, retain and motivate directors of the right calibre to
achieve the Company's objectives without making excessive
payments. In 2019, following the appointment of a new Chief
Executive Officer, the Remuneration Committee put in place a
The Company's policy is for all of the Executive directors to
have 12-month rolling service contracts. All non-executive
directors are salaried. 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 below and in note 9 to the
remuneration plan for the executive team comprising a fixed
financial statements.
salary, a variable annual bonus based on achieving certain
short-term targets, and a long-term share options scheme
linked to performance targets over a three-year period (the
Company policy on external appointments
Performance Share Plan (“PSP”)). The provisions of the plan
The Company recognises that its directors are likely to be
incorporate longer-term objectives to ensure the executive
invited to become non-executive directors of other companies
team is incentivised to maximise profitability and shareholder
and that exposure to such non-executive duties can broaden
return. Details of executive directors’ remuneration and
their experience and knowledge, which will benefit the Group.
awards under the share option schemes are detailed below.
Executive directors are therefore, subject to the approval of
Remuneration for non-executive directors consists of fees for
their services in connection with Board and committee
meetings. Dr Andreas Wiele, the Axel Springer Board member
for the year under review, did not receive a fee for his services.
Basic salary and benefits
Base salaries or fees for each Director are reviewed annually by
the Remuneration Committee, and adjusted where
appropriate to reflect individual performance, changed
responsibilities, market conditions and information from
independent sources on rates of salaries for similar roles and
responsibilities.
Annual bonus
The Company operates a short-term bonus scheme to
incentivise executive directors to meet the financial and
strategic objectives of the business. During the financial year
ended 30 April 2020, a total bonus of £100,000 (2019: £nil) was
awarded to the directors.
Pension
During the year, pension contributions of £12,000 (2019:
£2,000) were paid to Executive Directors. This is detailed in
the table of Directors’ pay below as post employment benefits.
Political donations
In line with the Company’s policy, neither the Company nor
the Group made any political donations during the year.
Taxable benefits
The Directors’ taxable benefits are detailed in the table below.
the Company’s Board, allowed to accept non-executive
appointments, as long as these are not with competing
companies and are not likely to lead to conflicts of interest.
Executive directors are allowed to retain the fees paid.
Share options
The Remuneration Committee is responsible for awarding
options over ordinary shares to executive directors and certain
senior managers under the employee and licensee share
option schemes (CSOP) and Performance Share Plan (PSP).
Following a review of executive director and senior team
incentives by the Remuneration Committee, a new long-term
incentive plan, Performance Share Plan (PSP), linked to
longer-term performance metrics, was introduced in July
2019. The PSP is intended to offer long-term incentives to
directors and senior management as the Remuneration
Committee believes that the potential for share ownership
and participation in the growing value of the Company
increases the commitment and loyalty of directors and
employees.
The vesting of awards made in FY2020 will depend on
performance measured over a three-year period to 30 April
2022, with 50% of the vesting subject to achievement of an
EBITDA target and 50% to a Total Shareholder Return (TSR)
target. These targets are summarised below.
• TSR – measured as relative TSR against FTSE AIM 100
constituents. Vesting range of full vesting for upper quartile
performance, and threshold vesting (25% of award) vesting
for median, with straightline vesting between threshold and
maximum. TSR is measured for three years from the date of
award and using a three-month averaging period at both
the beginning and end of the period
• EBITDA - measured as adjusted Group EBITDA in FY2022.
25% of awards vest for achieving threshold performance,
with straightline vesting between threshold and maximum.
Purplebricks Annual Report and Accounts 2020
31
Governance
DIRECTORS’ REPORT continued
Prior to the introduction of the PSP, the Company operated traditional employee and licensee share option schemes (CSOP). The
vesting conditions for CSOP are based on future service from the date of grant, with between 25% and 33% of the options vesting on or
after either the 12 or 24 month anniversary of the grant, and further options vesting every three months thereafter, so that options vest
in full on the 48-month anniversary of the date of grant to the employee or the licensee. Some use of CSOP may continue to be made
for employees below board-level.
Details of the options to purchase ordinary shares in the Company granted to the executive directors are set out below. Details of share-
based payments are below and included in note 10 to the financial statements.
Directors’ share options
Director
Vic Darvey
James Davies1
Share option
scheme
CSOP
PSP
CSOP
PSP
Vesting
period
4 years
3 years
4 years
3 years
Outstanding
Interest at
1 May 2019
700,000
Options
granted
during
the year
-
-
1,050,000
1,500,000
-
-
500,000
Options
Outstanding
exercised
during
the year
-
-
-
-
interest
at 30 April
2020
700,000
1,050,000
1,500,000
500,000
1 As announced on 17 April 2020, James Davies resigned as CFO following the end of the financial year. Accordingly, the share awards held by James Davies
and shown above have now lapsed.
Directors’ emoluments
The figures below represent emoluments earned by directors during the relevant financial year and relate to the period of each
director’s membership of the Board. Benefits incorporate all benefits assessable to tax arising from employment by the Group.
Year ended 30 April 2020
Executive directors
Michael Bruce
Vic Darvey
James Davies
Non-executive directors
Paul Pindar
Adrian Blair
Simon Downing
Michael Wroe
Salary or
fees and
benefits
£’000
Post
employment
benefits
£’000
Bonus
£’000
217
346
250
103
54
54
38
-
-
100
-
-
-
-
1,062
100
-
10
-
-
1
-
-
11
Total
£’000
217
356
350
103
55
54
39
1,173
Michael Bruce stepped down from his role as an executive director of the Group on 7 May 2019 and received a one-off payment of
£200,000 which is reflected in costs for the year ended 30 April 2020. Michael Wroe stepped down from his role as non-executive
director on 12 December 2019.
No director exercised share options during the year.
The table does not include the IFRS2 charges in respect of directors’ options. Full details of directors’ emoluments and IFRS2 charges
are contained in note 9.
Andy Botha was appointed as Chief Financial Officer on 11 May 2020. Mr Botha’s base salary in FY2021 will be £300,000 and he will
receive a 3% of base salary annual pension contribution. Mr Botha will also participate in the Company’s annual bonus plan and LTIP in
FY2021.
On his departure from the Company, Mr Davies’ outstanding share awards lapsed in full. As his departure was after the year end Mr
Davies’ IFRS2 credit will be recognised in FY 2021. Pursuant to the terms of Mr Davies’ service agreement, he was paid base salary while
serving notice with the company until 31 July 2020.
32
Purplebricks Annual Report and Accounts 2020
Governance
DIRECTORS’ REPORT continued
Directors and directors’ interests
The directors who held office during the financial year ending 30 April 2020 and up to the time of signing are set out below:
Adrian Blair1
Andy Botha (appointed 11 May 2020)
Michael Bruce (resigned 7 May 2019)
Stephanie Caspar 1 (appointed 27 July 2020)
Vic Darvey (appointed 7 May 2019)
James Davies (resigned 11 May 2020)
Simon Downing 1
Paul Pindar1
Andreas Wiele 1 (resigned 24 June 2020)
Michael Wroe 1 (resigned 12 December 2019)
1 Denotes non-executive director
Directors’ shareholding
The interest of the directors in the shares of the Company are set out below:
30 April 2020
30 April 2019
Shares
Options
Shares
Vic Darvey
James Davies 1
Adrian Blair 2
Simon Downing 2
Paul Pindar 3
Michael Bruce 4
-
-
1,750,000
2,000,000
33,675
133,500
10,827,227
-
-
-
-
-
1
James Davies resigned as director on 11 May 2020 and his outstanding share awards lapsed in full
2 Denotes non-executive directors
3 Paul Pindar’s shareholding includes those of his wife Sharon Pindar
4 Michael Bruce resigned as director on 7 May 2019. His shareholding included those of his wife Isabel Bruce
This directors' report was approved and signed on behalf of the Board.
Vic Darvey Chief Executive Officer
Andy Botha Chief Financial Officer
31 July 2020
31 July 2020
-
-
33,675
133,500
10,827,227
Options
700,000
1,500,000
-
-
-
33,386,072
2,430,551
1 Denotes non-executive Director
Purplebricks Annual Report and Accounts 2020
33
Financial Statements
INDEPENDENT AUDITOR’S REPORT
Independent auditor’s report to
the members of Purplebricks
Group plc
Report on the audit of the financial statements
OPINION
In our opinion:
the financial statements of Purplebricks Group plc (the
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further
‘parent company’) and its subsidiaries (the ‘group’) give a
described in the auditor’s responsibilities for the audit of the
true and fair view of the state of the group’s and of the
parent company’s affairs as at 30 April 2020 and of the
group’s loss for the year then ended;
the group financial statements have been properly
prepared in accordance with International Financial
financial statements section of our report.
We are independent of the group and the parent company in
accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as
Reporting Standards (IFRSs) as adopted by the European
applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Union;
the parent company financial statements have been
properly 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.
We have audited the financial statements which comprise:
the consolidated statement of comprehensive income;
the consolidated and parent company balance sheets;
the consolidated and parent company statements of
changes in equity;
the consolidated and parent company cash flow statement;
and
the related notes 1 to 31.
The financial reporting framework that has been applied in
their preparation is applicable law and 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.
34
Purplebricks Annual Report and Accounts 2020
Financial Statements
INDEPENDENT AUDITOR’S REPORT continued
SUMMARY OF OUR AUDIT APPROACH
Key audit matters
The key audit matters that we identified in the current year were:
• Valuation of deferred income for the UK component
• Valuation of goodwill in relation to Canada
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
The materiality that we used for the group financial statements was £1.7 million, which was determined on
the basis of 1.5% of group revenue from total operations.
The group audit team performed a full scope audit of the parent company and Canada component
and an audit of specified account balances for the discontinued operations in the US and Australia in
the year.
The overall scope of our audit resulted in us performing audit procedures over 99% of group revenue,
90% of group expenditure, (including trading losses from joint ventures), and 99% of group net assets.
Significant
changes in our
approach
As a result of the recent and ongoing global pandemic, Covid-19 has led to uncertainty around consumer
behaviours and the future economic activity of consumers. We recognise that this has led to increased
judgement around the future activity levels in the housing market and the Purplebricks business.
Consequently, we have included a new key audit matter and identified an associated significant risk
associated to the valuation of goodwill in relation to the Canadian business.
Due to Purplebricks also making the decision in the year to close operations in both the US and Australia,
the group audit team completed the audit of the current year income and expenditure associated with
discontinued operations disclosures. In the prior year, component auditors completed the audit of
specified account balances for the Australian business and the group audit team completed the audit of
specified account balances for the US.
CONCLUSIONS RELATING TO GOING CONCERN
We are required by ISAs (UK) to report in respect of the following matters where:
the directors’ use of the going concern basis of accounting in preparation of the financial statements is not
appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may
cast significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern
basis of accounting for a period of at least twelve months from the date when the financial statements are
We have nothing
to report in
respect of
these matters.
authorised for issue.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Last year our report contained two key audit matters which are not included in our report this year: accounting for the acquisition of
DuProprio, and impairment of investments and intercompany receivables held by the parent company. We have assessed each of
these items during the course of the audit, and concluded that these were not key audit matters in the current period. In addition,
the key audit matter for the valuation of deferred income has been revised to only focus on the UK component following the closure
of Australian business in the year.
Purplebricks Annual Report and Accounts 2020 35
Financial Statements
INDEPENDENT AUDITOR’S REPORT continued
Valuation of deferred income for the UK component
Key audit
matter description
In applying IFRS 15, the group have concluded that instruction revenues must be spread over the average
period taken to sell a property. Accounting estimates are used to determine this average sales period. This is
calculated based on the expected period of time from instruction to completion of a sale, using data from
instructions received in the first 6 months of the current year; and is adjusted for any outliers in that
population (such as properties listed for more than 12 months, or properties where Purplebricks were
instructed but the property has not yet been published on the website).
In calculating the deferred income as at 30 April 2020, the group have extended the period over which
revenue is recognised to reflect the uncertainty in the UK housing market at the balance sheet date due to
Covid-19. This has extended the average period over which services are provided, and hence revenue is
recognised, by 35% compared to the prior year, which has resulted in higher proportion of revenue from open
instructions being deferred.
As detailed in note 2.5, instruction revenue in the UK is recognised using an output method over time, being
the period from instruction to sale of the property on a straight line basis.
Judgement has been used to determine the period over which to recognise instruction revenue, which has
been disclosed as a key source of estimation uncertainty in note 3.3 to the financial statements. The
performance measure over which revenue is recognised is based on the expected time taken from
instruction of a new property until the point at which a sale completes. This expectation is set with reference
to historical experience, and the increased uncertainty of the performance of the UK housing market as at 30
April 2020 due to Covid-19. All UK property sales were postponed between 26 March 2020 and 13 May 2020
due to restrictions put in place by the UK Government in response to the pandemic, which has impacted the
expected average time from instruction to completion for a transaction compared to the prior period. The
impact of Covid-19 has increased the risk we have identified in relation to this key audit matter, as there is
increased estimation uncertainty over the average time taken from instruction to completion compared to
the prior year.
The measure of performance used has been determined on a portfolio basis, using the average time taken for
a property sale to complete, which is described in the accounting policies section in pages 48 to 59.
Our procedures involved:
• testing the key IT controls over key systems used to retain sales information and management review
controls over the review of the deferred revenue calculation. We identified that the management review
controls in relation to the review of the calculation of the deferred revenue balance were not sufficiently
precise for us to be able to rely on these controls as part of our audit;
• assessing the appropriateness of management’s consideration of the impact of Covid-19 in determining
the expected average period for properties to sell, comparing this to market data and to the business’s
performance post year end;
• using internal data analytics specialists who analysed the underlying data used to calculate the average
period taken to sell a property in the UK and developed an independent expectation of the value of
deferred income; and
• assessed the appropriateness of the disclosures made regarding the level of estimation uncertainty in
relation to the average days service used to calculate the value of deferred revenue
How the scope
of our audit
responded to the
key audit matter
Key observations
Based on our work we are satisfied that the accounting for deferred income is in line with accounting
standards and is materially appropriate.
36
Purplebricks Annual Report and Accounts 2020
Financial Statements
INDEPENDENT AUDITOR’S REPORT continued
Valuation of goodwill in relation to Canada
Key audit
matter description
As part of the business combination accounting in respect of the acquisition of the Canadian component,
which took place in 2018, the group held goodwill of £16.9m on the group balance sheet at 30 April 2020.
Assessment of the recoverable amount, being the higher of fair value less costs of disposal and value-in-use,
requires judgement around future revenue and cashflows of the CGU. The key assumptions in calculating the
value-in-use are forecasted growth in the number of instructions, growth in average revenue per instruction,
improvements in gross margins, long term growth rate and the discount rate to be applied.
Following the outbreak of Covid-19 in March 2020 there has been significant operational disruption which
presents a threat for many businesses. This has had a knock-on impact on the housing market in Canada
which resulted in a decline in revenues and significant uncertainty as to when, of if, activity levels will return
to pre-Covid levels.
This resulted in increased estimation uncertainty in the assessment of the value- in-use of the Canadian
business at the annual impairment testing date of 30 April 2020. Management have disclosed the estimates
used to determine the value in use in note 18 to the financial statements.
Subsequent to the year end, as disclosed in note 31, the group reached an agreement to sell the Canadian
business for £35m. This further supports the conclusion that no impairment should be recognised in the
financial statements as at 30 April 2020.
Our procedures involved:
• obtaining an understanding of the key controls over the group’s forecasting process and goodwill
impairment review. We identified that the management review controls in relation to the review of the
value-in-use calculation in the annual testing of goodwill were not sufficiently precise for us to be able to
rely on these controls;
• working with our valuation specialists to assess and challenge the discount rates used by management
against appropriate valuation methodology;
• evaluating and challenging the Canadian CGU’s cash flow forecasts based on historical forecasting accuracy
and external data (i.e. market growth reports) to substantiate management’s growth forecasts, in particular
considering each of the key assumptions noted above;
• assessing the formulaic and mechanical accuracy of management’s impairment model;
• assessing the sensitivity of the Canada CGU to key inputs and reviewing the impairment disclosures against
the requirements of IAS 36 – Impairment of Assets; and.
• considering the additional evidence gained from the sale of the Canadian business on 15 July 2020.
How the scope
of our audit
responded to the
key audit matter
Key observations
Based on the work performed, we concur with the directors’ conclusions that the carrying value of goodwill is
appropriate.
Purplebricks Annual Report and Accounts 2020 37
Financial Statements
INDEPENDENT AUDITOR’S REPORT continued
OUR APPLICATION OF MATERIALITY
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions
of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work
and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
£1.7 million (2019: £2.0 million)
£1.4 million (2019: £1.6 million)
Basis for
determining
materiality
We set materiality for the current year at
The materiality for the Purplebricks Group plc (the
1.5% of group revenue from total
operations (2019: 1.5% of revenue).
parent company) audit was capped at 80% (2019:
78%) of group materiality on the basis of the relative
size of this component to the group as a whole. This
represents 1.7% (2019: 1.8%) of revenues generated by
the company.
Rationale for
the benchmark
applied
We consider revenue to be the most appropriate
The UK business is the largest trading component
benchmark. The group remains loss making and
of the group. Consistent with our group approach
therefore revenue was considered to be the most
to materiality, we consider revenue to be the most
representative benchmark to use. The directors
appropriate benchmark due to the low levels of
also deem revenue growth to be one of their key
reported profits for the company in the period.
indicator when assessing the performance of the
The directors also deem revenue growth to be
group.
their key indicator when assessing the
performance of the company and the
components of the group.
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set at 60%
of group materiality for the 2020 audit (2019: 60%). In determining performance materiality, we considered the following factors:
the quality of the control environment and our ability to rely on certain IT controls over the completeness and accuracy of revenue as
well as our inability to rely on manual review controls;
the impact of the closure of activities in the US and Australia in the period; and
the level of uncorrected audit adjustments identified in the audit for the year ended 30 April 2019.
We have reported to the Audit Committee all audit differences in excess of £85,000 (2019: £101,000), as well as differences below that
threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters
that we identified when assessing the overall presentation of the financial statements.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our group audit was scoped by obtaining an understanding of the group and its environment, including group-wide controls, and
assessing the risks of material misstatement at the group level. Based on that assessment, we focused our group audit scope on the
consolidation at the parent company level (it being the main trading business in the UK) and the group’s overseas business segments in
the US, Australia and Canada.
Canada
The Canadian component accounts for 26% of the group’s revenue and was subject to a full scope audit using a component materiality
of £1.0 million (2019: £1.1 million). The component auditor in Canada, who was directed and supervised by the group audit team,
performed the audit of the Canada component.
Australia and US
The Australian and US components in aggregate account for 5% of the total revenue from continuing and discontinued operations and
were subject to specified audit procedures performed by the group audit team using a component materiality of £0.6 million (2019: £0.8
million). As these businesses were discontinued in the current financial year, the group audit team performed specified audit procedures
around account balances in the period of wind-down of operations, associated closure costs and the related disclosures within the
financial statements.
38
Purplebricks Annual Report and Accounts 2020
Financial Statements
INDEPENDENT AUDITOR’S REPORT continued
Parent company and consolidation
The parent company accounts for over 68% of the group’s revenue and was subject to a full scope audit using component materiality of
£1.4 million, which was performed by the group audit team. At the parent company level we also tested the consolidation process and
carried out analytical procedures to confirm our conclusion that there were no significant risks of material misstatement in the
aggregated financial information of the remaining components not subject to audit or audit of specified account balances.
