and eventually managed to escape in 1863.
With the claims put forward by Darwin, those who held racist views naturally imagined that they had found a scientific foundation for their views about human classes. But shortly afterwards, science revealed that in the same way that Darwin's claims had no scientific validity, a great many movements built around Darwin's ignorant views had committed an enormous error.
With the support it received from Darwinism, the Nazis practiced racism in the most violent manner. Yet Germany was not the only place where so-called "scientific" racism reared its head. A number of racist administrators and intellectuals arose in many countries, particularly in Great Britain and America, racist laws and practices also made a rapid appearance.
Of course, this claim is totally unfounded. That people have different skin colors or different racial or ethnic origins doesn't make them superior or inferior to anyone else. One main reason why this deception became prevalent in the 19th century was the widespread ignorance of the time, itself due to the primitive scientific conditions.
To say that justice belongs to the strong—a grave error—will lead to terrible social chaos. No matter what the conditions and circumstances, all people must benefit from true justice, regardless of their color, language or gender. The claim made by Darwinist racists that justice only applies to the strong in no way reflects the truth. Every individual may wish to acquire things of the highest quality and the most attractive for himself and for his society, but he is never justified in ignoring the harm he inflicts on others in doing so. To claim the opposite violates reason and good conscience.
The middle of the 20th century saw another surge of racism in certain regions of the USA. The Ku Klux Klan, whose ideology was based on violence, was one of the most prominent supporters of American racism. This organization supported such errors as the superiority of the white race and caused the deaths of a great many people.
Once the theory of evolution acquired an alleged scientific validity, scientists were able to speak without hesitation of such illusory concepts as "inferior" races and some races being more closely related to apes than to human beings. Despotic dictators such as Hitler recognized such claims as a golden opportunity and killed millions of people because they were "inferior," "inadequate," "flawed" or "sick." One of the main reasons why almost all 19th century evolutionists were racists is that their intellectual forerunner, Darwin, himself held such views.
The native Australians or Aborigines, whom Darwinists regarded as inferior, are no different from any other race. The photo on the right shows the native Australian athlete Cathy Freeman lighting the 2000 Olympic flame.
Slaves seeking their freedom in Western South Africa in 1904were savagely put down.
In predicting the elimination of "lower races" according to his own twisted lights, Darwin not only provided support for racism, but also established an allegedly scientific foundation for the race wars, slaughter and genocide to take place later in the 20th century.
Huxley refers to the black race as if they were animals, not human beings, and makes the oft-disproven claim that the blacks will inevitably lag behind in the conceptual race.
Two young blacks hanged in 1902, for being members of a different race. In the 21st century, however, it has been realized that in biological terms, there are no differences between races.
You were wrong, Hitler! The arian race project proved to be a tale... The DNA map shows that 99% of the genes in white, black and yellow races are identical.
Research has determined that genetic differences between the races are very small, and that the races cannot be differentiated between in terms of genes. Scientists researching the subject state that typically there is a 0.2% genetic difference between any two people, even within the same group. Features that reveal racial differences such as skin color, and the shape of the eyes account only for 6% of this 0.2% variation. On the genetic level that means a 0.012% difference between races54—so small as to be irrelevant.
Dr. J. Craig Venter, head of the Cilera Genomics Corp. that runs the Human Genome Project, says that "race is a social concept, not a scientific one.56 Dr. Venter and scientists from the National Institutes of Health mapped the entire human genome and concluded that there was only one single human race.
Certain drugs companies test their new products on the citizens of countries in Africa, Eastern Europe, Asia and South America, and during the course of these experiments, moral and professional laws are violated. In 1996, a 10-year-old girl weighing only 18.5 kg (40 pounds) and living in the Nigerian city of Kano suffered terrible pain due to meningitis. A world-famous American drug company was testing an antibiotic—which had not yet been licensed—on children in a camp it had set up. The drug being tested was of great importance to the company: stock exchanges estimated that if the Food and Drug Authority granted permission for the drug to be used, it would bring the company some $1 billion a year. The firm was unable to find test subjects in America, and so had come to Kano.
The firm's doctors began giving the girl an experimental daily dose of 56 mg of this drug. On the third day the girl died. Investigations by the Washington Post showed that drugs testing for profit was becoming increasingly widespread in Africa, Asia, Eastern Europe and South America. In order to circumvent the American FDA's strict rules, some American firms were cooperating with doctors in these countries, and tens of thousands of Third World country citizens were being used as guinea pigs in experiments. Although a spokesman for the firm in question stated that the experiments had received the necessary permission, experts stated that the meningitis experiment in Nigeria incident was incompatible with medical ethics and regulations in a number of regards. For example, although experiments of this kind should last at least a year, the one in Nigeria lasted only six weeks. Meningitis sufferers in America were generally given quick-acting drugs intravenously, but the Nigerian girl was given by mouth a drug that had never been tested on children. Again, in the event of negative affects in tests of this kind, the drug should immediately be stopped and another drug administered. But the drug company continued to give the little girl the same drug until she died.
Discriminatory practices against native Australians still go on today. The photo above shows a group protesting against their lands being taken from them.
• Along with museum curators from around the world, some of the top names in British science were involved in this large-scale grave-robbing trade.3 These included anatomist Sir Richard Owen, anthropologist Sir Arthur Keith, and Charles Darwin himself. Darwin wrote asking for Tasmanian skulls when only four full-blooded Tasmanian Aborigines were left alive, provided his request would not "upset" their feelings. Museums were not only interested in bones, but in fresh skins as well. These would provide interesting evolutionary displays when stuffed.
• Pickled Aboriginal brains were also in demand, to try to prove that they were inferior to those of whites.
• There is no doubt from written evidence that many of the "fresh" specimens were obtained by simply going out and killing the Aboriginal people.
Another study documenting this maltreatment and slaughter inflicted on the Aborigines is the book Aborigines in White Australia: A Documentary History of the Attitudes Affecting Official Policy and the Australian Aborigine 1697–1973 edited by Sharman Stone, Parliamentary Secretary to the Australian Minister for Environment and Heritage. Apart from a few comments by the editor, this book consists of such documents as parliamentary records, examination reports, letters to editors and anthropological reports..
Sir Douglas Nicholls, the first native Australian to be knighted, and his wife.
As the book's editor makes clear, some European Darwinists portrayed the deaths of Aborigines as proof that this race was condemned to disappear as a consequence of "natural law." In the 20th century, however, it was realized that these alleged proofs were invalid. The Aborigines had died not because of any laws of nature, but from the maltreatment they'd received. Also, of course, when the numbers of dark skinned people were observed to be increasing, it was realized that these Darwinist claims were untrue.
What has been recounted here is only a tiny part of Social Darwinism's dark face, but is enough to suggest the full scale of the disasters that atheism and Darwinism wreaked on humanity.
4. David Monaghan, 'The Body-snatchers', The Bulletin, November 12. 1991, s.34.
Yet the imaginary scenario that Haeckel backed up with forged drawings laid a seemingly scientific foundation for racism in a great many countries, particularly in Germany.
Professor George J. Stein, director of the International Security Studies Core at the Air War College, published an article headed "Biological Science and the Roots of Nazism" in American Scientist. "In essence," he wrote, "Haeckel and his fellow social Darwinists advanced the ideas that were to become the core assumptions of national socialism,"5 thus summarizing the deadly relationship between Haeckel, Social Darwinism and racism.
5. George J. Stein, "Biological Science and the Roots of Nazism," American Scientist, Vol. 76, Jan/Feb. 1988, s. 56.
A picture by Adam Willaerts showing a British ship sailing to East India.
Long before Darwin, colonialism began growing in 16th-century Europe. Exactly like racism, however, colonialism later drew strength from Darwin's theory and turned to a new target. Following the Industrial Revolution especially, commercial aims fueled the spread of European states to new continents and countries. Looking for new markets and raw materials, Europeans set about exploiting countries on other continents. Imperialist initiatives of the 19th century were based on different motives, however, which is why they became known as the new imperialism.
