The Purplebricks share price rocketed yesterday for the second day running.
As a result, the firm starts today’s trading with a valuation of some £360m – yet, as one financial website, the Investor’s Champion, pointed out yesterday, it has “yet to make a bean”.
Purplebricks had reported a ‘maiden’ profit of £300,000 but this was after costs and share awards were stripped out, and the Telegraph reported that it had actually posted losses of £2.8m.
Purplebricks shares started yesterday morning at 125p and ended at 145p, having leapt in two days from 105p after the results were unveiled.
The City has been clearly impressed by this week’s interim results for the six months to the end of October.
Yet Purplebricks has still not said how many homes it has sold in the UK.
One guesstimate, based on the value of properties it says it has sold, suggests an impressive 11,500 transactions.
However, Purplebricks itself has not come back to us after saying it would prefer to calculate the number of sales based on its boast that it is selling a home every 16 minutes.
Investor’s Champion yesterday commented on Purplebricks’ “amazing growth” but added that the “valuation still looks a bit crazy”.
It went on: “The so called ‘hybrid’ estate agent providing a new way to buy, sell or let property, delivered fabulous top line growth for the six months ended 31 October 2016, boosting the share price, which had fallen 38% from previous highs.
“However, before everyone gets too excited, it’s worth remembering this business is valued at approximately £360m and so far hasn’t made a bean! Our latest Blog ponders the valuation further.
“Management talks of a ‘seismic shift underway in the estate agency market’ and while we are all in favour of a wholesale change to this status quo and commend their offering, it’s a struggle to see how one business can be an outright winner where there are so few barriers to entry, which PURP’s current valuation surely implies, and a growing number of rivals – think easyproperty.com, emoov.co.uk, tepilo.com, urban.co.uk, housesimple.com, housenetwork.co.uk etc.
“Revenue in the 6 months was up 159% to £18.7m with the newer Australian business contributing £0.4m and first-half sales exceeding full-year 2016 sales of £18.6m.
“They recruited 124 Local Property Experts (‘LPEs’) in the period bringing the total to 329 at period end with the full-year target 360 LPEs. They also claimed that the UK business generated a maiden profit, but for profit read ‘adjusted EBITDA’ of £0.3m (H1 FY16: loss £6.0m). The operating cash outflow was £989k and a further £919k of capex was incurred.
“While first half instructions increased 108% that seems to be lagging the sales growth of 159%, although we are probably being picky as it’s hard to complain too much with growth of 100%+ and a sale every 16 minutes.
“The comment that the UK market backdrop is tough is slightly concerning but with £29.1m of cash and some willing shareholders, management is no doubt confident they can see off most of the competition.
“The proposed £10m investment in the Australian market will consume some of that cash as will the launch of new marketing initiatives from Boxing Day which has the objective of achieving a market leading position in the UK as early as possible.
“We agree it’s looking good but that valuation is still perplexing.
“The house broker is forecasting full year sales of £47.1m meaning there is £28.4m to do in the second half to end April 2017 in what is the peak property selling period. For the year ending April 2018 sales are forecast to rise significantly to £83.5m when a maiden adjusted pre-tax profit of £16.1m is also forecast, with resulting adjusted eps 6.p. At the current share price of 145p this puts the shares on a c24x multiple.
“This doesn’t sound too demanding but assumes a top line growing at a significant 77%, which is!
“This is also a business that’s surely going to demand meaningful marketing spend to attract what amounts to short term customers.
“We hope they succeed as it’s certainly a market that needs shaking up … but really struggle with that valuation.”
Comments (41)
EXTRACT FROM CHAT WITH PURPLEBRICKS AS A PROSPECTIVE VENDOR
Visitor] John my postcode is ********
[Visitor] Karen French is the expert How many properties does she have on the market in her patch?
[Leanna] Unfortunately I do not have that information im afraid. The best thing to do would be to contact Karen herself. Do you have her details?
