Purplebricks shares tumble despite assurance that trading is in line with expectations

Purplebricks’ share price fell yesterday after it announced expansion into mainland Europe and said that trading was in line with expectations with double-digit growth in the UK.

Purplebricks also said that the Canadian business was performing strongly.

Despite this, the shares ended the day 2.3% down at around 213p, after falling to a low of 200p.

Yesterday, Purplebricks announced a new joint partnership with Axel Springer called NewCo, which is taking a 26% stake in German online estate agent Homeday.

The stake could be raised to around 50% next year.

City analyst William Packer said the investment in Germany could be disruptive in view of potential regulatory reform.

Currently a fee of around 5% is shared by both buyers and sellers in around 70% of transactions.

However, new rules could mean that only sellers pay commission.

Packer said this could be deflationary for traditional agents.

A source at Purplebricks said of the deal: “Essentially, it allows Michael Bruce and the team the freedom to continue to focus on growing in its existing markets of UK, Australia and the US, while not missing out on the opportunity in Germany.

“In this respect it is similar to their deal in Canada, which they said this morning was growing strongly.

“Michael has previously stated that they are not looking at rolling out from scratch in new countries at the moment as they are focused on existing markets. This is consistent with that.

“I think their logic is that if they weren’t able to do a roll-out now, given the benefits of first mover advantage they would, in the absence of investing in Homeday, have missed out completely in Germany.

“With the backing of Axel Springer and Purplebricks, Homeday should hopefully become the clear winner in this market.”

Purplebricks has hit trouble in Australia, where the property market is in crash mode.

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36 Comments

  1. Breckland Agent

    Now there’s a shock. PB struggling in a challenging market, where local buyer / vendor education is essential and agents awareness of the market is critical.

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    1. Property Paddy

      nail on head Breckland Agent “Vendor education” in a purple nutshell.

       

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  2. Moveaside01

    ‘There go the wheels’…….

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  3. JVSOZ

    Amazing! Desperately keeping up appearances Brucey boys… Another racehorse anyone?

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  4. downdoobydodowndowndubaduba

    it feels like an accident waiting to happen – and doing a lot of industry damage en-route.

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    1. PeeBee

      “…and doing a lot of industry damage en-route.”

       

      Most relevant words on this comment thread, unfortunately.

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  5. Mark Walker

    Loss making company snaps up loss making company.

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  6. AgentV

    Is it disruption or distraction?

    BSOS23PC

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  7. WestMidsValuer97

    Now there is a huge surprise……

    I bet the idiots that invested are coming to the realisation they cannot beat the high street.

    There’s a place in the market for them but all they we’re interested in doing was slagging off the traditional model rather than concentrate on employing people who actually understand the market….

    What a shame…..oh wait….no, I don’t care.

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  8. Robert May

    If Countrywide can’t make disruption work, If Russell Quirk, the world’s loudest and greatest advocate of disruption, reckons it doesn’t work and most of all if Mr. Livesey and Mr. Plumtree can’t force a worthwhile profit out of disruption, it is fairly clear that disrupting a service industry such as estate agency DOES NOT WORK

     

    Mr Lawson misread my post yesterday about lost income; the point was that  if anyone is offering a good and genuinely comparable service why is the service being discounted by an average 66.35%? That doesn’t make sense

    Unlike Rightmove agency operates at very slender profit margins. The cost of selling a home is mainly spent on  service staff not premises. It is not possible to ‘not collect‘ 66% of the possible income available to a business and hope to make a profit if all you are doing is saving about 10% fixed cost of premises.

    Available income is being sacrificed to win market share, a lot of what is collected is spent on brand awareness,  all that makes for a very fragile business model that very efficient, economies of scale expert agents can’t get to work.

     

     

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    1. Property Pundit

      This is it in a nutshell.

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    2. smile please

      Brilliant summary Robert.

      Look at all the companies and individuals leaving the ‘online space’

      Mergers, Closing businesses, Stopping the option of an online only offering, Even owners of companies that have / had direct input saying their is not an appetite for it and it is not sustainable.

      We of course all knew this and it is credit to all the full service agents that they have weathered the storm, ironic that a tougher market will actually help full service agents.

      Coupled with the fact that everyday there are more and more stories coming out about onliners lack of service and misleading T&C’s its all looking rather positive.