Social Darwinist suggestions dominated the new imperialist view of the world. One of the Darwinist causes of the new imperialism was the race for superiority. The British, French, Germans and other nations competing with one another were deceived into thinking that they needed to acquire new lands in order to emerge victorious as the most powerful nation in the race for superiority.
Above: A procession of the Britain's Royal Family in India under British colonial rule. Below: The arrival of British forces occupying Palestinian lands in the wake of the Ottoman Empire. Palestine had enjoyed peace and security for hundreds of years under Ottoman rule, but colonial administration brought with it chaos, conflict, and oppression.
The hunger to acquire new territories, caused by the new imperialism, led to conflicts between the imperialist countries themselves. Again based on the errors of Darwinism, regarding local peoples as "inferior races" led to enormous cruelties. Imperialists maintained that they were setting out to bring civilization to the lands in question, but inflicted a terrible amount of tears and suffering.
African peoples were exploited for years by Westerners believing in Darwinist deceptions.
According to Social Darwinism's worldview, human beings exist not to get to know one another, but to fight. Accordingly, the most important impetus for human progress is conflict between races and nations. Social Darwinism's irrational assumptions state that in order to emerge victorious from the conflict between races, new discoveries will be made. As a result, the "civilized" and "superior" will come out on top, and humanity will thus progress. To suggest that people will progress by killing and massacring one another, persecuting and oppressing others, is nothing more than barbarism. Disagreements and problems will arise from time to time. Yet all difficulties can be resolved by peaceful means. To imagine that violence offers a solution only makes the difficulties in question even more intractable. As already made clear, nations are perfectly justified in taking precautions to protect their future interests. But it is both illogical and a violation of good conscience to frame a policy ignoring the rights of other nations or believing that one nation's interests lie in destroying those of others.
The American Civil War (1861-1865) between the northern states, who demanded that slavery be abolished, and the southern states, who wanted it to continue. The idea of the superiority of the white race became a casus belli, and for four years, countrymen were to fight against one another. Slavery was finally abolished in the United States when the North emerged victorious.
Elsewhere in his book, Darwin refers to the conflict between "savages" and the "civilized," and claims that the latter will emerge superior. By these totally illusory assumptions, he prepared the groundwork for the chaos and suffering that would continue for nearly a century.
In the 19th century, this deviant belief that conflict between races and nations was a path to progress and which regarded races and nations other than its own as "inferior," took control over large parts of the world. Some imperialist Europeans behaved most ruthlessly towards the inhabitants of their conquered lands. From the measures they adopted, it was evident that they regarded these peoples as weak and inferior, denigrated them, and refused to accept them as humans who enjoyed equal rights with themselves. The new imperialism was a 19th-century implementation of Social Darwinism on a world scale.
The Social Darwinist views that dominated the colonial elites revealed themselves in policies adopted towards the native peoples. These administrations did not regard these peoples of the countries they ruled as human, but as primitive, intermediate life forms, and usually inflicted suffering, destruction and unhappiness. Social Darwinism was one major factor in these countries' ruthless policies. As already seen, the aggressive measures adopted by some nations, that in their arrogance regarded other nations as inferior, acquired false legitimization through Social Darwinism. These countries regarded themselves as perfectly justified in adopting such policies, which only increased their greed and aggression.
The Opium Wars are an interesting example. Great Britain began selling opium to China in the early 1800s, even though at the time the production, sale and consumption of opium were forbidden in Britain itself. The English governing class, who scrupulously protected their own people against this scourge, soon made the Chinese people dependent on opium. After his son died of excessive opium consumption, the emperor decided to put a stop to the British importing the drug into his country.
A government official, Lin Zexu (Lin Tse-Hsü), was sent to Canton—the East India Company's largest port—about putting an end to the trade. Since the British merchants did not favor cooperation, Zexu had the opium warehouses closed. The British immediately followed this with military intervention. The Chinese were routed and forced to accept a humiliating treaty, under which the opium trade in China was regarded as legal. Lin Zexu lost his post in the government and was sent into exile.
The Portuguese, for their part, exercised their "superiority" by effectively making slaves of the natives. They kidnapped natives from their colony of Angola and sent them far across the sea as "contracted" workers for five years. But very few of them survived long enough to make the return trip.70 In the great majority of occupied countries, colonizing powers took for themselves such territories and resources as they considered appropriate and gave them to settlers or companies from their own countries. They took no interest in the people who had lost their lands, and totally exploited their workforces, goods and mineral resources.
From their colonies, the British sent raw materials like cotton, tea and minerals to Britain, and later sent products made from them back to the colonies, to be sold at high prices. Cotton from India was processed in Britain, and the sale of Indian cotton was prohibited in India. In other words, they could use only cotton sold by the British. The Indians were also able to buy only salt produced by the British.
Above: King Prempeh, leader of the African Ashanti tribe, and the Queen Mother, submitting to British troops.
Left: The treatment meted out to native Australians.
Another practice of the new imperialism was their belittling and behaving disrespectfully towards rulers of the countries they colonized. But in earlier times, from the era of Elizabeth I up until Napoleon, administrators had treated foreign leaders equally. The deviant idea of regarding oneself as superior gained increasing strength in 19th-century Europe, bringing with it insolence and rudeness.
Darwinist imperialists portrayed their colonization of other nations as the result of their races being "inferior" and "backward." According to such claims, the order of the superior race had to spread across the entire world, and if the world were to progress, the inferior had to be improved. Put another way, the colonialist powers alleged that they were bringing "civilization" to the lands they conquered. Yet their practices and policies in no way reflected their claims to be "well intentioned." Along with their Social Darwinist ideas, the 19th- and 20th-century colonialist powers brought with them chaos, conflict, fear and humiliation, rather than well-being, happiness, culture and civilization. Even if one accepts that the colonialists did provide some benefits for their colonies, still the harm they wreaked was many times greater.
The struggle means suffering, intense suffering, while it is in progress; but that struggle and that suffering have been the stages by which the white man has reached his present stage of development, and they account for the fact that he no longer lives in caves and feeds on roots and nuts. This dependence of progress on the survival of the fitter race, terribly black as it may seem to some of you, gives the struggle for existence its redeeming features; it is the fiery crucible out of which comes the finer metal.
A picture of the Congo under French colonial rule. The native peoples in the jungle were slaughtered by whites regarding them as a species of animal.
This "world view" that regards most nations as inferior, and their suffering and death as a step on the path to so-called evolution, poses a danger to all humanity. If individuals join forces to depict an idea as scientific fact, no matter how dangerous or how unscientific and illogical it may be, and engage in propaganda on its behalf, then soon that idea and its byproducts will be accepted by those who lack sufficient information on the subject in question. This is where the hidden danger of Darwinism lies. People believing in concepts such as "the struggle for survival" and "conflict between superior and inferior races" carried out all kinds of ruthless actions under the shelter of these claims—or at least kept silent while others did so. As a result, racist, aggressive, and ruthless dictators such as Hitler, Mussolini and Franco emerged, and millions applauded their words. And because of these cruel ideologies, tens of millions lived and died in pain, fear and suffering.
In 1827, the French began occupying Algeria. As part of the colonialist mentality of the time, the French regarded nations other than their own as second class, and constructed a system based on oppression of and violence against the Algerians. First of all, education and even speaking in Arabic were banned. Then Algeria was made economically totally dependent on France. Opponents were bloodily suppressed. Below: A picture showing the torture and mistreatment of the Algerian people.
Inset left: İn Nebraska in 1919, a group of some 5,000 whites besieged the courthouse and captured a black prisoner and beat him senseless before shooting him more than 1,000 times and finally burning the body. Large picture: Two young blacks, Thomas Shipp and Abraham Smith, were lynched in Indiana in 1930. Thousands of Whites armed with baseball bats beat the two to death before hanging them. İn the 1930s, the Ku Klux Klan began to grow. These lynchings are just two of the countless examples of the hatred and ruthlessness that racism brings with it.
A Polish girl whose older sister was killed by the Nazis in 1939.
