The Financial Times has queried whether Purplebricks is over-valued.
In an article by Judith Evans, comparisons are made with Foxtons and Countrywide.
Evans said that the company’s business model “wasn’t enough to thrill investors until recently”.
She said: “After it floated on London’s junior market in late 2015 at 95p, Purplebricks hummed along between 100p and 175p until last December, when the share price really took off.”
The catalyst, according to Anthony Codling at Jefferies, was provided by Purplebricks’ expansion plans – first into Australia, and later this year into the US.
Purplebricks recently raised £50m through a share placing to enable it to launch in America.
According to Codling: “The timing of Purplebricks’ fundraising and launch into the US was close to perfect, coming hot on the heels of a Which? report in which Purplebricks was named the best online agent in the UK with respect to accurately valuing houses.”
Codling also said that with a large chunk of Purplebricks’ shares held by its directors and by equity investor Neil Woodford – who owns 26% of the company – there are relatively sparse trading volumes, which tend to exaggerate price moves.
The FT article says it remains “an open question” as to whether Purplebricks really will revolutionise the market.
It notes that at £763m, Purplebricks’ current market capitalisation is almost double that of Countrywide at £388m.
Evans quotes Russ Mould, investment director at AJ Bell, who says that to justify its recent share price highs, Purplebricks would need 30,000 new instructions a year.
Evans’ article appeared under the headline “Is online estate agent Purplebricks overvalued?”.
It drew the comment from reader Peter Bill – a well known property commentator – “Answer to question in headline: by miles”.
Yesterday, Purplebricks’ share price slipped 1%, or 3p, to finish at 286p.
Earlier this month, on March 7, it hit a record high of 365p.
Please Miss, I know this one! At some point investors want the HUGE profits that were promised for years ending 15 and 16, it doesn’t look like trading profits will happen for YE 17 either.
Even if disruptors do disrupt the industry it will only ever be short term and unsustainable. Imagine Rightmove and Zoopla with just 6 national coverage firms. Both those companies rely on lots of subscriptions of £842 average (rightmove), the service suppliers will naturally come to the defence of the mass customer base or will risk the consequences,
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RM and ZPG could get their comuppance in due clourse for being traitors to the thousands of loyal customers they have in the iindustry byletting on line only agents onto their sites.
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Unlesss I am misreading something here £763,000,000 capital value for 30,000 new instructions a year works out at £25,433 per instruction. How can that possibly make any sense whatsoever. On the same basis a small independent selling 60 houses a year would be worth over £1.5 million.
So does that mean that if a a group of say 500 independent agents came up with some new software and disruptive ideas they would increase their business value tenfold? Or has someone just got the decimal point (hopefully not me) in the wrong place!!!
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Why would the value of a company only depend on one year of revenue?
Valuations take into account all kinds of factors, including future profits (if relevant), potential market share and then the good old price/earnings ratio.
The gross profit margin at all of your 500 independents would still be at around 10-15% with no economies of scale whereas PB have a target gross margin somewhere near 50-70% – that’s why investors like it.
Tech is scalable whereas people aren’t.
Whether Estate Agency is a people business is likely to be tested in the coming years. I would prefer agents to prove their value and maintain their role as otherwise there’s going to be a lot of unemployment.
In the words of Bill Gates “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction”
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Not a bad idea agent v. While they have a real market share of about 1% in every town in britain..the big numbers are obviously confusing investors. Countrywide just need a better P.R. company and they could make purple figures look like childs play..
If all the members then had a side brand i presume they could enjoy the massive discounts enjoyed on Rightmove for houses on market and not per office..which seems an unfair business model now.
I propose a new Righmove Price List:
1-25 houses = £250
25-50 = £350
50-100 = £500
100+ = etcetc
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>While they have a real market share of about 1% in every town in britain
1%?
Check out Rightmove for the County of West Midlands over the last 24 hours. 24 new listings = approx 7.5% of total for the county.
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‘Tech is scalable whereas people aren’t’.
Exactly…and most people want to deal with a person rather than tech!!!
So the real secret is to marry the best of both worlds. Thats what we are aiming to do. We are also aiming for 50% profit in a few years time…..provided we still give the best service possible at a reasonable cost….I would accept much lower profit if that is what was required to keep service as high as possible. Guess that’s why we will be of much less interest to investors.
By the way….. has anybody else noticed on the rightmove calender that tomorrow is also the 24th, as well as today? Do they know something we dont?
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“Whether Estate Agency is a people business is likely to be tested in the coming years. ”
This idea that most people want to deal with a person rather than a tech I think is one that you would like to be the case but is not actually proved. Given the distrust and dislike of estate agents by the general public (see any survey ever) then let’s see over the next ten years what happens.
