Purplebricks Group PLC confirms challenges but analysts see some

Purplebricks Group PLC (AIM:PURP) half-year results confirmed the challenging market but showed evidence of some “encouraging signs”, said analysts.

Revenue in the first half of the year fell 7% to £41.3mln as a tougher market backdrop saw instructions fall 38%, while there was a net cash position of £58.3mln at the October half-year point.

The online estate agent said it has continued to see a “significant imbalance” in the second half between the strong demand for housing and a “very limited” supply of stock, which has driven house prices higher.

“Although housing supply has increased in January, we expect these market dynamics to continue through the second half of our financial year, which will continue to impact instructions and gross margins,” management said, while the comparable performance on last year will be further impacted by an expected increase in costs as the company moves to a model where agents are fully employed rather than freelance.

Broker Peel Hunt said better news was to be found in the form of the provisions in the Lettings businesses, which at £3.6mln is at the lower end of expectations.

The analysts were also impressed by operational progress being made following the strategic changes, noting that conversion rates increased by four percentage points since the switch to the fully employed model and market share had grown 0.6 points. 

The shares, having fallen 16% so far this year, were up 4% to 20.8p on the results.

Peel Hunt said it was keeping its estimates and rating under review at this stage.