Purplebricks Gets GBP125 Million Investment, Warns On Annual Revenue (ALLISS)

26th Mar 2018 12:43

LONDON (Alliance News) - Purplebricks Group PLC on Monday agreed to a GBP125 million strategic investment by European publisher Axel Springer, appointed several new board members, and said that revenue for 2018 financial year will be 5% below company compiled consensus due to subdued UK market conditions.

The online estate agent said Frankfurt-listed Axel Springer will subscribed for new ordinary shares as well as acquiring existing ordinary shares from certain directors of the company at 360 pence per share. Following the transaction, Axel Springer will own around 12% stake in Purplebricks.

Purplebricks shares were down 9.4% at 282.20p per share, while Axel Springer shares were up 1.1% at EUR68.40 on Monday.

Purplebricks said that Axel Springer's funding will enable the company to achieve its strategic goals and ambitions more quickly and effectively. The group plans to invest GBP50.0 million of the subscription proceeds to accelerate its US rollout. The rest of the funding will go towards entry into new geographic markets and technological innovation and expansion of Purplebricks service offering.

The group also said that it appointed Andreas Wiele, currently president of classifieds media at Axel Springer, as a non-executive director.

Purplebricks Chief Executive Officer Michael Bruce said: "The strategic partnership with Axel Springer is ground breaking and will propel Purplebricks further towards our strategic goals and global ambition. We now have the platform, funding and, through Axel Springer's experience, as well as the appointment of four new leading non-executive directors, the expertise to achieve our vision."

Axel Springer SE President Classifieds Media said: "Under the leadership of its founder Michael Bruce, Purplebricks has created a highly innovative digital real estate platform and has become the clear market leader in the UK in a short space of time. For Axel Springer, this minority stake offers the opportunity to participate in an innovative, fast growing business model in new markets."

In the trading update, the company highlighted poor weather conditions affecting the spring market start and said that its instructions down 17% for the first three weeks of March, compared to the same period the prior year. This was after 10% of the company's local property experts were taken out of the field entirely in late February and early March to take part in a training initiative over a ten day period.

However, the company said that market has recovered over the last ten days and saw record levels of instructions which translate to a monthly run rate of nearly 7,000 instructions. As at April last year, the group reported total instructions of 5,497.

Purplebricks said its UK division experienced strong growth both in the total estate agency market and hybrid estate agency sector, although new instructions do not meet market expectations. The prior year, the group sold properties worth GBP5.8 billion and agreed on GBP3.7 billion of further sales.

The company said it expects revenue to come in doubled, although around 5.0% behind company compiled consensus of GBP98.0 million with the impact on the operating profit. In 2016, Purplebricks delivered revenue of GBP46.7 million and operating loss of GBP6.0 million.

Australia and the US revenues are on track to meet full-year expectations, the company added. The year before, Australian division posted revenue at GBP3.5 million while the US division did not generate any revenue.

Following a thorough recruitment process, Purplebricks has expanded its non-executive directors' team, who are expected to join the board on or before April 25.

Adrian Blair, chief operating officer at Just Eat PLC, and Simon Downing, the founder and executive chairman of Civica Group Ltd, were appointed as an independent non-executive directors.

In addition, the company appointed Mike Wroe, former chief financial officer at Just Eat, as a senior independent non-executive director.

Purplebricks said that non-executive directors Nick Discombe and Will Whitehorn will retire from the board on or before June 30.

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