Purplebricks Group plc

Okay. Good morning, everyone, and welcome to the Purplebricks Interim Results.

My name is Vic Darvey, and I’m the CEO. I’d like to start today by giving some context around the numbers and then I’m going to hand over to James who will walk us through the financial review.

Now don’t think it will be lost on anyone, but it's an incredibly difficult market at the moment with political and economic uncertainty dominating the landscape, none more so than today. But despite the challenging market conditions, I'm pleased to say that we've seen resilient trading in the first half with our diverse revenue streams and strong RP growth resulting in positive revenue growth for the group.

We've also saved our customers over £150 million in commission. Turning our focus to the UK, we've maintained our 4% market share of listings.

But more importantly, we've increased our share of the number of houses we've sold to 5.3% of the total market, as the investments we've made in our people and our technology start to pay off. Our Canadian business has modestly outperformed expectations with especially strong growth in English Canada.

We end the first half having now stabilized the business and significant the losses incurred last year have now been reversed with the Group enjoying profitable trading in the first half of the year. We've also maintained a strong cash position of over £41 million.

The exit of our U.S. and Australian markets is going well and the associated costs are well within the guided range of the full year.

Looking forward, we're also making good progress on our strategy with our brands continuing to gain traction in both markets and a transformation program that would deliver a number of new strategic initiatives designed to accelerate the growth of our business. I'll talk about those later.

In the meantime, I'm now going to hand over to James who will take us through the financial review.

Thank you, Vic, and good morning, everyone. When we announced our year-end results in July, it signaled a reset in a number of areas; capital allocation and financial discipline, geographical focus and investment in technology.

These three aspects of the alignment are themes which underpin our financial performance over the last six months. Overlying this internal focus has been a very challenging macroeconomic backdrop, especially in the UK.

So moving on to the UK business, as Vic mentioned, the market has been soft. Our instructions are down 15% over the same period last year, although our market share of new listings has been maintained at 4%.

This highlights the reductions in new listings coming to market over the period. We also measure market share later in the process.

The increase in our share of property sold in the market, which has increased to 5.3%, up 280 basis points year-over-year is a more important data point from our perspective. This is further proof of the fact that we over-index on actually selling property, aligning ourselves with our customers’ objectives.

Our customers mandate is to sell their property, not to list their property. Our revenue is down 2.7%, which we believe is a strong performance against the market backdrop and is a result of our ability to consistently increase our average revenue per instruction, a term we call RP, which varies by 19% year-on-year.

The proportion of revenue attached to ancillary items increased by 100 basis points to 45%. These are the two KPIs we consistently report upon to demonstrate the quality and resilience of our revenue.

Our lettings business was slightly down year-on-year. However, when you adjust for the recent tenant fee regulation, there is underlying year-on-year growth of around 10%.

We guided to dialing down our absolute marketing expenditure year-on-year along with a reduction in the overall percentage spend on pure TV media, and this is being achieved. We have reassured that the market share was maintained despite this discipline being applied throughout the half, and during the half actual expenditure on CV slots was reduced by over 30%.

We were delighted to generate 5.5 million of adjusted EBITDA during the period in such a tough market. The EBITDA is also after we actively chose to invest in our people and technology.

This is against a backdrop in our sector where there is minimal investment taking place due to revenue and liquidity challenges. I’ll discuss our investments and operating leverage in more detail shortly.

Since we now have a proven profitable UK business even in a very tough market, I’m keen to continue to highlight wider KPIs on a consistent basis. I shared this chart in the summer showing how instructions won and RP progressed.

I’ve continued this chart for the last six months. You can see the softness in listings, but you can also see the continued upward trajectory in average revenue per instruction.

Remember the December slump each share represents the Christmas low which is soon forgotten as the new year kicks in. As Vic will discuss shortly, we’re keen to commence market testing – sorry, we're back to commence market testing for a new pricing proposition.

I’m excited to see the results of this on RP progression over the short to medium term. We also continue to improve attachment rates and ancillary products.

Notable upside opportunities continue to exist in conveyancing and mortgages to name just two areas. Operating leverage.

UK operating costs increased by 2.2 million or 18.3% during the period. There have been a number of one-off costs in the half as we upgraded in many areas along with deep investment in technology.

