Purplebricks to furlough staff, but undecided on when to do it
Hybrid agency also reveals plan to preserve its cash pile including cutting TV and radio ads, and severely restricting online marketing spend.
Purplebricks has revealed its plans to survive the crisis including a complete halt in TV and radio ads, and has said it will eventually furlough its directly-employed staff, but has not yet decided when.
Purplebricks has around 300 call centre and head office staff on traditional work contracts, while another 600 are self-employed territory owners and LPEs.
As well as stopping its radio and TV adverts and severely restricting its online marketing, Purplebricks says its digital platform, which enables customers to upload their own photographs, videos and property details, has enabled it to switch many of its usually face-to-face activities online and is now offering both video valuations and virtual viewings.
Weakening
Despite these initiatives, Purplebricks says it has seen a weakening of activity since the government urged people not to travel and, last week, not to move home unless contractually bound to do so.
The hybrid agency is also reducing its supplier costs and other overheads as it tries to preserve its £35 million cash at the bank and implement a lean operating model throughout the crisis period.
“The COVID-19 situation continues to evolve and is likely to remain uncertain for some time,” the company says.
“Given the recent impacts Purplebricks now expects revenues to be below expectations for the full year to April 2020.
“It is too early to predict the impact on [Purplebricks’] financial performance for the 2021 financial year until the impact of COVID-19 on the housing market becomes clearer.
“Nevertheless, the company believes its flexible, digitally-led operating model leaves Purplebricks positioned for long-term success.”
Read the official guide to the government’s job retention scheme.
Well at least some good come out of bad
In April 2018 Purplebricks had 152M cash at bank, this April that will have reduced to around 35M, that is a 117M cash burn in 24-months, or a £4,875,000 cash burn a month.
I revealed on the 2nd of March in a Daily Telegraph article that in 2019 Purplebricks had 21,380 vendors who de-listed their properties. Leaving over behind 18M of fee they had paid upfront. Following this revelation the share price fell off a cliff.
Marketing and selling property is all about trust, as Rightmove is now finding once that trust is lost – things soon unravel.
I am extremely sympathetic to any person hit by this terrible situation we are now all facing, and I think Local Property Experts, those very hardworking, self-employed (debatable) workforce who props up this online Behemoth, are now going to find things even harder, a shame that all those millions went on Olympic adverts rather than a contingency fund to help them during difficult times.
Doing the mathematics, Purplebricks unlike a traditional agent, has no ‘pipeline of sales’ to live off, its income is from upfront fees and cross selling of services at point of instruction. With lock down, the amount of new instructions for all agents will stall.
As to changing to a leaner model, Puplebricks Achilles heel has always been its lack of physical offices, if it cuts its advertising – it ceases to exist.
Without adverts on the tv, massive online spend – the fickle general public will soon ‘forget’ the brand, and maybe this is a bigger challenge than the £4,875,000 cash burn.
Even with reduced overheads, it will eat through that £35M very quickly, but before it doers the market capitalisation will be so low that either a buyer will swoop in and buy the company, or Axel Springer will take it private and hopefully look at the model and start again.