The deceptive idea that inter-racial conflict could lead to nations' progressing also laid the foundation for wars. Before World War I, when Social Darwinism was widespread, war was considered the "most appropriate means" for the elimination of the weak and the eradication of people seen as burdens, the survival of the strong, and the development of the human race.
Social Darwinist logic formed the basis of ruthless Nazi occupations, during which time millions of Russians were expatriated for slave labor and more millions executed for no crime at all.
The idea that war is a "regulative element" cannot be justified in rational or logical terms, nor with scientific facts. War is a destructive force that causes enormous losses of life and property, and its effects on society are enormously difficult to repair.
Young people being obliged to fight, despite all the suffering that war brings with it, represents the dark face of Darwinism.
As long as they do not experience war, people may never realize what a terrible disaster it actually is. It must never be forgotten that war spells sorrow, loss and suffering for millions of innocents. The way to build a world without war and conflict, one full of peace and security, is by the eradication of ideologies incompatible with the religious moral values commanded by God.
Keith's words indicate just how ruthless Darwinist suggestions can make people. Keith believed that the world needed to be "pruned" from time to time, that those "elements" that delayed the strengthening of the world needed to be cut away and discarded. He was openly supporting savagery. The "pruning" referred to by Keith was war, and those who died in war, whom he felt needed to be discarded, were helpless men and women and children. Those taken in by the deceptions of Darwinism feel no sympathy for these innocent people. The theory that in order to strengthen and develop the white race, those regarded as weak may be eliminated led to cruelties never seen before.
African- Americans lynched in 1906.
So long as love of God and feelings of compassion and sympathy for the human beings He created do not prevail, humanity will continue to experience such tragedies.
Social Darwinism's twisted views are one of the main reasons for the wars, conflict and slaughter that have continued unabated since the 19th century. As a result of the constant calls for war, even some who knew nothing about Social Darwinism fell under its spell.
These views were shared at the very highest levels. For instance, German Chancellor Theobald von Bethmann-Hollweg subscribed to the belief, common among the middle class when World War Ibegan, that conflict between Slav and Teuton was inevitable.78 The Kaiser is known to have held similar views. Many historians regard the wicked claims that war was unavoidable and the cleansing of inferior races was natural and useful as some of the principal causes of World War I.
history as one of war and bloody conflict.
never left the faces of millions.
The philosopher Friedrich Nietzsche was also one of the most prominent supporters of Social Darwinism in Germany. According to him, the ideal social system should be based on armed conflict: "Man shall be trained for war and woman for the recreation of the warrior; all else is folly."79 According to Nietzsche's twisted view, life consisted solely of war, and war contained everything within it.
During World War I, the Germans employed mustard gas in violation of the rules of war. The picture shows a British soldier killed by that gas.
These ideas advanced by Hitler and others like him were products of a terrible ignorance. Those who imagined that with the theory of evolution they were basing their militaristic and aggressive thinking on a scientific foundation were merely deceiving themselves. Yet with the tens of thousands of people they induced to follow them, they inflicted ruin on the world on an unprecedented scale.
Social Darwinist ideas that encouraged conflict afflicted millions all over the world. Babies crying over the body of their dead mother are just a part of the great suffering inflicted by war.
In wartime, not only the civilians suffer. Soldiers forced to fight as a result of a philosophy that has inflicted nothing but blood and sorrow on the world are also part of war's cruel face.
These deceptions, identified and described by many academics, account for the 20th century's history of war, slaughter and genocide.
White students attacking a black lawyer. Racism is a cause of anger, hatred, aggression and conflict. These students have so taken leave of their humanity as to kill an innocent man solely because of the color of his skin. They are living under the influence of Social Darwinism, whether consciously or otherwise. Top: An Alabama passenger bus in 1930. A separate section marked "Colored Passengers" was set aside for blacks.
Such savagery was not limited to the Nazis. Many parts of the world have experienced terrible catastrophes because of racism. Because of it, hundreds of thousands have been regarded as worthless, humiliated, forced from their homes and enslaved, killed or abandoned to die, treated like animals, and used in pharmaceutical experiments. The examples cited in this book are just a few of the many documented instances of savagery and violence.
The social structure envisaged by Darwinism needs to be accurately identified. Like all other materialist theories, Social Darwinism, maintaining that people are selfish creatures who live solely for their own interests, responsible solely to themselves, can never bring proper moral values and happiness to individuals or to society as a whole. In order to acquire proper moral values and happiness, a person needs to abandon selfish desires. Religious moral values, as commanded by our Lord, teach people how this will be. People's responsibility towards God and the kind of moral values they need to attain His approval are revealed in the Qur'an.
If people have faith in God's commandments and the Book revealed by Him, then they will feel compassion and affection towards others.
Those who love and fear God and obey His commandments, see other people as beings He created, and make no distinctions between them on grounds of race, nation, skin color or language. In every human being, they see beauty created by God, and take pleasure in that beauty. Their faith makes them loving, compassionate and protective. However, someone brainwashed by Darwinism's falsehoods looks down on other races and nations, feels justified in oppressing and even eradicating them, and spreads nothing but tension, unhappiness and fear. The racism and imperialism witnessed in the 19th and 20th centuries are the result of this Darwinist world view.
37. Karl A. Schleunes, The Twisted Road to Auschwitz, Urbana, IL: University of Illinois Press, 1970, pp. 30, 32 ; Jerry Bergman, "Eugenics and Nazi Racial Policy," p. 118.
38. Sidney M. Mintz, American Scientist, vol.60, May/June 1972, p. 387.
39. John C. Burham, Science, vol.175, February 4, 1972, p. 506.
40. Edwin G. Conklin, The Direction of Human Evolution, New York, NY: Scribner's, 1921, p. 34.
42. George Gaylord Simpson, "The Biological Nature of Man," Science, vol.152 (April 22, 1966), p. 475.
43. Henry Fairfield Osborn, "The Evolution of Human Races," Natural History, January/February 1926; 2nd pub. Natural History, vol. 89, April 1980, p. 129.
44. James Ferguson, "The Laboratory of Racism," New Scientist, vol. 103, September 27, 1984, p. 18.
45. Stephen Jay Gould, "Human Equality is a Contingent Fact of History," Natural History, vol.93, November 1984, p. 28.
46. Charles Darwin, The Descent of Man, 2nd ed., New York: A L. Burt Co., 1874, p. 178.
47. Matt Ridley, Nature Via Nurture, Chapter One, "The Paragon of Animals."
48. Charles Darwin, The Voyage of the Beagle, edited David Amigoni, London: Wordsworth, 1997, p. 477.
50. Francis Darwin, The Life and Letters of Charles Darwin, Vol. I, 1888. New York:D. Appleton and Company, pp. 285-286.
51. Stephen Jay Gould, Ontogeny and Phylogeny, Cambridge, Mass: Harvard University Press, 1977 , p. 127.
52. Thomas Huxley, Lay Sermons, Addresses and Reviews, New York, NY: Appleton, 1871, p. 20.
53. Robert Lee Hotz, "Race has no Basis in Biology, Researchers Say," Los Angeles Times, February 20, 1997.
55. Natalie Angier, "Do Races Differ? Not Really, DNA Shows," New York Times, August 22, 2000.
60. Sribala Subramanian, "The Story in Our Genes;" Time, January 16, 1995, p. 38.
63. Encyclopedia Britannica, 1946 edition, vol. 12, p. 122A.
64. Gertrude Himmelfarb, Darwin and the Darwinian Revolution, Elephant Paperbacks, Chicago:1996, p. 416.
67. Darwin, The Descent of Man, p. 297.
68. Karl Pearson, National Life from the Standpoint of Science, Cambridge: Cambridge University Press, 1900, pp. 11-16, 20-23, 36-37, 43-44.