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    3. cyberduck46

      >If Countrywide can’t make disruption work, If Russell Quirk, the world’s loudest and greatest advocate of disruption, reckons it doesn’t work and most of all if Mr. Livesey and Mr. Plumtree can’t force a worthwhile profit out of disruption, it is fairly clear that disrupting a service industry such as estate agency DOES NOT WORK

       

      Robert, why do you always ignore PB UK’s performance?

       

      >Mr Lawson misread my post yesterday about lost income; the point was that  if anyone is offering a good and genuinely comparable service why is the service being discounted by an average 66.35%? That doesn’t make sense

       

      Well given that PB UK does make a profit then there are obviously reasons:

       

      A few thoughts/ideas.

      1)  PB’s profit margin per transaction is very low.

      2) PB’s LPE’s and staff earn less. (Not sure if this is the case but if so that would be a reason)

      3) Technology reduces need for as many employees.

      4) More efficient use of employee time – lots of thumb twiddling for traditional agents and staff sitting in the office waiting around posting on social media.

      5) A lower but adequate standard of service without so much money being spent on the trappings of “success”. Traditional Agents need to demonstrate all the extra cost is actually worth paying triple the cost and more rather than saying they offer a better service. British Airways offer a better standard of service but if you only want to get from A to B then Easyjet is fine for a large percentage of people.

      With regard to that profit margin. I read an interesting article by Michael Day, who I think was formerly a Director at Connells. It was titled ”
      BROKEN ESTATE AGENCY MARKET
      There are simply too many agents fishing in a pond that isn’t growing”

       

      On PurpleBricks he commented…

       

      “We are already seeing several of the online businesses look to raise fees. A back of a fag packet calculation shows that an additional £200 per transaction would, on the current annual level of 1.2 million transactions, generate around £240 million in extra revenue or c£12000 per office. This would help any business but would transform a business like Purplebricks who get paid on listings and so would see the equivalent of £400 on every unit sold. Assuming they have around 5% of the market, a £200 increase on their pricing would generate an additional £24 million of revenue, largely all profit and starting to reward the faith their investors have shown to date. From their current low fees starting point, the online and hybrid agents will probably find it easier to raise fees than their “High Street” counterparts.”

       

      Well worth a read.

       

       

       

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      1. AgentQ73

        Hi Cyberduck

        I think you misunderstood a post I made last week, apologies if i wasn’t clear.

        You said you had a proxy for measuring new instructions for PB. I asked if you also measure the number of reductions, the number of sales, number of fall throughs, number of completions etc etc or solely new instructions ?

        Thanks

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      2. davehedgehog

        ‘lots of thumb twiddling for traditional agents and staff sitting in the office waiting around posting on social media. Not in my office’s pal – Again, you show your ignorance at not working at the coal face and until you do I take everything you write with a very large pinch of salt. Oh, and ‘Technology reduces the need for less employees’ – That works both ways, whether online or not.

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      3. smile please

        I posted on Twitter yesterday we had 2 competing offers on a property. one was in a chain with PB and circa 10k more. The seller took the lower offer as they did not want to be in a chain with PB.

        The public and agents do not want to deal with them as the service is so bad.

        Also i think they made a loss if you included EBITDA.

        Rumours of a class action lawsuit from PB Reps against PB in Australia.

         

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      4. Robert May

        Explain  why if Purblebricks UK is profitable and as good as is claimed they’re charging so little? It does not make sense to not charge the average commission of  £3372 if you are  exchanging contracts on 88% of everything you list.

        It is wholly wrong of the board to ignore their obligations to their shareholders to be charging so little and therefore missing out on about £2400  pure profit on 8.8 in 10 properties they list.

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        1. Property Bigeye

          Mr May, I can only assume you have no business sense. The whole reason that they get most of their business is down to price point, and national marketing. This band wagon mentality of a large number of butt-hurt local agents on here is pathetic, and once you all go into administration I just hope you all have enough character to admit you were wrong.

          I see no reason why people who comment on here do? You are not making any money from this, nor are you helping. PB will continue to grow and snide comments on a very small property news site will do nothing!

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          1. WestMidsValuer97

            Property Bigeye…what on earth are you on about – Robert May has made a very valid statement.

            We can only assume your business acumen is based on the ridiculous press coverage that PB and others alike receive. Minimal at best.

            This band wagon as you call it, is actually a group of experienced industry professionals – not the dregs of the industry and completely inexperienced ‘local experts’. I think you’ll find that many of them had corporate/independent backgrounds and failed miserably in their careers. The only company going into administration is the one failing to produce a profit after ungodly amounts of investment.

            Your business acumen clearly doesn’t go as far as realising that the only reason PB is around is to make the founders a ridiculous amount of money – with an exit plan from the start.

