There has been a damning assessment of Purplebricks in the Telegraph, with a recommendation to sell shares.
Yesterday EYE reported that Purplebricks’s share prices went up, with purchasers including CEO Michael Bruce and chairman Paul Pindar. A glowing report on Purplebricks’ prospects was written by its own broker.
The Telegraph article raises doubts as to whether Purplebricks will ever make a profit and warns that in the face of competition from other online agents, it will have to spend heavily to fight for growth.
John Ficenec, who writes the Questor column, was commenting on Tuesday’s interim results – the first that Purplebricks has issued to the City.
Ficenec said: “Questor would avoid the shares as they look highly over-priced, even after falling 18% since coming to the market.”
He went on: “Purplebricks is reporting stellar revenue growth rates, but investors need to remember this is from a standing start.
“Revenue increased by 777% during the six months to the end of October, compared with the same stage a year earlier.
“The second half has started well, with a 275% year on year rise in revenue. Instructions in January are on target to hit 2,000 for the month.
“This kind of growth isn’t cheap. Once advertising and marketing costs are taken into account, the loss before tax widened to £6.4m in the first half, up from £2.5m a year earlier.
“The company still has enough cash to keep going, with £22.8m raised from the markets in December adding to the £9.7m it had in the bank at the end of October.
“The issue here is whether Purplebricks will ever make a profit and why it has come to the stock market at such an early stage.”
Ficenec went on: “The company faces fierce competition from rivals such as eMoov, Housesimple and easyProperty, and will have to spend heavily to fight for growth.”
His piece concluded: “Questor would avoid the shares because the company should have achieved a solid track record of sales and profits before listing.
“There is way too much risk, no profits and that exposes shareholders to painful losses.
“The house broker Zeus Capital forecasts pre-tax profits of more than £8m by April 2017 but this looks overly optimistic. Sell.”
Zeus Capital was the adviser that handled Purplebricks’ launch on the AIM stock market just before Christmas.
Yesterday, shares in Purplebricks ended slightly up at 84.5p.
Comments (15)
You’ve gotta love the thought that they have 160-odd (not)LP(not)Es; all the callcentre (sorry… head office…) staff and according to review site (don’t)TP thousands of adoring fans – and yet they can only muster ONE dribbly ‘Dislike’ for all the comments that relate the glaring truth…
It was about 3 years ago and several times since (only last week being the latest) I have commented about housing stocks falling and suggesting plan ahead and tighten your belts. With the NAEA, RICS and lenders confirming stocks falling year on year (down 50% in last ten years) it makes me wonder where all these people think they are going to get business from and importantly how they manipulate stats to make it look all rosey and they are doing well. Portals are the worst for claiming record visits when actual sales are getting less and less.
It is a simple fact: Short and dwindling supply does not provide growth.
So should you be in the property market in any shape of form, plan, plan, plan for there is no sign of it getting better anytime soon. Blindly putting ones head in the sand is how many a business or investor goes bankrupt.
“The issue here is whether Purplebricks will ever make a profit and why it has come to the stock market at such an early stage.”
H’mm considering all the rules and regulations it is a wonder it was ever allowed to get off the ground. I would think there must be some investors who feel they have been duped and now looking to see which “lawyer for you – no win no fee” they can find. Meanwhile the directors bank fat salaries.
Everything about PB marketing is misleading, their local rep lives 50 miles away from us, they are not making the saving they claim compared to our fee’s and using the 2011 Which report, as are Yopa. This is typical conduct that gave estate agents a bad name. Everything they do is manipulated to mislead.
Without RM they wouldn’t be in business?
Anyone else “shorted” PURP stock yet?
Surely a punt every self-respecting full service “local” estate agent is required to take.
“The Telegraph article raises doubts as to whether Purplebricks will ever make a profit and warns that in the face of competition from other online agents” – A telling comment. It seems that they are fighting for a share of the 2.5% on-line market share at a time that the on-liners appear to be moving towards the traditional model. ‘Local’ experts, no sale no fee etc.
Why, oh why is this not a surprise. These call centre agents have had a good run at it but can only make the package work if they are allowed to make a nice handsome loss! It seems a great idea to sell houses by any other route than estate agents but as Tesco’s, the banks, building societies and insurance companies have found out it is very easy to buy in but horribly difficult to make a profit.
A well reasoned and thoughtful article.
True PB are increasing market share, also true they are going to have to spend a small fortune managing the portfolio of clients and then another to keep growth on track.
I wonder how many properties they have to list/sell to break even ?
And fight off other on line agents and local proper agents
36 p per share by Easter I bet !
Part of their growth strategy is for existing LPEs to recruit more LPEs. Sounds like a classic pyramid scheme to me.
Please can I politely object to the perpetuation of the myth that they have local property experts? Some of their reps are good quality agents with sound histories in the industry, others are not and some do not appear to have either the qualification or experience to be a senior negotiator.
I have a genuinely serious concern over the claim they are local. Attempting to cover the equivalent of 20 towns a piece and vast swathes of the countryside. It is a claim the property mis-descriptions act would have come down on hard if anyone dared to suggest an 75 mile trip to the shop was ‘local’
It is simply abhorrent to me that Advertising standards consider ‘local’ as a subjective matter and will dismiss any attempt to challenge them, so when the industry itself gives credibility to this misleading, self-aggrandisement I object in the strongest possible terms.
Some are good agents, a few could be classed as experts if they stuck to a manageable geographic area but others are simply listing reps who judging from personal experience of the service would struggle to be considered for interview as a negotiator.
Yeah – wot he said!
Bitten off more than they can chew? Their strategy is to increase their LPE’s from 160 to 300 next year, with potentially 1000 ‘experts’ throughout the UK. Two week training course and incentives for each LPE to recruit others! Sounds more like TheUtilityWareHouse than a disruptive estate agency. Their ability to grow any significant volume will depend on recruitment and their need to service this business.
Just as PB has a manipulative sales strategy, their share price has also been artificially inflated. Still, they achieved their personal objectives.
“…Two week training course and incentives for each LPE to recruit others!”
So basically it’s ‘Juice Plus’ without the yummy, nutritious snacks!
;o)
To quote mr Russel Quirk. “Spot on”.
An informed piece until;
“Ficenec went on: “The company faces fierce competition from rivals such as eMoov, Housesimple and easyProperty,”
I guess he’s referring to shouty, aggressive fierce rather than meaningful, credible fierce
“This kind of growth isn’t cheap. Once advertising and marketing costs are taken into account, the loss before tax widened to £6.4m in the first half, up from £2.5m a year earlier.
“The company still has enough cash to keep going, with £22.8m raised from the markets in December adding to the £9.7m it had in the bank at the end of October.
“The issue here is whether Purplebricks will ever make a profit and why it has come to the stock market at such an early stage.”
Ficenec went on: “The company faces fierce competition from rivals such as eMoov, Housesimple and easyProperty, and will have to spend heavily to fight for growth.”
What a good job all these call-centre agents can pass on the savings of not having expensive high street premises…