1 question:
What is the percentage of buyer leads that:
a) Call in directly
b) Email
c) Come into your high street premises to register like in the good old days
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All sources, but actually if I am honest we do the most selling when we are out on viewings talking to buyers, and if they are not interested in that one….cross referencing them to other properties. We also register as many people as we possibly can and notify our ‘hot list’ when we have new properties to market.
Most of all I talk to anyone and everyone about property in general. When you are a true estate agent at heart, it’s not a job, it’s a way of life!
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Given how vague your answer is, I’m guessing you don’t actually track that then…
Probably should.
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Why?
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I think more and more people like the convenience of tech.
Why should people try PB? Because they save you money on average. Even if they don’t sell everything
Working on average commission of £4000 and the simple case of PB having just a 30% success rate and traditional estate agents a 100% success rate look at an example of 10 sellers. If all 10 of them sold through a traditional agent their cost would be £40,000. But if 3 of them sell for £850 and 7 of them sell for £850 plus £4000 = £4850 the cost is £36500. So the average cost per owner is still less if PB have an awful conversion rate and traditional agents have a superb success rate.
There must be a certain percentage of properties that nobody can sell at the price the owner wants. So imagine how much they save in general if you look at a more likely scenario where a traditional agent sells 90% of properties and PB 80%.
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Hi Cyber
As I said elsewhere (another board, another name) – “The savings of the few funded by the many.”
I’ll add that the many then get annoyed with PB for having the michael taken and tell there friends and they tell theirs and then the next seven fools tell theirs and they tell theirs….. etc., etc., ….eventually PB runs out of Fools.
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>The savings of the few funded by the many
Only if it’s a few that sell with PB. If it was just a few we’d have heard about it.
From their interim account:
“Sold and completed on £2.589bn of property in H1 2017 compared to £2.766bn for the full
year 2016. Sales agreed subject to contract pipeline a further £2.521bn”
Verification exercise
We are very proud of our success in selling property on behalf of our customers which is testament
to Purplebricks being the most positively reviewed estate agent in the UK. We recently conducted
a verification exercise on a random sample of our properties marked on the portals as SSTC,
nationally and regionally, against the Land Registry database.
We took into account the sample size of our properties and regions referred to in any notes
published by analysts in the market and increased them five fold. We also looked at a larger
sample of 10,000 properties spread across the UK (which did not include any of the regional
sample).
The results of the samples were as follows:
10,000 properties sampled nationally:
Confirmed as registered by the Land Registry: 91.9%
1,611 properties sampled in Southampton, Bournemouth and Birmingham
Confirmed as registered by the Land Registry: 87.5%
For the remaining percentage in each sample that was not confirmed as registered at the Land
Registry, we obtained third party evidence from Solicitors and thereafter from our records as to the
status of those properties which comprised of a mix of SSTC, exchanged, completed but not yet
registered at Land Registry or back on market.
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The answer: yes.
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the answer is a No, it is really, really worth a heck of a lot more. my reasoning is simple.
I’m a complete idiot !!
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Investment and speculation is all well and good but its a merrygoround unless the business actually makes a real profit not a EBTida rubbish smoke and mirrors proffit then its not making a profit. That profit then has to pay back the investors and give a return. Who is going be landed holding the baby?
This merrygoaround will end a lot of people will feel very stupid – not the set up guys as they are cashing in and good on them for making a lot of money but the train is reaching the end of its tracks for sure,
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Do bears poo in the woods ?
Is the Pope a Catholic ?
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So far evidence of both is scant. Not unlike Purplebricks’s profit!
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Bernie Madoff says, “Seems legit.”
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So, Which? have had the wool pulled too!!
“coming hot on the heels of a Which? report in which Purplebricks was named the best online agent in the UK with respect to accurately valuing houses.”
Get 3 local agents around, who are genuine ‘local property experts’ to give you the benefit of their extensive local knowledge. Take a view on their valuation figures and tell Purplebricks what figure you want to put the house on the market for.
This is not a gripe, just an observation. The Which report has no value, but it is being quoted.
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Looking at rightmove intel yesterday, PB had the honour of largest % price reductions this year in my patch. Good 2/3% ahead of the corporate over valuers.
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Yes, and then when they finally get asking price from heavily reduced initial price,,guess which p.r. will get on the tele…the 99% of asking price figure….
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So PB made a £12 million loss last year and the Bruce Bros made £17 million profit this year. Has the business World gone mad?
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For sure it has
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Investors made a £12 Million loss last year whilst the Bruce Bros trousered a £17 Milion profit – fixed that for you 😉
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Has anybody else noticed on the rightmove calender that tomorrow is also the 24th, as well as today? Do they know something we dont? Spooky!!!!!
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The misleading adverts they use really wind me up making it appear that they will sell your house for nothing the sooner something is done about this the better. Regarding the crazy valuation of the company as we all know in this game you are only as good as your last month.
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I’m going to post later.
Just want to apologise in advance…
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