TIDMPURP
RNS Number : 9703D
Purplebricks Group PLC
15 October 2018
This announcement contains inside information for the purposes
of Article 7 of Regulation 596/2014 on market abuse
Purplebricks Group plc
("Purplebricks" or "the Company")
Purplebricks and Axel Springer jointly acquire 25.9% of the
leading German online estate agent Homeday
Investment marks Purplebricks' first entry into the European
real estate market
and
Current trading update
Purplebricks (AIM: "PURP"), the leading hybrid estate agency,
announces that it has entered into a joint venture ("NewCo") with
Axel Springer to enter the German market and jointly take a stake
in the leading German online estate agent, Homeday. Separately,
Purplebricks confirms that it is trading in line with the Board's
expectations for the current full year.
Key terms
-- Purplebricks and Axel Springer have entered into a joint
venture, NewCo, initially split 50/50, in order to jointly acquire
a stake in Homeday
-- NewCo has conditionally agreed to a first round investment
which will give it a shareholding of 25.9% in Homeday (including an
existing 4% stake brought in by Axel Springer) and Newco a
valuation of EUR25.4m (GBP22.3m), equating to an investment of
EUR12.7m (GBP11.1m) by Purplebricks, which will be funded from
existing cash resources, for an effective 12.9% shareholding in
Homeday
-- The first round investment in Homeday is in part subject to
approval by the relevant antitrust authorities
-- Purplebricks and Axel Springer, via NewCo, will have an
option to acquire up to a further aggregate 28.5% in Homeday in
August 2019 and, subject to certain performance criteria being met,
the existing Homeday investors and founders will have an option to
require NewCo to make such further investment. Should the second
round of investment be made by both Purplebricks and Axel Springer
in full, NewCo's investment in Homeday would increase to a total of
54.4%, requiring an additional investment of up to EUR20m
(GBP17.5m) by Purplebricks, which Purplebricks has the option to
fund in cash or through the issue of Purplebricks shares to Axel
Springer, which would bring Purplebricks' effective shareholding in
Homeday to 27.2%
-- Between 2021 and 2024 certain put and call options will be
exercisable, subject to certain financial criteria being met, to
effect the acquisition by NewCo of the remaining shares in Homeday
that it does not already own. The purchase consideration will be
determined by pre-agreed multiples of revenue and EBIT respectively
at the relevant time
-- The Homeday management team, led by CEO and founder Steffen
Wicker, will continue to run the business under the Homeday brand,
with the added support and expertise of both Axel Springer and
Purplebricks
-- Purplebricks and Axel Springer will each have a seat on the
Homeday board, effective from completion of the first round of
investment in Homeday
-- Axel Springer is a related party of Purplebricks and entry
into the joint venture comprises a related party transaction for
the purposes of the AIM Rules
-- The directors, other than Andreas Wiele, having consulted
with Zeus Capital Limited, the Company's nominated adviser,
consider that the terms of transaction are fair and reasonable
insofar as the shareholders are concerned
About Homeday
Launched in 2015 by founder and CEO Steffen Wicker and based in
Berlin, Homeday operates homeday.de, a transaction-based digital
real estate agency platform in Germany that helps customers to buy
or sell real estate. The Homeday model has some similarities to
Purplebricks, combining a technology platform with an expanding
number of local agents, referred to as 'realtors', operating across
65 German residential markets including Berlin, Hamburg, Munich and
Cologne. The realtors are typically sub-contractors rather than
employees. The customer proposition and service level provided by
Homeday are well regarded, as evidenced by a Trustpilot average
score of 9.3 from over 850 reviews.
For the year ended 31 December 2017 Homeday reported revenues of
EUR3.5m and a loss of EUR3.2m. As at 30 June 2018, Homeday had net
liabilities of EUR1.4m. Homeday anticipates strong revenue growth
in 2018 and has budgeted that it will breakeven in 2021.
About the German Market
Germany represents one of the largest residential real estate
markets in Europe, with more than 600,000 annual sales
transactions. Reflecting the higher commission rates charged in the
country, the annual sales commission income is estimated at
EUR5.1bn. The German housing market is in good health, supported by
strong economic growth, rising average household incomes, low
interest rates and population growth.
The German residential real estate market is highly fragmented.
The largest agents are banks such as Sparkasse, Postbank, VR Bank
and traditional agents such as von Poll and Engel & Völkers.
The average transaction value is circa EUR240,000 with average net
commission rates of around 5.8%, equating to transaction fees of
EUR13,900. In this high fee environment Homeday offers an
attractive and competitively priced proposition.
Combined proposition of Homeday, Axel Springer and
Purplebricks
Purplebricks believes that the combination of Homeday's
experienced and committed team, together with Axel Springer's
presence in and knowledge of the media market in Germany, and
Purplebricks' own operational and technology platform expertise,
will significantly strengthen Homeday's growth potential.
Although the online market in Germany is still small, it is a
fast-growing market and Homeday has developed rapidly to become the
market leader in just 4 years, achieving close to 50% market share
of the online space (Source: Immobilienscout24). Purplebricks will
contribute its increasing knowledge and experience of building
online businesses in different international markets with a
particular focus on optimising the customer experience, building
Homeday's marketing impact and refining its technology platform to
best effect.
