Total revenues for the group totalled £136.5 million, up 55% on a year earlier, with UK revenues up by 21% to £90.1 million. However, operating losses of £52.3 million, mainly driven by investment in its US and Australian businesses, took focus away from any positivity in the annual results.
As such, the group took the opportunity to formally announce its withdrawal from the US market following a review started in May, just weeks after giving notice of plans to pull out of Australia as well.
The company has found it difficult to crack the US in particular and says opting to withdraw from both markets will allow it to “significantly reduce cash burn going forward”.
Chief executive Vic Darvey commented: "We have taken the difficult decisions to exit our businesses in both Australia and the US as it is very important that we now focus our resources on the UK and Canada, where we have a strong established presence and where there are significant opportunities to grow market share and deliver profitable growth for shareholders."
Back to basics
Investors growing impatient with costs and lead times linked to international expansion might just welcome today’s news. While initial growth into Canada has proved fruitful, the UK business has been propping up the US and Australian arms since they launched, even notching up a £5.3 million profit on its own in the year to 30 April 2019.
The group also claims to have 76% of the online estate agency market, completing on over £10 billion of UK property since last year, with average revenue per instruction at £1,243, up by 6%. All the more frustrating for investors who have seen this progression wiped out by new markets.
Regrouping around core business channels might be a sensible move - akin to investors running their winners and cutting their losers. It can be hard to exit stage left, having sunk time, energy and money into new ventures but Purplebricks has been pragmatic in getting back to its core growth strategy with the resources it has to hand. Without doubt, this means its technology-led proposition.
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The group admitted its expansion efforts had been distracting and had stretched its product and technology teams “to the limit”. With this side of the business being the main selling point of the proposition, investors have been rightfully worried that the firm’s eyes have been bigger than its belly in terms of expansion plans. The market has clearly seen the effects of this, sending shares tumbling over the past year in particular.
Investors will be hoping to regain the momentum that saw huge growth for the firm in the first half of 2017, and with plans to fully exit the US and Australia by the end of 2019, will be looking to see how renewed efforts on the UK manifest themselves on the balance sheet.
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