Purplebricks ‘tells City it is now 4th biggest agent in UK’

| Rosalind Renshaw

Online agency Purplebricks says it has become the fourth largest estate agency in the UK.

It says that this is “by fee paying customers at current run rate”.

It puts itself fourth behind Countrywide, Connells and LSL, and ahead of Spicerhaart, Foxtons, Kinleigh Folkard & Hayward, and Savills.

It also says, in what looks like a pitch to investors and which is  headed ”24 hours estate agency”, that it is 3.8 times larger than Foxtons, and has double the number of properties for sale than the next largest online agency. It claims that 70% of traffic happens when agents are closed.

The document says: “A national property business driven by a mix of property experts market-leading technology and customer facing software that is changing the experience of selling, buying and letting property. We are rapidly becoming a major brand through extensive advertising and marketing, by exceeding customers expectations and by charging a fraction of the traditional cost.”

Purplebricks also says in the document that its customer reviews rate it as 9.4% out of 10, and that it has six times more reviews than its nearest competitor.

In the apparent pitch, it says that it charges an average of £1,080 fee, compared with the average estate agent fee of £4,425. It estimates that this year, there will be 1.5m “transactions to market”, including properties which are sold, withdrawn and which will be unsold by the end of 2015.

Purplebricks is said to be planning to launch on the stock market in the first week of December at a valuation of £250m. The 22-page document that has been passed to EYE is called “Purplebricks Test Marketing Presentation”. The presentation team are named as Purplebricks chairman Nick Discombe, CEO Michael Bruce, chief financial officer Neil Cartwright, and non-executive director and former Capita boss Paul Pindar.

In what appears to be the prospectus, it says it wants to scale more quickly to build out a national footprint.

Its average fee is £1,080 compared with the normal fee of £4,425.

The Purplebricks prospectus puts its market share at well ahead of other online players – 4,000 properties for sale ahead of 1,958 (emoov), 1,611 (House Simple), 1,426 (House Network), 1,378 (Tepilo) and 924 (Hatched).

It also reveals that Purplebricks now has 150 local property experts, of whom 89% are licensed and 11% employed.

Hatched yesterday sold to bricks and mortar high street chain Connells.

One analyst said of the Purplebricks prospectus that it raised more questions than answers.

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39 Comments

  1. Peter Green
    November 17, 2015 at 08:00

    I wonder how much the founders will make when they float the company ?

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    1. Anonymous Coward
      November 17, 2015 at 08:52

      A metric cr*pload?

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  2. marcH
    November 17, 2015 at 08:30

    I see not so much a float as a bit of a bellyflop. Who, in their right mind with a prospectus that raises “more questions than answers, in a difficult market environment, and with 4,000 properties on the books (which even if they all sold at an average fee of £1080 would only bring in £4.3m) look to raise enough funding to create a £250m company ??

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  3. Naysayer
    November 17, 2015 at 08:31

    9.4% out of 10. That will be 0.94/10 approval rating. Good going Purple Bricks. Would love to see the accounts. Advertising – £20m, income – £500,000. Will be interesting to see how they fare when the (awful) advertising campaign kitty runs dry.

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  4. Peter
    November 17, 2015 at 08:36

    After new investors realise it is all hype to inflate the share price, the value will drop like a ton of purplebricks.

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  5. smile please
    November 17, 2015 at 08:36

    Tip of the hat to where it is due, it has never been bout estate agency for PB its all been about offering something to the market that is different that is not over saturated, floating it and make big bucks.

    And looks like they will manage it.

    But the canny investor will look at how much they have had to plough in to the business to get the share they have. they have not made money just the opposite. embarked on a national media campaign (expensive) and looked to buy market share.

    Now they are looking to cash in. Time will tell if it is sustainable but once its floated there really is nowhere else to run and get money …..

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  6. mrharvey
    November 17, 2015 at 08:37

    4th largest in terms of what?

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  7. jmeapps01
    November 17, 2015 at 08:40

    Ha ha ha ha ooooh ha ha ha ha ha

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    1. Anonymous Coward
      November 17, 2015 at 08:53

      Can’t help but hear that as the Joker (played by Heath Ledger!)

