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Agencies & People

Purplebricks is back in profit but market share stands still at 4%

Update released this morning reveals improving business efficiencies and losses stemmed, but its overall performance is flat, the company admits.

Nigel Lewis

purplebricks

Purplebricks has confirmed that the company has not increased its market share in the UK and that sales volumes have dropped, particularly in the South East.

“The significant losses incurred in the prior period have now been reversed,” the company says. It has also confirmed that the overall group has returned to profitability.

The comments are made in a statement ahead of its interim results for the six months ended on 31st October within which the company says it has maintained its market share at 4%. This is despite comments by its CEO Vic Darvey recently that it will eventually reach 10% of the UK market.

The more detailed results are due to be published on 12th December, the day of the General Election.

It also says the company will report an improvement in the marketing-to-revenue ratio as ‘planned efficiencies are now being realised’.

Canadian boost

And Purplebricks says its Canadian business, which it purchased and then rebranded in January, has done better than expected.

But despite the good news, the company is likely to be bracing itself for a lukewarm reaction from the City.

Its overall performance is expected to ‘flat’ when compared to the same period last year.

 

 

November 7, 2019

One comment

  1. Vic Darvey CEO of Purplebricks is a very bright man, and is an industry titan, but when he says things like the company is ‘not for sale’, or the company is going to change how it charges customers – the question I am going to ask is … Is Vic there? As I think he might be a little light on strategy.

    More worryingly, when Vic says ‘significant losses in the prior period have been reversed’ – maybe the comment without the spin should be that as stated in The Times, that Purplebricks has reported, ‘a full-year operating loss of £52.3 million.’

    For me, the only great thing about Purplebricks for investors in its shares, was that on paper it seemed to be the mother of all cash cows. It appeared, and that was always the illusion, that with a positive cashflow from upfront fees, that it would once established make huge profits, without a costly bricks and mortar empire of offices, populated by expensive employed staff.

    The truth, now the smoke and mirrors are no more and the business model is clear for all to see, is that you can strip out the staff costs, the managers the negotiators etc who sell property and just have listers (even better if they are self-employed), but if your business campaign runs on a multi-million pound spend on television, web, radio and every media medium – it does not matter how much cash you are getting upfront, if the spend per unit listed far exceeds the cash you get in.

    Close scrutiny of the annual accounts of Purplebricks show a worrying conclusion that gross profit runs at about 45%, but when ‘marketing costs’ and ‘admin’ costs are added in that 45% gross profit becomes a negative figure.

    Purplebricks were closer to making profit when their turnover was 50M plus, they made a 5M loss. They then bragged that when turnover doubled, they would hit profit. Instead the 5M loss grew into a multi-million loss.

    Possibly, the only thing keeping the Purplebricks empire afloat is the model of cash upfront, win or lose for the vendor. This pays the Local Property Experts and covers some of the costs of the business.

    If Vic feels that he is going to change the model, the cash input will dry up, and if the company has to wait 5-months for properties to sell and complete, from point of instruction, those multi-million monthly costs will eat the company and Vic alive.

    Also, Vic’s new bright idea to raise the basic cost of the offering by £100, may also come back and bite him, as PB’s USP, was that it was cheap to list. If the gap between the onliner, and traditional agents (with real salespeople front-end marketing and selling property) is becoming ever smaller, many wise vendors may return to the tried and tested route to sell their home.

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