Overall assessment of the group audit scope
The overall scope of our audit resulted in us performing audit procedures over 99% of group revenue, 90% of group expenditure,
(including trading losses from joint ventrues), and 99% of group net assets.
As a business, Purplebricks Group plc is extremely reliant on technology. Therefore effective technology controls are important not just
to address financial risks, but also for other areas such as operational, regulatory and reputational risk. Given the high volume, low value
nature of the group’s transactions, reliance on the IT control environment is a fundamental part of the audit approach.
We relied on certain IT controls over instruction revenue for the UK component. Our assessment of the UK IT control environment
included general IT controls (such as user access and IT change management) and automated controls (such as appropriate
configuration of tariffs) only in relation to systems which impacted revenue recognition for the UK component.
Overall, whilst key general IT controls have been working effectively across the in-scope financial systems, we identified:
Exceptions in general IT controls on financial reporting systems; and
Opportunities to strengthen the control environment through implementing controls in line with documented policy requirements.
Management have provided sufficient mitigating evidence and/or performed adequate mitigating procedures to address the identified
IT risks for the purposes of the financial statement audit.
We have performed a fully substantive audit over all other areas of the financial statements and for instruction revenue for all other
components as we were unable to rely on controls as we have not been able to obtain detailed evidence of the controls occurring in the
period or found that the controls do not fully address our identified risk of material misstatement.
Due to Covid-19 related travel restrictions, the group audit team were unable to visit the Canadian component. However, we included
the component audit team in our team briefing, discussed their risk assessment, reviewed documentation of the findings from their
work, held regular discussions in advance of and throughout the audit and joined the component audit close meeting.
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
We have nothing
to report in
respect of
these matters.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic
alternative but to do so.
Purplebricks Annual Report and Accounts 2020 39
Financial Statements
INDEPENDENT AUDITOR’S REPORT continued
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org. uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Report on other legal and regulatory requirements
OPINIONS 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 the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements..
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course
of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
We have nothing to
report in respect of
these matters.
• 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.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of
directors’ remuneration have not been made.
We have nothing to
report in respect of
these matters.
USE OF OUR REPORT
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.
Andrew Halls FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Birmingham, UK
31 July 2020
40
Purplebricks Annual Report and Accounts 2020
Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 APRIL 2020
Revenue
Cost of Sales
Gross profit
Administrative and establishment expenses
Marketing costs
Share of results of joint venture
Operating loss
Finance income
Finance expense
Loss on ordinary activities before taxation
Taxation on loss on ordinary activities
Loss from continuing operations
Loss from discontinued operations
Loss for the year
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations
Total other comprehensive income
Total comprehensive loss
Earnings per share
From continuing operations
Basic and diluted loss per share
Total including discontinued operations
Basic and diluted loss per share
Note
6
19
8
13
14
11
7
12
12
2020
£m
111.1
(43.4)
67.7
(45.5)
(28.8)
2019
£m
113.8
(44.4)
69.4
(36.3)
(34.1)
(2.8)
(0.5)
(9.4)
(1.5)
0.5
(4.3)
(13.2)
0.8
(4.2)
(4.9)
1.7
1.3
(11.5)
(7.7)
(19.2)
(3.6)
(51.3)
(54.9)
(0.1)
(0.1)
(0.1)
(19.3)
(0.1)
(55.0)
(4)p
(6)p
(1)p
(18)p
The accompanying accounting policies and notes form an integral part of these financial statements.
Comparatives have been restated to show separately the results of continuing and discontinued operations – see note 2.2
Comparative figures have not been restated for the adoption of IFRS 16 at 1 May 2019 – see note 2.
All losses and other comprehensive income are attributable to equity shareholders of the parent.
Purplebricks Annual Report and Accounts 2020 41
Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 APRIL 2020
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Investment in joint venture
Deferred tax asset
Current assets
Tax receivable
Trade and other receivables
Contract assets – accrued income
Contract assets – prepaid cost of sales
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Contract liabilities - deferred income
Provisions
Borrowings
Lease liabilities
Net current assets
Total assets less current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Lease liabilities
Net assets
Equity
Share capital
Share premium
Share-based payments reserve
Foreign exchange reserve
Retained earnings
Total equity
Note
2020
£m
Restated1
2019
£m
15
16
17
19
11
20
20
20
23
21
21
21
21
22
21
11
22
24
25
26
26
19.5
19.2
3.5
12.5
9.0
63.7
0.1
10.2
5.3
5.3
31.0
51.9
19.5
21.9
2.0
10.7
7.1
61.2
1.2
11.4
9.7
6.3
62.8
91.4
115.6
152.6
(11.8)
(14.6)
(0.4)
(0.1)
(0.7)
(27.6)
(25.0)
(19.4)
-
-
-
(44.4)
24.3
47.0
88.0
108.2
(0.1)
(4.4)
(1.4)
(5.9)
-
(4.5)
-
(4.5)
82.1
103.7
3.1
177.4
6.9
(1.8)
(103.5)
82.1
3.0
177.4
8.6
(0.5)
(84.8)
103.7
These financial statements were approved and authorised for issue by the Board of Directors on 31 July 2020 and were signed on its
behalf by:
Vic Darvey Director
Andy Botha Director
Company registration number 08047368
The accompanying accounting policies and notes form an integral part of these financial statements.
1 See note 20
42
Purplebricks Annual Report and Accounts 2020
Financial Statements
COMPANY STATEMENT OF FINANCIAL POSITION
AT 30 APRIL 2020
Non-current assets
Intangible assets
Property, plant and equipment
Investment in subsidiaries
Investment in jointly controlled entities
Amounts owed by group undertakings
Deferred tax asset
Current assets
Tax receivable
Trade and other receivables
Contract assets – accrued income
Contract assets – prepaid cost of sales
Cash and other cash equivalents
Total assets
Current liabilities
Trade and other payables
Provisions
Contract liabilities - deferred income
Lease liabilities
Net current assets
Total assets less current liabilities
Non current liabilities
Lease liabilities
Net assets
Equity
Share capital
Share premium
Share-based payments reserve
Retained earnings
Total equity
Note
2020
£m
Restated1
2019
£m
16
17
18
19
20
11
20
20
20
23
21
21
21
22
3.6
1.4
31.6
15.8
6.0
7.1
65.5
-
5.5
5.3
5.1
28.0
43.9
4.4
0.8
31.9
11.2
-
6.1
54.4
0.3
5.4
8.2
5.6
57.6
77.1
109.4
131.5
(8.1)
(0.4)
(13.0)
(0.3)
(21.8)
(13.5)
-
(14.7)
-
(28.2)
22.1
48.8
87.6
103.3
22
(0.5)
-
24
25
26
87.1
103.3
3.1
177.4
6.9
(100.3)
87.1
3.0
177.4
8.6
(85.7)
103.3
The Company reported a loss for the financial year ended 30 April 2020 of £15.2m (2019: loss of £92.5m)
These financial statements were approved and authorised for issue by the Board of Directors on 31 July 2020 and were signed on its
behalf by:
Vic Darvey Director
Andy Botha Director
Company registration number 08047368
The accompanying accounting policies and notes form an integral part of these financial statements.
1 See note 20
Purplebricks Annual Report and Accounts 2020 43
Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2020
At 1 May 2019
Exercise of options
Tax in respect of share options
Share-based payment charge
Transactions with owners
Loss for the year
Exchange differences on
translation of foreign operators
Total comprehensive loss
Share
capital
£m
3.0
0.1
-
-
0.1
-
-
-
Share
premium
£m
177.4
-
-
-
-
-
-
-
Share-based
payment
reserve
£m
Foreign
exchange
reserve
£m
Retained
earnings
£m
Total equity
£m
8.6
(0.4)
-
(1.3)
(1.7)
-
-
-
(0.5)
(84.8)
103.7
-
-
-
-
-
(1.3)
0.4
0.2
-
0.6
(19.3)
-
0.1
0.2
(1.3)
(1.0)
(19.3)
(1.3)
(1.3)
(19.3)
(20.6)
At 30 April 2020
3.1
177.4
6.9
(1.8)
(103.5)
82.1
FOR THE YEAR ENDED 30 APRIL 2019
At 1 May 2018
Exercise of options
Tax in respect of share options
Share-based payment charge
Transactions with owners
Loss for the year
Exchange differences on
translation of foreign operators
Total comprehensive loss
Share
capital
£m
3.0
-
-
-
-
-
-
-
Share
premium
£m
Share-based
payment
reserve
£m
Foreign
exchange
reserve
£m
Retained
earnings
£m
176.4
1.0
-
-
1.0
-
-
-
4.6
(0.3)
-
4.3
4.0
-
-
-
(0.4)
(33.4)
-
-
-
-
-
(0.1)
0.3
3.2
-
3.5
(54.9)
-
Total equity
£m
150.2
1.0
3.2
4.3
8.5
(54.9)
(0.1)
(0.1)
(54.9)
(55.0)
At 30 April 2019
3.0
177.4
8.6
(0.5)
(84.8)
103.7
44
Purplebricks Annual Report and Accounts 2020
Financial Statements
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2020
At 1 May 2019
Exercise of options
Tax in respect of share options
Share-based payment credit
Transactions with owners
Loss for the year
Total comprehensive loss
At 30 April 2020
FOR THE YEAR ENDED 30 APRIL 2019
At 1 May 2018
Exercise of options
Tax in respect of share options
Share-based payment charge
Transactions with owners
Loss for the year
Total comprehensive loss
At 30 April 2019
Share
capital
£m
3.0
0.1
-
-
0.1
-
-
3.1
Share
capital
£m
3.0
-
-
-
-
-
-
Share
premium
£m
177.4
-
-
-
-
-
177.4
Share
premium
£m
176.4
1.0
-
-
1.0
-
-
3.0
177.4
Share-based
payment
reserve
£m
8.6
(0.4)
-
(1.3)
(1.7)
-
-
6.9
Retained
earnings
£m
(85.7)
0.4
0.2
-
0.6
(15.2)
(15.2)
(100.3)
Share-based
payment
reserve
£m
Retained
earnings
£m
4.6
(0.3)
-
4.3
4.0
-
-
8.6
3.3
0.2
3.3
-
3.5
(92.5)
(92.5)
(85.7)
Total
equity
£m
103.3
0.1
0.2
(1.3)
(1.0)
(15.2)
(15.2)
87.1
Total
equity
£m
187.3
0.9
3.3
4.3
8.5
(92.5)
(92.5)
103.3
Purplebricks Annual Report and Accounts 2020 45
Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 APRIL 2020
Loss for the year after taxation
Adjustments for:
Amortisation of intangible assets
Depreciation of tangible fixed assets
Impairment of intangible assets
Impairment of tangible fixed assets
Share-based payment (credit) / charge
Gain on lease modification
Credit to loss provision
Increase in provisions
Interest income
Interest expense
Share of result of joint venture
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
Cash utilised in operations
Taxation received / (paid)
Interest paid
Net cash outflow from operating activities
Investing activities
Purchase of property, plant and equipment
Development expenditure capitalised
Purchase of intangible assets
Interest income
Investment in joint venture
Acquisition of subsidiary net of cash acquired
Net cash outflow from investing activities
Financing activities
Lease interest payments
Payments against lease liabilities
Proceeds from external borrowings
Repayments of external borrowings
Proceeds from issue of shares
Net cash (outflow) / inflow from financing activities
Net decrease in cash and cash equivalents
Effect of foreign exchange rates
Cash and cash equivalents at beginning of year
Note
16
17
16
17
10
20
21
13
14
11
17
16
16
13
19
23
23
23
23
24
2020
£m
(19.2)
4.1
1.7
0.5
0.6
(1.3)
(0.1)
(0.4)
0.4
(0.5)
0.2
2.8
(1.7)
(12.9)
7.0
(14.2)
(4.8)
(24.9)
1.0
(0.1)
2019
£m
(54.9)
3.7
0.8
-
-
4.3
-
-
-
(0.8)
0.1
0.5
(1.1)
(47.4)
(6.6)
4.9
1.1
(48.0)
(1.0)
(0.1)
(24.0)
(49.1)
(0.8)
(2.1)
(0.1)
0.5
(4.6)
-
(1.1)
(2.6)
(0.7)
0.7
(11.2)
(27.3)
(7.1)
(42.2)
(0.1)
(0.9)
0.3
(0.1)
0.1
(0.7)
(31.8)
-
62.8
-
-
-
-
1.0
1.0
(90.3)
0.3
152.8
Cash and cash equivalents at the end of the year
31.0
62.8
The accompanying accounting policies and notes form an integral part of these financial statements.
Cash flows relating to discontinued operations are presented within note 7
46
Purplebricks Annual Report and Accounts 2020
Financial Statements
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 APRIL 2020
Loss for the year after taxation
Adjustments for:
Amortisation of intangible assets
Impairment of intangible assets
Impairment of investments in subsidiaries and intercompany receivables
Depreciation
Share-based payment (credit) / charge
Credit to loss provision
Increase in provisions
Interest income
Interest expense
Fair value movement in respect of derivatives
Taxation
Operating cash (outflow) / inflow before changes in working capital
Movement in trade and other receivables
Movement in trade and other payables
Movement in deferred income
Cash outflow / (inflow) from operations
Taxation received
Interest paid
Note
16
16
18
17
20
21
2020
£m
(15.2)
Restated1
2019
£m
(92.5)
2.4
0.5
8.9
0.6
(0.1)
(0.1)
0.4
(0.7)
0.1
-
(0.7)
(3.9)
2.0
(5.3)
(1.7)
(8.9)
0.2
(0.1)
1.9
-
96.9
0.4
2.8
-
-
(0.7)
-
(0.1)
(0.2)
8.5
(3.3)
4.2
1.2
10.6
0.2
-
Net cash (outflow) / inflow from operating activities
(8.8)
10.8
Investing activities
Purchase of property, plant and equipment
Development expenditure capitalised
Purchase of intangible assets
Investment in subsidiaries
Investment in jointly controlled entity
Loans to subsidiaries
Interest income
Acquisition of subsidiary
Net cash outflow from investing activities
Financing activities
Repayments against lease liabilities
Proceeds from issue of shares
Net cash (outflow) / inflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
17
16
16
18
19
23
24
(0.3)
(2.1)
-
(4.6)
(4.6)
(9.8)
0.7
-
(0.5)
(2.6)
(0.1)
-
(11.2)
(59.3)
0.7
(30.9)
(20.7)
(103.9)
(0.2)
0.1
(0.1)
(29.6)
57.6
-
1.0
1.0
(92.1)
149.7
Cash and cash equivalents at the end of the year
28.0
57.6
1 See note 2.2
Purplebricks Annual Report and Accounts 2020 47
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
1. General information
Purplebricks Group plc (the Company) is a public company
limited by shares which is listed on the Alternative Investment
Market of the London Stock Exchange. The company is
incorporated in the United Kingdom and registered in England
and Wales. The address of the Company’s registered office is
Suite 7, First Floor, Cranmore Place, Cranmore Drive, Shirley,
Solihull, West Midlands, B90 4RZ. The Company is primarily
involved in the estate agency business.
2. Summary of significant
accounting policies
2.1 BASIS OF PREPARATION AND CONSOLIDATION
The Group and Company financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS Standards). The financial statements have also
been prepared in accordance with IFRS Standards adopted by
the European Union and therefore the Group financial
statements comply with Article 4 of the EU IAS Regulation.
The Company has taken advantage of section 408 of the
Companies Act and not included its own income statement in
these financial statements.
The consolidated financial statements have been prepared
under the historical cost convention as modified by financial
instruments recognised at fair value.
The consolidated financial statements incorporate the results
and financial position of the Company and entities controlled
by the Company (its subsidiaries) made up to 30 April each
year. Control is achieved when the Company:
has the power over the investee;
is exposed, or has rights, to variable returns from its
involvement with the investee; and
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies
used into line with the Group’s accounting policies.
All intra-group assets and liabilities, equity, income, expenses
and cash flows relating to transactions between the members
of the Group are eliminated on consolidation.
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.
2.2 RESTATEMENT
Discontinued operations
A discontinued operation is a component of the entity which
the Group has decided to close, or which has been disposed of
or which is classified as held for sale and which represents a
separate major line of business or geographical area of
operations. The results of discontinued operations are
presented separately in the statement of comprehensive
income and statement of cash flows. In 2020, the results of the
US and Australian operations have been classified as
discontinued operations. The comparative figures included in
the statement of comprehensive Income and statement of
cash flows in respect of the year ended 30 April 2019 have been
restated accordingly.
Presentation of contract assets
In the current year, contract assets, being accrued income and
prepaid cost of sales, are presented separately on the face of
the statement of financial position. Comparative amounts have
also been separately presented, with a corresponding
reduction in the amounts shown as trade and other
receivables. No restatement of total amounts has occurred.
has the ability to use its power to affects its returns.
See note 20 for more detail.
The Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control
listed above.
Consolidation of a subsidiary begins when the Company
obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, the
results of subsidiaries acquired or disposed of during the year
are included in profit or loss from the date the Company gains
control until the date when the Company ceases to control the
subsidiary.
Profit or loss and each component of other comprehensive
income are attributed to the owners of the Company and to
the non-controlling interests. Total comprehensive income of
the subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the
non- controlling interests having a deficit balance.
48
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
2.3 GOING CONCERN
In adopting a going concern basis for the preparation of
the financial statements, the directors have made appropriate
enquiries and have considered the Group's business activities,
cash flows and liquidity position as set out on pages 6 and 7
and in note 27 to the financial statements, and the Group's
principal risks and uncertainties as set out on pages 16 and 17.
The directors have taken into account reasonably possible
future economic factors in preparing trading and cash flow
forecasts covering the period to 31 August 2021. This
assessment was carried out initially without taking account of
the cash inflow arising from the sale of the Group’s Canadian
business, but did take into consideration sensitivity analysis
with regard to the forecast volume of instructions, the variable
nature of significant elements of the Group’s cost base and
steps which could be taken to further mitigate costs if
required. Mitigations include a reduction in marketing
expenditure and reductions in expenditure in the Group’s
contact centre and support functions.
In satisfying themselves that the going concern basis is
appropriate, the directors also took into account recent
practical experience and steps which were taken with regard
to cost control and cash preservation due to the COVID-19-
related macro-economic conditions leading up to and
following the year-end. Even in the situation of a severe
downside sensitised fall in revenues that is in excess of the
The Group is not party to any leases where it acts as a lessor.
Details of the Group’s accounting policies under IFRS 16 are set
out below, followed by a description of the impact of adopting
IFRS 16.
Accounting policies under IFRS 16 Leases
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all
lease arrangements in which it is the lessee, except for short-
term leases (defined as leases with a lease term of 12 months or
less) and leases of low-value assets. For these leases, the Group
recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease.
The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement
date, discounted by using the rate implicit in the lease. If this
rate cannot be readily determined, the Group uses its
incremental borrowing rate.
The lease liability is presented as a separate line in the
consolidated statement of financial position and is
subsequently measured by increasing the carrying amount to
reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the
lease payments made.
directors’ realistic expectations, and before taking any such
The Group remeasures the lease liability (and makes a
mitigating actions, the Group expects to maintain a position
corresponding adjustment to the related right-of-use asset)
of liquidity throughout the forecast period to 31 August 2021.
whenever:
The subsequent cash inflow from the sale of the Group’s
Canadian business, of $61.5m Canadian Dollars (c.£36m),
received on 17 July 2020 (subject to further post-closing
the lease term has changed, in which case the lease liability
is remeasured by discounting the revised lease payments
using a revised discount rate.
adjustments, as referred to in note 31) has further enhanced the
a lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease
payments using a revised discount rate.