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  8. Gump
    November 17, 2015 at 08:54

    I’m confident it will end up a floater, not sure about the December date though

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    1. smile please
      November 17, 2015 at 08:58

      Don’t be surprised if they do Gump its a race to float. Once one has done it the others will get a fraction of the original.

      Guessing Emove missed the boat as they have been muscled out on market share, they may look at going the Hatched route and sell to a corporate.

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  9. LD1602
    November 17, 2015 at 09:12

    Well I am just a humble estate agent who knows nothing about what measures you might use to accurately value a company.

    I do know however that Foxtons turned over £136,000,000 in 2014 given their average fee Purple Bricks would need to sell circa 126,000 properties in order generate a similar figure.

    In order to justify their claim of being 3.8 times the size of Foxtons Purple Bricks would need to complete about 450,000 sales annually and be generating revenue of nearly half a billion?

    Annual revenue of half a billion would I suppose give credence to a company valuation of £250,000,000.

     

     

     

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    1. Tristramboris
      November 17, 2015 at 09:30

      Not if the definition is “fee paying customer”

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  10. PeeBee
    November 17, 2015 at 09:52

    The company boldly claim “99% of properties sold or let achieve asking price or more”.

    Interesting – seeing as of their 4240 listings on Zoopla, AT LEAST 1604 of their properties – 37.8% of the total – have been reduced from their original asking price already. 

    Answers, on a postcard, please…

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    1. Keith
      November 17, 2015 at 11:20

      I think the simple answer is that they claim  “99% of properties sold or let achieve asking price or more” and not ” “99% of properties sold or let achieve original asking price or more”.

      What’s that phrase about lies, damned lies and statistics?

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      1. PeeBee
        November 17, 2015 at 13:10

        Open question to all…

        When does “marketing” cross the line and become “deception”?

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        1. smile please
          November 17, 2015 at 13:13

          When the ASA says it does 😉

          And considering that you may as well say what you like!

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          1. Robert May
            November 17, 2015 at 14:37

            @Asa_uk Ha ha ha ha ooooh ha ha ha ha ha (credit jmeapps01)

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        2. Ben Redway
          November 21, 2015 at 13:13

          Maybe when you say ‘More satisfied customers on your website’ when you know that’s not true!

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          1. PeeBee
            November 22, 2015 at 09:55

            An interesting example, Mr Redway – and yes you’re absolutely correct.

            Who is the offender you refer to?

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            1. Ben Redway
              November 22, 2015 at 17:18

              PeeBee – as you ask – the offender is just a small washed out old agent in Huddersfield called Bramleys. Have you seen their customer reviews? They’re quite shocking!

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              1. PeeBee
                November 22, 2015 at 18:36

                So why pick on an Agent in ‘uddersfield of all places to try to make a point of some vague description?  What have they ever done to you?

                Customer reviews?  You must be referring to the handful of hate-mails planted on AA, I take it, rather than the DOZENS of glowing testimonials on their own website from what appear to be perfectly satisfied customers.

                I know which I’d be more inclined to take notice of…

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                1. Ben Redway
                  November 22, 2015 at 18:43

                  Well of course we could contact some and ask!

                  Reading some of them on AA, I doubt a competing agent would write such a long letter and naming individuals.

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                  1. PeeBee
                    November 22, 2015 at 19:03

                    Who said they were competitors?  Not me.

                    As far as checking out REAL (oops sorry – used caps again…) reviews, I’m sure the subject Agent would love you to get in touch to do just that!

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              2. Robert May
                November 22, 2015 at 22:23

                A small washed out  old agent in Huddersfield? I follow Bramleys on Twitter, they are far from any of the things you just accused them of.  If more agents were like Bramleys the industry would be a profession again.

                I think you owe them an apology.

                 

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                1. PeeBee
                  November 23, 2015 at 09:19

                  It won’t be forthcoming, Robert.

                  I think ‘Mr Redway’ will now slink back into the imagination of ‘his’ creator.

                  Best forgotten, I would suggest.

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  11. GPL
    November 17, 2015 at 09:54

    It’s remarkable!…… here we are in the 21st Century and they are still peddling!

