Notes to the financial statements

 

1. General information

 

Purplebricks Group plc is a public company limited by shares which is listed on the Alternative Investment Market of the London Stock Exchange. The company is incorporated in the United Kingdom and registered in England and Wales. The address of the Company's registered office is Suite 7, First Floor, Cranmore Place, Cranmore Drive, Shirley, Solihull, West Midlands, B90 4RZ. The Company is primarily involved in the estate agency business.

 

On 2 July 2018 the Group acquired 100% of the share capital of 9059-2114 Quebec Inc., which heads a group of companies operating one of Canada's leading commission-free real estate brands, Duproprio, giving the Group an established presence in a new market.

 

2. Summary of significant accounting policies

 

2.1 Basis of preparation and consolidation

 

This financial information has been prepared on the going concern basis under the historical cost convention as modified by the revaluation of certain financial assets and liabilities (including derivative instruments) at fair value.

 

The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 30 April 2019 or 2018. The financial information for the year ended 30 April 2018 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditor reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498(2) or (3) of the Companies Act 2006. The audit of the statutory accounts for the year ended 30 April 2019 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's annual general meeting.

 

This financial information has been extracted from the annual consolidated financial statements for the year ended 30 April 2019 Purplebricks Group plc, which will be delivered to the Registrar of Companies when they become available. These financial statements will be prepared in accordance with International Financial Reporting Standards as adopted by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS as adopted by the European Union.

 

2.2 Restatement

Following the adoption of IFRS 15 Revenue from Contracts with Customers, the Group has restated the Statement of Comprehensive income, the Statement of financial position, the statement of cash flows and the statement of changes in equity. More information of the impact of this are set out in notes 2.4.1 and note 13.

 

Prior period error

In the current period, the Group has reclassified cash flows relating to interest income in the statement of cash flows. In the prior period, this cash flow was reflected within cash flow from financing activities. As interest income arises on funds held on deposit, this is presented within cash flow from investing activities.

 

In addition to this, the Group has reclassified cash flows realting to debt factoring finance costs in the statement of cash flows. In the prior period, these cash flows had been presented within cash flows from financing activites. Receivables are sold at a discount to face value on non-recourse terms, with the discount representing the costs charged by the factor. The factors settles the debt to the Group on a net basis, after deducting fees. As no cash flows arise from these transactions, because the costs charged by the factor are deducted from the gross payment, the cash flows have been removed from the statement of cash flows.

 

 

 

Notes to the financial statements (continued)

 

2.2 Restatement (continued)

 

Extract from statements of cash flows

	2018
	£000
Operating cash outflow before changes in working capital previously reported	(19,589)
Increase in the loss before tax due to adoption of IFRS 15 (see note 13)	(3,011)
Decrease due to removing the adjustment for debt factoring finance costs	(1,724)
Operating cash outflow before changes in working capital (restated)	(24,324)
Cash flows from investing activities previously reported	(3,694)
Reclassification of interest income from cash flows from financing activities	232
Cash flows from investing activities (restated)	(3,462)
Cash flows from financing activities previously reported	100,320
Increase due to removal of cash outflows from debt factoring finance costs	1,724
Reclassification of interest income to cash flows from investing activities	(232)
Cash Flows from financing activities (restated)	101,812

 

2.3 Going concern

 

The financial statements have been prepared on the going concern basis. The directors have prepared a monthly forecast to July 2020, which on the basis of the assumptions made, shows that the Group can operate with its existing resources. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance that may arise as a result of current economic conditions and other risks faced by the Group show that the UK is likely to continue being profitable and cash generative during the year ended April 2020, partially offsetting net cash consumption by the Group's international operations. At the financial year-end the Group reported cash balances of £62.8 million. The directors have performed sufficient sensitivity analysis to be satisfied that the going concern basis of preparation is appropriate.

 

Accordingly, the directors believe that it is appropriate to adopt the going concern basis of accounting in preparing the financial statements.

 

2.4 New accounting standards adopted in the period

 

2.4.1 Implementation of IFRS 15 Revenue from Contracts with Customers

 

Revenue recognition

The Group has initially adopted IFRS 15 Revenue from Contracts with Customers in these financial statements.

 

An explanation of how the Group has applied IFRS 15, including the judgements taken in the application of the standard, is set out below.

 

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It has replaced IAS 18 Revenue. As the overall value of the adjustments on adoption of IFRS 15 to the Group's previously reported results is significant, in order to ensure comparability of current period reported results against the restated results of comparative periods, the Group has adopted the standard using the fully retrospective method, with the effect of initially applying the standard recognised at the beginning of the comparative period, ie 1 May 2017.

 

 

 

Notes to the financial statements (continued)

 

2.4.1 Implementation of IFRS 15 Revenue from Contracts with Customers (continued)

 

Accordingly, the information presented for the year to 30 April 2018 has been restated.

The effect of initially applying this standard mainly arises from:

 

·      later recognition of instruction fee revenue, and associated cost of sales, following identification of the relevant performance obligations and when and how revenue relating to these is allocated and recognised,

·      earlier recognition of revenue from Conveyancing referrals and Brokerage activities, and associated cost of sales, following assessment of the relevant performance obligations and when and how revenue relating to these is recognised.

 

Please see the tables set out at note 13 for further information.

Table 1 summarises the impact of transition to IFRS 15 on retained earnings at 1 May 2017.

 

Tables 2 - 6 summarise the impacts of adopting IFRS 15 on the Group's previously reported:

·      Statement of profit or loss and other comprehensive income for the year ended 30 April 2018.

·      Statement of financial position as at 30 April 2018 and 30 April 2017.

·      Earnings per share for the year ended 30 April 2018.

·      The consolidated statement of cash flow for the year ended 30 April 2018 has been restated to reflect the adjustments detailed in these tables.

 

The details of the new significant accounting policies and the nature of the changes to previous accounting policies in relation to the Group's various services are set out below. Under IFRS 15, revenue is recognised when control of the services passes to the customer. The Group has been required to use judgement in determining the timing of the transfer of control - at a point in time or over time - for each service type.

 

Contracts with customers

 

The Group has identified the following significant categories of contracts with customers:

·      Instructions ("a")

·      Conveyancing ("b")

·      Brokerage ("c")

·      Lettings - landlord setup services ("d")

·      Lettings - monthly management services ("e")

 

The adjustments arsing on the adoption of IFRS 15 in respect of categories "a" and "b" are set out in the tables at the end of this note. As the adjustments arising on categories "c", "d" and "e" are not material, they have been presented together in an "Other" category in these tables.

 

Instructions ("a")

The Group is entitled to an instruction fee at the point at which a property is listed for sale. The Group offers a number of additional services to customers who list their properties for sale, including accompanied viewings and premium portal listings, which are typically charged for at the same time as the instruction. Most services (for example, advice on property sales strategy) are provided before the listing of the property advertisement. Some services (for example post sales support) are only provided to those customers who accept an offer for their property.

 

The Group has taken the judgement that all of the services which are provided in exchange for the instruction fee and, where relevant, fees for additional services, represent a single Performance Obligation which is the provision of estate agency services. The reason for this is that the service of listing for sale and these additional services are highly interrelated, are dependent on each other and cannot be purchased separately by customers, or purchased at all unless those customers have instructed the Group to list their property for sale.

