OREANDA-NEWS. December 04, 2015. NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA (THE "UNITED STATES") (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT.

This announcement is not an offer of securities for sale in any jurisdiction. This announcement is an advertisement and not a prospectus. Investors should not subscribe for or purchase any transferable securities referred to in this announcement. An admission document will be published by the Company in due course in connection with the proposed admission of its ordinary shares to trading on AIM, a market operated by London Stock Exchange plc. The Company will be re-registered as a public limited company under the name Purplebricks Group plc prior to Admission. Copies of the Admission Document will, following publication, be available for inspection on the Company's website, at www.purplebricks.com/investors.

Purplebricks, a leading hybrid estate agency, has conditionally raised ?58.1 million before expenses from an institutional placing and is expected to be admitted to AIM with a market capitalisation of ?240.3 million and on a fully diluted valuation of ?255.0m.

Purplebricks is a national estate agency and lettings business driven by a combination of professional Local Property Experts (LPEs), technology and customer facing software designed to change the whole experience of selling, buying and letting property. The Company is becoming a major brand through extensive advertising and marketing, providing a service intended to exceed customers' expectations, whilst charging a fraction of the cost of a traditional estate agent.

The Company has grown rapidly since its regional 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 as the next largest online agency. Purplebricks typically also sells its properties faster than its online competitors.

Trading in Purplebricks' shares is expected to start at 8.00am on 17 December 2015. (Ticker symbol PURP.L).

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

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 ?665 plus VAT for a sale anywhere in the UK other than certain defined London postcodes, where there is a charge of ?965 plus 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.

Reasons for Admission and use of proceeds

The Placing and Admission will assist Purplebricks in its development by:

·      Providing the capital to further deepen the national footprint, particularly in London and Scotland

·      Further raising awareness of the profile and the brand

·      Continuing to invest in the technology and software platform, which the Directors believe will enhance the Company's market position

·      Helping to retain, attract and incentivise employees

·      Providing directors and senior management with a partial realisation of their investment

The Placing is expected to raise before expenses approximately ?25.0 million for the Company and approximately ?33.1 million for certain of the Company's shareholders who are selling shares pursuant to the Placing.

Significant shareholders

 

Before admission

Following admission

Nortrust Nominees Limited2

30.62%

28.68%

Michael Bruce (Chief Executive Officer)3

23.94%

17.03%

Paul Pindar (Non-executive Chairman)3

4.98%

4.46%

Nick Discombe (Senior NED)3

3.88%

2.67%

Kenny Bruce

6.99%

5.05%

Old Mutual GI

-

6.53%

Artemis Asset Management Ltd

-

4.43%

FIL Investments International

-

3.41%

2 Nortrust Nominees Limited holds individual holdings of the Ordinary Shares as nominee for each of CF Woodford Investment Fund and Woodford Patient Capital Trust plc

3 The holdings of the directors include their connected persons

 

 

Michael Bruce, Chief Executive of Purplebricks, said:

"The Purplebricks' team have dedicated four and a half years to develop and establish a model which is designed to change the way we sell, buy and let residential property. We have a compelling customer proposition of a low flat fee combined with a high quality and personalised service, underpinned by our proprietary technology platform.

The business model is disruptive and has allowed us to establish Purplebricks as a nationwide agency at a lower investment than a traditional agency, with a more flexible cost structure which supports the sustainability of our pricing strategy.  

The IPO will represent a major milestone in the rapid development of Purplebricks, which is already the fourth largest estate agency in the UK based on a monthly run rate of the Company's transaction numbers. 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 and create value for our shareholders."