70. John Merriman, A History of Modern Europe, vol. 2: From the French Revolution to the Present, pp. 990-991.
71. Pearson, National Life from the Standpoint of Science.
72. Milner, Encyclopedia of Evolution, p. 59.
73. Oscar Levy, Complete Works of Nietzsche, 1930, vol. 2, p. 75.
74. Himmelfarb, Darwin and the Darwinian Revolution, p. 417.
77. W. Carr, A History of Germany 1815-1990, 4th. ed, p. 205.
79. Levy, Complete Works of Nietzsche, vol. 2, p. 75.
80. H. Enoch, Evolution or Creation (1966), pp. 147-148.
81. Max Nordau, "The Philosophy and Morals of War," North American Review, 169 (1889), p. 794.
82. Jacques Barzun, Darwin, Marx, Wagner, Garden City, N.Y. :Doubleday, 1958, pp. 92-93.


text:
Purplebricks Group (PURP)
Thursday 13 December, 2018
Purplebricks Group
Purplebricks Group PLC
("Purplebricks", the "Company" or the "Group")
Interim Results for the six months ended 31 October 2018
Step-up in UK profitability, building a global business
Purplebricks Group plc (AIM: PURP), the world's leading hybrid real estate agency, announces its Interim Results for the six months ended 31 October 2018 ("H1 2019" or the "First Half").
IAS 18
(pro forma)
£m
+260bps
Operating loss
Adjusted EBITDA[1]
Net cash[2]
Financial highlights (IFRS 15 basis [3])
· Group revenue up by 75% to £70.1 million (H1 2018: £40.1 million)
· UK revenue up by 39% to £48.3 million, UK ancillary revenue up 25%
· International now represents 31% of Group revenue
· Group gross margin up by 260bps to 59.9%, UK like for like [4] gross margin up by 180bps
· UK Adjusted EBITDA £8.4 million, up 265% (H1 2018: £2.3 million)
Operational highlights
· Completed on £5.4 billion of UK property (H1 2018: £4.6 billion), saving customers £96 million in commission
· UK hybrid market share of 74%
· UK average revenue per instruction up 6%
· Australian model evolved to work better for customers, LPEs and Purplebricks
· Confidence to expand US business to Arizona, Nevada and Florida - now operating in seven states, representing more than 20% of US-wide instructions
· DuProprio/ComFree our Canadian business acquired in July 2018 continues to meet management's high expectations
· Agreed minority JV investment in Homeday.de, the leading German hybrid real estate agent
· Appointed Vic Darvey (former Managing Director of MoneySupermarket) as our first Group Chief Operating Officer, starting January 2019
Michael Bruce, Group CEO, commented:
"Our UK business continues to make good progress, with strong sales growth, market share gains and a step-up in both profitability and positive cashflow. It is this strength that will see Purplebricks emerge stronger from the ongoing industry shakeout, which is expected to continue to expose undercapitalised traditional and online competitors.
"Following Axel Springer's investment in March, we are already seeing how shared knowledge and best practice across the business can benefit the entire Group.
"Purplebricks has led industry change and through our strategy of relentless innovation will continue to do so. We are always looking to improve the customer experience and with over £100 million of net cash, we are uniquely placed to do so, investing in technology and first class people. We remain confident that our UK success will be replicated internationally and that we will deliver substantial value for our shareholders."
Our UK business continues to outperform the industry, demonstrating an ability to grow strongly and win share in challenging market conditions. Whilst we expect no short-term improvement to this market dynamic, we are confident that we will continue to outperform and take further UK market share from competitors throughout the second half of our financial year.
Having now launched in phase one target states in the US, early indications show brand recognition and consideration are growing strongly. We are confident, with new marketing creative launching in the new year, that we will see a step up in instructions from our most recently added DMAs, which are yet to generate a meaningful contribution. Our near term strategy remains focused on maximising operational delivery, which will drive further revenue over time.
With six months of the year behind us and in light of the above, the Board narrows the range of our previously disclosed 2019 guidance, under IAS 18, from £165-185 million to between £165-175 million, in line with current market consensus.The adoption of IFRS 15 will result in an approximate 2% downward adjustment to our guidance, with a minimal impact on profit and no impact to cash.
---END---
A presentation will be held for analysts and professional investors at 09.00am (UK time) at Instinctif Partners, 65 Gresham Street, London EC2V 7NQ. Please RSVP to Catherine Walton (+44 020 7457 2020 - [email protected]) if you would like to attend.
The presentation will be webcast live and will be accessible via the Purplebricks website [5] at www.purplebricksplc.com/investors/latest_results. An on-demand replay will also be available on the Purplebricks website following the presentation.
Michael Bruce, James Davies
Zeus Capital (NOMAD)
Nicholas How, Benjamin Robertson
Peel Hunt (Broker)
Dan Webster, George Sellar
Investec Bank (Broker)
Keith Anderson, Carlton Nelson
Instinctif Partners
David Simonson, Mark Reed, George Yeomans
This announcement includes statements that are, or may be considered to be, "forward-looking statements". By their nature, such statements involve risk and uncertainty since they relate to future events and circumstances. Results may, and often do, differ materially from forward-looking statements previously made. Any forward-looking statements in this announcement reflect management's view with respect to future events as at the date of this announcement. Except as required by law or by the AIM Rules of the London Stock Exchange, the Company undertakes no obligation to publicly revise any forward-looking statements in this announcement following any change in its expectations to reflect subsequent events or circumstances.
About Purplebricks
Purplebricks is the world's leading next generation real estate agency. Based in the UK, it also operates in Australia, the US and Canada. Purplebricks combines highly experienced and professional Local Property Experts (US: Local Real Estate Experts) and innovative technology to help make the process of selling, buying or letting more convenient, transparent and cost effective. Purplebricks shares are traded on the London Stock Exchange AIM market.
First Half 2019 Review
Purplebricks has delivered a strong trading performance as well as achieving substantial strategic progress in the six months to 31 October 2018.
Group revenue under the new accounting standard IFRS 15 "Revenue from Contracts with Customers" rose 75% to £70.1 million (H1 2018: £40.1 million). This performance was driven by 39% sales growth in the UK, 28% in Australia, 5,900% in the US and a contribution of £9.2 million from our newly acquired Canadian business, which is included for the first time. While reporting strong growth in Australia, the underlying performance was held back by market conditions and some operational issues, which we have taken steps to correct with changes to the team, customer proposition and business model.
The Group gross margin was 60%, up from 57% in the comparable period last year, with the UK margin rising to 65% (up 180bps on a like-for-like basis), reflecting the increasing contribution from higher margin ancillary sales, which recent investment in the Home Purchase team has enabled.
Notwithstanding the challenging macro economic backdrop and market disruption caused by Brexit uncertainty, Purplebricks has continued to outperform its UK peers, winning market share from traditional operators and maintaining its substantial lead over online/hybrid competitors. We completed on £5.4 billion of UK property (H1 2018: £4.6 billion), saving customers £96 million in commission during the First Half [6].
While the UK market has seen unprecedented investment by competitors in marketing and unsustainable reductions in fees charged, it has not materially impacted Purplebricks. As we have previously noted, this dynamic appears to have started to take its toll on the industry with mounting evidence of a shakeout in both traditional and online business models. Management believes that our growth, scale, flexibility and financial strength, with no debt and net cash as at 31 October 2018 of £103.1 million, places us in a strong position to continue to grow market share at the expense of under-capitalised competitors.
We have made substantial progress in the development of our US business over the first six months of the year - rolling out into the states of Arizona, Nevada and Florida, expanding the teams in both the East and West Coast offices, which now total 91 people, and further growing the base of Local Real Estate Experts ("LREEs"), which at 31 October numbered 140. Brand awareness continues to grow and in the Los Angeles DMA, where the business is most established, having soft launched in September 2017, prompted brand awareness as at October 2018 has grown to 44%, ahead of the UK at the same time of its development.
Management is confident that with Purplebricks now operating in seven states across the US in just over one year, we have built up a profile and a substantial amount of market intelligence to enable us to make more informed strategic decisions and prudent capital deployment. This is expected to drive further growth and achieve a meaningful share of the US market, where selling fees typically average between 5% to 6%, including the opportunity to earn buy side commission. Early key performance indicators, compared with other geographic markets at the same time in their development are encouraging, with the business achieving a higher conversion from listing appointment to listing, the highest conversion from listing to sale and a larger proportion of higher margin ancillary revenue.