 

Notes to the financial statements (continued)

 

2.4.1 Implementation of IFRS 15 Revenue from Contracts with Customers (continued)

 

Although the services are priced separately, the overall revenue for each contract of this type is attributable to this single Performance Obligation and is recognised as the services as a whole are provided. Revenue is recognised on an output basis over time, as the estate agency services are performed. This method reflects the fact that the customer receives benefit from the Group's performance as the service is provided to the customer. The Group has assessed that the starting point for provision of service is the customer's instruction to the Group, and the ending point is either the completion of sale or the customer's decision to withdraw from sale.

 

A key estimate within the Group's accounting policy for revenue from instructions is the length of the period over which estate agency services are performed. The Group utilises analysis of historical data to ascertain the length this period, which covers both a marketing period and a post sales support period. If the length of the average service period increased by 5%, then there would be a corresponding decrease in revenue of £0.7 million for the year to 30 April 2019.

 

Costs associated with Instructions revenue include commissions paid to the Group's LPEs. This commission is due at listing of the advertisement for sale. Therefore, these costs are prepaid over the average service period. These costs are reported within prepayments.

 

Australian model

During the year ended 30 April 2019, the Group's Australian business has introduced a revised business model under which the instruction fee is split into two elements. These elements are (i) an upfront fee, which is non-refundable and which is recognised over time on an input basis, and (ii) a success fee, which is due only on settlement of a successful sale of the property. Each fee is in respect of the performance obligation to provide estate agency services.

 

Variable consideration in respect of the success fee is recognised over time on an input basis as the Group fulfils its performance obligation, over the expected service period, at the fair value of expected consideration receivable. The expected fair value of consideration received is estimated based on historical experience. The Group monitors the rate of sales of properties marketed at each reporting date, in order to restrict the revenue recognised under this method to an amount at which it is highly probable that reversal will not occur.

 

US model

 

During the year ended 30 April 2019, the Group US business introduced a revised business model under which the up front instruction fee is no longer required, with payment due only on settlement of a successful sale of the property. The success fee is recognised when a sale is unconditionally agreed.

 

Previous accounting policy and impact of adoption of IFRS 15

 

Under the Group's previous accounting policy, instruction fees were recognised as the Group's obligations were completed. Instruction fee revenue was allocated to obligations occurring before listing and obligations after listing. A significant proportion of the obligations, based on an assessment using an input method occurred prior to listing, and therefore a significant portion of the total transaction price was recognised at or before listing.

 

Therefore, on adoption of IFRS 15, the amount of reported deferred income in respect of instruction fees has increased, and the amount of reported revenue has decreased. The amount of prepaid cost of sales recognised as an asset in the statement of financial position has increased, and the amount of reported costs of sales has decreased. The impact of the relevant adjustments is shown within the tables below. The impact on reported revenue for the year ended 30 April 2018 is show in the table below.

 

 

 

Notes to the financial statements (continued)

 

2.4.1 Implementation of IFRS 15 Revenue from Contracts with Customers (continued)

 

Previous accounting policy and impact of adoption of IFRS 15

 

Under the Group's previous accounting policy, instruction fees were recognised as the Group's obligations were completed. Instruction fee revenue was allocated to obligations occurring before listing and obligations after listing. A significant proportion of the obligations, based on an assessment using an input method occurred prior to listing, and therefore a significant portion of the total transaction price was recognised at or before listing.

 

Therefore, on adoption of IFRS 15, the amount of reported deferred income in respect of instruction fees has increased, and the amount of reported revenue has decreased. The amount of prepaid cost of sales recognised as an asset in the statement of financial position has increased, and the amount of reported costs of sales has decreased. The impact of the relevant adjustments is shown within the tables below. The impact on reported revenue the year ended 30 April 2018 is show in the table below.

 

		Year ended 30 April 2018
		£000
Instruction revenue as previously reported		66,597
Impact of adoption of IFRS 15		(6,301)
Instruction revenue as restated		60,296

 

Conveyancing ("b")

Where the Group introduces sellers and buyers of properties to one of the Group's third party partners for conveyancing services, the Group earns commission for these referrals, which is due at completion of the property transaction.

In respect of Conveyancing revenue, the Group's Performance Obligation is to make the referral to the Group's third party partners. Following that referral, the involvement of the Group in the conveyancing process is incidental.

 

Therefore, the Group recognises revenue on completion of its Performance Obligation, at the point of referral. Revenue is recognised at the expected value of the consideration which will become due at completion as determined at the point of referral, calculated by reference to historical data in respect of sale completion rates. The Group monitors the conversion of cases referred at each reporting date, in order to restrict the revenue recognised under this method to an amount at which it is highly probable that reversal will not occur.

 

As part of the Group's work on the adoption of IFRS 15, the Group's relationship with its customers in respect of Conveyancing revenue has been re-assessed with a view to confirming whether the Group is principal or agent in the underlying transactions. The Group's view remains that, as previously, it is acting as an agent of the third party partner which contracts directly with the seller of the property and which invoices that seller directly. Therefore it is appropriate for the Group to recognise as revenue only the referral fee earned from the third party partner, which is the customer of the Group.

 

Previous accounting policy and impact of adoption of IFRS 15

 

Under the Group's previous accounting policy, conveyancing referral fees were recognised at the completion of the property sales that would give rise to them, ie when the receipt of each individual fee due became certain.

 

 

 

 

 

Notes to the financial statements (continued)

 

2.4.1 Implementation of IFRS 15 Revenue from Contracts with Customers (continued)

 

Therefore, on adoption of IFRS 15, the amount of reported accrued income has increased, and the amount of reported revenue has also increased. The amount of accrued cost of sales, which will become payable on completion of the transaction and which are reported within accruals, has increased. The impact of the relevant adjustments is shown within the tables below.

 

The impact on reported revenue for the year ended 30 April 2018 is show in the table below.

 

		Year ended 30 April 2018
		£000
Conveyancing revenue as previously reported		15,414
Impact of adoption of IFRS 15		152
Instruction revenue as restated		15,566

 

Brokerage (c)

The Group also provides, in the US and in parts of Canada, Buyside brokerage and Escrow services. These services are provided to customers who are both sellers and buyers of residential properties, with the performance obligation in each case being to assist the customer in bringing the transition to a successful conclusion. Revenue, in the form of commission, becomes due in respect of these transactions on successful completion of a property sale.

 

Customers receive benefit from the Group's services as they are performed over time between an instruction to act on the customer's behalf and completion of the property transaction. Therefore revenue in respect of these services is recognised under IFRS 15 over time on a straight line basis as the Group fulfils its performance obligation. Revenue is recognised at the fair value of the expected consideration which will be receivable, taking into account historical transaction completion rates. The fair value of consideration is a key estimate and therefore the Group monitors the rate of sales of properties marketed at each reporting date, in order to restrict the revenue recognised under this method to an amount at which it is highly probable that reversal will not occur.