Group’s year-end cash position of £31.0m.
Based on the Group's forecasts, the Directors are satisfied
that the Company, and the Group as a whole, have adequate
resources to continue in operational existence for the
foreseeable future. Accordingly, the financial statements have
been prepared on the going concern basis.
2.4 NEW ACCOUNTING STANDARDS ADOPTED IN
THE YEAR
2.4.1 Implementation of IFRS 16 Leases
The Group has adopted IFRS 16 Leases in these financial
statements from 1 May 2019, using the modified retrospective
approach.
IFRS 16 introduces new or amended requirements with respect
to lease accounting. It introduces significant changes to lessee
accounting by removing the distinction between operating
and finance lease, requiring the recognition of a right-of-use
asset and a lease liability at commencement for all leases,
except for short-term leases and leases of low-value assets. In
contrast to lessee accounting, the requirements for lessor
accounting have remained largely unchanged.
Purplebricks Annual Report and Accounts 2020 49
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
The right-of-use assets comprise the initial measurement of the
Impact on lessee accounting
corresponding lease liability, and any initial direct costs, less
IFRS 16 changes how the Group accounts for leases previously
lease payments made at or before the commencement day.
classified as operating leases under IAS 17, which were off-
They are subsequently measured at cost less accumulated
balance sheet.
depreciation and impairment losses.
Applying IFRS 16, for all leases (except as noted above), the
Right-of-use assets are depreciated over the shorter period of
Group now recognises right-of-use assets and lease liabilities in
lease term and useful life of the underlying asset. The
the consolidated statement of financial position, initially
depreciation starts at the commencement date of the lease.
measured at the present value of the future lease payments as
The Group does not have any leases that include purchase
described above.
options or transfer ownership of the underlying asset.
The right-of-use assets are presented within the same line item
of the measurement of the right-of-use assets and lease
as that within which the corresponding underlying assets
liabilities whereas under IAS 17 they resulted in the recognition
would be presented if they were owned – for the Group this is
of a lease incentive liability, amortised as a reduction of rental
property, plant and equipment.
expenses on a straight-line basis.
Lease incentives (e.g. rent-free periods) are recognised as part
For short-term leases (lease term of 12 months or less) and
Under IFRS 16, right-of-use assets will be tested for impairment
leases of low-value assets (such as office equipment), the Group
in accordance with IAS 36 Impairment of Assets. This replaces
has opted to recognise a lease expense on a straight-line basis
the previous requirement to recognise a provision for onerous
as permitted by paragraph 6 of IFRS 16. This expense is
lease contracts.
presented within administrative and establishment expenses in
the statement of consolidated income.
Under IFRS 16 the Group recognises depreciation of right-of-
use assets and interest on lease liabilities in the consolidated
Other costs associated with leases, such as maintenance and
income statement, whereas under IAS 17 operating leases
insurance, are expensed as incurred.
previously gave rise to a straight-line expense in other
Approach to transition
operating expenses.
The Group has applied IFRS 16 using the modified retrospective
Under IFRS 16 the Group separates the total amount of cash
approach, without restatement of the comparative figures.
paid for leases that are on consolidated statement of financial
In respect of those leases the Group previously treated as
operating leases, the Group has elected to measure its right-of-
use assets arising from property leases using the approach set
out in IFRS 16.C8(b)(i). Under IFRS 16.C8(b)(i) right-of-use assets
are calculated as if IFRS 16 applied at the lease commencement
position into a principal portion (presented within financing
activities) and interest (presented within operating activities) in
the consolidated statement of cash flows. Under IAS 17,
operating lease payments were presented as operating cash
outflows.
date but discounted using the incremental borrowing rate at
Areas of judgement
the date of initial application. The incremental borrowing rate
Significant judgements applied in the adoption of IFRS 16
represents the rate of interest that the Group would have had
included determining the lease term for those leases with
to pay to borrow the funds necessary to obtain an asset of
termination or extension options and determining an
similar value to the right-of-use asset in a similar economic
incremental borrowing rate where the rate implicit in a lease
environment, over a similar term, with similar security.
could not be readily determined.
The Group’s weighted average incremental borrowing rate
Where the Group’s leases include termination options, the
applied to lease liabilities as at 1 May 2019 is 6.4%.
right-of-use assets and lease liabilities assume these are not
exercised. None of the leases in place at 1 May 2019 included
As a practical expedient, the Group has relied on the previous
identification of leases under IAS 17 for all contracts that existed
extension options.
on the date of initial application.
50
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
Financial impact
The application of IFRS 16 to leases previously classified as operating leases under IAS 17 resulted in the recognition of right-of-use assets
and lease liabilities. Operating lease incentives previously recognised as liabilities have been derecognised and factored into the
measurement of the right-to-use assets and lease liabilities.
The table below sets out the adjustments recognised at the date of initial application of IFRS 16.
GROUP
Non-current assets
Property, plant and equipment
Total impact on assets
Current liabilities
Trade and other payables
Lease liabilities
Non-current liabilities
Lease liabilities
Total impact on liabilities
Impact on retained earnings
As previously reported at 30 April 2019
£m
Impact of IFRS 16
£m
As restated at 1 May 2019
£m
2.0
(25.0)
-
-
2.2
2.2
0.1
(1.0)
(1.3)
(2.2)
-
4.2
(24.9)
(1.0)
(1.3)
Of the total right-of-use assets of £2.2m recognised at 1 May 2019, £2.1m related to leases of property and £0.1m to leases of other
equipment.
The impact on trade and other payables relates to the previously recognised creditor in respect of rent-free periods.
COMPANY
Non-current assets
Property, plant and equipment
Deferred tax asset
Total impact on assets
Current liabilities
Trade and other payables
Lease liabilities
Non-current liabilities
Lease liabilities
Total impact on liabilities
Impact on retained earnings
As previously reported at 30 April 2019
£m
Impact of IFRS 16
£m
As restated at 1 May 2019
£m
0.8
6.1
(13.6)
-
-
0.7
-
0.7
0.1
(0.3)
(0.5)
(0.7)
-
1.5
6.1
(13.5)
(0.3)
(0.5)
Purplebricks Annual Report and Accounts 2020 51
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
The table below presents a reconciliation from operating lease
Consolidated statement of financial position impact
commitments disclosed at 30 April 2019 to lease liabilities
The table below presents a reconciliation of right-of-use assets
recognised at 1 May 2019.
from 1 May 2019 to 30 April 2020.
Group
£m
Company
£m
GROUP
Operating lease commitments disclosed
under IAS 17 at 30 April 2019
Short-term and low-value lease
commitments straight-line expensed
under IFRS 16
Effect of discounting
Service charges included in 30 April 2019
lease commitments
4.5
(0.1)
(0.3)
(1.8)
1.5
-
(0.1)
(0.5)
Lease liabilities recognised at 1 May 2019
2.3
0.9
Consolidated Income statement impact
The application of IFRS 16 resulted in a decrease in other
operating expenses and an increase in depreciation and
interest expense compared to IAS 17.
During the year, the group impaired right-of-use assets relating
to leases held in the US and Australia of £0.6m
During the year ended 30 April 2020, in relation to leases under
IFRS 16 the Group recognised the following amounts in the
consolidated income statement:
Recognised on adoption of
IFRS 16 on 1 May 2019
Additions
Lease modification
Depreciation
Impairment
FX on retranslation
30 April 2020
Property
£m
2.1
0.7
0.1
(0.6)
(0.6)
-
1.7
Other
£m
0.1
-
-
-
-
-
0.1
Total
£m
2.2
0.7
0.1
(0.6)
(0.6)
-
1.8
COMPANY
Property
£m
Other
£m
Total
£m
Recognised on adoption of
IFRS 16 on 1 May 2019
Additions
Lease modification
Depreciation
30 April 2020
0.7
0.1
0.1
(0.3)
0.6
-
-
-
-
-
0.7
0.1
0.1
(0.3)
0.6
Group
£m
Company
£m
The table below presents a reconciliation of lease liabilities
from 1 May 2019 to 30 April 2020.
Depreciation
Impairment of right-of-use assets
Interest expense
short-term and low-value lease expense
0.6
0.6
0.1
0.1
Under IAS 17, the equivalent amounts would have been
Depreciation
Interest expense
Lease expense
£m
-
-
0.9
0.3
-
-
-
£m
-
-
0.3
Cash flow statement impact
Cash flows related to repayment of interest are presented
within operating cash flows. Cash flows related to repayment
of lease liabilities are presented within financing cash flows.
Total cash outflows under leases were £1.0m.
Previously, all cash flows relating to the Group’s lease portfolio
GROUP
Property
£m
Recognised on adoption of
IFRS 16 on 1 May 2019
Additions
Lease modification
Repayments of liabilities
FX on retranslation
30 April 2020
2.2
0.7
-
(0.9)
-
2.0
Other
£m
0.1
-
-
-
-
0.1
COMPANY
Property
£m
Other
£m
Recognised on adoption of
IFRS 16 on 1 May 2019
Additions
Lease modification
Repayments of liabilities
30 April 2020
0.8
0.1
0.1
(0.2)
0.8
-
-
-
-
-
Total
£m
2.3
0.7
-
(0.9)
-
2.1
Total
£m
0.8
0.1
0.1
(0.2)
0.8
were presented within operating cash flows.
2.4.2 IFRIC 23 Uncertainty over Income Tax
Treatments
IFRIC 23 Uncertainty over Income Tax Treatments has been
adopted in the year. The adoption of this standard has had no
significant effect on the Company or Group’s reported financial
performance or position.
2.5 Revenue recognition
Under IFRS 15, revenue is recognised when control of the
services provided passes to the customer. The Group is
required to use judgement in determining the timing of the
transfer of control – at a point in time or over time – for each
52
Purplebricks Annual Report and Accounts 2020
service type.
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
The Group has identified the following significant categories of
are set out within the trade and other payables and contract
contracts with customers:
Instructions to list property for sale
Conveyancing
Brokerage
Lettings – landlord setup services
Lettings – monthly management services
Instructions
The Group is entitled to an instruction fee at the point at which
a property is listed for sale. The Group offers a number of
additional services to customers who list their properties for
sale, including accompanied viewings and premium portal
liabilities note.
The period of service is less than one year and therefore no
deferred revenue held on the consolidated statement of
financial position will be recognised after more than one year.
Costs associated with Instructions revenue include
commissions paid to the Group’s LPEs. This commission is due
at listing of the advertisement for sale. Therefore, these costs
are prepaid and amortised over the average service period.
Unamortised costs at each period end are reported as contract
assets within prepayments, as set out in the trade and other
receivables and contract assets note.
listings, which are typically charged for at the same time as the
Conveyancing
instruction. Most services (for example, advice on property
Where the Group introduces sellers and buyers of properties to
sales strategy) are provided before the listing of the property
one of the Group’s third party partners for conveyancing
advertisement. Some services (for example post-sales support)
services, the Group earns commission for these referrals, which
are only provided to those customers who accept an offer for
is due at completion of the property transaction.
their property.
The Group has taken the judgement that all of the services
which are provided in exchange for the instruction fee and,
In respect of Conveyancing revenue, the Group’s Performance
Obligation is to make the referral to the Group’s third party
partners. Following that referral, the involvement of the Group
where relevant, fees for additional services, represent a single
in the conveyancing process is incidental.
Performance Obligation which is the provision of estate agency
services. The reason for this is that the service of listing for sale
and these additional services are highly interrelated, are
dependent on each other and cannot be purchased separately
by customers, or purchased at all unless those customers have
instructed the Group to list their property for sale.
Therefore, the Group recognises revenue on completion of its
Performance Obligation, at the point of referral. Revenue is
recognised at the expected value of the consideration which
will become due at completion as determined at the point of
referral, calculated by reference to historical data in respect of
sale completion rates. The Group monitors the conversion of
Although the services are priced separately, the overall revenue
cases referred at each reporting date, in order to restrict the
for each contract of this type is attributable to this single
revenue recognised under this method to an amount at which
Performance Obligation and is recognised as the services as a
it is highly probable that reversal will not occur. This approach
whole are provided. Revenue is recognised on an output basis
gives rise to contract assets in the form of accrued income.
over time, as the estate agency services are performed, which
Movements in amounts recognised as accrued income are set
results in straight-line recognition.
out within the trade and other receivables and contract assets
This method reflects the fact that the customer receives
note.
benefit from the Group’s performance as the service is provided
The Group’s assessment is that it is acting as an agent of the
to the customer. The Group has assessed that the starting
third party partner which contracts directly with the seller of
point for provision of the service is the customer’s instruction to
the property and which invoices that seller directly. Therefore,
the Group, and the ending point is either the completion of
it is appropriate for the Group to recognise as revenue only the
sale or the customer’s decision to withdraw from sale.
referral fee earned from the third party partner, which is the
The nature of the Group’s instruction service does not lend
itself to observable outputs such as units produced, or
Brokerage
customer of the Group.
milestones signed off by the customer. In view of the large
The Group also provides, in parts of Canada, Buyside brokerage
number of customers from whom instructions revenue arises,
and Escrow services. These services are provided both to
the Group has taken the view that on a portfolio basis, the most
customers who are sellers and buyers of residential properties,
appropriate method to measure the output of the instruction
with the Performance Obligation in each case being to assist
service provided is on a straight line basis over the time elapsed
the customer in bringing the transaction to a successful
as services are provided.
A key estimate within the Group’s accounting policy for
revenue from instructions is the length of the period over
conclusion. Revenue, in the form of commission, becomes due
in respect of these transactions on successful completion of a
property sale.
which estate agency services are performed. The Group utilises
Revenue in respect of brokerage services is recognised at the
analysis of historical data to ascertain the length of this period,
point at which the Group becomes unconditionally entitled to
which covers both a marketing period and a post-sales support
the consideration. Typically, this point is shortly before the
period. Please refer to the significant estimates and
judgements section below for further information.
Contract assets and liabilities
The approach described above gives rise to contract liabilities
in the form of deferred revenue. Movements in these amounts
completion of the sale of the property, which is the point at
which the Group receives payment. Therefore, the Group
recognises contract assets in the form of accrued income for
amounts due and unpaid. Movements in this accrued income
is set out within the trade and other receivables and contract
assets note.
Purplebricks Annual Report and Accounts 2020 53
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
Lettings landlord setup services
Amounts due from landlords in exchange for monthly
The Group offers Lettings services to landlords in the UK only.
management services are invoiced or deducted from rentals
When the Group enters into contracts with prospective
landlords to list their property to let, the Group’s Performance
Obligation is to provide a series of services aimed at identifying
a suitable tenant for the landlord’s property. These services
received on behalf of landlords as they become due on a
monthly basis. Therefore, no contract assets or liabilities arise
from the provision of this service.
include preparation of an advertisement to let and later
2.6 FUNCTIONAL AND PRESENTATION CURRENCY
support services. Fees charged to landlords in exchange for
identifying a tenant for their rental property become due to the
Group at tenant move in.
The Group has taken the judgement that all elements of the
advertisement service and other support services provided
represent a single Performance Obligation related to the
identification of a suitable tenant who then moves into the
property. This Performance Obligation is the provision of
Landlord Setup Services. The Group has taken the judgement
that an expected value of consideration which will become due
for the Services can be determined using historical data
regarding the proportion of successful tenant move ins and
therefore the that revenue can be reliably estimated before
tenant move in.
All revenue is therefore attributable to this single Performance
Obligation.
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 GBP, which is the functional currency of the
Company, and the presentational currency for the Group.
2.7 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
This revenue is recognised on an output basis over time, as the
recognised directly in equity. For such non-monetary items,
services are performed between the instruction to list the
any exchange component of that gain or loss is also recognised
property to let and tenant move in, which results in straight-
directly in equity.
line recognition.
Costs associated with Landlord Setup Services revenue include
2.8 FOREIGN EXCHANGE ON CONSOLIDATION
commissions paid to the Group’s Local Lettings Experts
(“LLEs”). This commission is due at tenant application, which is
towards the end of the process. Therefore, these costs are
accrued over the period over which Landlord Setup Services
are provided. These costs are reported within accruals.
Contract assets and liabilities
Income recognised in advance of cash received represents a
contract asset in the form of accrued income. Movements in
accrued income are set out within the trade and other
receivables and contract assets note.
Amounts due to LLEs which are recognised in advance of
payment represent a contract liability in the form of accrued
expenses. Movements in accruals are set out within the trade
and other payables and contract liabilities note.
Lettings monthly management services
The Group also enters into contracts with landlords to provide
rent collection and other tenant management services. Fees
charged to landlords in exchange for the ongoing
management of their rental properties become due to the
On consolidation, assets and liabilities of undertakings whose
functional currency is other than sterling are translated into
sterling at the year-end exchange rates. The results of these
undertakings are translated into sterling at average rates of
exchange for the year. Exchange differences arising on
retranslation are recognised through other comprehensive
income in the foreign exchange reserve.
2.9 SEGMENTAL REPORTING
The Group trade is managed as a single division, providing
services relating to the sale and letting of properties. However,
management report to the Board, being the Chief Operating
Decision Maker, using geographical segments being UK,
Australia, USA and Canada. The financial information reviewed
by the Board is materially the same as that reported under
IFRS.
2.10 PENSION BENEFITS
Group monthly in arrears over the period of the tenancy.
The Group operates defined contribution pension
arrangements and accounts for employer pension contribution
expenses on an accruals basis.
In respect of fees charged to landlords in exchange for the
ongoing management of their rental properties, the Group’s
Performance Obligation is to provide management services
over a period of time. Revenue is recognised on a straight line
basis over time as the services are performed.
54
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
2.11 TAXATION
Current tax
The useful lives over which these assets are depreciated are:
Computer equipment – over 3 years
Tax expense recognised in profit or loss comprises the sum of
Fixtures and fittings – over 5 years
deferred tax and current tax not recognised in other
Motor vehicles – over 3 years
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 the profit or loss
Leasehold improvements – over 5 years
2.13 INVESTMENTS IN SUBSIDIARIES
in the financial statements. Calculation of current tax is based
The Company’s investments in subsidiaries are stated at cost
on tax rates and tax laws that have been enacted or
less any provision for impairment.
substantively enacted by the end of the reporting period.
Repayable tax credits relating to research and development
expenditure arising under the HMRC R&D regime for small and
medium sized businesses are recognised within current tax.
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
2.14 JOINT VENTURES
Under IFRS 11 Joint Arrangements, investments in joint
arrangements are classified as either joint operations or joint
ventures. The classification depends on the contractual rights
and obligations of each investor rather than the legal structure
of the joint arrangement.
The Group’s interests in joint ventures are accounted for using
the equity method, after initially being recognised at cost in
the consolidated statement of financial position.
and liabilities are calculated, without discounting, at tax rates
Under the equity method of accounting, investments are
and laws that are expected to apply to their respective period
initially recognised at cost and adjusted thereafter to recognise
of realisation, provided those rates are enacted or substantively
the group’s share of the post-acquisition profits or losses of the
enacted by the end of the reporting period.
investee in profit or loss, and the Group’s share of movements
in other comprehensive income of the investee in other
comprehensive income. Dividends received or receivable from
associates and joint ventures are recognised as a reduction in
the carrying amount of the investment.