The acquisition of the Duproprio and ComFree businesses in Canada in July 2018 and the agreed minority investment in Homeday.de in Germany as part of a strategic investment alongside Axel Springer, announced in October 2018 and expected to complete later in December, mark new milestones for the Group. Both deals back existing management teams, with local knowledge and proven track records. The strength and depth of the teams are such that Purplebricks' senior management is able to focus most of their time and attention on delivering in existing markets. Management believes that there are substantial growth opportunities in these new territories where there are materially higher estate agents fees and moving costs compared to the UK. In less than five years since launch, Purplebricks now operates in four countries with an addressable market of four million [7] property transactions a year.
Purplebricks remains focused on growing the business and winning further share in all its markets, and will continue to invest across the business in first class people, marketing, technology and infrastructure. This investment combined with the early stage rollout in the US, has resulted in Adjusted EBITDA losses widening to £21.0 million (H1 2018: loss of £9.9 million). The Group remains confident that this level of investment is necessary to extend its lead in a competitive marketplace and will, in time, generate an attractive return for shareholders.
Delivering an ever better service to customers remains critical to our success, evidenced by customer feedback from both Trustpilot (with an 89% 5* Excellent rating from over 61,100 reviews across the UK, US and Australia) and Feefo, where our rating is 4.7 out of 5.0 in the UK.
Business review by geography
New instructions (000's)
Avg revenue per instruction (£)
A unique model of scale and agility
The core Purplebricks business model is built around a flexible cost base without the fixed salaried costs of real estate agents, substantial infrastructure costs and the cost of operating entirely on a flexible contingency fee basis. The strengths of the Purplebricks business model are evident and the risks of operating a traditional agency model or a no sale no fee online offer are increasingly clear.
Purplebricks has the added advantage of scale, achieving 38,600 new instructions in the six month period, a year-on-year increase of 20%. This scale is evident in the profitability of the UK business, with Adjusted EBITDA, the best proxy for cash profit, up 265% to £8.4 million (H1 2018: £2.3 million). Operating profit in the period was £5.7 million (H1 2018: £0.8 million). We continue to invest in technology and people in order to continue to lead change in the industry and to advance the target of reaching at least 10% market share in the medium term. In the First Half, UK adjusted administrative expenses were £9.3 million (H1 2018: £7.8 million), improving as a percentage of UK revenue to 19% (H1 2018: 22%).
Investing to drive customer experience and long-term market leadership
Building on our market leading technology
Purplebricks was built on the vision of combining first class Local Property Experts ("LPEs") with industry-leading technology, with our platform remaining a key differentiator from peers. Technology is also at the heart of our strategy to create longer lifetime relationships with customers, keeping them engaged with the business through a broader offering of products and services and with simple yet innovative ways of making their lives easier, more convenient and better informed.
The Group continues to invest in technology, with the ongoing focus on improvements to the customer experience as well as making the journey easier and simpler by reducing friction points across the platform. These improvements, which can be marginal in nature, through increased conversion, can drive a material improvement in profitability. We have invested in technology to create efficiencies, increase productivity and improve the customer experience.
The in-house technology team, along with external expertise, continues to work on Purplebricks Plus, the aim of which is to provide timely access to other value-based home-related services including broadband, TV, energy and insurance simply through the Purplebricks app. This will represent a major step forward in terms of customer experience and a further meaningful differentiator to the competition. Work remains on-going, with a number of partnership deals already signed, including Comparison Technologies. Purplebricks Plus is expected to launch before the end of our current financial year.
Outbound team strengthened
There has been a notable increase in the effectiveness of this central team whose role is to proactively convert leads from various sources. The team has been strengthened and is now led by an experienced Regional Director promoted into this role. Instructions per team member have risen by approximately 50% year-on-year, with an equivalent increase in valuations. We are making continuous productivity gains and will build on them with upgraded telephone systems, auto-dialers, enhanced reporting and smart distribution of calls, leads and opportunities.
Concierge team now covers the whole country
Purplebricks is fundamentally about selling houses while giving a much better experience and saving our customers money. As part of our strategy to deliver exceptional outcomes we have a Concierge team that focuses on those properties that need more input to increase exposure, create more activity and secure a sale. They supplement the contracted work of the LPE to identify ways of improving the prospects of sale by reviewing marketing exposure and sale price with customers. While this additional service comes at no added charge to the customer, the team has a very high success rate in helping to secure sales and typically attracts very positive feedback from customers.
Home Purchase team driving ancillary sales
During the First Half, we created a Home Purchase team, replacing and enlarging the existing Conveyancing Sales team, with an enhanced customer proposition, utilising sophisticated data resources to engage with buyers, sellers and viewers. This team is focused on driving ancillary sales predominantly to buyers. As can be seen from our First Half results, the investment is showing a good early payback, with UK ancillary revenues in the period increasing by 25% year-on-year. This growth has been primarily driven by early success in selling conveyancing services to the buyer. Some progress has been made with mortgage referrals, though this opportunity remains in its infancy. There still remains a significant opportunity with conveyancing and mortgages to further drive revenue and margin.
Post-sales Support team driving successful customer outcomes
As a full service real estate agency we have grown the team of people who support our customers through the journey from sale agreed to completion. This team supplements the work performed by LPEs rather than replacing it, with their specialist skills deployed when specific issues arise which potentially put a sale at risk. This team is extremely experienced and there has been a strong focus on productivity and efficiency as we further drive the operational leverage within our central functions. The number of sales being completed, influenced by this team, coupled with the number of customer reviews demonstrate that they play a significant part in the customer journey and indeed their satisfaction.
Improving LPE productivity
We had built up a national network of 851 LPEs, sales assistants and academy members as at 31 October 2018, and our focus is on improving productivity by on-going improvements to recruitment, training, technology and the sharing of best practise. During the First Half, we recruited an experienced People Director and are currently recruiting for a senior Training Director to jointly oversee the future growth and development of our LPEs and our people. We believe they will have a big impact on the quality of people and service, operational excellence, productivity and increased revenue growth through better conversion of opportunities.
As we expand internationally and learn more about ways to engage the customer, we are able to share best practice across the Group. This has led to the improvements in the productivity of LPEs.
There is an internal grading system for LPEs, which highlights differences in productivity and ultimately profitability between the highest and the lowest performers. It is very encouraging that an increasing number of LPEs are obtaining the highest gradings and work will continue to improve this further.
In addition to the productivity improvements, Purplebricks is in the process of recruiting further new LPEs as we approach the spring market. It is encouraging that the quality of the candidates remains at the highest level and that we are attracting more branch manager standard experts than a year ago. We also have 72 people currently in our academy training programme.
Creating engaging marketing and advertising
Effective marketing has always been one of the key drivers of our growth. Operating under a single national brand, the industry-leading strategy of running a high impact, near continuous presence on TV and radio has resulted in Purplebricks being the best-known estate agency brand in the UK in less than five years.
The marketing success in the First Half is set against increased investment in marketing by online competitors and a challenging housing market. The latest available data from The Nursery, a leading independent research and planning agency, shows that as at September 2018, Purplebricks has industry-leading unprompted brand awareness, which has grown to 48%, an increase of eight percentage points since May, from people looking to sell their property. Within its competitive set, including property portals and traditional leading high street agents, Purplebricks has the industry's highest prompted brand awareness at 97%.
Having established leading brand awareness, the marketing focus continues to be on consideration (whether customers would consider appointing us next time they sell a property), which had increased to 43% as at 30 September 2018, up from 40% at May 2018. Top box consideration, defined as a consumer stating that they would definitely use Purplebricks next time they sell a property has, over the same time period, increased by 500bps.
