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Housesimple has enough to keep going for ‘foreseeable future’ despite less cash in the bank

Hybrid agency's results cover period prior to the launch of its 'free to list' property marketing service.

Nigel Lewis

housesimple

The company behind hybrid estate agent Housesimple has published its latest annual accounts which reveal a worsening financial position for the company and a reduction in its head count.

Its results, which cover the 12 months to the end of March this year, reveal increasing debts and seven fewer employees, taking its team to 86 people.

Its cash reserves have shrunk from £3.17 million to £2.18 million while debts have increased from £13.4 million to £21.8 million, driven largely by money lent to it by investors. This has totalled £12.5 million during the 12 month period covered by its accounts.

The company also raised £4.5 million from existing shareholders by way of an equity issue, it has revealed.

Investor backing

These include Toscafund Asset Management and Freston Ventures, the private investment vehicle of Carphone Warehouse founder Sir Charles Dunstone and his business partner Roger Taylor plus other individuals.

Despite its indebted financial position, the company’s board say that Housesimple can continue to trade using its cash resources until at least October 2020 and that it will will carry on for the ‘foreseeable future’.

Housesimple will face significant cashflow challenges as it begins to roll out the company’s ‘free to sell’ offering.  Earlier this year the roll-out began in the NW of England and most recently in the East Midlands, with plans to go national soon.

This includes offering free listings, sales support and a for sale board to vendors. Housesimple hopes to general revenue from referrals and commission from selling financial and conveyancing products to clients.

December 23, 2019

One comment

  1. Housesimple need to change their strategy immediately, maybe Sir Charles Dunstone, who is an extremely bright and busy man might contact me early in the New Year, as I have a real solution.

    With no changes, Housesimple using their present strategy of ‘free selling’ in return for ‘referral fee income’ will be burning through millions of capital, to no good effect.

    The digital transformation of real estate (all sectors) which the UK estate agency sector is but a small part, is not just an automatising of some backroom processes, helping with the heavy lifting. It is a proptech revolution, where mindsets and technology property and possibilities, blur, mingle and re-imagine what can be.

    Instead online agents, have just been a digital copy of the old style traditional model of agency, just with no offices and considerably less staff.

    When they could and should be so much more, in fact if they were, instead of offering low fees or no fees, buyers sellers, tenants, landlords and everyone in the sector would actually say that at a fee level HIGHER than normal agents, they represented great value as they provide a better level of service.

    As Purplebricks has shown, you can certainly buy the market, they claim they are the king agent by instruction capture – according to data presented on a recent website, but if your daily cost to run the business is a lot more than the cash coming in each day, when the investor’s money runs out – the lights get turned off.

    Totally on board that the customer embraces new choices when presented, but tens of millions is paid to Purplebricks a year in good faith by vendors who fail to get a completion.

    So, with 41M in the kitty, down from 190M a year last April, not sure Purplebricks is a maturing business, unless someone pumps more millions in as investment. Just look at their accounts, cost of acquisition of client and marketing is more than cash raised by new clients, an unsustainable model.

    Statistics can prove anything you want them to, and recently a website stated that with 16,000 plus properties listed Purplebricks was the dominant agent, but here are my more analytical thoughts.

    Purplebricks have over 500 Local property experts/listers who are self-employed owning their own company.

    This means that on average they each have listed for their company around 30 properties currently for sale. 16,000 instructions divided by 500 LPE’s.

    Purplebricks unlike most other agents, turn each instruction into upfront cash, typically a spend by the vendor of £1,300, so that 16,284 of listings means close on 21M of fee in their bank, and that is just for listing.

    So, a good model for their cash flow. But, why then do Purplebricks lose/burn around 3M more each month than they get as income?

    In April 2018, they had 150M sitting in their bank according to their annual accounts, in the next 12 months despite taking to the market thousands of properties, they managed to burn through 7.5M of cash each month, more than their incoming cash, a staggering 90M burnt through in the year, leaving them with only 60M in the kitty by April 2019.

    In their latest financial report, they have burnt through another 19M since April, leaving just over 41M. Which if they burn through 3M a month, means they will probably run out of cash in 14 months.

    Do I hate online agents? No, I like the customer to get a seamless, omni-channel journey of property delight, which on the face of it – the sci-fi like fanfares which greeted the online invasion promised. And at present I feel many using online agents may feel they have been kidnapped and are being driven around in Del Boy’s yellow three wheel Reliant Robin.

    Online agents need to adapt or get out of the game. If you want to adapt, I have some really good pointers.

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