When the Group’s share of losses in an equity-accounted
investment equals or exceeds its interest in the entity,
including any other unsecured long-term receivables, the
Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the group and its
associates and joint ventures are eliminated to the extent of
the Group’s interest in these entities. Unrealised losses are also
eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
The carrying amount of equity-accounted investments, which
are held at cost in the Company, is tested for impairment in
accordance with the policy described in note 2.19.
Deferred tax assets are recognised to the extent that it is
foreseeable that the underlying tax loss or deductible
temporary difference will 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.
2.12 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.
Purplebricks Annual Report and Accounts 2020 55
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
2.15 BUSINESS COMBINATIONS AND GOODWILL
2.16 CASH AND CASH EQUIVALENTS
Acquisitions of subsidiaries are accounted for using the
Cash and cash equivalents comprise cash in hand together
acquisition method. The consideration transferred in a
with other short-term, highly liquid deposits which are not
business combination is measured at fair value, which is
subject to any risk of changes in value.
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 the
income statement as incurred.
At the acquisition date, the identifiable assets acquired and the
liabilities assumed are recognised at their fair value at the
acquisition date, except that:
2.17 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 in respect of the customer facing
Purplebricks software platform is recognised in the statement
deferred tax assets or liabilities and assets or liabilities related
of financial position when the Group can demonstrate the
to employee benefit arrangements are recognised and
following:
measured in accordance with IAS 12 Income Taxes and IAS 19
Employee Benefits respectively;
liabilities or equity instruments related to share-based
payment arrangements of the acquiree or share-based
payment arrangements of the Group entered into to replace
share-based payment arrangements of the acquiree are
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.
measured in accordance with IFRS 2 Share-Based Payments
how the intangible asset will generate probable future
at the acquisition date (see below); and
economic benefits.
assets (or disposal groups) that are classified as held for sale
the availability of adequate technical, financial and other
in accordance with IFRS 5 Non-current Assets Held for Sale
resources to complete the development and to use or sell
and Discontinued Operations are measured in accordance
the intangible asset.
with that Standard.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for
the items for which the accounting is incomplete. Those
provisional amounts are adjusted during the measurement
period (see above), or additional assets or liabilities are
recognised, to reflect new information obtained about facts
and circumstances that existed as of the acquisition date that,
if known, would have affected the amounts recognised as of
that date.
Goodwill is measured as the excess fair value of the
consideration transferred over the fair value of the identifiable
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.
net assets acquired. If the total of the consideration
The useful lives over which these assets are amortised are:
transferred, and previously held interest measured at fair value,
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.
Internally generated intangible – straight line over 3 years
Capitalised software – straight line over 3 years
Amortisation is included within administrative expenses.
Goodwill is separately disclosed 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.
56
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
2.18 INTANGIBLE ASSETS ACQUIRED IN A BUSINESS
appropriate, on initial recognition. Transaction costs directly
COMBINATION
Intangible assets acquired in a business combination and
recognised separately from goodwill are initially recognised at
attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised
immediately in profit or loss. See note 26 for further details.
their fair value at the acquisition date (which is regarded as
Financial assets
their cost).
Subsequent to initial recognition, intangible assets acquired in
a business combination are reported at cost if appropriate less
accumulated amortisation and accumulated impairment
losses, on the same basis as intangible assets that are acquired
separately.
The Group has financial assets which are measured at
amortised cost using the effective interest method, less
provision for impairment. Amortisation is presented within
administrative expenses. The Group’s trade and other
receivables fall into this category of financial instruments.
The Group applies the IFRS 9 expected credit loss model. The
expected credit losses on trade receivables are by reference to
The useful lives over which these assets are amortised are:
past default experience of the debtors and an analysis of the
patents and trademarks – straight line over 18 months
customer relationships – straight line over 5 years
Proprietary tech – straight line over 3 years
Certain intangible assets, such as brands, are deemed to have
an indefinite life and are held at cost and not amortised but
rather tested annually for impairment. These assets are
considered to have an indefinite life, given the strength and
durability of the Group’s brands and the level of marketing
support. The nature of the industry we operate in is such that
brand obsolescence is not common, if appropriately supported
by advertising and marketing spend.
Amortisation is included within administrative expenses.
debtors’ current financial position, adjusted for factors that are
specific to the debtors, general economic conditions of the
industry in which the debtors operate and an assessment of
both the current as well as the forecast conditions at the
reporting date.
For trade and other receivables, the amount of credit loss is
measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows
discounted at the financial asset’s original effective interest
rate. The carrying amount of the asset is reduced and the
amount of the loss is recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss
decreases, the reversal of the previously recognised
impairment loss is recognised in profit or loss.
2.19 IMPAIRMENT
Impairment testing of trade receivables is described in note 20.
The carrying amount of the Group’s assets including property,
plant and equipment and intangibles 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.
2.20 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 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
Definition of default
The Group considers the circumstances of each significant
debtor individually in determining an event of default.
However an indicator that a default has occurred is when a
financial asset is more than 90 days past due unless the Group
has reasonable and supportable information to demonstrate
that a more lagging default criterion is more appropriate.
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events
that have a detrimental impact on the estimated future cash
flows of that financial asset have occurred. Evidence that a
financial asset is credit-impaired includes observable data
about the following events:
(a) a breach of contract, such as a default or past due event;
(b) it is becoming probable that the borrower will enter
bankruptcy or other financial reorganisation
Write off policy
Receivables are written off where there is no reasonable
expectation of recovery and enforcement activity has ceased.
Any recoveries made are recognised in profit or loss.
Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the
probability of default, loss given default (i.e. the magnitude of
the loss if there is a default) and the exposure at default. The
assessment of the probability of default and loss given default
is based on historical data adjusted by forward-looking
information.
Purplebricks Annual Report and Accounts 2020 57
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
As for the exposure at default, for financial assets, this is
The credit risk on liquid funds is minimised because the
represented by the assets’ gross carrying amount at the
counterparties are UK banks with high credit-ratings assigned
reporting date, the Group’s understanding of the specific
by international credit-rating agencies.
future financing needs of the debtors, and other relevant
forward-looking information.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
For financial assets, the expected credit loss is estimated as the
allowance for all trade receivables which are not subject to the
difference between all contractual cash flows that are due to
receivable sale arrangement.
the Group in accordance with the contract and all the cash
flows that the Group expects to receive, discounted at the
original effective interest rate. For a lease receivable, the cash
flows used for determining the expected credit losses is
consistent with the cash flows used in measuring the lease
receivable in accordance with IFRS 16.
Trade receivables across the Group have been assessed with
regard to counterparty specific and macroeconomic credit risk
characteristics which vary from country to country and
according to the nature of the counterparty. The Group also
considers days past due in making this assessment as well as
historical credit losses experienced within over a period of 12
If the Group has measured the loss allowance for a financial
months prior to the reporting date. The expected loss rates
instrument at an amount equal to lifetime ECL in the previous
derived from the assessment described above are adjusted to
reporting period, but determines at the current reporting date
reflect current and forward-looking information affecting the
that the conditions for lifetime ECL are no longer met, the
ability of the customers to settle the receivables. As the Group
Group measures the loss allowance at an amount equal to 12-
has a small number of counterparties from whom significant
month ECL at the current reporting date, except for assets for
trade receivable amounts are due, this assessment is
which the simplified approach was used.
performed individually by counterparty where appropriate.
Credit risk management - Sale of receivables
Financial liabilities and equity
Receivables from customers who elect to pay later for services
Debt and equity instruments are classified as either financial
rather than pay up-front are initially recognised at the
liabilities or as equity in accordance with the substance of the
transaction price, which is approximate to fair value under a
contractual arrangement.
held for sale business model.
Borrowings
In order to manage both liquidity requirements and credit risk
Interest-bearing loans and overdrafts are initially recorded at
in the UK, the Group operates committed facilities with a third
fair value, which equates to proceeds less direct issue costs at
party finance house, whereby customer receivables in respect
inception. Subsequent to initial recognition, borrowings are
of customers who utilise the Group‘s “pay later” option are sold
measured at amortised cost, using the effective interest rate
immediately to the finance house. The receivables are sold at a
method. Any difference between the proceeds, net of
discount to face value on non-recourse terms, and the discount
transaction costs, and the amount due on settlement is
retained by the finance house represents its fee for
recognised in the Income Statement over the term of the
administering the collection of receivables. There are
borrowings.
thresholds built into the facility agreement which allow the
fee/discount to be revised upwards or downwards on a
prospective only basis (i.e. in relation to the sale of receivables
arising in the future) if actual credit and funding cost
experience differs significantly from the initial assumptions
that were used to set the fee.
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
At the point of sale of receivables to the factor the difference
issued share capital.
between fair value and sale price is charged to the income
statement as finance expense. Receivables due from the factor
are measured at amortised cost under a held to collect
business model and assessed for impairment under the
expected loss model.
Outside of the UK, the Group does not sell on its receivables
and therefore bears credit risk and needs to assess expected
credit losses.
Derivative financial instruments
The Group uses derivative financial instruments to manage its
exposure to foreign exchange rate risk via foreign exchange
forward contracts. Further details of derivative financial
instruments are disclosed in note 27.
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
Credit risk refers to the risk that the counterparty will default
resulting gain or loss is recognised in profit or loss immediately.
on its contractual obligations resulting in financial loss to the
Group. The Group’s credit risk is primarily attributable to its
trade receivables. As discussed under “Sale of Receivables”
above, credit risk is managed in the UK via a non-recourse
receivable sale arrangement.
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.
58
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
2.21 SHARE-BASED PAYMENTS
2.24 EXCEPTIONAL ITEMS
The Group operates equity settled share option programmes
Exceptional items (referred to last year as “non-recurring
which allow certain employees and LPEs to acquire shares of
items”) represent amounts which result from unusual
the Company. The fair value of options granted is recognised
transactions or circumstances which warrant individual
as an income statement expense with a corresponding
disclosure due to their nature and also significance. The
increase in equity. The fair value of market conditions is
identification of these items is judgemental and this
measured using the Black-Scholes model at grant date. The
judgement is made at Board level. We believe that adjusting
fair value of non-market conditions is estimated at grant date
for such items improves comparability period on period.
These amounts are adjusted from alternative performance
measures in order to present an alternative perspective on the
results of the Group. Exceptional items are not expected to
recur regularly or cyclically.
2.25 FACTORED RECEIVABLES
Receivables arising from customers who choose to pay later in
the UK are sold at a discount to face value on non-recourse
terms, with the discount representing the costs charged by the
factor. The factor settles the debt to the Group on a net basis,
after deducting fees. This gives rise to a loss on derecognition
of receivables, which is presented within finance expenses.
and re-estimated at each reporting date. The expense is
allocated over the vesting period of each tranche of options
granted. The relevant deferred tax amount is calculated at
each reporting date over the vesting period equivalent to the
expected tax deduction on future exercise, and is recognised if
appropriate (see deferred tax accounting policy note). Expense
in respect of options granted to employees of subsidiaries of
the Company is debited to the cost of investment of the
subsidiary by which they are employed. An element of the
share-based payment cost of UK based employees who
perform Group roles is allocated to and recharged to the
overseas entities, on a similar basis to salary and other related
costs.
2.22 SHARE-BASED PAYMENTS RESERVE
This comprises the cumulative share-based payment charge
recognised in profit or loss in relation to equity-settled options,
net of transfers of charge on exercise of options to the profit
and loss reserve.
2.23 PROVISIONS
Provisions for legal claims are recognised when the group has a
present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be
required to settle the obligation, and the amount can be
reliably estimated.
Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to
any one item included in the same class of obligations may be
small.
Provisions are measured at the present value of management’s
best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount rate
used to determine the present value is a pre-tax rate that
reflects current market assessments of the time value of
money and the risks specific to the liability.
The increase in the provision due to the passage of time is
recognised as interest expense.
Purplebricks Annual Report and Accounts 2020 59
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
3. Critical accounting estimates and judgements
In the application of the Group’s accounting policies, the
of the downside reduction applied, the value of the recognised
directors are required to make judgements (other than those
deferred tax asset could range from 0% to 100% of the balance
involving estimations) that have a significant impact on the
recognised being £7.1m.
amounts recognised in the financial statements and to make
estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based
on historical experience and other factors that are considered
to be relevant. Actual results may differ from these estimates.
The 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 if the
revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and
future periods.
Estimates
In the view of the directors, the areas of estimation uncertainty
that may have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
within the next financial year are detailed below:
3.3 REVENUE RECOGNITION
Instruction revenue is recognised over the estimated period
between instruction and completion or withdrawal of the
property from sale (“service period”) and the directors are,
therefore, required to estimate the average total service period,
taking into account historical experience in addition to current
and possible future economic conditions and factors. At each
reporting date, this estimation includes an assessment of the
future service period in respect of instructions on hand at the
period end.
As at 30 April 2020, the directors have taken account of the
impact of the COVID-19 crisis on the housing market in the UK
in developing their view of the likely future service period. The
directors assessed, as at 30 April, that in the UK, due to
lockdown measures in place in March and April, the future
service period in respect of instructions on hand at 30 April
2020 could reasonably be considered to be significantly longer
3.1 MEASUREMENT OF INTANGIBLE ASSETS
than has historically been the case. While we are in the very
early stages of seeing the impact of COVID-19, based on
evidence to date, the directors have adopted an estimated
service period which is approximately 35% longer than at prior
year in calculating contract liabilities in respect of deferred
income as at 30 April. An increase or decrease of 10% in the
estimated service period would have resulted in an increase or
decrease in deferred income of approximately £1.8m
respectively.
Significant uncertainty at the reporting date, as to the timing
and profile of recovery from lockdown measures and the wider
impact of COVID-19 on the UK economy, means there is a
greater degree of subjectivity in estimating the future service
period than would be the case in a “steady state” scenario and
the directors have adopted a best estimate approach, taking
into account available evidence. Should the UK housing
market recover to pre-crisis levels subsequent to the reporting
date, there would be a reasonable expectation that the service
period would move closer to the historical norm for future
reporting periods.
The Group recognises an intangible asset in respect of software
developed in-house. This software is a key part of the Group’s
operating model and value proposition. Management are
required to estimate the time and related value attributable to
the element of the development team that relates to the
creation and build of intangible assets which meet the criteria
for capitalisation in IAS 38. The cost of this team is material and
a significant change in this estimate could have a significant
effect on the value of costs capitalised. The impact of a change
to this estimate could result, at the most extreme, ie in a
scenario where either no development team costs are
capitalised, or where they are capitalised in full, in a decrease of
£3.6m or increase of £2.1m in administrative and establishment
expenses in the current year. Further details of the amounts
capitalised are included at note 16.
3.2 MEASUREMENT OF DEFERRED TAX ASSETS
The Group has potential deferred tax assets, principally in the
form of tax losses and possible tax deductions relating to the
exercise of share-based payments. Deferred tax assets are only
recognised to the extent it is probable that sufficient future
taxable income will be available against which the losses and
deductions can be utilised.
The recognition of deferred tax assets is dependent upon the
estimation of future taxable profits in the territories that the
group operates within. The decision to recognise deferred tax
assets is made after taking into account forecasts of future
taxable profits, sensitised for downside risk. If the estimated
future taxable profits were to change materially, either
positively or negatively, this could have a material impact on
the tax charge or credit recognised in the income statement.
Depending on the length of the forecast period and the scale
60
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
The terms of the UK’s future trading relationship with the EU
3.4 REVENUE RECOGNITION
following Brexit remain uncertain and could have an effect on
the UK property market. Due to the uncertainty of the extent
and timing of any impact on the wider UK economy, it is
impractical to determine any potential, consequential impact
on the timing of revenue recognition in the UK business at the
date of this report and no such estimate has been made.
Judgements
The following are the critical judgements, apart from those
The Group provides services for instruction fees, including fees
receivable up front and fees receivable at completion of sale.
The Group has taken a judgement that under IFRS 15 the
Performance Obligation relating to these fees is discharged
over time (between instruction and completion) rather than at
a point in time. An alternative judgement that fees should be
recognised at a point in time would have a material impact on
both deferred income and revenue for the current year.
involving estimations (which are presented separately above),
Further detail is set out in the revenue recognition policy
that the directors have made in the process of applying the
above.
Group’s accounting policies and that have the most significant
effect on the amounts recognised in the financial statements.
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:
Expected date
of adoption
Annual Improvements to IFRS Standards
Amendments to IFRS 3 Business Combinations, IFRS 11 Joint
1 May 2020
2015 - 2017 Cycle
Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs.
Definition of Material
To clarify and align the definition of material. The amendments are
1 May 2020
(Amendments to IAS 1 and IAS 8)
intended to improve the understanding of the existing requirements
rather than to significantly impact an entity's materiality judgements.
Interest Rate Benchmark Reform
Published in response to the ongoing reform of interest rate
1 May 2020
(Amendments to IFRS 9, IAS 39 and IFRS 7)
benchmarks around the world. The amendments aim to provide relief for
hedging relationships.
Definition of a Business
(Amendments to IFRS 3)
To help entities determine whether an acquired set of activities and assets
1 May 2020
is a business or not. The amendments clarify the minimum requirements
to be a business, remove the assessment of a market participant's ability to
replace missing elements, and narrow the definition of outputs.
None of the new standards not yet in issue are expected, once adopted, to give rise to a significant change in the reported results or
financial position of the Group.
Purplebricks Annual Report and Accounts 2020 61
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
5. Alternative performance measures
The Group makes use of a number of alternative performance
Relevance to strategy
measures in assessing the performance of the business. The
The adjusted measure is considered relevant to assessing the
definition and relevance of each of these is set out below. The
underlying performance of the Group against its strategy and
Group believes that these measures, which are not considered
plans. The rationale for excluding depreciation, amortisation,
to be a substitute for or superior to IFRS measures, provide
share-based payments charges and exceptional costs from this
stakeholders with helpful additional information on the
measure is consistent with that set out above in the “Adjusted
underlying performance of the Group.
Adjusted EBITDA
Definition
Profit or loss from operating activities, adding back
EBITDA” section.
Reconciliation
CONTINUING GROUP (2019
restated)
2020
– IFRS 16
basis
£m
2020
– IAS 17
basis
£m
2019
– IAS 17
basis
£m
depreciation, amortisation, share-based payment charges and
Administrative expenses
(45.5)
(45.5)
(36.3)
comparability of the Group’s results period on period.
UK
Amortisation: a non-cash item which varies depending on
Administrative expenses
exceptional items.
Relevance to strategy
The adjusted measure is considered relevant to assessing the
underlying performance of the Group against its strategy and
plans. The rationale for excluding certain items is as follows:
Depreciation: a non-cash item which fluctuates depending
on the timing of capital investment. We believe that a
measure which removes this volatility improves
the timing of and nature of acquisitions, and on the timing of
and extent of investment in internally generated intangibles
such as software. We believe that a measure which removes
this volatility improves comparability of the Group’s results
period on period. Where applicable, impairment of
intangible assets is also excluded as an exceptional item.