We continue to diversify our media mix with Outdoor included for the first time alongside category-leading investment in television, radio and PPC. We will continue to flex our approach to media channel in order to drive greater consideration through educating more and more people on the nature and extent of the service we offer. We recently undertook pitch sponsorship for each of the Scotland home rugby games televised on the BBC. This gave us access to new audiences with a broadcaster that does not permit traditional advertising.
Lettings represented 8% of UK revenue in the First Half (H1 2017: 8%) and we continue to develop our capabilities with 5,800 units under management at 31 October 2018, up 32% year-on-year (31 October 2017: 4,400). We have recently strengthened our management of this team to examine ways to further scale the business and our national network of Local Lettings Experts. Our intention is to provide an opportunity for Landlords similar to what we offer Sales Vendors with service excellence and delivery.
The legislative risk to tenant fees is not expected to have a material impact on the business.
(242)bps
Evolving the offer to better work for customers, LPEs and Purplebricks
The operating loss of A$10.2 million in the First Half includes one-off costs in connection with the recent restructuring and re-positioning of the business. Some further one-off restructuring costs are also expected in the second half of the year. These changes have been implemented by the new management team, led by Neil Tavender, CEO of Australia. Neil has had a career in senior sales, management and leadership roles in digital and property businesses, including with Rightmove, where he was Sales Director.
The underlying results testify to the challenges in the first few months of the period but are too early to show the benefits of the recent changes in the customer offering and reward for LPEs. After undertaking consumer research and testing we launched a new customer proposition from 1 October 2018 as follows:
· An all-inclusive fee of A$8,800
· Only half of the fee is now paid upfront, which can be deferred for six months or until completion
· The other half of the fee is payable upon completion of a successful sale
· The service includes for the first time a premium marketing package, a premiere listing on realestate.com.au and professional photography
Lessons have been learned in Australia and we continue to believe that with the depth of knowledge and experience of the new management team, the business can grow to become the leading real estate agent in Australia. While it is too early to be definitive, early indications are encouraging.
In addition to the customer proposition the business model has also been revisited, including a review of all costs. This has resulted in a lower fixed cost base, and greater flexibility in cost structures. One such change has been the removal of the salaried position of Local Sales Assistants. Combined with other changes the number of monthly instructions required to reach breakeven has been substantially reduced. As a result, it is now expected that second half losses will be below those reported in the First Half.
We are very excited about the opportunity and progress we are making in the US, the largest residential market in the world. Since we successfully launched our real estate brokerage business in September 2017 in the Los Angeles designated market area ("DMA"), we now have established operations across seven states and ten separate DMAs. This established footprint represents more than 20% of the total US addressable residential existing resale market.
During the First Half, we accelerated expansion into DMAs across Arizona, Nevada and Florida, providing broader access to a strong consumer base. We continue to grow across all our markets and take share despite the California market as a whole softening in terms of year-on-year sales levels.
The US team also successfully launched its portfolio of ancillary services within the first year of operations, which now include escrow closing services and a national title business, positioning us favourably to continue strong revenue growth. We are already seeing over a 70% attachment rate on our escrow closing services. In calendar 2019, we will roll out our mortgage business and insurance services. We expect the US market to be our second largest market by revenue by the end of this financial year.
In 2019, we will continue to invest in marketing, building brand awareness across all our DMAs as we continue to refine our offering, driving market penetration with our established team, infrastructure and leadership. To date we have achieved notable success - with a net promoter score of more than 90 and some 1,000 five-star Trustpilot reviews, a testament to the outstanding customer service provided by our highly trained Local Real Estate Experts.
Four months from acquisition
In July 2018 the Canadian business trading under the brands DuProprio and ComFree was acquired for a net cash consideration of £27.3 million. The business has a leading position in the province of Quebec, with a market share of 20% and has recently expanded its operations into the territories of Ontario and Western Canada, which combined accounted for 78% of total Canadian instructions in 2017. Under the ownership of Purplebricks, but led by the local management team, headed by CEO Marco Dodier, the strategy is to deepen the rollout across the country and develop the buy side opportunity. Currently, the vast majority of the income is generated from the sellside.
The performance since acquisition has been strong, with KPIs in line or ahead of pre-acquisition expectations.
The business has a well-invested and highly scalable technology platform. Marketing however has historically been limited, despite the fact that the cost of media in the country is relatively low. A new and more ambitious marketing strategy has now been finalised for the new calendar year and will run in tandem with the rebranding of the ComFree business to Purplebricks. We will retain the DuProprio brand as it is well-established and respected in Quebec.
The Company will be investing over the medium term to capture the market share opportunity across the country, using the retained profits generated by Quebec and supplemented by cash from Purplebricks. It is anticipated that the new marketing campaign will have a significant impact on brand awareness and drive a substantial uplift in topline growth. With the inherent operational gearing in the model, market share gains outside of Quebec are expected to drive a move into profitability in the medium term.
We are delighted to confirm that Vic Darvey has agreed to join us as Group Chief Operating Officer with effect from January 2019.
Vic is a digital leader with more than 20 years' experience successfully scaling a number of international consumer brands, most recently as Managing Director of MoneySupermarket.com. He has held leadership roles across a number of highly competitive and disruptive businesses, including LastMinute.com. Vic brings a proven record of technology delivery and leadership of cutting edge data-led, customer-focused, commercial innovation.
Adjusted EBITDA, which is not defined in IFRS, is a measure which is used by the board and management for planning and reporting.
Profit or loss from operating activities, adding back depreciation, amortisation and share based payment charges and non-recurring acquisition costs. The Group believes that this measure, which is not considered to be a substitute for or superior to IFRS measures, provides stakeholders with helpful additional information on the underlying performance of the Group.
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 acquisition costs: a one-off item which exists only in an accounting period when an acquisition occurs. We believe adjusting for these non-recurring items improves comparability period on period.
Adjusted operating costs
Adjusted operating costs are administrative expenses, adjusted by adding back depreciation, amortisation and share based payment charges and non-recurring acquisition costs.
Condensed consolidated statement of comprehensive income
for the six months ended 31 October 2018
Six months ended 31 October 2018
Restated for IFRS 15 adjustments Six months ended 31 October 2017
Restated for IFRS 15 adjustments Year ended 30 April 2018
Unaudited
Cost of Sales
Administrative and establishment expenses
Marketing costs
Loss from operating activities
Loss from operating activities before adjustments:
Share based payment charge
Amortisation of intangibles
Non-recurring acquisition costs
Net finance costs
Fair value movement in respect of derivatives
Loss on ordinary activities before taxation
Taxation on loss on ordinary activities
Loss for the period
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translation of foreign operations
Total other comprehensive income
Total comprehensive loss
Losses per share
Basic and diluted loss per share
Condensed consolidated statement of financial position
Restated for IFRS 15 adjustments 31 October 2017
Restated for IFRS 15 adjustments 30 April 2018
Non-current assets
Deferred tax asset
Tax receivable
Trade and other receivables
Cash and other cash equivalents
Deferred income
Derivative financial instruments
Total assets less current liabilities
Deferred tax liabilities
Share premium
Share based payments reserve
Foreign exchange reserve
Condensed consolidated statement of changes in equity
Share based payment reserve
At 1 May 2018 Restated
Exercise of options
Tax in respect of share options
Transactions with owners
Exchange differences on
translation of foreign operations
At 31 October 2018
Restated for the six months ended 31 October 2017
At 1 May 2017 - as previously reported
Effect of misstatements
Effect of IFRS 15
At 1 May 2017 - Restated
Foreign exchange translation
At 31 October 2017 - Restated
Restated for the year ended 30 April 2018
Effect of IFRS 15 (Unaudited)
Cost of share issue charged to share premium account
Loss for the year
At 30 April 2018 as restated
Condensed consolidated Statement of Cash Flows
Loss for the period after taxation
Adjustments for:
Amortisation of intangible assets
Debt factoring finance cost
Operating cash outflow before changes in working capital
Movement in trade and other receivables
Movement in trade and other payables
Movement in deferred income
Net cash outflow utilised in operating activities
Cash flow from investing activities
Interest received
Purchase of property, plant and equipment
Development expenditure capitalised
Purchase of intangible assets
Acquisition of subsidiary net of cash acquired
Net cash flow utilised in investing activities
Cost of issue of shares
Net cash flow from financing activities
Net increase in cash and cash equivalents
Effect of foreign exchange rates
Cash and cash equivalents at the end of the period
Notes to the condensed set of financial statements
Purplebricks Group plc is a public limited company limited by shares registered in England and Wales. The address of the Company's registered office is Purplebricks Group plc, Suite 7, First Floor, Cranmore Place, Cranmore Drive, Shirley, Solihull, West Midlands, B90 4RZ. The Company is primarily involved in the estate agency business.