 

Previous accounting policy and impact of adoption of IFRS 15

 

Under the Group's previous accounting policy, brokerage and escrow fees were recognised at completion of the underlying property sales.

 

Therefore, on adoption of IFRS 15, the amount of reported accrued income has increased, and the amount of reported revenue has also increased. The amount of accrued cost of sales, which will become payable on completion of the transaction and which are reported within accruals, has increased. The impact of the relevant adjustments is shown within the tables below .

 

The impact on reported revenue for the year ended 30 April 2018 is show within "other" revenue in table 5 in note 13.

 

 

 

 

Notes to the financial statements (continued)

 

2.4.1 Implementation of IFRS 15 Revenue from Contracts with Customers (continued)

 

Lettings landlord setup services (d)

In respect of contracts with prospective landlords to list their property to let, the Group's performance obligation is to provide a series of services aimed at identifying a suitable tenant for the landlord's property. These services include preparation of an advertisement to let and later support services. Fees charged to landlords in exchange for identifying a tenant for their rental property become due to the Group at tenant move in.

 

The Group has taken the judgement that all elements of the advertisement service and other support services provided represent a single Performance Obligation related to the identification of a suitable tenant who then moves into the property. This Performance Obligation is the provision of Landlord Setup Services. The Group has taken the judgement that an expected value of consideration which will become due for the Services can be determined using historical data regarding the proportion of successful tenant move ins and therefore that revenue can be reliably estimated before tenant move in.

 

All revenue is therefore attributable to this single Performance Obligation. This revenue is recognised over time on a straight line basis between the instruction to list the property to let and tenant move in, as the customer receives the benefits of the Landlord Setup Services are performed.

 

Costs associated with Landlord Setup Services revenue include commissions paid to the Group's Local Lettings Experts ("LLEs"). This commission is due at tenant application, which is towards the end of the process. Therefore, these costs are accrued over the period over which Landlord Setup Services are provided. These costs are reported within deferred income.

 

Previous accounting policy and impact of adoption of IFRS 15

 

Under the Group's previous accounting policy, Landlord Setup fees were recognised only at tenant move in when consideration in respect of each individual contract became certain.

 

Therefore, on adoption of IFRS 15, the amount of reported accrued income has increased, and the amount of reported revenue has increased. The impact of the relevant adjustments revenue for the year ended 30 April 2018 is shown within "Other" revenue in table 5 in note 13.

 

Lettings monthly management services (e)

The Group also enters into contracts with landlords to provide rent collection and other tenant management services. Fees charged to landlords in exchange for the ongoing management of their rental properties become due to the Group monthly in arrears over the period of the tenancy.

 

In respect of fees charged to landlords in exchange for the ongoing management of their rental properties the Group's performance obligation is to provide management services over a period of time. There is no change under IFRS 15 to the Group's previous accounting policy of recognising these fees over the period of the tenancy.

 

 

 

 

Notes to the financial statements (continued)

 

2.4.2 Implementation of IFRS 9

Financial Instruments

 

The Group has initially adopted IFRS 9 Financial Instruments in these financial statements.

 

The adoption of IFRS 9 has had no impact on the Group's statement of financial position or results as previously disclosed, as the requirements of IFRS 9 do not change any of the Group's previous accounting approaches or judgements.

 

2.5 New accounting policies adopted in the period

 

2.5.1 Joint Ventures

 

Under IFRS 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor rather than the legal structure of the joint arrangement. During the year the Group has entered into a joint venture in respect of Homeday as described earlier in the report.

 

The Group's interests in joint ventures are accounted for using the equity method.

 

Under the equity method of accounting, investments are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses of the investee in profit or loss, and the Group's share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.

 

When the Group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.

 

Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group's interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

 

The carrying amount of equity-accounted investments is tested for impairment when indicators of impairment exist.

 

 

 

Notes to the financial statements (continued)

 

3. Critical accounting estimates and judgements

 

In the application of the Group's accounting policies, the directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

Estimates

 

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

 

3.1 Measurement of intangible assets

 

The Group recognises an intangible asset in respect of software developed in house. This software is a key part of the Group's operating model and value proposition. Management are required to estimate the time and related value attributable to the element of the development team that relates to developing intangible assets which meet the criteria for capitalisation in IAS 38. Because the amounts spent on the development team are material, a significant change in this estimate could have a significant effect on the value of costs capitalised. The impact of a change to this estimate could result, at the most extreme, in a -7% or +5% change to adjusted operating costs for this year ended. Further details are included at note 8.

 

3.2 Impairment

 

Determining whether goodwill, investments or intercompany balances are impaired requires an estimation of the value in use of the cash-generating units to which value has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and to apply a suitable discount rate in order to calculate present value. The assumptions and sensitivities applied by management in determining whether there is any impairment are set out in notes 8, 9 and 10.

 

3.3 Measurement of deferred tax assets

 

The Group has potential deferred tax assets, principally in the form of tax losses and potential tax deductions relating to the exercise of share-based payments, but deferred tax assets are only recognised to the extent it is probable that sufficient future taxable income will be available against which the losses and deductions can be utilised. The issue of estimation in respect of deferred tax assets, therefore, relates to the uncertainty inherent in forecasting future taxable profits in each territory. The decision to recognise deferred tax assets, has been made after taking into account forecasts of future taxable profits sensitised for downside risk. If our view of future taxable profits were to change materially in future, either positively or negatively, then this could have a material impact on the income statement credit or charge. Depending on the length of the forecast period taken into account and the scale of the downside reduction applied, at the extreme, the amount of the recognised deferred tax asset could range from 0% to 100% of the balance recognised being £7,120,000.

 

3.4 Revenue recognition

 

In relation to instruction revenue which is recognised over time, the Group estimates the average period taken from instruction to completion. This estimate directly impacts the period over which revenue is recognised.

Notes to the financial statements (continued)

 

3. Critical accounting estimates and judgements (continued)

 

The terms of the UK's departure from the EU following the referendum in 2016 ('Brexit') remain uncertain, and could have an impact on the UK property market. This could impact the time taken to sell properties in the UK market, which would impact the timing of revenue recognition for the Group. Due to the uncertainty of the impact of Brexit on the wider UK economy, it is impractical to determine the impact on the timing of revenue recognition in the UK business at the date of this report.

 

Judgements

 

The following are the critical judgements, apart from those involving estimations (which are presented separately above), that the directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in financial statements.

 

3.5 Revenue recognition

 

The Group provides services for instruction fees, including fees receivable up front and fees receivable at completion of sale. The Group has taken a judgement that under IFRS 15 the performance obligation relating to these fees is discharged over time (between instruction and completion) rather than at a point in time. Further detail is set out in the revenue recognition policy above.

 

4. Alternative performance measures

 

The Group makes use of a number of alternative performance measures in assessing the performance of the business. The definition of and relevance of each of these is set out below. The Group believes that these measures, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with helpful additional information on the underlying performance of the Group.

 

Adjusted EBITDA 

 

Definition

Profit or loss from operating activities, adding back depreciation, amortisation and share-based payment charges and non-recurring costs.