These legs of investments are fundamental aspects of our high strategy, which Vic will be running for you shortly. If we just were to strip out one-off costs, our adjusted admin costs represented 23.1% of revenue compared to 19.2% last year.

Without stripping out these one-offs, adjusted admin costs as a proportion of revenue was 25.9% this year. We monitor this KPI closely, although we will continue to invest if the return on investment is expected to be meaningful.

Marketing investment, including portal costs, reduced by 9% year-on-year. If we exclude portal costs, CPI was flat within H1 compared to last year although the all important measure of total marketing as a percentage of sales was down 180 basis points.

We spent 13.3 million on marketing including portal costs in H2 last year. We will not be spending at these levels in H2 this year.

Our brand health is strong and we'll be seeing some exciting developments over the coming months as a result of our collaboration with Team GB up to and including the Olympic Games. Moving on to Canada.

Canada enjoyed a solid six month period with particularly pleasing growth from the rebranded business outside of Quebec. As a reminder, we completed our purchase of our Canadian operations on the 6th of July 2018.

We've added in pro forma numbers as if ownership happened from the 1st of May 2018 to enable a meaningful like-for-like comparison. The Canadian business and its associated performance is made up of two broad themes; stable mid-to-high teens profitability and established market share within Quebec and high revenue growth outside of Quebec as the Purplebricks branded business gains traction with very encouraging signs following the enhanced marketing campaign.

The market for new listings in Quebec was broadly flat year-on-year whereas in Ontario and Western Canada, the market was down approximately 2%. The Canadian market is similar to the U.S.

market and as much as they’re often buy-side and sell-side agents covering each property. Outside of Quebec, the buy-side opportunity is becoming an increasingly important driver of revenue.

This aspect alone has shown 40% year-on-year growth in volume with over 70% growth in revenue. We see a large proportion of future revenue growth coming from the English-speaking regions of Canada.

Overall, RP within Canadian business increased 27% year-on-year. This increase has two elements.

Firstly, the increase in the proportion of higher fee buy-side mandates along with better attachment rates of ancillary products for sell-side mandates. As the shape of the Canadian business changes with buy-side revenue becoming a more important aspect of the whole, going forward I expect that we will be disclosing two separate RP measures as opposed to the current blended measure; one for buy side and one for sell side.

We’ll be clear on any changes made to KPIs to ensure transparency and comparability. Total Canadian revenue grew by an encouraging 16.4% year-on-year.

There was a slight FX tailwind on constant currency, this growth was 13%. The overall Canadian business was broadly breakeven with 0.1 million of adjusted EBITDA.

Marketing investment increased by over 60% outside of Quebec, which is the sole reason for the lower bottom line result this year as we invest in brand health. This approach is clearly working.

The volume of leads has risen 45%. It’s early days, although we are seeing very encouraging signs.

Australia and U.S. closure.

I guided to closure costs of between 10 million and 14 million in the summer. We're now able to narrow this range to between 10.5 million and 13 million.

There’s an expected further cash outflow of up to £3 million before these regions will be fully closed. The process will be completed by the end of our financial year.

Revenue for continuing operations was up 12.5% or more relevant 1.9% on a pro forma basis. The key group measure I would like to draw your attention to is the wholesale change to the financial characteristics of the group versus the same period last year.

In H1 last year, the group incurred an adjusted EBITDA loss of £21 million. This year, the same measure is a profit of 4.3 million.

We ended the half with net cash of £41.6 million. This slide shows our investments made during the period.

You can see the 5.5 million of adjusted UK EBITDA along with the small EBITDA profit in Canada, along with the increasing investment in marketing in regions of English Canada. As of the end of October, we have spent £9.3 million in closing the U.S.

and Aus. We also invested £2.7 million in the U.S.

prior to the closure decision. Within other outflows at 10.2 million, working capital includes U.S.

and Aus creditors from the start of the period plus the timing of UK marketing spend. Other outflows within this category include the capitalization of tech investment and factoring costs for deferred payment product.

£5 million was invested in Homeday, our German investment. We have no further contractual commitments to invest into Homeday, although we’re pleased to say the business is performing well.

Before I pass over to Vic, I want to reiterate that we have made some big decisions during this calendar year. This is the first reporting period when our continuing operation is starting to take shape and the positive £25 million swing in adjusted EBITDA is the result of this.