The financial information set out in this announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.
The Consolidated Statement of Financial position at 30 April 2018, the Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and associated notes for the year then ended have been extracted and subsequently restated for IFRS 15 adjustments from the Group's 2018 financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498(2) or (3) of the Companies Act 2006.
2. Summary of significant accounting policies
These interim unaudited financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, and do not contain all of the disclosures required by IAS 1 Presentation of Financial Statements or other standards. The accounting policies adopted are consistent with those of the previous financial period (see pages 41 to 45 of the 2018 Annual Report) except as described below at Note 2.2 and 2.3.
2.1 Basis of preparation
The Company's financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
The consolidated financial statements have been prepared under the historical cost convention subject to recognising certain financial instruments at fair value.
2.2 Tax
Taxes on income in the interim period are accrued using the tax rate that would be applicable to expected total annual earnings.
2.3 New accounting standards adopted in the period
Implementation of IFRS 15 Revenue from Contracts with Customers
The Group has initially adopted IFRS 15 Revenue from Contracts with Customers in these interim 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. Accordingly, the information presented for the 6 months to 31 October 2017 and the year to 30 April 2018 has also been restated.
The effect of initially applying this standard mainly arises from:
· Later recognition of instruction fee revenue, and associated cost of sales, and
· Earlier recognition of revenue from Conveyancing referrals and Brokerage activities, and associated cost of sales.
Please see the tables set out at the end of this document.
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:
· interim statement of profit or loss and other comprehensive income for the six months ended 31 October 2017
· statement of profit or loss and other comprehensive income for the year ended 30 April 2018
· interim statement of financial position as at 31 October 2017
· statement of financial position as at 30 April 2018.
· earnings per share for the 6 months ended 31 October 2017 and for the year ended 30 April 2018
The condensed consolidated statement of cash flow for both comparative periods have been restated to reflect the adjustments detailed in Tables 1 - 6.
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.
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, straight line, 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 £0.6m for the 6 months to 31 October 2018.
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.
New Australian model
The Group's Australian business has recently 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 treated in line with the description above, 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. The success fee is accrued over time 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.
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 6 months to 31 October 2017 and for the year ended 30 April 2018 is show in the table below.
Year ended 30 April 2018
Instruction revenue as previously reported
Impact of adoption of IFRS 15
Instruction revenue as restated
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.
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.
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 6 months to 31 October 2017 and for the year ended 30 April 2018 is show in the table below.
Conveyancing revenue as previously reported
Brokerage (c)
The Group also provides, in the US, 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.
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 6 months to 31 October 2017 and for the year ended 30 April 2018 is show within "other" revenue in table 7 below.
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 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.
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 6 months to 31 October 2017 and for the year ended 30 April 2018 is shown within "Other" revenue in table 7 below.
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.
2.4 Restatement for prior period error
This comprises the cumulative share based payment charge recognised in profit or loss in relation to equity-settled options, net of transfers of charge on exercise of options to the profit and loss reserve.
There was an error in the brought forward share based payment reserve at both 1 May 2016 and 1 May 2017, with an equal and opposite compensating error in retained earnings at £975k. This error, which was due to the incorrect application of the vesting period of the options resulting in an understatement of the SBP expense recognised, has been restated. There was no impact on reported earnings or net assets.
3. Segmental reporting
The Group trade is managed as a single division, providing services relating to the sale of properties however management report to the Board 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 it owns a Company in: UK, Australia, the US and Canada. During the period, no customer contributed 10% or more of the Group's revenues (six months ended 31 October 2017 - none; year ended 30 April 2018 - none).
The following is an analysis of the Group's revenue and results by reporting segment:
H1 2019 unaudited
Consolidation adjustment
Sales and marketing costs
Profit/(loss) from operating activities
Profit/(loss) from operating activities before adjustments:
Profit/(loss) on ordinary activities before taxation
Taxation on profit/(loss) on ordinary activities
Profit/(loss) for the period
Depreciation & amortisation
Acquisition costs
Share based payments
Restated for IFRS 15 adjustments - H1 2018
Restated for IFRS 15 adjustments - Year ended 30 April 2018
Analysis of revenue by contract type
As at 31 October 2017
As at 30 April 2018
As restated under IFRS 15
Segment assets and liabilities by location
31 October 2018 Unaudited
Restated for IFRS 15 adjustments 31 October 2017 Unaudited
Restated for IFRS 15 adjustments 30 April 2018 Unaudited
Consolidation adjustments
5. Loss per share
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.
Basic and diluted
6 months ended 31 October 2018
Restated for IFRS 15 adjustments 6 months ended 31 October 2017
Loss £000
Weighted average number of shares ('000)
Loss per share (£)
The table below reconciles the weighted average number of shares:
Weighted average number of shares year ended 2018
Weighted average issue of new shares and exercise of options
Weighted average number of shares period ended October 2018
6. Finance (expense)/income and other charges
Invoice factoring charges
7. Share capital
Share capital as at 31 October 2018 amounted to £3.024 million. During the period, the Group issued 535,346 ordinary shares of £0.01p each in satisfaction of the exercise of share options. The issue in satisfaction of the exercise of share options increased the number of shares in issue from 301,843,009 to 302,378,355.
8. Acquisition of subsidiary
On 6 July 2018, the Group obtained control of DuProprio/Comfree by acquiring 100 per cent of its issued share capital. DuProprio/Comfree owns and operates one of Canada's leading commission-free real estate service networks as an online offering with similar aspects to Purplebricks. Provisional goodwill of £14,169,000 arose on the acquisition.
The board believes that the acquisition will be a strong strategic fit with the Group's operations in the UK, Australia and the US and will provide an attractive opportunity to deliver on, and accelerate, the Group's stated strategy of continuing to expand its operations into new territories with an established operator and a strong management team.
The fair values included below are based on management's best estimates of the values as at 6 July 2018 based on all available data that has been received since that date. As at 31 October 2018 a full detailed fair value exercise is still in progress for all assets and liabilities acquired. Therefore, the amounts recognised for these assets and liabilities are provisional.
As outlined by IFRS 3, management has until the earliest of the date at which all information required is received or one year from the acquisition date in order to satisfy the measurement period criteria.
Acquisition related costs amounting to £447,000 were recognised as an expense in the income statement. No other acquisition costs were recognised.
Recognised amounts of identifiable assets acquired and liabilities assumed
Du Proprio brand
Other identifiable intangible fixed assets
Deferred income tax liabilities
Deferred revenues
Total identifiable assets
Total consideration
Satisfied by:
Net cash outflow arising on acquisition:
Cash consideration
Less: cash and cash equivalents acquired
9. Derivative financial instruments
The Group enters into contracts for foreign exchange forwards in order to secure a protected AUS:GBP and USD:GBP exchange rate.
Foreign exchange forward contracts - carried at fair value through profit or loss
Balance at start of period
Loss/(gain) in movement in fair value
through profit or loss
Balance at end of period
Maturity analysis of foreign exchange forward contracts
10. Financial instruments
Capital risk management objectives are to ensure the Group's ability to continue as a going concern and to provide a return to shareholders.
The capital structure of the Group currently consists of cash and equity attributable to equity holders of the Group, comprising issued capital, reserves and retained earnings as disclosed in the statement of changes in equity. The Group's Audit Committee reviews the capital structure as part of its risk analysis. As part of this review, the Committee considers the cost of capital and the risks associated with each class of capital.