Share-based payment charges: a non-cash item which varies
significantly depending on the share price at the date of
grants under the Group’s share option schemes, and
depending on the assumptions used in valuing these awards
as they are granted. We believe that a measure which
Depreciation & amortisation
Share-based payment
charge
Exceptional items
6.1
0.7
1.6
5.5
0.7
1.6
4.4
2.7
0.5
Adjusted operating costs
(37.1)
(37.7)
(28.7)
2020
– IFRS 16
basis
£m
2020
– IAS 17
basis
£m
2019
– IAS 17
basis
£m
(31.2)
3.5
(0.1)
1.6
(31.2)
(24.8)
3.2
(0.1)
1.6
2.3
2.1
0.5
Depreciation & amortisation
Share-based payment
(credit) / charge
Exceptional items
Adjusted operating costs
(26.2)
(26.5)
(19.9)
Adjusted operating loss
Definition
Profit or loss from operating activities, adding back share-
based payment charges, share of results of joint venture and
removes this volatility improves comparability of the Group’s
exceptional items.
results period on period and also improves comparability
with other companies which typically do not operate similar
share-based payment schemes.
Exceptional items: These items represent amounts which
result from unusual transactions or circumstances and at a
significance which warrants individual disclosure. We believe
that adjusting for such exceptional items improves
Relevance to strategy
The adjusted measure is considered relevant to assessing the
underlying performance of the Group against its strategy and
plans. The rationale for excluding share-based payments
charges from this measure is consistent with that set out above
in the “Adjusted EBITDA” section.
comparability period on period. See note 8 for further detail
Reconciliation
of amounts disclosed as exceptional in the year.
Please see segmental reporting in note 7.
Reconciliation
Please see segmental reporting in note 7.
Adjusted operating costs
Definition
Adjusted operating costs are administrative and establishment
expenses, adjusted by adding back depreciation, amortisation
and share-based payment charges and exceptional items.
62
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
6. Revenue
7. Segmental reporting
Revenue by contract type
Continuing operations
Instructions
Conveyancing
Other (Lettings and Brokerage)
Discontinued operations
Instructions
Conveyancing
Other (Lettings and Brokerage)
2020
£m
65.6
16.7
28.8
111.1
3.6
1.8
0.7
2019
£m
69.3
17.9
26.6
113.8
14.1
2.0
6.6
Total revenue
117.2
136.5
The Group trade is managed as a single division, providing
services relating to the sale and letting of properties, however
management report to the Board (the Board being the Chief
Operating Decision Maker (“CODM”)) using geographical
segments. The financial information reviewed by the Board is
materially the same as that reported under IFRS and falls under
the four geographic locations: the UK, Canada, Australia and
the US. During the year, no customer contributed 10% or more
of the Group’s revenues (2019: none).
On 7 May 2019, the Company announced that it was exiting the
Australian market, and on 3 July 2019, the Company
announced its withdrawal from the US market. In each case
the business was put into an orderly rundown ahead of closure.
The segmental analysis includes recharges between segments.
Certain of these recharges are of costs which are not classified
as discontinued. These are adjusted in the tables below. The
operating losses of discontinued segments are reconciled to
the net loss relating to discontinued activities within this note.
The following is an analysis of the Group’s revenue and results
by reporting segment:
Purplebricks Annual Report and Accounts 2020 63
Arising on
consolidation
Adjustment
for recharges
Continuing
operations
Australia
Arising on
consolidation
Adjustment for
recharges
Discontinued
activities
£m
£m
Total
£m
117.2
£m
6.1
(4.4)
(47.8)
1.7
69.4
27.9% 59.2%
(6.1)
(51.6)
(3.2)
(32.0)
-
(2.8)
(7.6)
(17.0)
(7.6)
(17.0)
0.8
(2.0)
-
-
6.9
(1.3)
2.8
1.6
-
-
-
-
2.1
-
-
2.1
2.1
-
(0.5)
-
-
1.6
(8.8)
(7.0)
2.1
-
(0.5)
-
1.6
2.1
(0.5)
-
-
(6.1)
0.8
(2.0)
-
(51.6)
6.9
(1.3)
1.6
(7.3)
(44.4)
(7.6)
(2.0)
(17.0)
(1.3)
-
-
2.8
1.6
1.6
(9.6)
(13.9)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
Year ended 30 April 2020
Revenue
Cost of sales
Gross profit
UK
£m
80.5
Canada
£m
30.6
(28.9)
(14.5)
51.6
16.1
Gross profit margin (%)
64.1%
52.5%
Administrative expenses
(31.2)
(10.6)
Marketing expenses
(20.6)
(8.2)
Share of results of joint
venture
-
-
£m
£m
-
-
-
-
(1.6)
-
(2.8)
-
-
-
-
(2.1)
-
-
£m
111.1
£m
1.5
US
£m
4.6
(43.4)
(2.2)
(2.2)
67.7
(0.7)
2.4
60.9% (46.7%) 52.2%
(45.5)
(28.8)
(2.8)
(3.4)
(4.8)
(1.2)
(2.0)
-
-
Operating (loss)/profit
(0.2)
(2.7)
(4.4)
(2.1)
(9.4)
(5.3)
(4.4)
Reconciliation to adjusted EBITDA
Operating (loss)/profit
Depreciation & amortisation
Share-based payments
Share of results of joint
venture
Exceptional items
Adjusted EBITDA
(0.2)
3.5
(0.1)
-
1.6
4.8
(2.7)
1.0
0.3
-
-
(1.4)
(4.4)
1.6
-
2.8
-
-
(2.1)
-
0.5
-
-
(1.6)
(9.4)
(5.3)
(4.4)
6.1
0.7
2.8
1.6
1.8
0.5
0.3
(0.7)
(0.8)
-
-
-
-
(5.5)
(4.9)
Reconciliation of administra tive expenses to adjusted operating costs
Administrative expenses
(31.2)
(10.6)
Depreciation & amortisation
Share-based payments
Exceptional items
3.5
(0.1)
1.6
1.0
0.3
-
Adjusted operating costs
(26.2)
(9.3)
(1.6)
1.6
-
-
-
(2.1)
(45.5)
(3.4)
(4.8)
-
0.5
-
6.1
0.7
1.6
0.5
0.3
(0.7)
(0.8)
-
-
(1.6)
(37.1)
(3.6)
(5.3)
Reconciliation of operating loss)/profit to adjusted operating (loss)/profit
Operating (loss)/profit
Share-based payments
Share of results of joint
venture
Exceptional items
Adjusted operating profit /
(loss)
(0.2)
(0.1)
(2.7)
0.3
-
-
-
1.6
1.3
(4.4)
-
2.8
-
(2.1)
0.5
-
-
(9.4)
0.7
2.8
1.6
(5.3)
(0.7)
(4.4)
(0.8)
-
-
-
-
(2.4)
(1.6)
(1.6)
(4.3)
(6.0)
(5.2)
64
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
Canada
Arising on
consolidation
Adjustment
for recharges
Continuing
operations
Australia
Adjustment
for recharges
Discontinued
activities
Year ended 30 April 2019
Revenue
Cost of sales
Gross profit
UK
£m
90.1
(33.3)
56.8
£m
23.7
(11.1)
12.6
Gross profit margin (%)
63.0%
53.2%
Administrative expenses
Marketing expenses
Share of results of joint venture
Operating profit/(loss)
(24.8)
(26.7)
-
5.3
Reconciliation to adjusted EBITDA
Operating profit/(loss)
Depreciation & amortisation
Share-based payments
Share of results of joint venture
Non-recurring acquisition
costs
5.3
2.3
2.1
-
0.5
(8.4)
(7.4)
-
(3.2)
(3.2)
0.8
0.4
-
-
Adjusted EBITDA
10.2
(2.0)
£m
£m
-
-
-
-
(1.0)
-
(0.5)
(1.5)
(1.5)
1.3
-
0.5
-
0.3
-
-
-
-
(2.1)
-
-
(2.1)
(2.1)
-
0.2
-
-
(1.9)
(36.3)
(34.1)
(0.5)
(1.5)
4.4
2.7
0.5
0.5
6.6
£m
113.8
(44.4)
69.4
£m
11.4
(7.4)
4.0
US
£m
11.3
(4.8)
6.5
(10.7)
(12.1)
-
(16.1)
(24.5)
-
£m
-
-
-
-
2.1
-
-
£m
22.7
(12.2)
10.5
(24.7)
(36.6)
-
(18.8)
(34.1)
2.1
(50.8)
Total
£m
136.5
(56.6)
79.9
(61.0)
(70.7)
(0.5)
(52.3)
61.0%
35.1%
57.5%
46.3%
58.5%
(1.5)
(18.8)
(34.1)
-
0.9
-
-
-
0.9
-
-
2.1
-
(0.2)
-
-
(50.8)
(52.3)
-
1.6
-
-
4.4
4.3
0.5
0.5
(17.9)
(33.2)
1.9
(49.2)
(42.6)
Reconciliation of administra tive expenses to adjusted operating costs
Administrative expenses
(24.8)
(8.4)
Depreciation & amortisation
Share-based payments
Non-recurring acquisition
costs
2.3
2.1
0.5
0.8
0.4
-
(1.0)
1.3
-
-
(2.1)
-
0.2
-
(36.3)
(10.7)
(16.1)
4.4
2.7
0.5
-
0.9
-
-
0.9
-
Adjusted operating costs
(19.9)
(7.2)
0.3
(1.9)
(28.7)
(9.8)
(15.2)
Reconciliation of operating profit / (loss) to adjusted operating profit / (loss)
Operating profit / (loss)
Share-based payments
Share of results of joint venture
Non-recurring acquisition
costs
Adjusted operating profit /
(loss)
5.3
2.1
-
0.5
7.9
(3.2)
0.4
-
-
(1.5)
-
0.5
-
(2.1)
0.2
-
-
(2.8)
(1.0)
(1.9)
(1.5)
(18.8)
(34.1)
0.9
-
-
0.9
-
-
2.7
0.5
0.5
2.2
2.1
-
(0.2)
-
1.9
2.1
(0.2)
-
-
(24.7)
(61.0)
-
1.6
-
4.4
4.3
0.5
(23.1)
(51.8)
(50.8)
(52.3)
1.6
-
-
4.3
0.5
0.5
(17.9)
(33.2)
1.9
(49.2)
(47.0)
Purplebricks Annual Report and Accounts 2020 65
2020
£m
69.0
5.7
74.7
-
-
-
(11.0)
63.7
2020
£m
113.6
13.0
126.6
-
-
-
(11.0)
115.6
2020
£m
22.0
13.1
35.1
-
-
-
(1.6)
33.5
2019
£m
77.2
4.5
81.7
0.1
0.2
0.3
(20.8)
61.2
2019
£m
228.9
9.9
238.8
5.0
4.6
9.6
(95.8)
152.6
2019
£m
28.1
7.2
35.3
32.6
49.0
81.6
(68.0)
48.9
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
Non current assets
UK
Canada
Continuing operations
Australia
US
Discontinued activities
Consolidation adjustments
Total
Total assets
UK
Canada
Continuing operations
Australia
US
Discontinued activities
Consolidation adjustments
Total
Total liabilities
UK
Canada
Continuing operations
Australia
US
Discontinued activities
Consolidation adjustments
Total
66
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
The Australia and US operations represent in their entirety the segments as disclosed above. The operating losses of discontinued
segments are reconciled to the net loss relating to discontinued activities as follows:
Operating loss relating to discontinued segments
Net finance expense relating to discontinued segments
Tax charge relating to discontinued segments
Loss from discontinued operations
Cashflows relating to discontinued operations were as follows:
Operating cash outflow before changes in working capital
Continuing operations
Discontinued operations
Operating cash outflow after changes in working capital, interest and taxation paid
Continuing operations
Discontinued operations
Net cash outflow from operating activities
Investing activities
Continuing operations
Discontinued operations
Financing activities
Continuing operations
Discontinued operations
2020
£m
(7.6)
(0.1)
-
(7.7)
2020
£m
(2.5)
(10.4)
(12.9)
(10.9)
(13.1)
(24.0)
(7.1)
-
(7.1)
(0.7)
-
(0.7)
2019
£m
(50.8)
(0.3)
(0.2)
(51.3)
2019
£m
8.8
(56.2)
(47.4)
9.9
(59.0)
(49.1)
(42.0)
(0.2)
(42.2)
1.0
-
1.0
Purplebricks Annual Report and Accounts 2020 67
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
8. Loss from operating activities
Loss from operating activities for the year has been arrived at after charging:
Amounts received by auditors and their associates in respect of:
Audit of group financial statements
Audit of subsidiaries
Bad debt (credit) / expense
Foreign exchange (gains)/losses
Depreciation and other amounts written off PPE:
Owned, in respect of continuing activities
Owned, in respect of discontinued activities
Depreciation of right of use assets – property in respect of continuing activities
Impairment of right of use assets related to discontinued activities – property
Amortisation of development costs
Amortisation of software
Amortisation of other intangibles
Impairment of development costs
Aggregate charge against income in respect of research & development costs not eligible for capitalisation
Rentals payable under plant and machinery operating leases
Leasehold property rentals
Exceptional items
Exceptional items comprise:
2020
£m
0.2
0.1
(0.4)
0.1
0.9
0.2
0.6
0.6
2.2
0.3
1.6
0.5
3.4
-
-
1.6
2019
£m
0.1
0.1
1.0
(0.5)
0.8
-
-
-
1.7
0.5
1.5
-
3.5
0.1
1.3
0.5
i) Costs of a fundamental restructuring of the customer service and sales functions of the UK business, primarily reflecting changes to
the network of independent LPEs as described in the business model, of £1.2m
ii) Costs of supporting the network of independent LPEs in response to the COVID-19 crisis of £0.4m
These items have been identified as exceptional because they are (i) the first instance of such costs being incurred in the group’s history
and (ii) they are not expected to recur regularly or cyclically.
Support to the LPE network during the COVID-19 crisis has continued into FY 2021. Further costs in relation to restructuring other
operational aspects of the UK business are expected to continue in FY 2021, as part of the same overarching, one-off restructuring
programme. The Board expects the aggregate costs of each of these items to be material across the two years.
The aggregate amounts accrued but not yet paid in respect of exceptional charges total £0.5m. All amounts are expected to be paid in
cash within 12 months. All amounts disclosed as exceptional are deductible to tax.
All exceptional items are presented within administration expenses in the consolidated income statement.
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. Amounts capitalised are shown in note 16.
Impairment of right of use assets arose from leases of properties in the US and Australia which had no ongoing value to the group.
Impairment of development costs arose from the amounts held in respect of the US and Australia customer facing websites.
In the prior year, the current statutory auditor also earned £36,000 in respect of services related to corporate finance transactions earned
prior to appointment as statutory auditor.
68
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
9. Staff costs
The monthly average number of persons employed by the Group during the year was as follows:
Sales and Marketing
Technical
Administration
2020
2019
Continuing
no.
Discontinued
no.
Total
no.
Continuing
no.
Discontinued
no.
715
108
91
914
12
3
19
34
727
111
110
948
728
117
86
931
183
27
100
310
The aggregate payroll costs of the persons employed by the Group, including the directors, were as follows:
2020
2019
Wages and salaries
Compensation for loss of office
Social security
Pension
Share-based payment charge / (credit)
Continuing
£m
Discontinued
£m
19.4
0.2
2.8
0.9
0.7
24.0
4.4
-
0.4
0.1
(2.0)
2.9
Total
£m
23.8
0.2
3.2
1.0
(1.3)
26.9
16.1
-
2.1
0.2
2.7
21.1
Continuing
£m
Discontinued
£m
The average number of persons employed by the Company
Sales and Marketing
during the year was as follows:
Technical
Administration
The aggregate payroll costs of the persons employed by the
Wages and salaries
Company, including the directors, were as follows:
Compensation for loss of office
Social security
Pension
Share-based payment charge
The following table provides details of remuneration paid to
Short-term employee benefits
directors of the Company.
Compensation for loss of office
Post employment benefits
Share-based payment charge
Total
no.
911
144
186
1,241
Total
£m
30.8
-
2.5
0.6
4.3
38.2
2019
no.
337
84
44
465
2019
£m
11.3
-
1.4
0.2
2.1
15.0
2019
£m
0.7
-
-
0.4
1.1
14.7
-
0.4
0.4
1.6
17.1
2020
no.
295
73
23
391
2020
£m
15.1
0.2
1.6
0.3
0.3
17.5
2020
£’000
1.0
0.2
-
0.8
2.0
The highest paid director received remuneration of £0.8m (2019: £0.7m) during the year.
No director had a material interest in any contract in relation to the business of the Group.
No director exercised share options during the current or preceding financial year.
The aggregate value of any company contributions paid, or treated as paid, to a money purchase pension scheme in respect of directors'
qualifying services was £11,000 (2019: £2,000).
During the year retirement benefits under money purchase schemes accrued in respect of qualifying services for 2 directors (2019: 2). The
Group does not operate any defined benefit retirement arrangements.
In addition to the 8 directors (2019: 9), 11 senior management (2019: 18) are also considered to be key management personnel.
Purplebricks Annual Report and Accounts 2020 69
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
The following table provides details of remuneration paid to key management personnel, being 19 individuals (2019: 27 individuals):
Salaries or fees, including bonuses and employer’s national insurance
Compensation for loss of office
Share-based payment charge
The remuneration of the Directors for the years ended 2020 and 2019 was as follows:
2020
£m
2.9
0.2
1.1
4.2
Short-term
employee
benefits
£’000
Post
employment
benefits
£’000
Share-based
payments
charge
£’000
Michael Bruce stepped down from his role as an executive director of the group on 7 May 2019. His termination payment of £200,000 is
reflected in the short-term employee benefits costs for the year ended 30 April 2020.
The table above reflects the accounting charge under IFRS 2 of equity-settled awards. No director exercised share options during the year.
Details of options granted to directors are set out in the Directors’ Remuneration Report on page 31.
828
2,001
2019
£m
4.0
-
1.0
5.0
Total
£’000
219
726
806
103
55
54
38
Total
£’000
273
688
30
3
5
57
56
62
217
346
350
103
54
54
38
1,162
-
10
-
-
1
-
-
11
250
273
30
3
5
56
56
61
734
-
-
-
-
-
1
-
1
2
2
370
456
-
-
-
-
23
415
-
-
-
-
-
-
Short-term
employee
benefits
£’000
Post
employment
benefits
£’000
Share-based
payments
charge
£’000
438
1,174
Year ended 30 April 2020
Executive directors
M Bruce
V Darvey
J Davies
Non-executive directors
P Pindar
A Blair
S Downing
M Wroe
Total
Year ended 30 April 2019
Executive directors
M Bruce
J Davies
Non-executive directors
P Pindar
N Discombe
A Whitehorn
A Blair
S Downing
M Wroe
Total
70
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
10. 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).
In addition, the Company granted awards under a Performance
Share Plan (PSP) during the year.
The vesting conditions for schemes 6 to 19 are based on future
service from the date of grant, with between 25% and 33% of
the options vesting on or after either the 12 or 24 month
anniversary of the grant, and a further vesting every three
months thereafter so that options vest in full on the 48 month
anniversary of the date of grant to the employee or the
Under these approved plans, a total of 14 schemes are currently
licensee.
operating, as listed below.
The vesting conditions for scheme 4 is 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.
On 25 July 2019 the Company granted 2,461,200 options under
a Performance Share Plan (“PSP”) (Scheme 20) to certain
employees. These options have an exercise price of £0.01 and
vest over 3 years. 50% of the vest is subject to achievement of
an EBITDA target and 50% to a total shareholder return (“TSR”)
target.