I'm sure I'm not alone in saying the macroeconomic stability would be welcome. Once achieved, we believe the pent-up demand across the UK will be released.

In the meantime, we have been firming up our foundations and investing in many areas so we can embrace the predicted increased volume when certainty and clarity returns. I’m now delighted to pass over to Vic.

Thank you, James. So I'd now like to talk about our delivery against the second phase of our strategy.

We continue to believe that there's a significant opportunity for further innovation in the market, and Purplebricks remain uniquely positioned to drive leverage through leadership and scale. We anticipate that we’ll see stabilization in recovery in the market over the next few years and this may well be accelerated with events happening today.

As consumer expectations continue to evolve fueled by 5G, technology will transform the property landscape reflecting the emerging trends we're seeing in other categories. But the business needs to evolve.

And as we start the second phase of growth, I think we’d all recognize that we have to do things differently. As a result, we've now kicked off a transformation program that would deliver a number of new strategic initiatives designed to get closer to our customers and ensure that our motivations are clearly aligned with selling and not just listing houses.

These not only look at optimizing our customer experience, especially on mobile, but evolving our pricing, transforming our customer processes and improving performance in the field. I'd now like to talk about these initiatives in more detail.

The first pillar of our strategy looks at how we evolve our pricing. When I became CEO six months ago, I would always get asked the question, does the upfront fixed fee model work in a declining market?

Well, the truth is the single-minded proposition of an upfront fixed fee has got us to where we are today and has created a business model that's resulted in Purplebricks becoming the largest and best performing estate agent in the UK. However, we also recognize that to extend our market leadership, we’ll need to evolve our pricing.

So we've now completed an in-depth pricing study having deployed four different pricing methods into the market. As a result, we plan to start a series of infill tests in the new year that would look at different pricing strategies with some reducing the level of upfront fee and splitting the payment between publication and completion.

It will also be an opportunity to understand how we evolve our agent remuneration, so not only pay our local property experts more but to achieve our goal of selling more houses. Reducing the level of the upfront fee will widen the market opportunity significantly and all the data that we have points to us being able to extend our audience with more sophisticated pricing.

To be clear, I can say with some degree of confidence that I don’t think we’ll ever move to a commission-based no sale, no fee. The fixed fee element of our pricing remains a critical part of our success attracting an audience of motivated sellers and contributing to a sell-through rate of 77% versus an industry average of less than 50%.

The second pillar of our strategy looks at the investments we're making in products and technology. And it would be good to start by reminding ourselves of what we said we'd focus on last time.

Over the next three years, we promised a step change in our customer experience by delivering rapid innovation of the customer journey, increasing LP productivity through automation and efficiency and starting to build the foundations of the estate agent of the future. Well, over the last six months, we’ve been working closely with all of our customer groups to understand how we improve our customer experience, focusing on the moments that matter in our customers’ lives.

And despite the difficult market conditions, we continue to invest in technology and in building out our engineering capability. We’ve restructured our teams to accelerate our ability to deliver with dedicated squads focused on improving the customer experience and early results have been promising.

Within an ever-increasing adoption of mobile and nearly 40% of our customers using our app, we've also increased our resources in mobile to deliver a more personalized experience for our customers. The app now has a 4.5 star approval rating based on over 20,000 reviews in the App Store and we continue to work hard to improve our overall customer experience.

As evidence of that, I’m pleased to announce that we recently teamed up with Amazon so that Purplebricks customers can now interact with Alexa to answer a range of questions about the sale of their home. Through our app and now with a simple voice command to Alexa, customers can receive real-time updates on their house sale in seconds.

Our local property experts is still there every step of the way with this new technology helping to reduce admin and giving our agents more time to support customers in other ways. And they'll be much more innovation coming out of the team in the next few months.

The third pillar of our strategy looks at how we get close to the customer and the investments we're making in the field to improve effectiveness and efficiencies. On the ground, the face-to-face experience will continue to be a huge part of the process but we need to invest in technology to help LPs in the field.

In July, we promised to give a day back a week to LPs by the end of 2020, and we’ve begun to do that with new product initiatives that look at the automation of a number of key processes. We’ve also started to build a category-leading sales toolkit with real-time market data that will significantly improve the conversation in the living room and introduce a powerful point of differentiation for our agents.