[Visitor] I cant believe that at Head Office you dont know hw many properties she is covering
[Visitor] Ok How many has she sold
[Visitor] How local is she to my postcode?
[Leanna] I shall check that for you, please bear with me.
[Visitor] Thanks
[Visitor] Just the sort of basic questions anyone instructing would want answering especaily asyou are paying up front
[Leanna] I understand, I am just trying to find out if there is anyway I can get that information for you.
[Visitor] Why isnt that information immediately available to you
[Visitor] ok how far doe she live from my postcode just want to find out how local is local?
[Leanna] That isnt information that I have access to, It would be Karen herself that would be able to provide that information. Karen covers your postcode and would be local to the area that she covers.
[Visitor] Thanks!!!!
Leaving aside all the usual negativity that naturally will surround a report on PB.
Looking at this from the view of someone on the outside looking in. Here are hundreds of agents ridiculing a new player that is taking business from them. This player is getting away with delivering less than them but in their mind is able to do most of what the agents do in terms of marketing clients properties.
This new player is spending millions on getting its name out, but in time may not have to as it gains marketing traction. This new player could continue to grow its market share, lower its cost base and further change the way people decide to sell. They might well gain a larger percentage of customers with realistic expectations and saleable properties.
This player might well affect those agents livelihoods and businesses.
These outsiders then might consider how it has come to this. Perhaps some might say that those agents idly sat by and allowed their main advertising medium to become their downfall. They allowed ‘their’ advertising source to become so big that that entity cared not about them anymore and allowed parasitical businesses to come in and effectively take their business from within. Previously this type of business could not have competed with them. They had been the masters of their own potential downfall. And they allowed it to happen.
Last paragraph is very insightful. Are you sure you are an outsider?
I was assuming the words of an outsider, sorry if unclear. I am an agency owner.
And I would say your assumations are, unfortunately, fairly accurate, Beano!
Has anyone else noticed what the the initials of Parasitical Business are?
“…as one financial website, the Investor’s Champion, pointed out yesterday, it has “yet to make a bean”.”
Am I alone in believing that in order to make said bean, it would have to recoup previous losses – not just turn over £0.01 more than it spends in a financial year?
That being the case – I think I’m right in saying that they’ve got some £20+million of catchup to play…
It’s a magic bean PeeBee; and you know where you find those, don’t you. I wonder if the ending will be one!
Excellent point and one I totally agree with. In my opinion you cannot truly claim to be that successful until you are making enough profit to buy back your shares (effectively claer your initial borrowings) or regularly pay out a reasonable dividend income (return on investment). That’s only my opinion of course.
sell sell sell…..
A forty percent odd rise on share price after one announcement. Bet that’s worth a few bob to some people. What will happen to the share price next June if the news is a lot worse. Guess now is the time some people will be thinking very carefully about crystalising their gain!
Down 6% today to 136 as we speak. On the 3rd Oct it was at 135 and then it plummeted to 104, so its basically gone back to where it was two months ago. Smells a bit!
Wonder if woodford will pull out now the last 2 days tinkering is done?
Typhoon et al
This is what 1 investor thinks from a bulletin board….all will come out in the wash eventually, but despite everything, I would be happy to own a biz where everyone…for the moment….values it for in excess of £1/3bn from scratch. The little niggle here is as others say, when a company can’t answer actually how many houses are actually sold in numerical terms, it leads to the question in time, ‘is this the emperors new clothes?’. For the internet generation, Google that fable, as it shows human weakness never changes no matter what the fashion of the time! And here is a quote which is as relevant today:- The children now love luxury; they show disrespect for elders and love chatter in place of exercise. Children are tyrants, not servants of the households. They no longer rise when their elders enter the room. They contradict their parents, chatter before company,
This is according to Socrates 2500 years ago, the Jeremy Kyle of his day. See things don’t change, here endeth your Philosophy lesson oh world of estate agency!
Sorry…forgot to include the investors view who used the service.