 

Relevance to strategy

The adjusted measure is considered relevant to assessing the underlying performance of the Group against its strategy and plans. The rationale for excluding certain items is as follows:

·      Depreciation: a non cash item which fluctuates depending on the timing of capital investment. We believe that a measure which removes this volatility improves comparability of the Group's results period on period.

·      Amortisation: a non cash item which varies depending on the timing of and nature of acquisitions, and on the timing of and extent of investment in internally generated intangibles such as software. We believe that a measure which removes this volatility improves comparability of the Group's results period on period.

·      Share-based payment charges: a non cash item which varies significantly depending on the share price at the date of grants under the Group's share option schemes, and depending on the assumptions used in valuing these awards as they are granted. We believe that a measure which removes this volatility improves comparability of the Group's results period on period and also improves comparability with other companies which typically do not operate similar share-based payment schemes.

·      Non-recurring costs: a one-off item which exists only in a single accounting period. We believe adjusting for such non-recurring items improves comparability period on period.

 

Reconciliation

Please see segmental reporting in note 6.
 

Notes to the financial statements (continued)

 

4. Alternative Performance Measures (continued)

 

Adjusted operating costs 

 

Definition

Adjusted operating costs are administrative and establishment expenses, adjusted by adding back depreciation, amortisation and share-based payment charges and non-recurring costs.

 

Relevance to strategy

The adjusted measure is considered relevant to assessing the underlying performance of the Group against its strategy and plans. The rationale for excluding depreciation, amortisation, share-based payments charges and non-recurring costs from this measure is consistent with that set out above in the "Adjusted EBTIDA" section.

 

Reconciliation

Group	2019 £m	2018 £m
Administrative expenses	(61.0)	(35.2)
Depreciation & amortisation	4.5	1.7
Share-based payment charge	4.3	3.5
Non-recurring costs	0.5	-
Adjusted operating costs	(51.7)	(30.0)

 

UK	2019 £m	2018 £m
Administrative expenses	(24.7)	(19.5)
Depreciation & amortisation	2.3	1.6
Share-based payment charge	2.1	2.4
Non-recurring costs	0.5	-
Adjusted operating costs	(19.8)	(15.5)

 

Adjusted operating profit/loss 

 

Definition

Profit or loss from operating activities, adding back share-based payment charges.

 

Relevance to strategy

The adjusted measure is considered relevant to assessing the underlying performance of the Group against its strategy and plans. The rationale for excluding share-based payments charges from this measure is consistent with that set out above in the "Adjusted EBTIDA" section.

 

Reconciliation

Group	2019 £m	2018 £m
Operating loss	(52.3)	(27.8)
Share-based payment charge	4.3	3.5
Adjusted operating loss	(48.0)	(24.3)

 

UK	2019 £m	2018 £m
Operating profit	5.3	2.2
Share-based payment charge	2.1	2.4
Adjusted operating profit	7.4	4.6

 

 

 

 

Notes to the financial statements (continued)

 

4. Alternative Performance Measures (continued)

 

Canada	2019 £m	2018 £m
Operating loss	(3.2)	-
Share-based payment charge	0.4	-
Adjusted operating loss	(2.8)	-

 

Australia	2019 £m	2018 £m
Operating loss	(18.8)	(13.2)
Share-based payment charge	0.9	0.6
Adjusted operating loss	(17.9)	(12.6)

 

US	2019 £m	2018 £m
Operating loss	(34.1)	(16.8)
Share-based payment charge	0.9	0.5
Adjusted operating loss	(33.2)	(16.3)

 

 

Like-for-like UK gross profit margin

 

Definition

Gross margin adjusting for significant items which are not directly comparable period on period.

 

Relevance to strategy

Gross profit margin of the UK operating segment under IFRS in FY 19 is not directly comparable to gross profit margin in FY 18 due to commercial changes in the business model which affect both the level of costs in the business and where these are recognised within the Income Statement.

 

The adjustments made to gross profit are in respect of:

i)              costs relating to the former deferred payment provider, which were recognised in FY 18 in cost of sales - deferred payment provider costs under the new commercial arrangement are recognised as finance costs.

ii)             Costs relating to an outsourced property management service within the Lettings business recognised in FY 18 as cost of sales - these activities are now undertaken by an in-house team, the costs of which are presented within administrative expenses.

 

The table below sets out the calculation of gross profit margin under IFRS and as adjusted in the "like-for-like UK gross profit margin" alternative performance measure. The alternative performance measure is considered a helpful additional measure as it provides insight into underlying performance between FY 18 and FY 19 on a more comparable basis. Adjustment has been made to FY 18 only to achieve this comparability.

 

 

Notes to the financial statements (continued)

 

4. Alternative Performance Measures (continued)

 

Reconciliation

UK Gross Profit Margin under IFRS	FY 19	FY 18
	£'000	£'000
Revenue	90,125	74,353
Cost of sales	(33,338)	(31,276)
Gross profit	56,787	43,077
Gross profit margin	63.0%	57.9%

 

Like-for-like UK Gross Profit Margin	FY 19	FY 18
	£'000	£'000
Revenue	90,125	74,353
Cost of sales	(33,338)	(31,276)
Deferred payment provider costs	-	1,662
Lettings outsourced property management service	-	1,555
Like-for-like cost of sales	(33,338)	(28,059)
Like-for-like gross profit	56,787	46,294
Like-for-like gross profit margin	63.0%	62.3%

 

 

Group revenue growth excluding Canada

 

Group revenue growth excluding Canada, which is not defined in IFRS, is a measure which is used by the board and management for planning and reporting.

 

Definition

Total revenue for the year excluding revenue from the Canada operating segment, which arose in the year by acquisition, divided by total revenue for the prior year.

 

Relevance to strategy

The measure allows year on year comparison of the revenue generating performance in the current year of operating segments which existed in the prior year, without the effect of acquisitions in the year.

 

Reconciliation

		FY 19
		£m
Total Revenue for FY 19		136.5
Revenue arising from Canada acquisition		(23.7)
Revenue for FY 19 excluding Canada		112.8
Revenue for FY 18		87.8
Group revenue growth excluding Canada		28.5%

 

 

 

 

Notes to the financial statements (continued)

 

5. Revenue

 

Revenue by contract type	FY 19	Restated* FY 18
	£'000	£'000
Instructions	83,404	60,296
Conveyancing	19,877	15,566
Other	33,232	11,925
Total revenue	136,513	87,787

* See note 2.2

 

6. Segmental reporting

 

The Group trade is managed as a single division, providing services relating to the sale and letting of properties, however management report to the Board including the CODM using geographical segments. The financial information reviewed by the board is materially the same as that reported under IFRS and falls under the four geographic locations: UK, Australia the US and Canada. During the year, no customer contributed 10% or more of the Group's revenues (2018: none).