In addition to this, we continue to make investments in training and ongoing performance management with a sharp focus on ensuring we recruit and retain the best talent in the industry. As such, we're in the process of delivering a step change to our learning and development capabilities to ensure that we focus not only on recruiting the best agents in the category, but that they have access to development opportunities throughout their journey of Purplebricks.

We’re also looking at the structure of the field and how that might need to evolve to meet our future needs. We have a very clear objective to not only recruit the best talent in the industry, but to ensure that we’re using our business model advantages to pay them more than any high street counterpart in every instance.

This will inevitably mean using our data better and also ensuring that everyone has access to the same opportunities in the field. The fourth pillar of our strategy looks at the investments we're making to transform our customer processes.

Over the last six months, we've made significant investments in both our people and our technology to improve the level of service we provide to our customers and re-orientate the business to selling more houses. We've introduced the world-class manager training program as well as a contact center school helping increase productivity by around 25%.

We have invested in further technology to ensure our customers have a choice of channel to communicate with us, including the deployment of a new omni-channel customer engagement platform. But by far our biggest investment has been in enhancing our resources in proactive sales support with Purplebricks now contacting every buyer and seller at a number of different stages throughout the transaction process and this has already reduced the time from SSTC to completion by seven days.

As I mentioned earlier, this has also helped us increase the number of houses we sell year-on-year with our market share of houses sold increasing to 5.3% of the total market. The improvements we've seen in the first six months of the year have been validated with a world-class net promoter score of 80, and we continue to be the most positively reviewed estate agent in the category.

We've also recently been awarded the Gold Trusted Service Award by our review provider, Feefo, which is a great endorsement of our improving service levels. Moving on to Canada, our performance in the first half was very promising and outperformed expectations in a difficult market.

We maintained a strong market share in Quebec, and as James mentioned a moment ago, we've seen strong growth in the rest of Canada as a result of increased marketing. In English Canada, the Purplebricks brand continues to cement a place of prominence in the market with prompted brand awareness now at 56%.

Our brokerage volumes are significantly ahead of last year with improvements in conversion and the successful recruitment of talented buy-side agents being the key drivers. We continue to work hard to improve the services we offer to our customers in the Canadian market and we remain optimistic about that opportunity.

So in summary, I'm very pleased with the progress we've made in the first six months of this year. Despite a difficult market, we not only achieved revenue growth and an EBITDA profit, we also increased the number of houses we sold over the period to increase our market share.

Having introduced the greater financial discipline promise at our last results presentation, we end the first half having now stabilized the business and we can now focus on the successful implementation of the second phase of our strategy. Current economic and political uncertainty in the UK means conditions remain challenging with volumes continuing to trend downwards.

However, the strength of our balance sheet enables us to continue to invest in our brands, our technology and our people at a time where many of our competitors have had to make different choices. Our renewed focus on operational excellence and improvements in our technology-led proposition, along with the four key pillars of our house strategy will enable us to reaccelerate growth.

And I'd like to finish today by reiterating our confidence in meeting our medium-term objective of achieving a 10% share of the market in the next three to five years. We're now going to throw it open to questions.

Thank you.

Hi. This is Natasha Brilliant from Citi.

And my first question is just on the four different pricing structures that you talked about testing. Can you just give us a bit more color on what those structures were, how are they sort of differentiated?

And then secondly, what gives you the confidence that changing the pricing structure can give you a wide audience or wider customer base? What is it about the change that will sort of attract them?

And then finally just coming back to your point on the market share and 10%, is that just to confirm listings or sales? And has some of the recent testing on pricing you've done given you more confidence that you might achieve that quicker?

Looking – trying to answer a number of questions, the first one was how do we extend our audience and the second one was can we improve conversion in the living room. And I think today we don't want to disclose any sensitive information or anything that we might believe to be competitive.

But I think from our perspective, what one thing we would say today is we absolutely – we don't believe we're ever going to move to no sale, no fee. We don't believe that’s a successful model.

We don't believe its additive to our business model either. But I think from our perspective, we believe there is significant headroom in our pricing.

So if you look at our average house price and if you look at the average commission in the marketplace, we still offer our customers thousands of pounds worth of savings. So, first and foremost, we believe there's headroom in our pricing and we can maintain our pricing advantage.

