Prospect of Purplebricks being profitable ‘elusive’ says expert
Company's half-year results reveal few bright spots and investment firm says yesterday's results 'not easy reading' for bosses or investors.
Purplebricks has released its half-year results revealing a 16% drop in revenue, a 38% plummet in gross profits and a rise in operating loss to £11.7 million.
But Neil Shah (pictured), Executive Director at investment research and consultancy firm Edison Group says: “As expected, Purplebricks results this morning do not make for easy reading.
“The company has red arrows against its revenue, with a 16% drop, and gross profits, with a 38% drop. An overall operating loss of £11.7 million reflects Purplebricks transition from a self-employed to a directly employed model, with profitability seemingly elusive.
“However, senior management remain confident that the company can break even in the fiscal year 2024 with a series of new products, with cost savings also increasing from £13m to £17m.”
Poor results
Despite the poor results, the company’s recently-installed CEO Helena Marston says her turnaround plan is working “and being delivered at pace” including reductions in the agency’s cost base from £13m to £17m in year-on-year comparable savings.
Overall the company’s instructions and fee revenue are stable albeit average revenue per share dropped by 1% to £1,624.
But its ongoing problem is that it’s not profitable following its transition from a self-employed model for its field staff to a directly employed one, although Marston says she is making progress towards break-even.
Losses
Losses from total operations decreased by 28% from £20.2 million to £14.6 million.
“Our plan to diversify revenue streams and build a more scalable, balanced business, with less reliance on instructions is gaining momentum,” she says.
“We launched our new mortgage proposition last month, five months ahead of plan, and are rapidly scaling our conveyancing services to the buyer segment of our customer base.
“Our plan to drive instructions is now underpinned by a better understanding of the areas where we know we can win and initiatives to drive profitability in each of them.
“We are ever mindful of the current economic environment.
“Our relevant, low-cost proposition, effectively communicated via our new marketing campaign, supports our customers and is especially attractive in these economically challenging times.
“I am confident that the progress we are making and the initiatives we are implementing to drive better performance in the field, together with the additional cost actions to ensure we are a leaner, more efficient organisation, underpin our full year expectations including a return to positive cash generation in early FY24.”
Purplebricks’ latest results have also dented the firm’s ‘cash at bank’ which has dropped from £58.3m to £31.3m.
Read more comments by Marston about Purplebricks’ performance.
Is it obligatory to take a delusion pill before working for these online companies??
Not focused on instructions?
There’s nothing more to say really.
If a 14.6 million loss is a Helen Marston turnaround, I hate to think what havoc this novice CEO will make if allowed to continue her reign of terror cutting all personnel to the bone and expecting anything but a death spiral of even more losses. Purplebricks gets cash from listing instructions, in 2023 that pie will be 12% less for all agents as the housing market cools, so that will add to her pile of woes.
It really is time for an experienced CEO to step in. This is just a re-run of the Alison Platt Countrywide Plc fiasco, she too oversaw a 90% drop in share price, before she was forced out, but not before a huge swathe of talent had been culled. It is easy to remove peope who do not agree with you, far harder to build a substantial business through making the correct decisions and building a team that backs you.
Purplebricks perhaps should rebrand to Fantasy Island as it seems that the CEO and new CFO have little grasp of the real seismic problems about to wallop this brand.
In many ways listening to Helen Marston live giving her pre-prepared view of the company results, it reminds me of a certain Liz Truss, talking how she has a plan, we all know how that went.
An Estate Agency that doesn’t priorotise instructions isn’t an Estate Agency. They are floundering around in a business they don’t understand, and have made monumental mistakes. From the start PB has been the perfect example of slick advertising without substance & the chickens have all come home to roost! Their demise is inevitable.