Current trading
Ahead of the half year trading update scheduled for 6 November,
Purplebricks confirms that it continues to trade in-line with
guidance issued in July. Trading in the UK is currently showing
double-digit growth year-on-year in monthly instructions, with
further market share gains, in what continues to be a challenging
market. Purplebricks' share of the UK online market remains above
70%.
The Canadian business Duproprio/Comfree, acquired in July 2018,
is performing strongly. Progress in the US remains on track and
following the recent expansion into Florida, Purplebricks is now
operating across seven states, within one year of launching in the
country.
The recent changes made to the Purplebricks Australia customer
proposition in order to address the current challenges in the local
property market appear initially to be well received.
Michael Bruce Group CEO of Purplebricks said:
"Our investment in Homeday secures for us a strong foothold in
Europe's second largest residential real estate market. This is a
good opportunity for Purplebricks, allowing us to partner early
with a dynamic and committed management team, while remaining
focused on realising the opportunity in our existing markets.
"Steffen Wicker and his colleagues at Homeday share many of our
own values and have a clear ambition to become Germany's leading
online real estate agent by providing a trusted and transparent
service to customers. We are confident that with the combined
support of Purplebricks and Axel Springer the Homeday management
team will help to transform the German market, and in the process
deliver exceptional value for customers and shareholders.
"I am pleased to report that we continue to perform in line with
our expectations and make further gains in market share despite
what are challenging market conditions in the UK real estate
sector."
Dr Andreas Wiele, President of Classifieds Media at Axel
Springer SE said:
"We strongly believe that Homeday enhances the consumer
experience in buying and selling real estate. At the same time the
company offers real estate professionals a great opportunity to
extend their service offerings through technology and scale. The
joint investment by Purplebricks and Axel Springer is further proof
of the excellent development of our partnership."
Steffen Wicker, CEO and co-founder of Homeday said:
"The combination of Purplebricks and Axel Springer as partners
in our business is compelling. The three-way knowledge share will
benefit all parties. We now have the funding and the backing to be
a decisive player in the German property market."
For further information, please contact:
Purplebricks +44 (0) 20 7457 2020
Michael Bruce, James Davies
Zeus Capital (NOMAD) +44 (0) 20 3829 5000
Nicholas How, Benjamin Robertson
Peel Hunt (Broker) +44 (0) 20 7418 8900
Dan Webster, George Sellar
Investec Bank (Broker) +44 (0) 20 7597 5970
Keith Anderson, Carlton Nelson
Instinctif Partners +44 (0) 20 7457 2020
David Simonson, Mark Reed, George
Yeomans +44 (0) 79 0308 9543
The person arranging release of this announcement on behalf of
the Company is James Davies, Chief Financial Officer.
For the purposes of this announcement:
-- the term Axel Springer means Axel Springer SE, through its
wholly owned subsidiaries, Axel Springer Digital Ventures GmbH and
Fünfundachtzigste "Media" Vermögensverwaltungsgesellschaft mbH;
and
-- Homeday means Homeday GmbH.
The release, publication or distribution of this announcement in
jurisdictions other than the United Kingdom may be restricted by
law and therefore any persons who are subject to the laws of any
jurisdiction other than the United Kingdom should inform themselves
about, and observe, any applicable requirements. This announcement
has been prepared for the purposes of complying with the UK AIM
Rules and MAR and the information disclosed may not be the same as
that which would have been disclosed if this announcement had been
prepared in accordance with laws and regulations of any
jurisdiction outside of England.
This announcement contains certain forward-looking statements.
No forward-looking statement is a guarantee of future performance
and that actual results or other financial condition or performance
measures could differ materially from those contained in the
forward-looking statements. These forward-looking statements can be
identified by the fact that they do not relate only to historical
or current facts. Forward-looking statements sometimes use words
such as 'may', 'will', 'seek', 'continue', 'aim', 'anticipate',
'target', 'projected', 'expect', 'estimate', 'intend', 'plan',
'goal', 'believe', 'achieve' or other words of similar meaning. By
their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
A number of these influences and factors are beyond the Company's
control. As a result, actual results may differ materially from the
plans, goals, and expectations contained in this announcement.
Any forward-looking statements made in this announcement speak
only as of the date they are made. Except as required by the FCA,
London Stock Exchange plc or applicable law or regulation, the
Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statements contained in this document to reflect any changes in the
Company's expectations with regard thereto or any changes in
events, conditions or circumstances on which any such statement is
based.
The amounts described in this announcement in EUR have been
converted into GBP at an exchange rate of 1.14.
References to GBP or GBP are to pounds sterling and to EUR or
EUR are to the Euro.
About Purplebricks
Purplebricks is the leading next generation estate agency in the
UK with operations in Australia, the US and Canada that combines
highly experienced and professional Local Property Experts (Local
Real Estate Experts in the US) and an innovative use of technology
to help make the process of selling, buying or letting so much more
convenient, transparent and cost effective. Purplebricks is
transforming the way people perceive estate agents and estate
agency.
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END
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