What is new?
Interim results to 31 October are impressive. They echo comments made at the AGM in September. Net cash at end September was £64.4m (August: £65m).
UK – continues to grow fast & profitably
Revenues rose 118%: “more than double the same period last year”;
Average revenue per instruction rose 14% to £1,138;
Gross profit margin rose to 56.5% (1H17: 55.6%; 2H17: 56.4%);
Administration overhead rises to £9.3m (1H17: £3.8m; 2H17: £5.3m);
Media spend of £10.1m as guided; 2H spend to rise to £13m;
UK Adj EBITDA was £4.7m (1H17: £0.3m; 2H17: £1.1m);
Australia – developing faster than UK (at similar period of development)
Revenues of £6.8m (1H17: £0.4m) are “many times ahead” of last year;
US – launch in September 2017 is “ahead of schedule”
Launch in January of San Diego, Sacramento & Fresno with 18 LREEs.
The CEO’s commentary updates revenue guidance for the UK from £80m to £84m and refers to Purplebricks “overseas expansion progressing well.”
Zeus’ view
Following new guidance, we increase our UK revenue forecast to £84m, assume overheads are slightly above twice 1H and a £3.5m increase in 2H media spend to £11.3m. Overall 2H18E will be a period of investment to gain further market share.
With more UK LPEs, higher revenue/transaction and more marketing spend we have increased our FY19E revenue and profit estimates by 25% to reflect increased scale and increased investment.
Overall, we leave our estimates for Purplebricks overseas revenue and adjusted PBTunchanged, as these business units are “slightly ahead of schedule.”
Valuation considerations
Since the AGM on 29 September, PURP shares are up 6.7% (4.2% relative to the FT All Share). With revenue growth ahead of expectations, this is a good time for investors to reappraise their expectations. In our opinion, EV/revenue provides a sensible valuation guide, given Purplebricks’ clear business model