 

The following is an analysis of the Group's revenue and results by reporting segment:

 

	Year ended 30 April 2019
	UK	Australia	US	Canada	Arising on Consolidation		Consolidated
	£'000	£'000	£'000	£'000	£'000		£'000
Revenue	90,126	11,375	11,333	23,679	-		136,513
Cost of sales	(33,339)	(7,377)	(4,858)	(11,052)	-		(56,626)
Gross profit	56,787	3,998	6,475	12,627	-		79,887
Gross profit margin (%)	63%	35%	57%	53%			59%
Administrative expenses	(24,748)	(10,721)	(16,105)	(8,478)	(964)		(61,016)
Marketing expenses	(26,708)	(12,071)	(24,497)	(7,374)	-		(70,650)
Share of results of joint venture	-	-	-	-	(536)		(536)
Operating profit/(loss)	5,331	(18,794)	(34,127)	(3,225)	(1,500)		(52,315)
Depreciation & amortisation	2,334	57	71	768	1,302		4,532
Share-based payments	2,098	862	943	360	-		4,263
Non-recurring acquisition costs	467	-	-	-	-		467
Adjusted EBITDA	10,230	(17,875)	(33,113)	(2,097)	(198)		(43,053)

 

 

Notes to the financial statements (continued)

 

6. Segmental reporting (continued)

 

	Year ended 30 April 2018 (restated - see note 13)
	UK	Australia	US	Consolidated
	£'000	£'000	£'000	£'000
Revenue	74,352	11,879	1,556	87,787
Cost of sales	(31,275)	(6,406)	(527)	(38,208)
Gross profit	43,077	5,473	1,029	49,579
Gross profit margin (%)	58%	46%	66%	56%
Administrative expenses	(19,487)	(7,306)	(8,402)	(35,195)
Marketing expenses	(21,387)	(11,355)	(9,400)	(42,142)
Operating profit/(loss)	2,203	(13,188)	(16,773)	(27,758)
Depreciation & amortisation	1,601	58	22	1,681
Share-based payments	2,369	593	496	3,458
Adjusted EBITDA	6,173	(12,537)	(16,255)	(22,619)

 

 

				2019	2018
Non current assets				£'000	£'000
UK				77,184	29,469
Australia				141	139
US				164	90
Canada				4,485	0
Consolidation adjustments				(20,808)	(18,536)
Total				61,166	11,162
Total assets
UK				228,935	211,892
Australia				5,016	3,835
US				4,558	3,326
Canada				9,918	0
Consolidation adjustments				(95,875)	(35,547)
Total				152,552	183,506
Total liabilities
UK				28,115	24,429
Australia				32,617	12,645
US				49,003	12,109
Canada				7,231	0
Consolidation adjustments				(68,139)	(15,855)
Total				48,827	33,328

 

 

 

Notes to the financial statements (continued)

 

7. Earnings per share

 

	Basic and diluted	Restated* Basic and diluted
	2019	2018
Loss £'000	(54,861)	(30,077)
Weighted average number of shares ('000)	303,090	273,072
Loss per share (£)	(0.18)	(0.11)
* See note 2.2

 

Diluted loss per share is equal to the basic loss per share as a result of the Group recording a loss for the year, which cannot be diluted.

 

The table below reconciles the weighted average number of shares ('000):

 

Weighted average number of shares 2018	273,072
Weighted average issue of new shares and exercise of options	30,018
Weighted average number of shares 2019	303,090

 

In addition to the above, there are 21,826,838 share options which could have a dilutive potential, but as these shares are antidilutive they have not been included in the weighted average number of shares used to calculate the diluted loss per share.

 

 

 

Notes to the financial statements (continued)

 

8. Intangible assets

 

Group	Internally generated intangible	Capitalised Software	Patents and trademark	Customer relationships	Proprietary Tech	Brand	Other	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Cost
Balance at 1 May 2017	1,936	193	100	1,071	-	-	-	3,300
Addition	-	641	-	-	-	-	-	641
Disposals	-	-	-	-	-	-	-	-
Internally developed	2,292	-	-	-	-	-	-	2,292
Balance at 30 April 2018	4,228	834	100	1,071	-	-	-	6,233
Addition	-	217	-	-	-	-	454	671
Disposals	-	-	-	-	-	-	-	-
Acquisition of subsidiary	-	-	-	1,730	2,884	13,266	-	17,880
Internally developed	2,606	-	-	-	-	-	-	2,606
Balance at 30 April 2019	6,834	1,051	100	2,801	2,884	13,266	454	27,390
Amortisation
Balance at 1 May 2017	(513)	(3)	(6)	(21)	-	-	-	(543)
Amortisation for the year	(936)	(39)	(67)	(214)	-	-	-	(1,256)
Balance at 30 April 2018	(1,449)	(42)	(73)	(235)	-	-	-	(1,799)
Amortisation for the year	(1,713)	(461)	(27)	(499)	(791)	-	(213)	(3,704)
Balance at 30 April 2019	(3,162)	(503)	(100)	(734)	(791)	-	(213)	(5,503)
Net carrying value
Balance at 30 April 2019	3,672	548	-	2,067	2,093	13,266	241	21,887
Balance at 30 April 2018	2,779	792	27	836	-	-	-	4,434

 

 

The internally generated intangible asset relates to capitalised development costs in respect of the customer facing Purplebricks software platform. The intangible asset in respect of brand acquired has an indefinite life and is tested annually for impairment. All other intangible assets are amortised over their useful economic lives. In the case of the internally developed intangible asset, amortisation is charged on a straight line basis over three years. The useful economic life of the customer relationships is five years. Capitalised software is amortised over three years on a straight line basis. The remaining useful lives of each asset are in keeping with the amortisation policy.

 

 

Notes to the financial statements (continued)

 

9. Goodwill

 

	BFL	Duproprio	Group
	£'000	£'000	£'000
Cost
At 1 May & 30 April 2018	2,606	-	2,606
Acquisition of subsidiary	-	16,880	16,880
As at 30 April 2019	2,606	16,880	19,486
Carrying amount:
At 30 April 2019	2,606	16,880	19,486
At 30 April 2018	2,606	-	2,606

 

9a Acquisition of subsidiary (Canada)

 

On 6 July 2018, the Group obtained control of 1005 9059-2114 Quebec Inc. by acquiring 100% of its issued share capital. This company heads a group of companies operating as DuProprio, which owns and operates one of Canada's leading commission free real estate service networks as an online offering with similar aspects to Purplebricks. Goodwill of £16,880,000 arose on the acquisition.

 

	£'000
Trade and other receivables	2,356
Cash and cash equivalents	3,652
Other assets	678
Property, plant and equipment	582
Customer relationships	1,730
DuProprio brand	13,266
Proprietary technology	2,884
Deferred income tax liabilities	(4,829)
Trade and other payables	(4,111)
Deferred revenues	(2,146)
Total identifiable net assets	14,062
Goodwill	16,880
Total consideration	30,942
Satisfied by:
Cash	30,942
Net cash outflow arising on acquisition:
Cash consideration	30,942
Less: cash and cash equivalents acquired	(3,652)
Net cash outflow	27,290

 

DuProprio contributed £23.7 million revenue and £(3.2) million to the Group's loss for the period between the date of acquisition and the reporting date. If the acquisition of DuProprio had been completed on the first day of the financial year, Group revenues would have been £142.3 million and loss for the year £55.7 million.

