PURP.L Regulatory News (PURP)

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17 December 2015

Purplebricks Group plc

("Purplebricks" or "the Company")

First day of dealings

Purplebricks, a leading hybrid estate agency, today announces the commencement of dealings in its Ordinary Shares on AIM, under the ticker code PURP.L and the ISIN number GB00BYV2MV74.

The hybrid model pioneered by Purplebricks differs from online operators through its combination of using Local Property Experts (LPEs), which at 18 November 2015 totalled 165, technology and customer facing software. Purplebricks aims to change the whole experience of selling, buying and letting residential property, by providing a transparent and superior customer service at a fraction of the cost of a traditional estate agent.

The Company has grown rapidly since its launch in April 2014, with its revenue in September 2015 being around 10 times greater than the previous year. Based on the Company's recent monthly run-rate of fee paying customers Purplebricks already has the fourth highest number in the UK1. In the 18 months since its regional launch, Purplebricks has also emerged as the market leader in the hybrid and online sector, with a market share of the top six national online competitors in excess of 60%; and has approximately 4,300 residential properties for sale, which represents more than twice the number of properties than the next largest online agency. Purplebricks typically also sells its properties faster than its online competitors.

Placing statistics

Zeus Capital is acting as the Company's Nominated Adviser and Broker.

Michael Bruce, Chief Executive of Purplebricks Group plc, said:

"Purplebricks' successful listing on AIM today represents a major milestone in the evolution of the business over the last four and a half years and is testament to the team's hard work and commitment. The funds raised will allow us to further deepen our presence across the UK through additional investment in people, technology, infrastructure and marketing to deliver our ambitious growth plans as well as value for all of our shareholders."

Strategy

It is estimated that annual UK estate agency fees amount to over £4.4bn. Purplebricks' strategy is to build upon its market leading online proposition and increase Purplebricks' share of the UK estate agency market for both sales and lettings.

The attainment of the strategy is based on the following key pillars of the Purplebricks' offer:

Superior value - Traditional estate agents charge a fee on sales typically within the range of 1 to 3% on the sale price and average at over £4,000 (inc. VAT). By contrast, the average Purplebricks' fee is £1,080 (inc VAT).

Local experts, personal service - Purplebricks is not an online estate agent, it is a hybrid estate agent that has a growing number of LPEs (165 as at 18 November 2015). The LPEs have detailed knowledge of their respective areas, visit the properties and provide valuations. Once instructed the LPEs provide support, advice and assistance throughout the sales process and customers can speak to an expert 24 hours a day.

LPEs are paid a fixed fee for each instruction and will also receive additional income for the sale of other products and services. Importantly to the LPEs an LPE can employ or contract sub-licensees to assist their growth within their region. To date 55 LPEs have already engaged sub licensees in their business. Accordingly, as they grow their business, increasing their employees and sub licensees an LPE can build capital value in their business as part of their licence agreement with Purplebricks. The LPE can, subject to the terms of their agreement which includes an approval by Purplebricks, sell their licence to an acceptable third party. The LPE is therefore motivated, engaged and rewarded for building their business within a culture of personal and professional integrity.

24/7 customer service - The technology enables interaction 24 hours a day. Approximately 70% of Purplebricks' customer traffic happens when traditional agents are closed. Customers can instantly know what is happening with their property, they can book valuations, arrange viewings, see feedback from viewings, offers can be made and sales can be agreed, customers can get performance reports and can contact Purplebricks 24 hours per day.

Focus on technology - Purplebricks has spent four and a half years developing and building its technology and has a team of developers who work on new features, maintenance and security. Purplebricks intends to continue to develop its offering, introducing new versions of its platform and assessing new and improved ways of accessing and operating the process of selling, buying and letting property.

High profile marketing strategy - The differentiated marketing strategy is based upon a consistent presence on the media, including TV to drive customer traffic to the website, complemented by extensive use of radio, Pay Per Click (PPC), social networking, retargeting and portal advertising. 

Brand awareness and customer engagement - Purplebricks aims to increase brand awareness among UK homeowners, landlords, buyers and sellers as a trusted and effective alternative to high street agents and online competitors. Customer satisfaction and referral is a fundamental part of the Purplebricks service. Purplebricks is rated excellent by independent review website Trustpilot (rated 9.4) with over 3,000 reviews from customers.

The business model

Instructions convert quickly to cash

Purplebricks has a competitive and transparent, flat fee pricing structure of £798 (inc. VAT) for a sale anywhere in the UK other than certain defined London postcodes, where there is a charge of £1,158 (inc. VAT). There are additional charges if the customer wants Purplebricks to undertake the viewings on their behalf, if they require an energy performance certificate, or a Rightmove premium display. The Company's additional sources of revenue currently comprise fees from conveyancing, mortgage referrals and insurance.