            The business is not viable on the scale it makes out, although it does have a place in the market, albeit very small.

            Also, their growth is pathetic in relation to the amount of capital raised.

            The reason most agents worth their salt on here reply or comment is based on the ridiculous comments and fantasies put forward by the haters of the High Street Agent. Your comments don’t help either so a little hypocritical of you.

            PB will not continue to grow, hence the losses and drop in share prices. FACT. You are quite right though, these comments on EYE will make no difference – interesting to read though.

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          2. Property Pundit

            You’re new here Property Bigeye aren’t you?

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            1. Room101

              Cyberduck46

              PURP subsidised to be cheaper than many estate agents by a long shot

              PURP has all the shiny tech

              PURP has 70%? of 7%? of the online market

              PURP + ALL other similar entities operating in that PURP space have just 7%? of the UK housing market

              PURP not going well in USA

              PURP not going well in AUS

              PURP UK LPE numbers down to below 640 if you remove the duplications.

              PURP SP low of 203 today despite all this amazingly good news!

              NOW – Take away the PURP national (fallacious) advertising and what have PURP UK got?

              Some residual memories, but ultimately naff all mate.  It would die without the millions pumped into suckering in the next round of misguided FSBO candidates.

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      5. Property Paddy

        Dear Ducky

        I think you make some very interesting points except………….

        Why hasn’t PB actually made enough money to pay a dividend yet?

        Is it because it spends more than it earns?

        Is it because such a fledgling business takes more time to evolve than a normal business?

        Is it because it would need such a big chunk of the market to make a profit that it never will?

        Maybe it should charge even more per instruction?

        Maybe it should charge a commission like er… oh I don’t know 1.5% plus VAT? to make a profit ?

        Perhaps PB should open up high street offices?

        Seriously Ducky.

        SHOW ME THE MONEY

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        1. Lil Bandit

          “it is fairly clear that disrupting a service industry such as estate agency DOES NOT WORK” There is a long list of service industries similar to real estate which have experienced widespread job losses, lets not all get complacent! It will always be adapt or die! But I just don’t think PB will be the catalyst for real estate.

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          1. Robert May

            Can you name  some  of the service industries  similar to agency that have suffered disruption please.

            Be careful not to include retail service industries that sell retail  ‘products’ such as holidays or banking services (which are products not services)

             

            Once you identify the uniqueness of  agency as a proper, intimate and personal, ‘serve a client’ service as opposed to a service where product is  sold to a customer it becomes difficult to find another proper service industry disrupted but the internet.

             

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          2. PeeBee

            Lil Bandit
             
            “There is a long list of service industries similar to real estate which have experienced widespread job losses…”
             
            Show me the list, please.

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            1. Lil Bandit

              Stockbrokers would be a prime example that instantly springs to mind (There is about 5-10% of what there used to be in the city), they used to offer a service based on trust and understanding the market. Unfortunately I just think that technology will change everything. That is not to say that there will be no estate agents, just less than today (In my opinion).

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              1. Robert May

                They are selling a single product to lots of people not a single product to a single person.  Stockbroking is retail sale not a service sale.

                 

                 

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                1. Lil Bandit

                  “This time it’s different”…. Time will tell

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              2. PeeBee

                Lil Bandit

                That’s not a “list” – long, short or medium – that, as you point out, is an example.

                And a totally dissimilar example at that.

                Looking forward to the list.

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  9. J1

    In a seemingly impossible environment to make genuine profits investors will flee
     
    As will their lexperts; but where will these people who have been failed by the Brucey bonus boys end up working next?

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  10. AgentQ73

    Interesting article on the Motley Fool website www.fool.co.uk/investing/2018/10/15/is-the-purplebricks-share-price-heading-to-200p

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  11. mrtickle

    In other news, rain is wet.

    Expect PB to fluctuate on a steady but gradual decline… save for big announcements and the odd upward blip as people get excited.

    We’ve all said it a hundred times – PB is destined to fail, everything else is just delaying the inevitable.

    I once said “Purplebricks will never be a household name”.

    And I stand by that forecast.

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    1. AgentQ73

      To be fair to them i bet they are the most recognised “estate agent” brand in the UK, you would hope so after the amount of money they have spent

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      1. Property Pundit

        And most quickly forgotten.

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  12. Property Poke In The Eye

    These For Sale By Owner/ Vendor DIY sites are starting to crumble.

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  13. Property Poke In The Eye

    PB are also going down the pan!!

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