Notes to the financial statements (continued)

 

10. Investment in subsidiaries

 

Cost:	Company £'000
1 May 2018	22,150
Acquisitions	30,942
Share-based payment charge in respect of employees of subsidiaries	1,433
At 30 April 2019	54,525
Impairment charge for the year
Charge arising in the year	(22,651)
At 30 April 2019	(22,651)
Carrying amount
At 30 April 2019	31,874
At 30 April 2018	22,150

 

The Group consists of a Parent Company, Purplebricks Group plc, incorporated in the UK and a number of subsidiaries held directly by Purplebricks Group plc, which operate and are incorporated around the world.

 

The Company holds 100% of the share capital and voting rights in respect of all subsidiaries.

 

Impairment Review

Australia and US - assessment of carrying value of cost of investment in the Company statement of financial position

 

During the year, the performance of the Group's operations in Australia and the United States was below expectation. After the year end, following strategic reviews, as set out earlier in the annual report, a decision was made to close operations in Australia, and in the US, each to be effected in FY 20.

 

The closure of the Australian operations is expected to result in a net cash outflow during FY 20. Therefore, the cost of investment in the Australian business and the intercompany receivables due from Australia have been impaired to zero in the accounts of Purplebricks Group plc, on a fair value less costs of disposal basis. This has resulted in an impairment charge in the company of £40,837,000 including £10,832,000 in respect of cost of investment. This impairment has no effect on the consolidated accounts.

 

The carrying value of US assets has been assessed on a value in use basis. Forecasts for FY 20 indicate a cash outflow. At the balance sheet date, cashflow forecasts for beyond FY 21 were subject to significant uncertainty. Therefore, management have taken the decision to impair in full all investment and intercompany receivable balances as at 30 April 2019. This has resulted in an impairment charge in the company of £53,082,000 including £8,819,000 in respect of cost of investment. This impairment has no effect on the consolidated accounts.

 

 

Notes to the financial statements (continued)

 

10. Investment in subsidiaries (continued)

BFL

The acquisition of BFL Property Management Limited ("BFL") in March 2017 gave rise to a cost of investment in the company balance sheet of £3.6 million, and a goodwill amount in the consolidated balance sheet of £2.6 million. As required by IAS 36, the carrying value of indefinite lived assets is tested annually for impairment. This assessment has been performed at the current reporting date for both the cost of investment in BFL and for goodwill relating to BFL on a value in use basis.

 

BFL trading since acquisition has been in line with expectations at the time of acquisition, and as anticipated the Lettings business of Purplebricks Group plc has benefited from the expertise acquired with BFL. Over time, contracts with landlords held by BFL have been replaced as they naturally come to an end with contracts with Purplebricks Group plc. Therefore, part of the value of the acquired business is now at 30 April 2019 represented by synergies within the group, rather than purely in contracts held by the acquired company. No new contracts are currently being entered into in the name of BFL.

 

BFL - assessment of carrying value of goodwill in the consolidated statement of financial position

 

The goodwill arising on the acquisition of BFL has been allocated to the cash generating unit represented by the group's UK lettings business as a whole. This is because following the integration of BFL staff into the wider UK lettings business, the activity in lettings relating to BFL cannot be distinguished from the wider lettings business.

 

A discounted cash flow calculation prepared in respect of the UK lettings business based on historical trends within this business indicates significant headroom over the carrying value of goodwill attributable to the BFL CGU. Assumptions within this calculation include the rate of revenue growth and the discount rate. This calculation indicates a recoverable value of £12,524,000 for this CGU, and headroom over the carrying value of goodwill of £9,918,000.

 

A change in discount rate of 1.0% has an effect of less than £2.0m on the DCF valuation and still shows significant headroom.

 

A change in revenue growth rate of 5.0% has an effect of less than £0.5m on the DCF valuation.

 

BFL - assessment of carrying value of cost of investment in the Company statement of financial position

In assessing the carrying value of cost of investment, a discounted cash flow calculation has been prepared which takes into account only contracts held by BFL and not the synergies in the wider Group.

 

Due to the reduction in the size of the business conducted within BFL since acquisition as a result of the partial transfer of trade as described above, and as this transfer of trade is expected to continue in future years, the cash flow forecasts indicate that a partial impairment of the cost of investment is required. This impairment amounts to 3.0m. This impairment results from management decisions taken as to the operation of the wider Lettings business rather than resulting from lower than expected performance of BFL post acquisition.

 

Assumptions within this calculation include the rate of revenue growth and the discount rate.

 

A change in discount rate of 1.0% has an effect of less than £0.1m on the DCF valuation.

 

A change in contract loss rate of 5.0% has an effect of less than £0.2m on the DCF valuation.

 

 

Notes to the financial statements (continued)

 

10. Investment in subsidiaries (continued)

The expected future continued transfer out of BFL contracts may well lead to a further impairment of cost of investment in BFL in future periods. Management will continue to review the carrying value of BFL at future reporting dates in order to assess whether a further impairment has become necessary.

 

Canada - assessment of carrying value of cost of investment in the Company statement of financial position and goodwill in the consolidated statement of financial position

The acquisition of the Canada based DuProprio business during the year gave rise to a cost of investment in the company balance sheet of £30,942,000, and a goodwill amount in the consolidated balance sheet of £16,880,000 and other intangible assets with indefinite lives totalling £13,266,000. As required by IAS 36, the carrying value of goodwill is tested annually for impairment. This assessment has been performed at the current reporting date on a fair value less costs of disposal basis.

 

Trading since acquisition has been in line with expectations at the time of acquisition. Management have prepared a fair value calculation based on a revenue multiple valuation approach. This multiple, as well as estimates of costs of disposal, has been based on historical experience. This approach indicates a recoverable value of £33.5 million, indicating headroom over the carrying value of cost of investment of £2.5 million, and (adjusting for underlying net assets of the Canada business) over carrying value of goodwill attributable to the Canada CGU and brand value of £1.3 million.

 

Sensitivity analysis performed has included assessment of the impact of using an alternative revenue multiple and effects of a change in foreign exchange rates. This analysis indicates that conditions which would require an impairment of goodwill and other indefinite lived intangible assets are an increase in foreign exchange rate of 8% or decrease in revenue multiple of 7%, which are not considered to be likely.

 

11. Investment in jointly controlled entity

 

			Group
			£'000
Opening Balance as at 1 May 2018			-
Additions			11,249
At 30 April 2019			11,249
Share of Result of joint venture
Opening Balance as at 1 May 2018
Share of result for the year			(536)
At 30 April 2019			(536)
Carrying amount:
At 30 April 2019			10,713
At 30 April 2018			-

 

On 20 December 2018 PBG plc purchased 50% of the share capital of Einhundertsiebte "Media" Vermogensverwaltungsgesellschaft bmH ("JV HoldCo"), a company incorporated in Germany which holds a 25.88% investment in Homeday GbmH, another company incorporated in Germany, from Funfundachtzigste "Media" Vermogensverwaltungsgesellschaft mbH, a wholly owned subsidiary of Axel Springer SE. The other 50% shareholding continues to be held by the Axel Springer group.
 

Notes to the financial statements (continued)

 

11. Investment in jointly controlled entity (continued)

Purplebricks and Axel Springer operate JV HoldCo as a joint venture under a joint venture agreement. Consideration for the purchase was £11,249,000.

