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Agencies & People

UPDATED: Purplebricks reveals instructions drop and costs of deposits debacle

Interim results for six months to 31st October 2021 will make for grim reading for its shareholders and investors.

Nigel Lewis

purplebricks darvey image

Purplebricks has released its delayed interim results for the six months ending October 2021.

The figures, which have been held up by problems created when it incorrectly notified thousands of tenants about their rental deposit protection, will make for grim reading at its Birmingham HQ.

The deposits farrago is expected to cost £3.6 million in potential claims, the company says, along with £2.7 million in lost goodwill.

“We were disappointed by the process issues that we became aware of in our lettings business in December,” says CEO Vic Darvey (main pic).

“These are being corrected and a root and branch review of the lettings business has been completed in relation to our processes and procedures.”

Year on year, revenue dropped by 7% to £41.3 million and profits by 11% to £26.2 million but more worrying, given the housing boom most agents have reported, instructions fell 38% to 21,131 and total fee income dropped by 29% to £34.7 million.

Profits at the agency moved from £8.4m for the same period last year to a loss of £0.8million.

Paid viewings

One piece of good news is its average revenue per instruction which increased by 15% to £1,652 helped by the ‘transformation’ activities at the agency.

As well as bringing all its field staff in-house, simplifying its business proposition and introducing a Money Back Guarantee, Purplebricks increased the number of people paying for accompanied or assisted viewings.

The company says its new employed model, which has seen 95% of vacancies filled, will ‘enable us to scale up growth quickly’.

Purplebricks’ significant cash pile is also reducing fast, the figures show, from £75.8 million to £58.3 million, brought on by several one-off costs including restructuring costs of £2 million.

“The first half was challenging, with the implementation of a major change to our operating model coinciding with the UK property market experiencing a substantial fall in new instructions,” says Darvey.

“This dynamic led to a disappointing financial performance but we are confident that we now have the right levers in place to drive a stronger financial performance going forward.”

Purplebricks’ market share sold by volume fell from 4.8% last year to 3.9%, says City analyst Zeus.

Industry reaction

Link to Stamp Duty feature“To be fair, the Group was dealing with internal challenges at the time and seeking to adjust its business model, but to have missed out on spoils of the strongest housing market since 2007, is perhaps the clearest evidence we have to date that the low-fee low-touch estate agency model is not one for the mass market,” says Anthony Codling of Twindig.

“There is a place for the budget estate agent, but most do not want to go for the low-cost option when trying to sell their most valuable asset.”

Read the results in full.

January 31, 2022

One comment

  1. Not at all sure how Purplebricks can say that their profits dropped to £26M, as they showed no profits for the period, looking at the balance sheet, Purplebricks show they have just made a 397% loss.

    That is they had a 6.8M ‘profit’ from trading operations 2021, compared with a (20.2M) LOSS for the same period of time – in todays results. And they have burnt cash, with only having 58M now to 75M a year ago.

    With big liabilities on the horizon – not least the possible multi-million class action against them.

    I always feel that the balance sheet of Purplebricks is inventive, showing a gross profit, then when ‘costs’ are deducted a huge minus figure usually appears.

    Famously I was quoted in the Daily Telegraph that ‘Countrywide’s (PLC) failure to embrace the Proptech Revolution will make it a financially wounded dinosaur.’

    Similarly I now feel that Purplebricks failed to ‘scale up and live up to its potential. Squandering hundreds of millions of revenue, building ultimately a very poor digital copy of a flawed analogue model of doing real estate – they had the vision, the cash and the opportunity – But the c-suite failed to deliver.’

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