My experience as a buyer of a maisonette on PurpleBricks is consistent with the negative comments about this company made online by other users. However, as a buyer, I can not complain as this may eventually enable me to purchase the property at a lower price than if it had been sold through a different company. The person from PurpleBricks who did the viewing pointed out the “communal garden” to us but fortunately I had checked the Land Registry which showed that the garden was private and it was also a completely different piece of land to that occupied by the “communal garden”. It didn’t help that the person doing the viewing lived about 30 miles away in London so he did not know anything about the area. However, the really frustrating thing from our viewpoint is that we have now had an offer rejected online but there is no way for us to negotiate using the online system. We have been given the number of the PurpleBricks franchise holder but when we phone up to start negotiations there is no answer – perhaps he is on holiday. We have now written to the owners to check up on a few further details of the property (we could not see the garage inside because it was locked) and I hope the owners will indicate to us the range of price that they may accept. I am almost certain that this deal would be done and dusted if, as is normal, we could negotiate a price with the agent as we would offer very close to the asking price but having an estate agency service which does not allow any negotiation is just plain silly.
Be interesting to know who its buying the shares!!
Think, Woolworths, Zavvi, Oddbins, Aquascutum, JJB Sports, Comet, HMV, Jessops, Blockbuster, Austin Reed, Phones4U and don’t forget BHS.
The business model looks good on paper, in practise it has many flaws. There are lots of copy cats, and in central London their presence is almost nil. Their local property expert who covers the SW3 area has no agency experience that I can find except that he was a director of Your Move. For example in SW3 they have one property for sale in Beaufort Street, (which they describe as the heart of Chelsea – not sure I’d agree with this). In SW1 they have nothing, and in SW7 they have one property. I don’t think we have anything to worry about here for quite some time!
It obvious to me the reason PB has not published the number of completed property sales is that they are not impressive enough to justify the share price. One has to ask why they are not disclosing this!
As for relying on other stats, such as selling a home every 16 minutes; this is meaningless without knowing the basis of calculation i.e. completed sales or SSTC and based on a 24 hour day or 10 hour day; and I suspect that the “16 a minute” is the figure based on a moment in time and not, as PB are hoping to imply, a consistent achievement over the past six months.
Are PB trying to fool their shareholders as well as potential investors?
Peter
“It obvious to me the reason PB has not published the number of completed property sales is that they are not impressive enough to justify the share price. One has to ask why they are not disclosing this!”
The “why” is simple. Because they don’t need to… because it doesn’t matter.
They work on a NSPR basis. The “sale” gains them nothing – other than the opportunity to peddle additional sources of income onto unsuspecting folk.
To the individual who saw fit to ‘Dislike’ my comment.
Go on – be a sport and explain to the readership why.
After all – it’s the festive season – you might as well give us all something completely ridiculous to have a laugh at…
such as selling a home every 16 minutes
So what we need is someone to stand up and say an independent agent sells a house every….what would it be…possibly no more than a minute (there are nearly 526,000 minutes in the year according to my calculations).
However even more powerful;
‘Selling a home every 16 minutes. Independent agents don’t just sell, on average we complete on a sale every minute of every day…and that’s verified.’
‘Independent Estate Agents…on average..a verified completed sale every minute of every day!’
If they want to using that metric …then we need to compare and up the anti. Lets stand up and shout it from the rooftops (obviously need to confirm the number of minutes is accurate first).
Any other suggestions?
“So what we need is someone to stand up and say an independent agent sells a house every….what would it be…possibly no more than a minute”
Thing is, AgentV – that isn’t one Agent. No doubt the ASA or someone would decree that it was unfair to quote such figures as it was not relative to the individual.
Some Agency branches sell (as it would appear the “average” PB bod is managing) one a week; some might do three, four or even five – and there will be some that close deals on less than one a month.
It’s all about stock, location, price and clientele.
PB quote one “sale” every sixteen minutes. I seem to remember that at one point LSL were claiming one deal done every five.