 

Based in Berlin, Homeday operates homeday.de, a transaction-based digital real estate platform in Germany that brings customers together with experienced brokers and supports them in buying and selling property. Following the investment, Dr. Andreas Wiele, President Classifieds Media Axel Springer SE, and James Davies, CFO of Purplebricks, have each taken a seat on the Advisory Board of Homeday.

 

The Group's holding in JV HoldCo is accounted for under the equity method.

 

Axel Springer has the right to increase its investment in JV Holdco beyond 50% by acquiring shares from Purplebricks at defined points up to 2023 for variable consideration which is based on the future performance of Homeday GmbH or a return on investment for Purplebricks.

 

JV HoldCo and the other shareholders of Homeday have entered into an Investment Agreement and a Shareholders' Agreement.

 

Purplebricks has a potential obligation under the Investment Agreement, conditional on the future performance of Homeday, to provide further capital and loan funding to Homeday of up to EUR 20 million in 2019. Purplebricks has the option to settle this potential future liability either in cash or by the issue of new shares in Purplebricks Group plc.

 

Under the Shareholders' Agreement, Put and Call options exist between JV HoldCo and the other shareholders of Homeday which may require or allow JV HoldCo to acquire shares held by the other shareholders, for consideration to be determined with reference to the performance of Homeday in future periods leading up to the exercise dates of the options in 2021 and 2024.

 

As it is not sufficiently possible at this stage to determine the likelihood of the option conditions being met, or the potential performance of Homeday in these periods, no range of potential purchase prices is provided at this stage.

 

As a start up entity, Homeday is currently lossmaking as the business makes significant investments in marketing. Homeday forecasts to become profitable as these investments translate into activity and revenue growth. Trading of Homeday has been in line with expectations at the time of acquisition.

 

 12 Post balance sheet event

 

On 7 May 2019, the Group announced that it had chosen to exit the Australian market and put the Australian business into an orderly run-down with immediate effect, pending closure. Since 8 May 2019, no new instructions have been taken in Australia and the business is focused on settling sales for customers under existing instructions, implementing an orderly reduction in staff numbers and curtailing relationships with suppliers and contractors. The run-down process remains ongoing at the reporting date.

 

Through the run-down process, the Group is monitoring Australian "net closure costs" which it defines as revenue earned since 8 May 2019, net of costs of serving existing customers, exiting supplier and contractor relationships, employee costs, customer refunds costs and other associated closure costs. Whilst employee costs and the costs of exiting supplier and contractor relationships can be estimated with a reasonable degree of accuracy, the principal uncertainty in measuring net closure costs relates to the quantum of revenue and associated costs. Given the uncertainty around these factors, the Group currently estimates net closure costs in the range of £6 million -£8 million.

 

Notes to the financial statements (continued)

 

12 Post balance sheet event (continued)

 

The Group also announced on 3 July 2019, that it has chosen to cease investment in the US. This will result in a closure of the business via an orderly run-down, or a sale of all or part of the US operation if a suitable purchaser is identified. No new instructions will be taken by the business from today. The US workforce will be rationalised and the core remaining team will be focused on selling properties which are listed and curtailing relationships with suppliers and contractors, with close oversight from the Group. Since the decision to cease investment is a very recent one, the closure costs are yet to be fully quantified and depend on various factors. However, initial preliminary estimates indicate that net closure costs of the US business will be between £4 million - £6 million.

 

The Australia and US operations represent in their entirety the segments as disclosed in note 6.

 

Other than normal accruals for services rendered and goods received, no specific provision for closure costs has been made in the financial statements for the year ended 30 April 2019.

 

13. Revenue recognition - transition to IFRS 15

 

Table 1 - impact of transition to IFRS 15 on retained earnings at 1 May 2017

	£000
Retained earnings as previously stated	(3,984)
Increase in deferred income relating to estate agency services	(7,055)
Increase in accrued income relating to conveyancing services	3,015
Increase in prepaid expenses relating to estate agency services	3,288
Increase in accrued expenses relating to conveyancing services	(504)
Other effects of the implementation of IFRS 15	29
Retained earnings as restated	(5,211)

Notes to the financial statements (continued)

 

13. Revenue recognition - transition to IFRS 15 (continued)

 

Table 2a - condensed statement of profit or loss and other comprehensive income for the year ended 30 April 2018

 

Year ended 30 April 2018
IFRS 15 adjustments by geographical segment
	Under previous accounting policies	UK	AUS	USA	Canada	As restated under IFRS 15
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	93,697	(3,765)	(1,661)	(484)	-	87,787
Cost of sales	(41,107)	1,791	880	228	-	(38,208)
Gross Profit	52,590	(1,974)	(781)	(256)	-	49,579
Administrative and establishment expenses	(35,195)	-	-	-	-	(35,195)
Marketing costs	(42,142)	-	-	-	-	(42,142)
Loss from operating activities	(24,747)	(1,974)	(781)	(256)	-	(27,758)
Finance income	60	-	-	-	-	60
Finance expense	(1,492)	-	-	-	-	(1,492)
Loss on ordinary activities before taxation	(26,179)	(1,974)	(781)	(256)	-	(29,190)
Taxation on loss on ordinary activities	(887)	-	-	-	-	(887)
Loss for the period	(27,066)	(1,974)	(781)	(256)	-	(30,077)
Items that may subsequently be reclassified to profit and loss
Exchange differences on translation of foreign operations	(490)	-	-	-	-	(490)
Total other comprehensive income	(490)	-	-	-	-	(490)
Total comprehensive profit/(loss)	(27,556)	(1,974)	(781)	(256)	-	(30,567)

 

Notes to the financial statements (continued)

 

13. Revenue recognition - transition to IFRS 15 (continued)

 

Table 2b - condensed statement of profit or loss and other comprehensive income for the year ended 30 April 2018

 

Year ended 30 April 2018
IFRS 15 adjustments by contract type
	Under previous accounting policies	Instructions	Conveyancing	Other	As restated under IFRS 15
	£000	£000	£000	£000	£000
Revenue	93,697	(6,301)	153	238	87,787
Cost of sales	(41,107)	3,013	(26)	(88)	(38,208)
Gross Profit	52,590	(3,288)	127	150	49,579
Administrative and establishment expenses	(35,195)	-	-	-	(35,195)
Marketing costs	(42,142)	-	-	-	(42,142)
Loss from operating activities	(24,747)	(3,288)	127	150	(27,758)
Finance income	60	-	-	-	60
Finance expense	(1,492)	-	-	-	(1,492)
Loss on ordinary activities before taxation	(26,179)	(3,288)	127	150	(29,190)
Taxation on loss on ordinary activities	(887)	-	-	-	(887)
Loss for the period	(27,066)	(3,288)	127	150	(30,077)
Items that may subsequently be reclassified to profit and loss
Exchange differences on translation of foreign operations	(490)	-	-	-	(490)
Total other comprehensive income	(490)	-	-	-	(490)
Total comprehensive profit/(loss)	(27,556)	(3,288)	127	150	(30,567)

 

 

 

 

 

 

Notes to the financial statements (continued)

 