But I think the one thing I’d say and the one thing that we've been doing over the last six months is when customers shortlist us or they consider us and don't instruct us, we've been out a significant percentage of those customers to understand why. And one of those is just confidence in the marketplace, specifically in London in the Southeast where houses aren't moving at the moment.

And one of the key indicates to that is the upfront fixed fee and actually whether we believe that we can extend our audience by reducing that upfront fee. So I think there are a number of different pricing tests we're going to put into market.

I think the first thing I'd say is as a digital business, we will always use data and customers would dictate whether we've got the pricing right or not. So there will be small tests in a number of different regions.

And when we see successes, we will start to amplify those successes. So that's the first thing.

The second thing is just understanding how we can structure our agent remuneration. So we've spent a lot of focus in the last six months re-orientating the business to selling houses that we've made a lot of investments in things like post-sales support in our contact center, introducing new training and that is working, right?

So we've seen a significant increase over the period in the number of houses we're selling. We now sell 5.3% of all houses in the market.

Historically, we've had a reputation for not selling houses. Personally, I don’t get that.

I’m new to the business, but all the data I see indicates that we sell houses better than any estate agent in the UK if I look at the 20ci data, if I look at our own data, the fixed fee model works for us. So for us, it's about evolution and understanding if we reduce the upfront barrier, whether we believe we can extend the audience.

And on market share, I think that’s a good question. We're asking ourselves the same question.

Now I think if you look at how we've changed the focus of the organization over the last few months and the investments we've made, for us it's about the number of houses we sell, not about the number of houses we list. So the number of instructions is actually going to become less important over time.

And I think I've still – I've met a lot of customers in my first 11 months but I've never met one customer that chooses to list their house and not sell it. So we have to be more aligned to the motivations of our customers.

That's a big change over the last six months with new leadership onboard, and it's nice to see the results starting to come through. Thank you.

This is Gavin Jago from Peel Hunt. A few areas if we could, please.

First one just on the UK and I think that pathway to growing the RP, obviously you think the significant headroom in the pricing. Do you think that the growth you think you can get is going to be kind of a one step improvement in the price and then grow the ancillary after?

Do you want to think about that pathway over the next three to five years? Second one was kind of around I guess the technicality of during the pricing test.

If you're going to Mrs. Megan's in certain postcard and saying, can we test you?

We’re going to charge you an extra X, how is that going to sit with them if they're looking on the Web site and everyone else is little less [ph]? And the third one is just really your views on how you're going to grow Canada in the English area from here, just a few views on what you've learned from the U.S., both the good and the bad to think you can deliver the growth in Canada successfully?

Okay. So if you don’t mind, James, I’ll take the first two questions and then you can talk about Canada.

So I think on RP if you just kind of look at the three leading indicators of our business in the next phase of growth in the next three to five years and if you look at the house strategy in the four key initiatives, they’re designed to do a number of things. So the first one is to clearly grow market share and extend our audience.

So if you look at some of our pricing and improving performance in the field, you look at those initiatives. That looks to grow our market share.

So that's a key lever for growth in the first instance. The second one is RP and RP is anything from pricing headroom to better attachment rates of mortgages and conveyancing to down the line actually further products.

One of why we believe we’re so uniquely positioned today is that we have significant engagement on our app. As I mentioned earlier, 40% of customers are using our app today and that gives us permission to start introducing relevant products at the right time for customers.

And as we help them on their journey to moving home and using data such as the moving day to understand other relevant products that will help us on our mission of saving customers more money. So I think it's about market share growth, it's about RP growth.

From our deep dive over the last few months we recognize that there's still significant headroom in our pricing. And you may have noticed in the last few weeks, we increased our pricing by £100 pounds, so we will see that coming through in the second half.

And then the third KPI for us is around leverage and that's not something we're looking at the moment. The theme of today is we continue to invest in our business at a time where our competitors are making very different decisions.

And we think that's the right thing to do. We have the strength on our balance sheet to be able to do that.

But I think for us if you look at the house strategy, you look at the four key initiatives, they're looking to do a number of things. One is growing market share.

The second is increased basket size and we're very pleased with what's happening there. And clearly our diverse revenue and basket size has balanced out the declining market conditions we've seen in the first six months.

And the third one is leverage. We believe there to be significant leverage, but that's not actually something that we're looking to use at the moment.