Details of the total number of shares under option at the period end are set out below:
Grant date
Sch No
10 Aug 2015
29 Jun 2016
05 Dec 2016
04 Jan 2017
05 Mar 2017
4
6
7
8
9
Type of
scheme
EMI
ESOP/LSOP
ESOP/LSOP
ESOP
ESOP/LSOP
29 Jun 2017
10
ESOP/LSOP
19 Dec 2017
05 Mar 2018
24 Jul 2018
02 Aug 2018
20 Nov 2018
07 Jan 2019
23 Jan 2019
12
13
14
15
17
18
19
25 Jul 2019
20
ESOP/LSOP
ESOP/LSOP
ESOP/LSOP
ESOP
ESOP
ESOP/LSOP
ESOP
PSP
No. of option
holders
No. of
options
Exercise
Price
Earliest exercise
date
Remaining
contractual life
1
45
94
2
58
2
43
9
73
1
2
1
1
15
3,384
1,509,581
1,424,213
387,500
899,127
1,400,000
571,400
110,000
1,908,000
125,000
200,000
700,000
500,000
2,143,200
£0.13
£1.29
£1.25
£1.40
£3.10
£3.05
£3.79
£4.15
£2.81
£2.87
£1.73
£1.65
£1.59
£0.01
10 Aug 2015
29 Jun 2017
5 Dec 2017
4 Jan 2018
5 Mar 2018
29 Jun 2018
19 Dec.2018
05 Mar 2019
24 Jul 2019
02 Aug 2020
20 Nov 2022
07 Jan 2020
23 Jan 2020
25 Jul 2022
5.3 years
6.2 years
6.6 years
6.7 years
6.8 years
7.2 years
7.6 years
7.8 years
8.2 years
8.3 years
8.6 years
8.7 years
8.7 years
2.2 years
3,715,692 share options were exercised during the year (2019: 1,247,338)
The number and weighted average exercise price of share options are as follows:
Outstanding at start of period
Granted during the period
Exercised during the period
Lapsed during the period
Outstanding at end of period
Exercisable at end of period
30 April 2020
30 April 2020
30 April 2019
30 April 2019
Weighted average
exercise price
Number of
options
Weighted average
exercise price
£1.97
£0.01
£0.02
£2.40
£1.86
£2.16
21,826,838
2,461,200
(3,715,692)
(8,738,941)
11,833,405
6,452,478
£1.85
£2.26
£0.77
£2.24
£1.97
£1.16
Number of
options
20,072,961
7,519,000
(1,247,338)
(4,518,285)
21,826,838
7,241,657
The weighted average share price at the date of exercise of options was £1.00.
The weighted average remaining contractual life of the options is 7.4 years (2019: 8.2 years).
Purplebricks Annual Report and Accounts 2020 71
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
Fair value assumptions in respect 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 CSOP and LSOP share
options granted. The estimate of fair value is measured using the Black-Scholes model.
On 25 July 2019 the Company granted 2,461,200 options under a Performance Share Plan (“PSP”) (Scheme 20) to a number of employees.
These options have an exercise price of £0.01 and vest over 3 years. 50% of the vest is subject to achievement of an EBITDA target and 50%
to a total shareholder return (“TSR”) target. The share price at the date of grant was £1.15. The valuation of the EBITDA target has been by
management judgement, and will be updated at each reporting period. The valuation of the TSR target was made at grant by use of a
Monte Carlo model. Inputs into the Monte Carlo model were an expected volatility of 40% and a risk-free interest rate of 0.44%. The total
value of the TSR element as at the date of grant was £1.0m.
The volatility assumption, measured at the standard deviation of expected share price movements, is based on a review of the Group’s
own historical volatility and of volatility used by listed companies in the same sector.
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 the date of grant
Weighted average exercise price
Weighted average contractual life (years)
Weighted average expected volatility
Weighted average risk free interest rate
Total fair value of options granted (£m)
30 April 2020 30 April 2019
£1.15
£0.01
3
40%
0.4%
£1.0
£2.26
£2.26
10
36.3%
1.5%
6.7
(Credit) / charge to consolidated statement of comprehensive income
The (credit) / charge to consolidated statement of comprehensive income, included within administrative expenses, comprises:
Share-based payment charge in respect of continuing activities
Share-based payment (credit) / charge in respect of discontinued activities
Credit to consolidated statement of changes in equity
Tax credit with respect to share-based payments
30 April 2020
£m
30 April 2019
£m
0.7
(2.0)
(1.3)
2.7
1.6
4.3
30 April 2020
£m
30 April 2019
£m
0.2
3.2
72
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
11. Taxation
Current tax credit/(charge) – Group
Current year
Adjustments in respect of prior year
R&D tax credit relating to prior years
Total current tax
Deferred tax credit - Group
Current year
Adjustments in respect of prior year
Total deferred tax
Total credit for the year
Reconciliation of effective tax rate
2020
£m
-
(0.1)
-
(0.1)
1.7
0.1
1.8
1.7
2019
£m
(0.2)
-
0.3
0.1
1.0
-
1.0
1.1
The tax credit/(charge) for the period differs from the standard rate of corporation tax in the UK during the year of 19% (FY 2019: 19%). The
differences are explained below.
Loss before taxation (continuing group)
Less share of loss of post-tax earnings of equity accounted investments
Loss before taxation of equity accounted investments (continuing group)
Tax credit calculated at UK corporate tax rate of 19% (FY 19: 19%)
Effects of:
Differences between UK and non-UK corporate tax rates
Non-deductible and non-taxable items
Utilisation of previously unrecognised deferred tax assets
Other changes in unrecognised deferred tax assets
Changes in tax rates
Deferred tax prior year adjustment
Tax charge related to discontinued operations
Current tax prior year adjustment
R&D tax credit relating to prior years
Total credit for the year
2020
£m
(13.2)
2.8
(10.4)
2.0
0.3
(1.0)
-
-
0.4
0.1
(0.1)
-
1.7
2019
£m
(4.9)
0.5
(4.4)
0.8
0.3
(1.1)
0.2
0.8
-
-
(0.2)
-
0.3
1.1
UK: The UK corporation tax rate for the year was 19%. From 1 April 2020 the UK corporation tax rate had been scheduled to reduce to 17%
and this rate was used for the measurement of UK deferred tax assets in the prior year. During the year, the UK Government announced
the cancellation of the proposed rate cut, meaning that the UK corporation tax rate remains at 19%, so UK deferred tax assets have been
remeasured at this higher rate. No R&D tax credit is included in the year ended 30 April 2020, as the Company qualified as "large" for the
purpose of R&D tax credits and so claimed under the "RDEC" regime, with the resulting credit included in operating profit, rather than tax.
Deferred tax assets / liabilities are measured at the rate at which they are expected to reverse or be used.
Purplebricks Annual Report and Accounts 2020 73
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
Tax included in changes in equity
GROUP
Deferred tax
Current tax
Total tax credit
2020
£m
0.2
-
0.2
2019
£m
3.0
0.3
3.3
The tax credits to equity represent the use as current year deductions, or recognition as deferred tax assets, of tax deductions related to
share incentive schemes, which are in excess of related income statement expenses.
Recognised deferred tax assets and liabilities
GROUP
Assets
Liabilities
Net deferred tax assets
GROUP 2020
2020
£m
9.0
(4.4)
4.6
ASSETS
LIABILITIES
Fixed asset
timing
differences
£m
Other
timing
differences
£m
Share-
based
payments
£m
Fixed asset
timing
differences
£m
Other
timing
differences
£m
Tax losses
£m
At 1 May 2019
Included in the income statement
Included in equity
At 30 April 2020
6.1
2.3
0.3
8.7
0.2
-
-
0.2
-
0.1
-
0.1
0.8
(0.7)
(0.1)
-
(4.5)
0.3
-
(4.2)
-
(0.2)
-
(0.2)
GROUP 2019
At 1 May 2018
Acquisition of subsidiaries
Included in the income statement
Included in equity
At 30 April 2019
ASSETS
Fixed asset
timing
differences
£m
-
-
0.2
0.2
Other
timing
differences
£m
Share-
based
payments
£m
-
0.1
(0.1)
-
-
-
0.7
0.1
0.8
LIABILITIES
Fixed asset
timing
differences
£m
(0.1)
(4.7)
0.3
-
(4.5)
Tax losses
£m
3.1
0.3
(0.2)
2.9
6.1
2019
£m
7.1
(4.5)
2.6
Total
£m
2.6
1.8
0.2
4.6
Total
£m
3.0
(4.3)
0.9
3.0
2.6
74
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
COMPANY 2020
At 1 May 2019
Included in the income statement
Included in equity
At 30 April 2020
COMPANY 2019
At 1 May 2018
Included in the income statement
Included in equity
At 30 April 2019
ASSETS
LIABILITIES
Fixed
asset
timing
differences
£m
Other
timing
differences
£m
Share-based
payments
£m
Fixed asset
timing
differences
£m
0.1
(0.1)
-
-
-
0.1
-
0.1
0.8
(0.7)
(0.1)
-
-
-
-
-
Tax losses
£m
5.2
1.5
0.3
7.0
ASSETS
LIABILITIES
Fixed
asset
timing
differences
£m
Other
timing
differences
£m
Share-based
payments
£m
Fixed asset
timing
differences
£m
-
0.1
-
0.1
-
-
-
-
-
0.7
0.1
0.8
-
-
-
-
Tax losses
£m
2.9
(0.6)
2.9
5.2
Total
£m
6.1
0.8
0.2
7.1
Total
£m
2.9
0.2
3.0
6.1
As at 30 April 2019, potential deferred tax assets in Australia and the US were not recognised, in anticipation of possible closure of the
businesses and, therefore, insufficient evidence that there would be relevant profits available in the future to utilise them. Following
closure of the businesses and filing of final tax returns, these former unrecognised deferred tax assets have now ceased to exist and are no
longer reported as either recognised or unrecognised. Deferred tax assets in the UK and Canada are recognised in full, based on financial
plans for these segments, which forecast the availability of sufficient profits for the utilisation of deferred tax assets.
The value of the future tax deduction for share-based payments is dependent on the share price at the point of exercise, therefore its
value is highly uncertain.
Unrecognised deferred tax assets
GROUP
Tax losses
Share-based payments
Fixed asset timing differences
Other timing differences
2020
2019
Gross Value
£m
Unrecognised
Tax value
£m
Gross Value
£m
Unrecognised
Tax value
£m
-
-
-
-
-
-
-
-
-
-
89.9
-
-
1.8
91.7
22.3
-
-
0.4
22.7
Purplebricks Annual Report and Accounts 2020 75
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
12. Earnings per share
Total including discontinued operations
Loss £m
Weighted average number of shares (‘000)
Basic loss per share (£)
Potentially dilutive shares unissued at year end (‘000)
Total potentially dilutive shares at reporting date (‘000)
Loss per share (£) – diluted
BASIC AND DILUTED
2020
2019
(19.2)
(54.9)
306,389
303,090
(0.06)
9,738
316,127
(0.06)
(0.18)
21,827
324,917
(0.18)
Diluted loss per share is presented as equal to the basic loss per share as a result of the Group recording a loss for the year, which cannot
be diluted.
Continuing operations
Loss £m
Weighted average number of shares (‘000)
Basic loss per share (£)
Potentially dilutive shares unissued at year end (‘000)
Total potentially dilutive shares at reporting date (‘000)
Loss per share (£) – diluted
BASIC AND DILUTED
2020
2019
(11.5)
(3.6)
306,389
303,090
(0.04)
9,738
316,127
(0.04)
(0.01)
21,827
324,917
(0.01)
Diluted loss per share from continuing operations is presented as equal to the basic loss per share as a loss cannot be diluted.
The table below reconciles the weighted average number of shares (‘000):
Weighted average number of shares 2019
Weighted average issue of new shares under share option schemes
Weighted average number of shares 2020
303,090
3,299
306,389
76
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
13. Finance income
Interest income
Fair value gains in respect of derivatives
Finance income
14. Finance expense
Interest expense
Lease interest
Charge for factored receivables
Finance expense
15. Goodwill
Cost and carrying amount
At 30 April 2019 and 30 April 2020
2020
£m
0.5
-
0.5
2020
£m
0.1
0.1
4.1
4.3
2019
£m
0.7
0.1
0.8
2019
£m
0.1
-
4.1
4.2
Lettings CGU
£m
Canada
£m
Group
£m
2.6
16.9
19.5
Please refer to note 18 for details of the impairment assessments performed in respect of the carrying amount of goodwill.
Purplebricks Annual Report and Accounts 2020 77
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
16. Intangible assets
GROUP
Cost
Balance at 1 May 2018
Addition
Acquisition of subsidiary
Internally developed
Balance at 30 April 2019
Internally developed
Additions
Transfer
Effect of foreign exchange
4.2
-
-
2.6
6.8
2.1
-
-
-
Balance at 30 April 2020
8.9
(1.4)
(1.7)
(3.1)
(2.2)
(0.5)
-
(5.8)
3.1
3.7
Amortisation
Balance at 30 April 2018
Amortisation for the year
Balance at 30 April 2019
Amortisation for the year
Impairment
Transfer
Balance at 30 April 2020
Net carrying value
Balance at 30 April 2020
Balance at 30 April 2019
COMPANY
Balance at 30 April 2018
Addition
Internally developed
Balance at 30 April 2019
Internally developed
Balance at 30 April 2020
Amortisation
Balance at 30 April 2018
Amortisation for the year
Balance at 30 April 2019
Amortisation for the year
Impairment
Balance at 30 April 2020
Net carrying value
Balance at 30 April 2020
Balance at 30 April 2019
78
Purplebricks Annual Report and Accounts 2020
Internally
generated
intangible
£m
Capitalised
software
£m
Patents and
trademark
£m
Customer
relationships
£m
Proprietary
technology
£m
Brand
£m
Other
£m
Total
£m
0.8
0.2
-
-
1.0
-
0.1
-
-
1.1
-
(0.5)
(0.5)
(0.3)
-
-
0.1
-
-
-
0.1
-
-
-
-
0.1
(0.1)
-
(0.1)
-
-
-
(0.8)
(0.1)
0.3
0.5
-
-
1.1
-
1.7
-
2.8
-
-
-
-
-
-
2.9
-
2.9
-
-
-
-
2.8
2.9
(0.2)
(0.5)
(0.7)
(0.6)
-
-
(1.3)
1.5
2.1
-
(0.8)
(0.8)
(1.0)
-
-
(1.8)
1.1
2.1
-
-
13.3
-
13.3
-
-
-
(0.1)
13.2
-
-
-
-
-
-
-
13.2
13.3
-
0.4
-
-
0.4
-
-
(0.4)
-
-
-
(0.2)
(0.2)
-
-
0.2
-
-
0.2
Internally generated
intangible
£m
Capitalised
software
£m
4.2
-
2.6
6.8
2.1
8.9
(1.4)
(1.7)
(3.1)
(2.2)
(0.5)
(5.8)
3.1
3.7
0.8
0.1
-
0.9
-
0.9
-
(0.2)
(0.2)
(0.2)
-
(0.4)
0.5
0.7
6.2
0.6
17.9
2.6
27.3
2.1
0.1
(0.4)
(0.1)
29.0
(1.7)
(3.7)
(5.4)
(4.1)
(0.5)
0.2
(9.8)
19.2
21.9
Total
£m
5.0
0.1
2.6
7.7
2.1
9.8
(1.4)
(1.9)
(3.3)
(2.4)
(0.5)
(6.2)
3.6
4.4
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
17. Property, plant and equipment
GROUP
Cost
Balance at 30 April 2018
Recognised on acquisition of
subsidiary
Additions
Disposals
Balance as 30 April 2019
Recognised on adoption
of IFRS 16 (see note 2)
Additions
Disposals
Effect of lease modification
Balance as 30 April 2020
Depreciation
Balance at 30 April 2018
Charge for the year
Disposals
Balance as 30 April 2019
Charge for the year
Impairment
Disposals
Balance as 30 April 2020
Net book value
At 30 April 2020
At 30 April 2019
COMPANY
Cost
Balance at 1 May 2018
Additions
Balance as 30 April 2019
Recognised on adoption of IFRS 16 (see note 2)
Additions
Effect of lease modification
Balance as 30 April 2020
Depreciation
Balance at 1 May 2018
Charge for the year
Balance as 30 April 2019
Charge for the year
Balance as 30 April 2020
Net book value
At 30 April 2020
At 30 April 2019
Computer
equipment
£m
Furniture
& fittings
£m
Leasehold
improvements
£m
Right-of-use
assets
- property
£m
Right-of-use
assets
- other
£m
Total
£m
1.2
0.4
0.7
-
2.3
-
0.6
(0.3)
-
2.6
(0.5)
(0.6)
-
(1.1)
(0.8)
-
0.3
(1.6)
1.0
1.2
0.5
0.1
0.3
-
0.9
-
0.1
(0.2)
-
0.8
(0.1)
(0.2)
-
(0.3)
(0.3)
-
0.2
(0.4)
0.4
0.6
-
-
0.2
-
0.2
-
0.1
-
-
0.3
-
-
-
-
-
-
-
-
0.3
0.2
-
-
-
-
-
2.1
0.7
-
0.1
2.9
-
-
-
-
(0.6)
(0.6)
-
(1.2)
1.7
-
-
-
-
-
-
0.1
-
-
-
0.1
-
-
-
-
-
-
-
-
0.1
-
Computer
equipment
£m
Furniture
& fittings
£m
Right-of-use
assets
- property
£m
0.9
0.4
1.3
-
0.3
-
1.6
(0.5)
(0.3)
(0.8)
(0.3)
(1.1)
0.5
0.5
0.4
0.1
0.5
-
-
-
0.5
(0.1)
(0.1)
(0.2)
(0.1)
(0.3)
0.2
0.3
-
-
-
0.7
0.1
0.1
0.9
-
-
-
(0.2)
(0.2)
0.7
-
1.7
0.5
1.2
-
3.4
2.2
1.5
(0.5)
0.1
6.7
(0.6)
(0.8)
-
(1.4)
(1.7)
(0.6)
0.5
(3.2)
3.5
2.0
Total
£m
1.3
0.5
1.8
0.7
0.4
0.1
3.0
(0.6)
(0.4)
(1.0)
(0.6)
(1.6)
1.4
0.8
Right-of-use assets have been recognised under IFRS 16 as set out in note 2. The majority of these assets relate to property leases. Other
assets relate to vehicle leases and leases of certain office equipment. During the year Group lease payments totalled £1.0m, of which
£0.1m related to repayment of interest and £0.9m related to repayment of principal amounts.
Purplebricks Annual Report and Accounts 2020 79
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
18. Investment in subsidiaries
COMPANY
Cost
1 May 2019
Share-based payment charge / (credit) in respect of employees of subsidiaries
Intercompany balances capitalised during the year
At 30 April 2020
Provision for impairment
As at 1 May 2019
Provisions made during the year
As at 30 April 2020
Carrying amount
At 30 April 2020
At 30 April 2019
£m
54.6
(1.2)
4.6
58.0
(22.7)
(3.7)
(26.4)
31.6
31.9
The Group consists of a Parent Company, Purplebricks Group
Group. Therefore, part of the value of the acquired business is
plc, incorporated in the UK, and a number of subsidiaries held
now represented by synergies within the group, rather than in
directly by Purplebricks Group plc, certain of which operate
contracts held by the acquired company. No new contracts are
and are incorporated in Canada. Subsidiaries in the US and
currently being entered into by the BFL statutory entity.
Australia are no longer operating.