The average Purplebricks' fee including all other sources of income is £1,080 (inc. VAT).

The customer can choose to pay upfront on instruction or they can delay the payment (at no additional cost) until the earlier of the sale of the property or ten months from instruction. The deferred payment is financed by Close Brothers. Purplebricks is paid by Close Brothers the next working day. If a customer wishes to defer payment, they are required to use Purplebricks' conveyancing services for the sale.

Low and flexible cost base

The cost structure of the business is different to that of a traditional estate agent. First, the hybrid model does not require the overheads of a high street estate agency business, with extensive, leased branches. Secondly, the LPEs typically operate under licence (89%) with fees payable upon instruction, rather than as an employee (11%). As a result gross margins are substantial, reaching 59.2% for the year ended 30 April 2015. The marketing budget is in alignment with the strategy of consistent presence in the media such as television, and aims not only to build awareness but also to help maintain and extend the Company's position as the market leader in the online sector.

Current trading and prospects

Since the Company's 30 April 2015 year end, Purplebricks has continued to see an encouraging growth in recognition of its brand and service offering with consistent progress across its key performance indicators in numbers of valuations and instructions and market share.

In November 2015, Purplebricks completed its national footprint with its launch into Scotland. Purplebricks expects to build on its progress to date through the remainder of the current financial year ending 30 April 2016 by filling out its national footprint through increasing numbers of LPEs, by introducing new technological features for its software, including an App to offer customers more choice and convenience, and through the evolution of its advertising and marketing strategy to raise brand awareness.

The Company's aims are to continue to build its lettings business, grow its mortgage business and optimise the significant and growing traffic visiting its website. Purplebricks approaches the key trading period of the first quarter of the new calendar year with confidence and, in the Directors' opinion, with the Purplebricks hybrid model set to continue to change the way that houses are sold and let.

Footnote

1 Purplebricks figure is based on annualised number of instructions received in September 2015, which is higher than the actual number of instructions received over the year to September 2015. Competitor data has been obtained from publicly available information or estimated by management, may represent different 12 month periods and is based on completed sales numbers

Enquiries:

Important information

This announcement is for information purposes only and does not itself constitute an offer or invitation to underwrite, subscribe for or otherwise acquire or dispose of any securities in the Company and does not constitute investment advice.

Neither this announcement nor any copy of it may be taken or transmitted, published or distributed, directly or indirectly, into the United States, Australia, Canada, Japan or South Africa or to any persons in any of those jurisdictions or any other jurisdiction where to do so would constitute a violation of the relevant securities laws of such jurisdiction. Any failure to comply with this restriction may constitute a violation of United States, Australian, Canadian, Japanese or South African securities laws. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe any such restrictions.

This announcement does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any Shares or other securities in the United States, Australia, Canada, Japan or South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful. The Placing and the distribution of this announcement and other information in connection with the Placing and Admission in certain jurisdictions may be restricted by law and persons into whose possession this announcement, any document or other information referred to herein, comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Neither this announcement nor any part of it nor the fact of its distribution shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

Zeus Capital Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as nominated adviser and broker to the Company in connection with the proposed Placing and Admission and will not be acting for any other person or otherwise be responsible to any person for providing the protections afforded to clients of Zeus Capital Limited or for advising any other person in respect of the proposed Placing and Admission or any transaction, matter or arrangement referred to in this announcement. Zeus Capital Limited's responsibilities as the Company's nominated adviser and broker under the AIM Rules for Nominated Advisers are owed solely to London Stock Exchange plc and are not owed to the Company or to any Director or to any other person in respect of his decision to acquire shares in the Company in reliance on any part of this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on Zeus Capital Limited by Financial Services and Markets Act 2000 (as amended) or the regulatory regime established thereunder, Zeus Capital Limited does not accept any responsibility whatsoever for the contents of this announcement, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Ordinary Shares or the Placing and Admission. Zeus Capital Limited accordingly disclaims all and any liability whether arising in tort, contract or otherwise (save as referred to above) in respect of this announcement or any such statement.

Forward-looking statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the Directors' current intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the Company's markets.

Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this announcement are based on certain factors and assumptions, including the Directors' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. While the Directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Save as required by law or by the AIM Rules for Companies, the Company undertakes no obligation to publicly release the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the Directors' expectations or to reflect events or circumstances after the date of this announcement.