So we're not using that lever. The second question on testing the market, clearly from our perspective there are a number of things that we need to do from a regional testing perspective, whether that’s regional TV advertising, whether that's using individual customers’ GoIP, so we can recognize how they're accessing the site and actually understand some of the regional differences.

We can actually start to serve customers different pages, different pricing. A lot of it will happen in the living room as well.

So in certain instances, we’ll be going in with one pricing structure. In others, we’ll be looking at two pricing structures.

But ultimately, like any digital business, we’ll be using the data to inform our decision-making. I think historically we were just gone out to market and launched new pricing.

We did promise full year results that we were going to use data better and it was going to inform our decision-making. So I think from our perspective, it’s very much about understanding where we see the success of each market and then amplifying those successes as quickly as possible.

So multivariate testing split data, AB testing, so that will be across all of our touch points including the living room, which is why it's taking some time to get those out into market. But as I said, as we get into the new year, we plan to get those tested markets soon as possible.

And just a couple of points on RP before I answer the Canadian question. I mentioned mortgages and conveyancing in particular because there have been two areas we've talked about many times before.

And take mortgages. Mortgages is up about 60% year-on-year from a very small base to be fair, but as we really are seeing growth in the area and there's quite a way to go.

And on conveyancing, we often say there's four buckets of conveyancing; there’s sort of our customers selling and buying and there’s people buying our properties are also buying and selling. And at the moment we only tick two of those boxes.

We get zero revenue in two of the other boxes. And in one of those four boxes, we’re at a very low percentage attachment rate.

So we believe there is a big opportunity still in conveyancing even though it's already quite a big chunk of revenue. And also we increased our prices by £100 on the 24th of October.

So this half had very little impact the price rise had, but then obviously in H2 we’ll get the full benefit of that in the external pricing test that would have no impact on volume. And as of now, we've not seen any impact on volume because of that extra £100 price noise.

So RP, very confident that even if we were to not grow the market share of RP is something we really can rely on. Going onto Canada, obviously, I've been here for a while now, so I've learned a lot from the U.S.

journey. And the one key thing that we've learned is financial discipline and really doing things at a much more disciplined pace.

For example, we are not in all regions in Canada. We're very focused.

Most of our marketing spend is on the connotations within Ontario. We're not going to try and cover every postcard in Canada.

That would be an absolutely crazy idea. And to give you an idea, we increased revenue – we increased marketing spend in English Canada by £1 million in the whole half versus the prior year.

And it’s an element of coincidence, but we saved £1 million on the UK marketing. So it's just an element of our discipline that we are only sort of opening the marketing tax when we see the results coming through as opposed to opening them and then seeing if it works, so discipline – we're not going to do a let's go to every part of Canada and flow £5 million in each region for six months.

That's not the way we are going to do it.

Sam Cullen from Berenberg. I’ve got a few, if I may.

Just first a couple of almost kind of factual ones. What were your LPE numbers in the UK for the first half of the year?

And then where do we expect marketing spend to be for H2? And then I guess almost following on from the questions earlier, if you think about the potential pricing change as you may see next year, how should we think about the cash impact of that, if you're getting a smaller upfront fee and then whatever 75% of your revenues deferred for six months until the transaction closes?

And what does that mean for LPEs take home and retention rates for LPEs? That’s all.

So marketing spend in H2, as I said, we spent 13.3 last year. We're going to be spending less than that this year.

And I don’t want to be more specific because obviously who knows what's going to happen over the next 24 or 40 hours, but the market could be very buoyant come 1st of February, could be very slow. We've got our foundations ready.

So if things are positive, we will open the taps marginally. But at the same time if they're not, we most definitely won't.

So it will be less than that number, but by how much we don’t know. We will keep options open on that.

In terms of cash impact, as Vic said, we're trying a few methods. But as an example if we were to do say a third upfront and two-thirds on completion and offer that to everybody without any other offer, there will be a small working capital impact but that will be a fraction of the level of the cash we've got.

So we will not be cash constrained in any method we're considering at the moment. But clearly working capital will be different if we did that sort of proposition, because we do get paid within 24 hours regardless of whether somebody takes deferred payments at the moment.

And with regards to LPEs, the whole concept is for them to pay them more but also to weight it more towards completion. And so they’re kind of our theories that we're testing.