The Company holds 100% of the ordinary share capital and
allocated to the cash generating unit represented by the
voting rights in respect of all subsidiaries.
group’s UK lettings business as a whole. This is because
The goodwill arising on the acquisition of BFL has been
Investments in the US and Australia
During the year, the Company capitalised amounts receivable
following the integration of BFL staff into the wider UK lettings
business, the activity in lettings relating to BFL cannot be
distinguished from the wider lettings business.
from its US subsidiary into cost of investment, resulting in an
A discounted cash flow calculation has been prepared in
increase in cost of investment of £4.6m. Credits in respect of
respect of the UK lettings business based on historical trends
previously recognised share based payment charges in respect
within this business out to 30 April 2023. These forecasts have
of US and Australian employees which lapsed on those
taken account of recent experience during the COVID crisis,
employees leaving the business totaled £1.5m. This credit is
which has affected the Lettings business comparatively less
offset by a charge in respect of Canadian employees of £0.3m.
significantly. A terminal value has then been calculated based
The net increase in cost of investment in US and Australian
on a terminal growth rate of 2.0%. The cashflows forecast have
subsidiaries of £3.1m has been impaired in full. The other
been discounted using a pre-tax rate of 8.5%. This calculation
£0.6m impairment charge relates to BFL (see below). At 30
indicates significant headroom over the carrying value of
April 2020, there is no remaining investment in respect of the
goodwill attributable to the BFL CGU. This calculation
US and Australia. During the year the Company also impaired
indicates a recoverable value of £26.1m for this CGU, and
£5.2m of intercompany receivables due from Australia.
headroom over the carrying value of goodwill of £23.5m.
Impairment Review
BFL
Changes to the assumptions used which are required to cause
an impairment in carrying value are:
i) an increase in discount rate to 46.2%;
The acquisition of BFL Property Management Limited ("BFL") in
ii) a reduction in assumed revenue growth rates of 13.5% in
March 2017 gave rise to a cost of investment in the company
each year forecasted; and
balance sheet of £3.6m, and a goodwill amount in the
consolidated balance sheet of £2.6m. As required by IAS 36,
the carrying value of indefinite lived assets is tested annually
for impairment.
BFL trading since acquisition has been in line with
expectations at the time of acquisition, and as anticipated the
Lettings business of Purplebricks Group plc has benefitted
from the expertise acquired with BFL. Over time, contracts
with landlords held by BFL have been replaced as they
naturally come to an end with contracts with Purplebricks
80
Purplebricks Annual Report and Accounts 2020
iii) a negative terminal growth rate assumption.
The Directors no not believe that there is reasonably possible
change in a key assumption on which management has based
its determination of the unit’s recoverable amount that would
cause the unit’s carrying amount to exceed its recoverable
amount.
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
Impairment of cost of investment in BFL
In the prior year, due to the reduction in the size of the
business conducted within BFL since acquisition as a result of
the partial transfer of trade as described above, and as this
transfer of trade was expected to continue in future years, the
cash flow forecasts indicated that a partial impairment of the
cost of investment is required. This impairment amounted to
£3.0m. This impairment resulted from management decisions
A discounted cash flow calculation prepared in respect of the
Canada business over the period to 30 April 2025, based on
historical trends, current market conditions including
experience to date of the COVID crisis and the timing and
extent of future recovery, as well as expectations of future
market trends. These forecasts indicate significant headroom
over the carrying value of indefinite life intangible assets
attributable to the CGU.
taken as to the operation of the wider Lettings business rather
Key assumptions within this calculation include the rate of
than resulting from lower than expected performance of BFL
revenue growth within the forecast period, the growth rate of
post acquisition.
As at 30 April 2020, management have re-performed a
discounted cash flow calculation taking into account contracts
held by BFL. These calculations indicate that the remaining
carrying value of the investment of £0.6m is not supported by
2.0% used to calculate the terminal value and the discount rate
of 13.0% used to discount the forecast cashflows. This
calculation indicates a recoverable value of £42.4m for this
CGU, and headroom over the carrying value of the assets of the
business of £10.0m.
the contracts which BFL continues to operate. Therefore this
Changes to the assumptions used which are required to cause
amount has been impaired in full.
Canada
an impairment in carrying value are:
i) an increase in discount rate to 15.2%;
ii) a reduction in assumed revenue growth rates of 5.5% in
The acquisition of DuProprio (“Canada”) in July 2018 gave rise to
each year forecasted;
a cost of investment in the company balance sheet of £30.9m,
a goodwill amount in the consolidated balance sheet of £16.9m,
iii) a negative terminal growth rate assumption.
and other intangibles of £17.8m, including £13.3m in respect of
The Directors no not believe that there is a reasonably possible
the DuProprio brand. The goodwill and brand are not
change in a key assumption on which management has based
amortised.
As required by IAS 36, the carrying value of indefinite lived
assets is tested annually for impairment. The assessment has
been performed at the total Canada level, as Canada is
assessed as a single income generating unit.
Trading since acquisition has been in line with expectations at
the time of acquisition, with significant growth outside Quebec
driven by investment in the Purplebricks brand in this region.
its determination of the unit’s recoverable amount that would
cause the unit’s carrying amount to exceed its recoverable
amount. The proceeds from the sale of the Canadian business
post year end, as disclosed in note 31, were in excess of the
carrying value of goodwill and intangible assets, which
supports the view that the carrying value is recoverable as at 30
April 2020.
During the year, a reorganisation of the Canadian group of
companies was carried out to simplify its corporate structure
and reduce the number of Canadian entities from 10 to 4.
Name of subsidiary
Country of
incorporation
Country of
operation
Nature of business
Register
ed office
BFL Property Management Limited
United Kingdom
United Kingdom
Residential lettings
Purplebricks Australia Pty Limited
Australia
Australia
Real estate agency
Purplebricks Inc
Centerpoint Closing Services LLC
9059-2114 Quebec Inc
4523024 Canada Inc
CF Real Estate Maritimes Inc
8495122 Canada Inc
Registered offices:
USA
USA
Canada
Canada
Canada
Canada
USA
USA
Canada
Canada
Canada
Canada
Real estate agency
Real estate agency
Real estate agency
Real estate agency
Real estate agency
Real estate agency
(1)
(2)
(3)
(3)
(4)
(4)
(4)
(5)
(1) Suite 7, Cranmore Place, Cranmore Drive, Shirley, West
(4) 300 - 8389 ave Sous-le-Vent, Lévis (Québec) G6X 1K7,
Midlands B90 4RZ, United Kingdom
Canada
(2) 50 Miller Street, North Sydney, NSW 2060, Australia
(5) 4000 - 1 Place Ville-Marie, Montréal (Québec) H3B-4M4
(3) 400 Spectrum Center Drive, Ste. 360, Irvine, California 92618
Canada
Purplebricks Annual Report and Accounts 2020 81
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
19. Investment in jointly controlled entity
At 1 May 2019
Equity investments in the year
Share of result for the year (see below)
At 30 April 2020
GROUP
£m
10.7
4.6
(2.8)
12.5
COMPANY
£m
11.2
4.6
-
15.8
In December 2018 Purplebricks Group plc purchased 50% of
In November 2019, Axel Springer invested EUR 10m into JV
the ordinary share capital of Einhundertsiebte “Media”
HoldCo in the form of a convertible loan. JV HoldCo then
Vermogensverwaltungsgesellschaft bmH (“JV HoldCo”), a
invested the same amount into Homeday in the form of a
company incorporated in Germany which held a 26%
convertible loan.
investment in Homeday GbmH (“Homeday”), another company
incorporated in Germany, from AVIV Group GmbH (then called
Funfundachtzigste “Media”
Vermoegensverwaltungsgesellschaft mbH), a wholly owned
subsidiary of Axel Springer SE, a related party of the Company.
The other 50% shareholding in JV HoldCo continues to be held
by the Axel Springer group.
Following the achievement of the “AS Capital Increase”
“Milestone” target set during 2018 in December 2019, in March
2020 Axel Springer invested a further EUR 20m into JV HoldCo
in the form of a convertible loan. Purplebricks did not
participate in this round of funding to JV HoldCo. Of this EUR
20m, EUR 5m was invested into Homeday, along with the
conversion of existing convertible loans with a principal value
Purplebricks and the Axel Springer group operate JV HoldCo as
of EUR 20m held by JV HoldCo, in exchange for 49,063 newly
a joint venture under a Joint Venture Agreement.
issued shares of EUR 1 each in Homeday. The other EUR 15m
Based in Berlin, Homeday operates homeday.de, a transaction-
based digital real estate platform in Germany that brings
customers together with experienced brokers and supports
them in buying and selling property.
Axel Springer has the right once per year to choose to increase
its investment in JV Holdco beyond 50% by acquiring shares
from Purplebricks at defined points up to 2023 for variable
consideration which is based on the future performance of
Homeday GmbH or a return on investment for Purplebricks.
JV HoldCo and the other shareholders of Homeday entered
into an Investment Agreement and a Shareholders’
Agreement. These agreements set out put and call options
under which the remaining shares of Homeday can be
acquired in the future by JV HoldCo. These agreements
included a milestone target set during 2018 which was
achieved in December 2019 and which has led to the
acquisition of Homeday by JV HoldCo during the year (see
below).
Current year developments
In August 2019, the Joint Venture Agreement, the Investment
Agreement and the Shareholders’ Agreement were amended
and restated in to reflect the progress made by Homeday.
Under the amended Investment Agreement, in September
2019, JV HoldCo provided a convertible loan to Homeday of
€10m, funded equally by Purplebricks and Axel Springer via an
equity investment into JV HoldCo. The €5m provided by
Purplebricks to JV HoldCo has led to the increase in investment
in the year reflected in the table above.
was lent to Homeday in the form of a loan. These transactions
took the shareholding of JV HoldCo in Homeday to 54.39% and
therefore following these transactions JV HoldCo controls
Homeday. JV HoldCo therefore consolidated 100% of the
results of Homeday from 1 January 2020, with Purplebricks
accounting for a 50% share of those results.
Under the amended Shareholders’ Agreement, put and call
options exist between JV HoldCo and the other shareholders of
Homeday which may require or allow JV HoldCo to acquire
shares held by the other shareholders, for consideration to be
determined with reference to the performance of Homeday in
the calendar years 2022 and 2023. The potential liabilities of JV
HoldCo under these put and call options has been included in
the total consideration calculated at the point of acquisition of
Homeday by JV HoldCo.
Accounting approach
Following the achievement of the AS Capital Increase
Milestone and the additional investment described above, the
JV partners assessed as of the end of December 2019 that the
put and call options that exist between JV HoldCo and the
minority shareholders of Homeday were virtually certain to be
exercised on one side or the other. Therefore JV HoldCo has
from 1 January 2020 (the month following the achievement of
the Milestone) applied the anticipated acquisition method, on
the basis that the minority shareholders will be bought out in
the future before access to any dividend stream or other return
and therefore do not have present access to the economic
returns of Homeday, and has fully consolidated the results of
Homeday without any minority interest, but with a liability to
the other shareholders representing the estimated future
amounts payable to them at their eventual exit.
82
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
As part of the acquisition accounting process, in accordance
with IFRS3 and IFRS 10, JV HoldCo revalued both its existing
26% shareholding in Homeday and the convertible loans
existing as at the acquisition date. Based on the provisional fair
value accounting exercise undertaken in the year, gains on
these revaluations amounted to £5.2m, of which Purplebricks’
share was £2.6m. These gains have been reflected in the
income statement of JV HoldCo and in the share of result
shown in the table above. The overall share of result is net of
Purplebricks’ share of Homeday’s losses for the period, which
amounted to £5.3m, and amortisation of intangible assets
arising on acquisition of £0.1m. Therefore the share of net loss
which has been accounted for in the year is £2.8m.
As the conversion of Axel Springer’s loans to JV HoldCo into
shares in JV HoldCo is not reasonably certain as at 30 April
2020, the Group’s 50% holding in JV HoldCo continues to be
accounted for as a joint venture, under the equity method.
Potential future developments
Under the amended Joint Venture Agreement Purplebricks
has the right, at its discretion, to provide further capital and
loan funding to Homeday through JV HoldCo. Should
Purplebricks choose not to participate in further funding of
Homeday through JV HoldCo, its share in JV HoldCo and thus
indirectly in Homeday may decrease if its joint venture partner
decides to exercise its right to conversion of the convertible
loans from AVIV to 107. Media. (in the limited time window (two
weeks per year) in which this is possible).
Under the amended Joint Venture Agreement Purplebricks
has the right, at its discretion, to provide further funding to JV
HoldCo to put JV HoldCo in a position to meet its purchase
price payment obligations resulting from the put and call
options. Should Purplebricks choose not to participate in such
further funding of Homeday through JV HoldCo, its share in JV
HoldCo and thus indirectly in Homeday may decrease if its joint
venture partner decides to make further investments in
Homeday via JV HoldCo on its own.
There are no significant legal restrictions on the ability of 107.
Media to declare or pay cash dividends. However, future
dividends would be dependent on the future trading and cash
generating performance of Homeday.
Purplebricks Annual Report and Accounts 2020 83
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
20. Trade and other receivables and contract assets
Receivable within 12 months
Trade and other receivables
Amounts owed by group undertakings
Prepayments
Contract assets - accrued income
Contract assets – prepaid cost of sales
Receivable after more than 12 months
Amounts owed by group undertakings
GROUP
COMPANY
2020
£m
6.8
-
3.4
10.2
5.3
5.3
20.8
2019
£m
6.2
-
5.2
11.4
9.7
6.3
27.4
-
-
2020
£m
2019
£m
3.2
-
2.3
5.5
5.3
5.1
15.9
6.0
0.6
1.4
3.4
5.4
8.2
5.6
19.2
-
In order to manage both liquidity requirements and credit risk
Restatement
in the UK, the Group operates committed facilities with a third
party finance house. Further detail is set out in the accounting
policy detailed in note 2.25.
At 30 April 2020, contract assets (accrued income and prepaid
cost of sales) have been separately presented on the face of the
statement of financial position. The comparative statement of
In Canada, the Group’s fees are typically received at the point
financial position has been restated to conform to the current
at which they become due. In 2020, receivables in the US and
year’s presentation. No changes have been made to the total
Australia were not sold on and the Group therefore bore credit
amounts.
risk in those territories.
The majority of expected credit loss provision at 30 April 2019
As the Group recognises accrued income at the expected value
related to operations in the US and Australia. As these
of consideration receivable, no credit loss provision against
operations have terminated in the year, any unutilised loss
accrued income is considered necessary.
provision was released to profit and loss. Given the nature of
Amounts owed by group undertakings to the Company bear
interest at 3.75% above LIBOR and are repayable upon demand
by the Company. See further detail in respect of these
amounts as provided in note 27.
the Group’s receivables in the UK and Canada, management
have assessed that no significant future credit losses are likely.
The movement in loss allowances for trade receivables during
the year was as follows:
GROUP
£m
COMPANY
£m
Opening loss allowance at 1 May 2019
Credit to loss allowance recognised in profit or loss during the year
Receivables written off during the year as uncollectible
Loss allowance at 30 April 2020
0.9
(0.4)
(0.5)
-
0.1
(0.1)
-
-
Total
£m
6.8
-
6.8
Current
£m
4.9
-
4.9
0-30 days
past due
£m
31-60 days
past due
£m
60+days
past due
£m
0.8
-
0.8
0.6
-
0.6
0.5
-
0.5
0.0%
0.0%
0.0%
0.0%
0.0%
Current
£m
0-30 days
past due
£m
31-60 days
past due
£m
60+days
past due
£m
3.8
-
3.8
0.9
-
0.9
0.7
(0.1)
0.6
1.7
(0.8)
0.9
Total
£m
7.1
(0.9)
6.2
0.0%
0.0%
11.0%
47.0%
12.7%
GROUP
As at 30 April 2020
Gross carrying amount
Loss allowance
Net carrying amount
Expected loss rate
GROUP
As at 30 April 2019
Gross carrying amount
Loss allowance
Net carrying amount
Expected loss rate
84
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
COMPANY
As at 30 April 2020
Gross carrying amount
Loss allowance
Net carrying amount
Expected loss rate
COMPANY
As at 30 April 2019
Gross carrying amount
Loss allowance
Net carrying amount
Expected loss rate
Current
£m
0-30 days
past due
£m
31-60 days
past due
£m
60+days
past due
£m
3.1
-
3.1
-
-
-
-
-
-
0.1
-
0.1
Total
£m
3.2
-
3.2
0.0%
0.0%
0.0%
0.0%
0.0%
Current
£m
0.4
-
0.4
0-30 days
past due
£m
31-60 days
past due
£m
60+days
past due
£m
-
-
-
-
-
-
0.3
(0.1)
0.2
Total
£m
0.7
(0.1)
0.6
0.0%
0.0%
0.0%
44.6%
17.4%
Summary of movements in contract assets - accrued income
Balance at 1 May 2018
Revenue recognised prior to invoice
Amounts invoiced
Balance at 30 April 2019
Revenue recognised prior to invoice
Amounts invoiced
Balance at 30 April 2020
GROUP
£m
COMPANY
£m
6.4
(13.3)
16.6
9.7
(18.5)
14.1
5.3
6.3
(14.1)
16.0
8.2
(16.7)
13.8
5.3
Accrued income at 30 April 2020 relates primarily to referrals to the Group’s conveyancing partners, where the Group’s performance
obligation is fulfilled at referral but payment is due on completion of the property sale. All accrued income is expected to convert to cash
within 12 months. The level of accrued income has decreased year on year due to a lower number of cases on hand at 30 April 2020 due to
the COVID-19 crisis.
Summary of movements in contract assets - prepaid cost of sales
Balance at 1 May 2018
Costs capitalised
Amounts amortised to the income statement
Balance at 30 April 2019
Costs capitalised
Amounts amortised to the income statement
Balance at 30 April 2020
GROUP
£m
COMPANY
£m
6.3
31.0
(31.0)
6.3
32.7
(33.7)
5.3
5.1
23.6
(23.1)
5.6
20.6
(21.1)
5.1
As set out in note 2.5, within prepayments are amounts relating to payments of commissions to LPEs and to LLEs. Commissions are
payable to agents at the point at which an Instruction is taken. These costs are capitalised at the start of the transaction and then
amortised, and costs therefore recognised, in line with recognition of revenue relating to the associate services, as those services are
provided. The table above sets out movements in these costs.
Purplebricks Annual Report and Accounts 2020 85
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
21. Trade and other payables, contract liabilities, leases and borrowings
GROUP
COMPANY
Amounts falling due within one year
Trade payables
Other taxation and social security
Other creditors
Accruals
Contract liabilities - deferred income
Provisions (see below)
Borrowings
Lease liability
Amounts falling due after more than one year
Borrowings
Lease liability
2020
£m
3.2
1.8
1.4
5.4
11.8
14.6
0.4
0.1
0.7
27.6
0.1
1.4
1.5
2019
£m
11.3
2.4
0.2
11.1
25.0
19.3
-
-
-
44.3
-
-
-
2020
£m
2.3
0.9
-
4.9
8.1
13.0
0.4
-
0.3
21.8
-
0.5
0.5
2019
£m
7.0
0.9
0.1
5.5
13.5
14.7
-
-
-
28.2
-
-
-
As set out in note 2.5, the Group invoices instruction services in advance of providing the service. This gives rise to contract liabilities in the
form of deferred income. The number of customers being serviced at 30 April 2020 was lower than the number being serviced at 30 April
2019. This has given rise to a lower deferred income balance. However the effect is partially offset by an increase in the estimated service
period (see also note 2.5), due to the effect of COVID-19 on the UK and Canada housing markets as at 30 April 2020. All deferred income
relates to partially unsatisfied performance obligations in respect of instructions revenue. All of the performance obligations will be
satisfied within one year of the reporting date, and therefore all deferred income will be recognised within one year of the reporting date.