The Group is not subject to externally imposed capital requirements.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
· Cash and cash equivalents
· Trade and other receivables
· Trade and other payables
· Derivative financial instruments
The Group held the following financial assets at each reporting date:
Loans and receivables
Trade and other receivables:
The Group held the following financial liabilities at each reporting date:
Held at amortised cost:
Held at fair value through profit or loss:
Derivative financial instrument -
foreign exchange forward contracts
The derivative was designated as fair value through profit or loss on initial recognition.
The fair value of the financial instruments set out above is not materially different from the book value.
It is the policy of the Group to enter into USD and AUD forward foreign exchange contracts to manage currency risk in relation to the Group's funding requirements for its US and Australian subsidiaries. Due to the low complexity of the derivative contracts, hedge accounting has not been applied and is not considered necessary.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
During each of the reporting periods, there were no transfers between valuation levels.
Fair values
Forward contract - Level 2
The Group is exposed through its operations to the following financial risks:
· Liquidity risk
· Interest rate risk
· Credit risk
· Foreign currency risk
The Group's policies for financial risk management are outlined below
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its financial obligationsas they fall due. The Group manages liquidity risk by maintaining adequate cash reserves and by monitoring forecast and actual cash flows to ensure cash is available to meet financial liabilities as they fall due. Sufficient cash is retained in immediate access accounts whilst cash surplus to short term requirements is deposited in notice accounts and fixed term deposits. Liquidity risk is managed through regular senior review performance versus an integrated profit and loss, balance sheet and cash flow model. Sensitivities are applied to this model to ensure the Group has early warning of any manifestation of liquidity risk and communicate any such risk to investors in a timely and accurate manner.
The following is an analysis of the contractual undiscounted cash flows payable under financial liabilities. The table includes principal only cash flows in respect of trade and other payables.
Trade payables and accruals due within
three months
Interest rate sensitivity analysis
Interest rate risk is the risk that the value of the future cash flows of a financial instrument will fluctuate due to changes in market rates. At the period end date there was no material exposure to movement in interest rates as the Group has no borrowings or other financial assets or liabilities linked to interest rates.
In order to manage both liquidity requirements and credit risk, the Group has a committed facility with a third party finance house, whereby customer receivables in respect of customers who utilise the Company's "pay later" option are sold immediately to the finance house. The receivables are sold at a discount to face value on non-recourse terms, and the discount retained by the finance house represents its fee for administering the collection of receivables. There are thresholds built into the faciltity agreement which allow the fee/discount to be revised upwards or downwards on a prospective only basis (i.e. in relation to the sale of receivables arising in the future) if actual credit and funding cost experience differs significantly from the initial assumptions that were used to set the fee.
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. The Company's credit risk is primarily attributable to its trade receivables. As discussed under "Sale of Receivables" above, credit risk is managed in the UK via a non-recourse receivable sale arrangement and a similar arrangement applies in Australia. In the US, at present the Group manages "pay later" receivables itself and has an excellent history with no significant trade receivables written off as irrecoverable, by monitoring the aggregate amount and duration of exposure to any one customer depending upon their credit rating. The Company has an excellent history with no material trade receivables written off as irrecoverable.
The credit risk on liquid funds is minimised because the counterparties are UK banks with high credit-ratings assigned by international credit-rating agencies.
Foreign currency risk management
A significant part of the Group's transactions are carried out in pound sterling (GBP). Exposures to currency exchange rates arise from the Group's trading activity carries out by its overseas operations, which is primarily denominated in Australian dollars (AUD), US dollars (USD) and Canadian dollars (CAN) for the period ended 31 October 2018. The Group holds AUD and USD denominated loans with its Australian and US subsidiaries which are the result of funding planned, early stage losses and marketing expenses.
To mitigate the Group's exposure to foreign currency risk, planned non-GBP funding requirements in relation to its US and AUS subsidiaries are monitored and forward foreign exchange contracts are entered into in relation to those planned funding cashflows, in line with the Group's risk management policies.
The Group does not enter into forward exchange rate contracts to mitigate the exposure to foreign currency translation risk on the Group's AUD and USD loans. The loans carry a commercial rate of interest and are therefore not designated at fair value. Additionally, the Group does not hedge translation risk in relation to the financial statements of its overseas subsidiaries.
Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed in the table below. The sensitivity of the profit and equity in regards to the Group's financial assets and liabilities and the AUD/GBP and USD/GBP exchange rate is also disclosed.
This assumes a nil% change of the AUD/GBP rate, a +/- 7% change of the USD/GBP and a +/- 3% change of the CAN/GBP rate for the period ended 31 October 2018. These percentages have been determined based on the average market volatility in exchange rates in the previous 6 months.
AUD $000
CAN $000
+/- 0% (£000)
+/- 11% (£000)
If GBP had strengthened against the USD by 7% then the net loss for the period would have reduced by £1,371,282.
If GBP had weakened against the USD by 7% then the net loss for the period would have increased by £1,577,712.
If GBP had strengthened against the CAND by 3% then the net loss for the period would have reduced by £1,287.
If GBP had weakened against the CAND by 3% then the net loss for the period would have increased by £1,367.
Exposures to foreign exchange rates may vary during the period depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group's exposure to currency risk.
11. Adjusted EBITDA
12. Revenue recognition - transition to IFRS 15
Table 1 - impact of transition to IFRS 15 on retained earnings at 1 May 2017
Retained earnings as previously stated (post share based payment reserve adjustments)
Increase in contract liabilities relating to estate agency services
Increase in contract liabilities relating to conveyancing services
Increase in prepaid expenses relating to estate agency services
Increase in accrued expenses relating to conveyancing services
Other effects of the implementation of IFRS 15
Retained earnings as restated
Table 2 - condensed statement of profit or loss and other comprehensive income for the six months ended 31 October 2017
IFRS 15 adjustments by geographical segment
Under previous accounting policies
Items that may subsequently be reclassified to profit and loss
Total comprehensive profit/(loss)
IFRS 15 adjustments by contract type
Table 3 - condensed statement of profit or loss and other comprehensive income for the year ended 30 April 2018
Table 4 - condensed statement of financial position as at 31 October 2017
Table 5 - condensed statement of financial position as at 30 April 2018
Six months ended 30 April 2018
Tax rceivable
Table 6 - impact of the adoption of IFRS 15 on the Group's reported earnings per share for the 6 months ended 31 October 2017 and for the 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)
Weighted average shares (000)
Table 7 - impact of adoption of IFRS 15 on brokerage and lettings revenue
Year ended 30 Arpil 2018
Other revenue as previously reported
13. Related party transactions
The directors have taken the exemption from disclosing transactions with the following Group companies on the grounds that they are all wholly owned subsidiaries. Related party transactions occur as a result of funding provided to the wholy owned subsidiaries for the purposes of marketing and support from the UK.
Balances with subsidiary undertakings
Trade receivables
Purplebricks Australia PTY Limited
Purplebricks Inc.
BFL Property Management Limited
Du Proprio/ComFree
Trade paybles
[1] Adjusted EBITDA is defined by the Group as profit/loss before net finance costs, tax, depreciation, amortisation and a charge for share-based payments.
[2] Net cash of £103.1 million as at 31 October 2018 is before the payment of £11.1 million to acquire a 12.9% stake in Homeday.de, which is expected to complete shortly.
[3] For a full explanaton of the impact of IFRS 15 and a reconciliation between the new and old accounting standards see note 2.3
[4] Adjusted for defered payment charge and insourcing of property management for lettings
[5] The content of the Purplebricks website should not be considered to form a part of or be incorporated into this announcement.
[6] Estimated savings based on industry commission of 1.5%.
[7] Does not include Homeday.de. US transactions are those within our current footprint of nine DMAs.
[8] At constant currency, except average income per instruction, which is quoted at actual rates.
IR FFISSDFASEIE

redpajama_set_name: RedPajamaCommonCrawl