And I think –

[Indiscernible]

Not necessarily. It depends.

There’s various ways you can do it. But we’ve got probably a dozen different payment methods we're exploring, but we're conscious.

We're not going to start our LPEs for six months, like [indiscernible]. And you mentioned LPEs, our LPEs are broadly consistent.

There's not been much up or down to be fair.

Hi. It’s Patricia Paré from UBS.

On the price increase that you've done in the UK in October, I guess why the timing given that the market is challenging that you're going to test new pricing methods from January onwards? My second question is on the advertising budgets.

You mentioned TV spend has reduced by 30%. I'm just wondering has some of that spend been allocated to other mediums and what does your mix look like currently?

And the third one is on LPEs. Again, what has been the initial reaction to the new pricing models and new remuneration models for them?

Okay. So let me just take the first one.

I think the timing of the pricing I think we feel we have such significant headroom in the marketplace. Actually all the data pointed to the fact that we believe we can increase our pricing by £100 pounds and it would have no impact on conversion.

So we’d see – one of the success factors for us is that we see no erosion of conversion. That’s proved to be the case.

And clearly that’s based on our average house price and an average commission in the marketplace. So we’re still saving our customers thousands of pounds in every instance.

So I think from our perspective, we felt that there was significant headroom to increase our pricing. And as we choose to make investments in the business, the timing was right for us to do that.

And just to reiterate the fact that it's proven to be the case that we've seen no erosion of conversion, but we've increased our pricing by £100. So I think the timing felt right from our perspective.

And I think as far as the – if I can just take the third question and then you can talk about advertising, James. The LPEs reaction has been very positive.

So just to be clear on the pricing study, a huge part of that was going out to LPEs as well to try and understand what's happening in the living room, to try and understand what we need to be doing to increase efficiencies but also to improve conversion. And I was with a number of our territory owners this week talking about pricing and everyone's looking forward to that, because they believe sometimes in certain instances when a customer isn’t confident about the market or potentially that they're going to sell their home, it does become a barrier because it is a commitment.

So I think for us, there is a very fine balance between reducing the upfront barrier and extending our audience and ensuring that we continue to see very strong sell-through rates. And I think that's really important, right?

We sell 77% of the houses we list against an industry average of less than 50%. And we don't really want to see that changing.

So for us, it's very important that we have a number of different pricing opportunities in the marketplace so that we can understand – we meet all of our success criteria because one of them will be that we don't want to see a reduction in our sell-through rate. That's very important to us.

We attract an audience of motivated sellers. It's why we strongly support the fixed fee model.

And we don't see that changing.

On the media spend, so in other areas, there was a module increase in digital. We're getting better at digital, more focused and more sophisticated.

Portal costs are in that number. And as we all know portal costs don't go down each year.

So they’ve gone up marginally during the half. So overall, we – there wasn’t much reallocation or shifting.

It was more a matter of general reduction, which as I mentioned gives us reassurance that we – if we turn off marketing, it doesn't go back and something. But having said that, that's not our strategy going forward.

Our strategy is to invest in marketing when we need to see at the right time. But yes, during the half it wasn't as if we shifted it all to something else.

It was a slight tweak here or there, but nothing major.

I think I’d add to that. We have some amazing content, right?

So we lead a business and in the heart of that business is helping customers save money. So that's the first thing I’d say.

So we've got a lot to talk about. And we're one of the main sponsors of Team GB.

We're just about to move into an Olympic year, so if you think about the content that will be coming, we can't disclose anything today, but we're really excited about 2020, what's going to happen in the run-up to the Olympics or the engagement that we're going to see as far as consumer interaction is concerned. And we firmly believe that we will be getting onto the front foot in 2020.

And who knows what's going to happen in the next 24 hours. That might add some stimulus to the marketplace, but we can directly influence the outcome here.

it’s within our gift.

How much of that goes to the Asians, and how much are they making now per instruction?

With the extra 100, we basically made our gross margin neutral. So they basically got with 37%, 38% to 40% of it.

So they get that – every instruction they win, they get an extra circa £40.

Okay. I’ll just close out by saying thank you for your time today, very much appreciate it.

If you haven’t voted, please go. Polling stations are open until 10 PM this evening I believe.

Okay. Thanks, guys.

I appreciate it. Thank you very much.