Or was it CW? Or were they doing better again?
Say there are 10000 “Independent” Highstreet-based Estate Agency branches. Each one of us only has to sell FOUR homes per annum to knock the smile off the Burples faces. TEN SALES EACH – they look like rank amateurs in comparison.
Considering the fact that were we to achieve, on average, FOUR TIMES MORE than that number then we wouldn’t be able to open our doors for trade – makes the Burple ones look like a rusty tap dripping tepid water into a steaming hot bathful by comparison – doesn’t it?
‘that isn’t one Agent’
Thanks for the comment PeeBee….but don’t purple bricks claim that all the LPE’s are individual businesses in their own right …just under the PB umbrella…so how is it that much different.
Of course if we had to create an umbrella for ourselves to be able to make the claim then there is another great reason for a network of independents.
You mean ANOTHER “network of independents” to add to the network of networks.
They are already there – like dandelions growing in the cabbage patch.
AgentV – sorry if that last post came across the way I’ve just read it myself.
I of all people shouldn’t be seen/sounding as if I’m mocking ways to combat what has been allowed to manifest.
I respect and acknowledge your passion. I also acknowledge and have every respect for what can be achieved by persistence and dedication.
Unfortunately, I also know that so far, not one ‘association’, ‘organisation, ‘network’ or ‘marketing group’ has been able to muster consistent support in meaningful volume to achieve anything other than promises of the earth which materialise as hollow words and inaction.
Do I want that to change?
OF COURSE I DO.
Will it happen in what is left of my working life?
I wish to ‘Plead the Fifth’ on that one.
Your telling me that it will be an uphill struggle!!! I don’t doubt that…so hopefully the first step will have to be an absolute ‘no brainer’ for agents to want to do.
I am working on it…just wish I had more time or resources available…trouble is houses coming along to sell keep taking priority! At the moment is there a network for just smallish independents? that works tirelessly defending its members position and developing new methods and products to help business promotion, generating leads, winning instructions, time saving etc.?
And don’t worry I don’t mind being thought of as a dandelion….or a cabbage for that matter…just not a ‘pineapple’…cos I dislike them with a passion.
After my experience of finding their headline £750 to instruct isn’t anything like the real picture it’s the add on’s. For example the £2,000 to use their legal services to sell.
Perhaps we should all offer £2000 legal costs and just offer 0.5% fees (for example)?
The only problem is I would feel very dishonest if I conducted my business in this way!
Trust Pilot reviews need to be after PB customers have gone through the whole process and had their final bill from the solicitors. I wonder what they truly think then.
Actually,if I were a Trust Pilot, I would try and preserve my reputation by insisting that agent reviews are not posted by anyone until after the service has been fully finished with…from start to completion or disinstruction!!
It really is a case of “Who pays the Ferryman” with Trustpilot the site skewed towards keeping their paying customers happy Its a complete farce that Bricks can get”unverified” unfvaourable reviews removed but allow the unverified favourable ones to stand .Trustpilot dont police these and as over 90% of Bbricks reviews are by single company reviewers it doe sbring their authenticity into question Just read a few of them overly gushing
I wholeheartedly agree with Property Paddy’s post yesterday and above.
Have you ever seen less money making referral scenarios on ‘Whatchdog’?
How about a cap on conveyancing referral fees, whatever form they may arise, before the Government ban them totally?
Once again, is it companies who represent a very small percentage of the market who are tarnishing the rest?
The comment that the UK market backdrop is tough is slightly concerning but with £29.1m of cash and some willing shareholders, management is no doubt confident they can see off most of the competition.
So who do they regard is the competition? Other online agents or high street independents? Whoever, they have a fighting fund of £29million which is nearly £1,500 for each of the nigh on 20,000 areas occupied by high street agents. Where there are clusters of agents together this could be anything up to £20,000 to £30,000.