Table 3a - condensed statement of financial position as at 30 April 2017

 

		Year ended 30 April 2017
		IFRS 15 adjustments by contract type
	Under previous accounting policies	Instructions	Conveyancing	Other	As restated under IFRS 15
	£000	£000	£000	£000	£000
Non-current assets
Goodwill	2,606	-	-	-	2,606
Intangible assets	2,757	-	-	-	2,757
Property, plant and equipment	718	-	-	-	718
Deferred tax asset	3,087	-	-	-	3,087
	9,168	-	-	-	9,168
Current assets
Tax receivable	-	-	-	-	-
Trade and other receivables	4,865	3,288	3,105	-	11,258
Cash and other cash equivalents	71,330	-	-	-	71,330
	76,195	3,288	3,105	-	82,588
Current liabilities
Trade and other payables	(7,301)	-	(558)	-	(7,859)
Deferred income	(2,307)	(7,063)	-	-	(9,370)
Derivative financial instruments	(104)	-	-	-	(104)
	(9,712)	(7,063)	(558)	-	(17,333)
Net current assets	66,483	(3,775)	2,547	-	65,255
Total assets less current liabilities	75,651	(3,775)	2,547	-	74,423
Non-current liabilities
Deferred tax liabilities	(244)	-	-	-	(244)
Net assets	75,407	(3,775)	2,547	-	74,179
Equity
Share capital	2,705	-	-	-	2,705
Share premium	74,901	-	-	-	74,901
Share-based payments reserve	1,669	-	-	-	1,669
Foreign exchange reserve	116	-	-	-	116
Retained earnings	(3,984)	(3,775)	2,547	-	(5,212)
Total equity	75,407	(3,775)	2,547	-	74,179

 

 

 

Notes to the financial statements (continued)

 

13. Revenue recognition - transition to IFRS 15 (continued)

 

Table 3b - condensed statement of financial position as at 30 April 2018

 

	30 April 2018
		IFRS 15 adjustments by geographical segment
	Under previous accounting policies	UK	AUS	USA	Canada	As restated under IFRS 15
	£000	£000	£000	£000	£000	£000
Non-current assets
Goodwill	2,606	-	-	-	-	2,606
Intangible assets	4,434	-	-	-	-	4,434
Property, plant and equipment	1,054	-	-	-	-	1,054
Deferred tax asset	3,068	-	-	-	-	3,068
	11,162	-	-	-	-	11,162
Current assets
Tax receivable	306	-	-	-	-	306
Trade and other receivables	9,380	8,406	1,100	306	-	19,192
Cash and other cash equivalents	152,846	-	-	-	-	152,846
	162,532	8,406	1,100	306	-	172,344
Current liabilities
Trade and other payables	(15,624)	(658)	-	(18)	-	(16,300)
Deferred income	(3,467)	(10,755)	(2,076)	(544)	-	(16,842)
Derivative financial instruments	(44)	-	-	-	-	(44)
	(19,135)	(11,413)	(2,076)	(562)	-	(33,186)
Net current assets	143,397	(3,007)	(976)	(256)	-	139,158
Total assets less current liabilities	154,559	(3,007)	(976)	(256)	-	150,320
Non-current liabilities
Deferred tax liabilities	(142)	-	-	-	-	(142)
Net assets	154,417	(3,007)	(976)	(256)	-	150,178
Equity
Share capital	3,019	-	-	-	-	3,019
Share premium	176,400	-	-	-	-	176,400
Share-based payments reserve	4,545	-	-	-	-	4,545
Foreign exchange reserve	(374)	-	-	-	-	(374)
Retained earnings	(29,173)	(3,007)	(976)	(256)	-	(33,412)
Total equity	154,417	(3,007)	(976)	(256)	-	150,178

 

 

 

 

Notes to the financial statements (continued)

 

13. Revenue recognition - transition to IFRS 15 (continued)

 

Table 3c - condensed statement of financial position as at 30 April 2018

 

		Year ended 30 April 2018
		IFRS 15 adjustments by contract type
	Under previous accounting policies	Instructions	Conveyancing	Other	As restated under IFRS 15
	£000	£000	£000	£000	£000
Non-current assets
Goodwill	2,606	-	-	-	2,606
Intangible assets	4,434	-	-	-	4,434
Property, plant and equipment	1,054	-	-	-	1,054
Deferred tax asset	3,068	-	-	-	3,068
	11,162	-	-	-	11,162
Current assets
Tax receivable	306	-	-	-	306
Trade and other receivables	9,380	6,300	3,167	345	19,192
Cash and other cash equivalents	152,846	-	-	-	152,846
	162,532	6,300	3,167	345	172,344
Current liabilities
Trade and other payables	(15,624)	-	(530)	(146)	(16,300)
Deferred income	(3,467)	(13,356)	-	(19)	(16,842)
Derivative financial instruments	(44)	-	-	-	(44)
	(19,135)	(13,356)	(530)	(165)	(33,186)
Net current assets	143,397	(7,056)	2,637	180	139,158
Total assets less current liabilities	154,559	(7,056)	2,637	180	150,320
Non-current liabilities
Deferred tax liabilities	(142)	-	-	-	(142)
Net assets	154,417	(7,056)	2,637	180	150,178
Equity
Share capital	3,019	-	-	-	3,019
Share premium	176,400	-	-	-	176,400
Share-based payments reserve	4,545	-	-	-	4,545
Foreign exchange reserve	(374)	-	-	-	(374)
Retained earnings	(29,173)	(7,056)	2,637	180	(33,412)
Total equity	154,417	(7,056)	2,637	180	(150,178)

 

Notes to the financial statements (continued)

 

13. Revenue recognition - transition to IFRS 15 (continued)

 

Table 4 - impact of the adoption of IFRS 15 on the Group's reported earnings per share for the year ended 30 April 2018

 

		Basic and diluted				Basic and diluted
				Year ended 30 April 2018	Year ended 30 April 2018	Year ended 30 April 2018
Earnings per share restated				As previously stated	Increase in loss on adoption of IFRS 15	As restated
Loss for the period (£000)				(27,066)	(3,011)	(30,077)
Weighted average number of shares				273,072,000	-	273,072,000
Loss per share (£)				(0.10)		(0.11)

 

Table 5 - impact of adoption of IFRS 15 on brokerage and lettings revenue

 

		Year ended 30 April 2018
		£000
Other revenue as previously reported		11,686
Impact of adoption of IFRS 15		48
		11,734

 

 

Table 6 - impact of adoption of IFRS 15 on consolidated statements of cash flows for the year ended 30 April 2018

 

	30 April 2018
		Under previous accounting policies	IFRS 15 adjustments	Other restatements - see note 2.2	As restated
		£000	£000	£000	£000
Loss for the year after taxation		(27,066)	(3,011)	-	(30,077)
Operating cash outflow before changes in working capital		(19,589)	(3,011)	(1,724)	(24,324)
Movement in trade and other receivables		(4,515)	(3,419)	-	(7,934)
Movement in trade and other payables		8,323	118	-	8,441
Movement in deferred income		1,161	6,312	-	7,473
Net cash utilised in operating activities		(14,620)	-	(1,724)	(16,344)