     

    What is the 21st Century phrase for Snake Oil Salesman?…… and in particular those purple bottles.

     

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  12. garret
    November 17, 2015 at 10:02

    Lets not forget, they DON’T have to sell a single property.

    They get paid regardless.

    All they need to do is convince 1929 homeowners per month to sign up and voila – annual revenue of £25,000,000.

    A valuation of 10x earnings = £250,000,000

    Given they’ve taken on 1,154 new properties in the last 30 days I think they’re basically there.

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    1. Paul
      November 17, 2015 at 10:34

      Not wanting to call you out on the numbers but…..

      Even if you took their highest price which is £1158 inc vat, that’s a net of £965 per transaction.

      £25,000,000 / 965 = 25,906.73 / 12 = 2158 per month.

      At the lower level it equates to 37,593.99 / 12 = 3132 per month.

      Putting that aside, you would have to deduct operating costs to breakout the numbers back to net profit, so that’s a lot of money that needs to come off.

      Someone mentioned on here they go 50:50 with their valuation people, so that’s a big chunk off, if true.

      I don’t know what their running costs are or their projected costs are, but generally if you are making 20-25% you are doing well.  Now I guess they will have better profit margins, but even still, they are going to have to get on a lot more than that.

      Don’t forget how much money they have had to spend to get those 1929 homeowners though.

      And that leads me to the main thing that will make or break them, they will only be able to increase at that rate if they DO sell the houses they take on, because when word gets around people wasted money using them, then people will stop going on with them and there ends the dream.

      If they get it right and sell lots, then they have a good thing going.

      And they do have lettings as well.

      I’m not saying they can’t do it, they just need a lot of transactions and they need to sell the majority.

      As a national outfit, they will be a big player in numbers, but going toe to toe locally with the local agents isn’t going to be a walkover.

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    2. Eric Walker
      November 17, 2015 at 13:56

      Ten times earnings or income? Warren Buffet once asked “Does management think the tooth fairy pays for capital expenditure?”

      The litmus test it the EBITDA figure, and even then 10 times is generous. Profit is key, not turnover,

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      1. Paul
        November 17, 2015 at 16:00

        Exactly Eric, turnover can be £100m but profit is where it is at.  10 times is generous but much like the dot com days, investors buy into the dream of future profits and then the multiples tend not to run in line an ordinary sale.

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        1. GlennAckroyd
          November 21, 2015 at 17:44

          10x EBITDA is not generous when you look at other Estate/Lettings PLC’s – They can attract 20x when floated.

          However, forgive my ignorance, but in the release to the City, was there any mention of profit?

          You can have any multiple, but if profit is 0 – any number x 0 = 0

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  13. PeeBee
    November 17, 2015 at 10:24

    In differentiating themselves from ‘Online Agents’, their website states “We give you a qualified Local Property Expert, a free professional valuation…”

    Yet when recruiting, they ask for “3 years + experience at Branch Manager or Senior Valuer level… NFOPP / NAEA qualification (or equivalent) or keen to work towards”

    Qualifiedish would be more appropriate, perhaps…?

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    1. wilko
      November 17, 2015 at 13:34

      You can earn £100k a year though…..not bad wages!

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      1. smile please
        November 17, 2015 at 13:57

        They paying 100k a year???

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  14. houseofpain
    November 17, 2015 at 11:24

    Wolf Of Wall Street-esque ‘pump and dump’ anyone?

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  15. paul-ch
    November 17, 2015 at 12:12

    Revenue is not the same as Earnings

    Revenues is the amount earned before deducting the cost of goods sold, expenses, and losses. Earnings is the net amount earned after deducting the cost of goods sold, expenses and losses. It is often presented as net earnings or net income.

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  16. Paul House
    November 17, 2015 at 14:26

    To confirm that Purplebricks are now the 4th biggest estate agency in the UK based on the amount of listings or “current run rate”.

    On that basis i’m the biggest agency in the country based on the amount of hob nobs consumed in our office during an average working day, believe me we get through packet loads.

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  17. NM
    November 19, 2015 at 22:16

    I think they are floating now rather than later as the bubble in the Nasdaq will go pop soon…..

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