Now is the time to start a network of independent agents to stand up for the counter argument of ‘hi tech, full service, no sale no fee’ as opposed to ‘pay up front online, part diy’.
if you read this, and are interested in knowing more, put a brief post in the thread.
£29m is a lot of money to normal folks but for a firm that burns £1/4m each week more than they bring in it isn’t very much at all.
Burn 1/4 of that by the time the next set of figures comes out a full 12 months after Bruce failed to deliver the £25million profit he promised and all but the thickest of investors will realise they’re whacking an expired equine
Said it late on yesterday, but supposing they had to do their absolute best to show a profit this half year because they know there is a very big black hole coming up the next 6 months. In June next year they can then call it a blip/adverse market factor because ‘look at last period….we were just entering profit’.
Its pretty obvious the share price is seriously affected by ‘the trend’ and they wanted a very favourable trend this period.
One positive from the SP spike is it will give them an opportunity to go to the market for some more cash .They are going to have to earmark the majority of their current pot in rolling out more territories in Oz .They are also going to have to address the poor showing of their lettings side which didnt even get a mention in the results .It has been a dismal failure and perhaps the only solution is to go into the market aggressively and buy one of the listed lettings agents.It seems as if they have little choice-either that or knock it on the head
Any cash call will seriously impact on the current SP . I think they arent going to achieve the forecasted revenue in H2 They have increased fees recenlty to mitigate the dropping off in instructions since the summer. It must be worrying that despite their continous recruitment of more lPE,s this has not manifested itself into increased sales .Looks like a couple of engines have already cut out on the rocket They might also need some new script writers for their Brothers Grimm Trustpilot,s reviews!
Difficult to see the Spring making up for what looks to be a quiet couple of months .Tipping point reached, Feast or Famine?
Trust pilot will not stand by the 3, 4 or 5 star reviews if the firm itself is shown to be openly defying their redress scheme provider and NTSEAT. Trust pilot will not risk their entire existence or reputation on anything that simply doesn’t stand scrutiny.
The tipping point for all firms was last Wednesday when the monitoring and scoring system for portaljuggling was switched on.; a system has been devised that detects and quantifies portaljuggling, allocating a score to those firms identified.
The proposal is that at 500 points the firm is notified they are under investigation, at 1000 points the firm has redress suspended meaning their stock is removed from portals, at 2000 point following reinstatement of redress, redress is withdrawn permanently effectively removing the problem from the industry.
In the past week the activity level of 7 branches across several firms has already exceeded the investigation trigger, 2 firms would have redress suspended and 4 branches are within 200 points of a permanent ban (in a week!)
Robert, is this true? If so Im excited for the first time in a while. If the police of this system do actually trigger these consequences then we can hopefully weed out the cheaters in our game and expose them for what they are…
see rummage4_search on twitter I have posted a redacted score sheet.
Chris Wood asked me for a solution and as is my style I delivered!
I am part way through a system that reports from first listing right through to land registry with every price change, aborted sale, every portaljuggle noted and scored.
It doesn’t matter whether or not the system is adopted, I am providing R4 agents with another very powerful instruction getter; the ability to provide vendors with a genuine and unbiased overview of the agents in the area.
@Rosalind Renshaw
If Robert May’s comment does not constitute “news” (of the most pertinant variety to the estate agency industry), I do not know what does.
I sincerely hope this will be thoroughly reported on in the very near future.
Ros,
I think Robert should be congratulated for his hard work on this project and given a regular monthly review slot on PIE to update us all!
Thank you Agent V.
Anything more formal than it is at the would be a struggle. There is quite a lot of pressure and pain already without adding in a deadline
It isn’t 11,500 transactions as I pointed out yesterday. Their listing reps manage to perform at trainee negotiator level averaging 1 sale a week from listing 37 properties every 20 weeks. A negotiator doing that in a normal office would struggle to get a promotion to senior negotiator.
I had their number reviewed by an IFA , he wasn’t complimentary but there again he isn’t one of the Woodford sycophants.