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.
Amounts falling due after more than 1 year - borrowings
During the year, the Group took out a loan of £0.3m to fund the acquisition of a new telephony system in Canada. This loan bears interest
at 3.0% and is repayable in monthly instalments until May 2021.
Movements in provisions
As at 1 May 2019
Amounts charged to income statement
As at 30 April 2020
GROUP
COMPANY
2020
£m
-
0.4
0.4
2019
£m
-
-
-
2020
£m
-
0.4
0.4
2019
£m
-
-
-
Provisions were made during the year against legal claims. All amounts at year end are expected to be utilised within one year.
Summary of movements in deferred income
Balance at 1 May 2018
Payments received
Revenue recognised net of refunds
Balance at 30 April 2019
Payments received
Revenue recognised net of refunds
Balance at 30 April 2020
GROUP
£m
COMPANY
£m
16.8
85.9
(83.4)
19.3
64.5
(69.2)
14.6
13.5
52.2
(51.0)
14.7
42.9
(44.6)
13.0
Deferred income at 30 April 2020 relates primarily to instructions revenue received or receivable at instruction but where the Group’s
performance obligation is fulfilled over time. The amount of deferred income at 30 April 2020 is lower than at prior year, as the decline in
transaction volumes caused by the COVID-19 crisis has only been partially offset by an increase in the expected performance period year
on year. The Group expects to recognise all deferred revenue as income within the next 12 months.
86
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
22. Lease liabilities
Amounts payable within 12 months
Amounts payable later than one year but less than 5 years
Amounts payable after more than 5 years
Minimum lease payments
Future finance charges
Minimum lease payments less future finance charges
Recognised as a liability – current
Recognised as a liability – non-current but not later than 5 years
Recognised as a liability – after more than 5 years
Recognised as a liability – total non-current
Recognised as a liability – total
GROUP
£m
COMPANY
£m
0.8
1.4
0.2
2.4
(0.3)
2.1
0.7
1.2
0.2
1.4
2.1
0.4
0.5
-
0.9
(0.1)
0.8
0.3
0.5
-
0.5
0.8
As at 30 April 2020, the group and Company leased properties, vehicles and certain office equipment with a carrying amount of £1.8m, as
set out in note 17. Lease expiry dates range from less than 12 months to 9 years.
As the group and Company had no finance leases in the prior year, no lease liabilities were included in borrowings until 1 May 2019. See
note 2 for an explanation of how lease liabilities were recognised on 1 May 2019 in the process of adopting IFRS 16 and for further
information about the change in accounting policy for leases.
Future lease liabilities in respect of low-value leases not accounted for under IFRS 16 are immaterial.
Capital commitments approved by the Board and existing at 30 April 2020 amounted to £nil (2019:£nil). Total commitments under non-
cancellable operating leases under IAS 17 as at 30 April 2019 were as follows:
GROUP
Payable
Within one year
In the second to fifth years
After five years
COMPANY
Payable
Within one year
In the second to fifth years
After five years
2019
Land and
buildings
£m
1.5
2.5
0.3
4.3
2019
Land and
buildings
£m
0.5
1.0
-
1.5
Other
£m
0.1
0.1
-
0.2
Other
£m
-
-
-
-
Purplebricks Annual Report and Accounts 2020 87
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
23. Notes to the cashflow statement
Cash and cash equivalents are represented by:
Cash at bank and on deposit with instant availability
Cash on deposit available within 35 days’ notice
Cash on deposit available at between 36 and 100 days’ notice
GROUP
COMPANY
2020
£m
10.7
10.1
10.2
31.0
2019
£m
14.0
46.1
2.7
62.8
2020
£m
7.7
10.1
10.2
28.0
2019
£m
8.8
46.1
2.7
57.6
Cash and cash equivalents comprise cash and short-term bank deposits with a maturity of up to 100 days. The carrying amount of these
assets is approximately equal to their fair value.
Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes.
Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s
consolidated cash flow statement as cash flows from financing activities.
GROUP
At
1 May
2019
£m
Lease liabilities
recognised on
adoption of
IFRS 16
£m
New leases
£m
Lease
modifications
£m
Repayment
of leases
£m
New
borrowings
£m
Repayment
of
borrowings
£m
Borrowings (see note 21)
Lease liabilities (see note 2.4.1)
Total liabilities from financing activities
-
-
-
-
2.3
2.3
-
0.7
0.7
-
-
-
-
(0.9)
(0.9)
0.3
-
0.3
(0.1)
-
(0.1)
At 30
April
2020
£m
0.2
2.1
2.3
COMPANY
At
1 May
2019
£m
Lease liabilities
recognised on
adoption of
IFRS 16
£m
New leases
£m
Lease
modifications
£m
Repayment
of leases
£m
Lease liabilities (see note 2.4.1)
Total liabilities from financing activities
-
-
0.8
0.8
0.1
0.1
0.1
0.1
(0.2)
(0.2)
At 30
April
2020
£m
0.8
0.8
Finance expense in respect of losses on derecognition of financial assets is a non-cash item. See note 2.25
There were no lease liabilities or borrowings as of 30 April 2019.
24. Share capital
Allotted, authorised, issued and fully paid
Class:
Ordinary
Number Nominal value
306,806,039
£0.01
2020
£m
3.1
3.1
2019
£m
3.0
3.0
During the year the Company issued a total of 3,715,692 shares of £0.01 each, for total consideration of £76,000. (2019: 1,247,338 shares of
£0.01 each, for total consideration of £964,000).
The table below summarises the movements of the number of shares at the beginning and end of the year
Ordinary shares at 1 May 2019
Shares issued during the year
Ordinary shares at 30 April 2020
88
Purplebricks Annual Report and Accounts 2020
Ordinary shares
303,090,347
3,715,692
306,806,039
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
25. Share premium
Balance at 1 May 2018
Premium arising on issue of shares in satisfaction of share options
Balance at 30 April and 1 May 2019 and at 30 April 2020
£m
176.4
1.0
177.4
26. Reserves
27. Financial instruments
Share-based payment reserve
Capital risk management
The share-based payment reserve represents all current and
Capital management objectives are to ensure the Company’s
prior period share-based payment charges less amounts
ability to continue as a going concern and to provide a return
transferred to retained earnings on exercise of share options.
to shareholders.
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
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.
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
foreign operations. Upon disposal of foreign operations, the
Trade and other receivables
related accumulated exchange differences are recycled to the
Trade and other payables
income statement.
Financial assets held at amortised cost
Trade and other receivables
Amounts owed by group undertakings
Accrued income
Cash and cash equivalents
The Group held the following financial assets at each reporting
date:
GROUP
COMPANY
2020
£m
6.8
-
5.3
31.0
43.1
2019
£m
6.2
-
9.7
62.8
78.7
2020
£m
3.2
6.0
5.3
28.0
42.5
2019
£m
0.6
1.4
8.2
57.6
67.8
Purplebricks Annual Report and Accounts 2020 89
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
The Group held the following financial liabilities at each reporting date:
Financial liabilities held at amortised cost
Trade payables
Other taxation and social security
Other creditors
Accruals
Lease liabilities
Borrowings
GROUP
COMPANY
2020
£m
3.2
1.8
1.4
5.4
2.1
0.2
14.1
2019
£m
11.3
2.4
0.2
11.1
-
-
25.0
2020
£m
2.3
0.9
-
4.9
0.8
-
8.9
2019
£m
7.0
0.9
0.1
5.5
-
-
13.5
Fair value of financial instruments
Financial risk management
Carrying value of the instruments in the financial assets and
The Group is exposed through its operations to the following
financial liabilities tables approximates to their fair value.
During part of the prior year it was the policy of the Group to
enter into USD and AUD forward foreign exchange contracts to
manage currency risk in relation to the Group’s cash funding
requirements for its US and Australian subsidiaries. Derivatives
were not designated in hedge relationships.
financial risks:
Liquidity risk
Interest rate risk
Credit risk
Foreign currency risk
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
below.
The Group’s policies for financial risk management are outlined
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
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.
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
monitoring forecast and actual cash flows to ensure cash is
available to meet financial liabilities as they fall due. Sufficient
cash is retained in immediate access accounts whilst cash
which is surplus to short-term requirements is deposited in
notice accounts. Sensitivities are applied to cash forecasts to
ensure the Company has early warning of any manifestation of
liquidity risk.
The following is an analysis of the contractual undiscounted
cash flows payable under financial liabilities excluding
derivatives which are disclosed in note 22. The table includes
principal only cash flows in respect of trade and other payables.
90
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
2020 GROUP
Financial liabilities held at
amortised cost
Trade payables
Other taxation and social security
Other creditors
Accruals
Lease liabilities
Borrowings
2019 GROUP
Financial liabilities held at
amortised cost
Trade payables
Other taxation and social security
Other creditors
Accruals
Lease liabilities
Borrowings
2020 COMPANY
Financial liabilities held at
amortised cost
Trade payables
Other taxation and social security
Other creditors
Accruals
Lease liabilities
Borrowings
2019 COMPANY
Financial liabilities held at
amortised cost
Trade payables
Other taxation and social security
Other creditors
Accruals
Lease liabilities
Borrowings
Within
1 month
£m
1 to
3 months
£m
3 months
to 1 year
£m
1 to 2
years
£m
2 to 5
years
£m
More than
5 years
£m
2.6
1.8
0.7
2.7
0.1
-
7.9
0.6
-
0.7
2.7
0.2
-
4.2
-
-
-
-
0.4
0.1
0.5
-
-
-
-
0.6
-
0.6
-
-
-
-
0.6
0.1
0.7
-
-
-
-
0.2
-
0.2
Within
1 month
£m
1 to
3 months
£m
3 months
to 1 year
£m
1 to 2
years
£m
2 to 5
years
£m
More than
5 years
£m
8.5
1.8
0.2
8.3
-
-
18.8
2.8
0.6
-
2.8
-
-
6.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Within
1 month
£m
1 to
3 months
£m
3 months
to 1 year
£m
1 to 2
years
£m
2 to 5
years
£m
More than
5 years
£m
1.2
0.9
-
2.5
-
-
4.6
1.1
-
-
2.4
0.1
-
3.6
-
-
-
-
0.2
-
0.2
-
-
-
-
0.3
-
0.3
-
-
-
-
0.2
-
0.2
-
-
-
-
-
-
-
Within
1 month
£m
1 to
3 months
£m
3 months
to 1 year
£m
1 to 2
years
£m
2 to 5
years
£m
More than
5 years
£m
5.2
0.7
0.1
4.1
-
-
10.1
1.8
0.2
-
1.4
-
-
3.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£m
3.2
1.8
1.4
5.4
2.1
0.2
14.1
Total
£m
11.3
2.4
0.2
11.1
-
-
25.0
Total
£m
2.3
0.9
-
4.9
0.8
-
8.9
Total
£m
7.0
0.9
0.1
5.5
-
-
13.5
Purplebricks Annual Report and Accounts 2020 91
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
Interest rate sensitivity analysis
Foreign currency risk management
Interest rate risk is the risk that the value of the future cash
A significant part of the Group’s transactions are carried out in
flows of a financial instrument will fluctuate due to changes in
pound sterling (GBP). Exposures to currency exchange rates
market rates. At the year end date there was no material
arise from the Group’s trading activity carried out by its
exposure to movement in interest rates.
overseas operations, which is primarily denominated in
Credit risk management
Credit risk refers to the risk that the counterparty will default
on its contractual obligations resulting in financial loss to the
Canadian dollars (CAD). The Company holds CAD denominated
loans with its Canadian subsidiary arising from intercompany
recharges. Loans to the Company’s US and Australia
subsidiaries have been impaired in full.
Group. The Group’s credit risk is primarily attributable to its
To mitigate the Group’s exposure to foreign currency
transaction risk, planned non-GBP funding requirements in
relation to its non-UK subsidiaries are monitored and forward
foreign exchange contracts are entered into in relation to those
expected cashflows. The Group does not enter into forward
exchange rate contracts to mitigate the exposure to foreign
currency translation risk on the carrying value of its non-GBP
loan receivables. The loans carry a commercial rate of interest.
Additionally, the Group does not hedge translation risk in
relation to the financial statements of its overseas subsidiaries.
Foreign currency denominated financial assets and liabilities
which expose the Group to currency risk are disclosed in the
table below. The sensitivity of profit with regard to the Group’s
financial assets and financial liabilities and the AUD/GBP, USD/
GBP and CAD/GBP exchange rates is also disclosed.
The table below sets out assets and liabilities held in foreign
currencies and the impact in GBP of changes in the respective
foreign exchange rates. The assumed percentage changes in
AUD/GBP, USD/GBP and CAD/GBP exchange rate are
determined based on historical market volatility and estimates
of potential future volatility.
trade receivables.
Trade receivables across the Group have been assessed with
regard to credit risk characteristics which vary from country to
country and according to the nature of the counterparty. The
Group also considers days past due in making this assessment
as well as historical credit losses experienced within over a
period of 12 month before 30 April 2020.
The expected loss rates derived from this assessment are
adjusted to reflect current and forward-looking information
affecting the ability of the customers to settle the receivables.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables which are not subject to the
receivable sale arrangement described below.
In order to manage both liquidity requirements and credit risk
in the UK, the Group operates committed facilities with a third
party finance house, whereby customer receivables in respect
of customers who utilise the Group‘s “pay later” option are sold
immediately to the finance house. The Group has assessed the
credit risk of the counterparty as low. See note 2.20 for further
details.
Outside of the UK, the Group does not sell on its receivables
and therefore bears credit risk and needs to assess expected
credit losses.
The credit risk on liquid funds is minimised because the
counterparties are UK banks with high credit-ratings assigned
by international credit-rating agencies.
30 April 2020
Trade and other receivables
Cash and cash equivalents
Trade and other payables
30 April 2019
Trade and other receivables
Cash and cash equivalents
Trade and other payables
AUD
$m
USD
$m
-
-
-
-
AUD
$m
3.9
2.4
(4.2)
2.1
-
-
-
-
USD
$m
1.6
2.9
(5.4)
(0.9)
CAD
$m
8.1
4.3
(16.5)
(4.1)
CAD
$m
6.8
2.0
(10.3)
(1.5)
AUD
+/- 10% (£m)
US
+/- 7% (£m)
CAD
+/- 10% (£m)
-
-
-
-
-
-
-
-
0.5
0.2
(0.9)
(0.2)
AUD
+/- 10% (£m)
US
+/- 7% (£m)
CAD
+/- 10% (£m)
0.2
0.1
(0.2)
0.1
0.1
0.2
(0.3)
-
0.4
0.1
(0.6)
(0.1)
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 as at 30 April 2020.
92
Purplebricks Annual Report and Accounts 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS continued
28. Related party transactions
Related party transactions occur as a result of funding provided to the wholly owned subsidiaries for the purposes of marketing and
support from the UK.
Company - balances with subsidiary undertakings
Trade receivables
Purplebricks Australia PTY Limited
Provision
Purplebricks Inc.
Provision
BFL Property Management Limited
DuProprio Inc.
2020
£m
-
-
-
-
-
6.0
6.0
2019
£m
30.0
(30.0)
44.3
(44.3)
0.2
1.2
1.4
During the year Purplebricks Group plc lent £5.2m to
Purplebricks Australia PTY Limited (2019: £22.6m) and £4.6m to
29. Commitments
Purplebricks Inc (2019: £35.7m). These amounts were to allow
Capital commitments, approved by the Board and existing at
these companies to conduct the orderly closure of their
30 April 2020 amounted to £nil (2019: £nil).
operations. During the year, amounts owed by Purplebricks
PTY Limited were forgiven and written off in the books of the
Company. Amounts owed by Purplebricks Inc (net of
provisions already held) were capitalised into cost of
investment and written off.
During the year, the Company provided management services
to Canada which have been recharged. Funding to support
expansion outside of Quebec has also been provided.
Movements in the balance with BFL relate to intra-group cash
sweeps. BFL Property Management Limited repaid £0.2m in
the year.
The background to the provisions held against intercompany
balances is set out in note 18.
30. Ultimate controlling party
There is no ultimate controlling party as no one investor has a
majority shareholding
31. Post balance sheet event
Sale of Canadian business
On 15 July 2020 the Group completed the sale of its Canadian
business, being all Canadian subsidiaries and the entire Canada
segment, to the Desjardins Group, a Canadian cooperative
financial group. Headline consideration was $60.5m Canadian
During the year Isabel Bruce, a person closely associated with
Dollars (£35m) adjusted for working capital and debt, to be
Michael Bruce, received salary and taxable benefits of £26,000
verified in line with completion accounts in due course. Part of
the proceeds were allocated to the repayment of intra-Group
debt owed to Purplebricks Group plc.
The recovery of the non-current intercompany balance shortly
post year end is a non-adjusting post balance sheet event.
(2019: £11,000).
In August 2019, the Group made an investment of €5.0m
(£4.6m) into to its related party Einhundertsiebte “Media”
Vermogensverwaltungsgesellschaft bmH (“JV HoldCo”), a
company incorporated in Germany in which the Group holds a
50% stake and which the Group operates as a joint venture
together with its related party Axel Springer SE, an entity
closely associated with Dr. Stephanie Caspar, a Non-executive
Director of Purplebricks. JV HoldCo has subsequently made
further investments into Homeday which have given JV HoldCo
control over Homeday. See note 19 for more detail.
Axel Springer SE, an entity closely associated with Dr.
Stephanie Caspar, Non‐executive Director, purchased
43,662,417 shares on 3 June 2019 at £1.00 per share.
Directors’ remuneration and key management personnel
disclosures can be found in note 9.
Purplebricks Annual Report and Accounts 2020 93
Company Information
Directors
Paul Pindar, Chairman
Vic Darvey, Chief Executive Officer (appointed 7 May 2019)
Andy Botha, Chief Financial Officer (appointed 11 May 2020)
Simon Downing, Senior non-executive director
Adrian Blair, non-executive director
Dr Stephanie Caspar, non-executive director (appointed 27
July 2020)
Registered office
Suite 7, Cranmore Place, Cranmore Drive, Shirley, Solihull,
West Midlands B90 4RZ, United Kingdom
Registered number
08047368
Auditor
Deloitte LLP, Four Brindleyplace, Birmingham B1 2HZ
Nominated advisor
Zeus Capital Ltd, 10 Old Burlington Street, London W1S
3AG
Co-brokers
Citigroup Global Markets Limited, Citigroup Centre, 33
Canada Square, London E14 5LB,
Peel Hunt LLP, Moor House, 120 London Wall, London
EC2Y 5ET
Solicitor
Norton Rose Fulbright LLP, 3 More London Riverside,
London SE1 2AQ
Registrar
Link Asset Services, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU
Board members’ photography by Matt Leete. mattleete.com
Purplebricks is committed to the environmental issues reflected in this Annual Report. The cover is printed on Fedrigoni Symbol digital satin
and the text pages on Condat digital silk which are FSC certified and ECF (Elemental Chlorine Free) from a FSC chain-of-custody certified mill.
Printed in the UK by PSW Paper & Print Ltd.
www.fsc.org
FSC A000531
T h e mark of
responsible forestry
94
Purplebricks Annual Report and Accounts 2020
Purplebricks Group plc,
Suite 7, Cranmore Place, Cranmore Drive, Shirley, Solihull, West Midlands B90 4RZ
United Kingdom
Company number 08047368
investors@purplebricks.com