With a downward swing in its profits of almost £50m in just one year, it’s getting increasingly hard to understand how Purplebricks can survive, not least with a recession looming.
Its newly released annual accounts show that its reorganisation has taken it from a £6.8m profit last year to a £42m loss – at a time when the market was the best it has been for a decade.
It reminds me of when Countrywide were heading in the same direction, only to be rescued at the last minute by Connells. Who will come to Purplebricks’ rescue? Not the shareholders, of that I’m certain, with the share price hovering around the 15p mark.
I’m also truly curious about the decision made by Non-Exec Chairman Paul Pindar to buy 2.5m shares on the same day the results were announced. Isn’t that like taking a sack of £50 notes and setting fire to it? One City analyst has said it is not forecast to become profitable over the next three years. Can they last that long?
Purplebricks’ USP has always been the lowest fee. They were the cheapest, but not any more. They always talked about being tech led, how can they be tech led without a significant investment and constant innovation in technology? How can you grow a business when you’ve cut head count and marketing? How can you cut costs and still deliver? So the CEO’s 2023 prediction could be tough to deliver.
Their new fee structure is still way too low, and in my opinion – as someone who set up an online-only estate agency and couldn’t make it work – they need to double it, at the very least.
Then they’re up against thousands of traditional estate agents with, what I believe, is a poor infrastructure to cope with the market change. Where is their other income coming from per instruction? Like others who’ve tried the low-cost model, they’ve discovered it just doesn’t pay.
We’re also heading into very turbulent times and I don’t believe there will be an estate agency in the country that won’t have to put up its fees because of the rise in the cost of living, combined with the challenges facing the housing market. Is Purplebricks a business that can adapt to a buyers’ market in a recession?
Purplebricks may have £42m in the bank but if it continues burning through cash at the same rate, it won’t be around in 18 months’ time. How can the city even think this business can survive?
The company has now said it wants to recruit its own mortgage consultants and be an appointed representative, which feels like a desperate roll of the dice.
As someone who started a financial services company from scratch when we took over the Woolwich Property Services estate agency (which became haart), we needed 189 mortgage consultants. It took three years and a £24m investment to get there.
If they think they’ll have sufficiently trained mortgage consultants by the end of the year, I’d say they are clutching at straws. Then they have to get the business in; do they have the right culture, drive and understanding of how to achieve the FS income they so desire? I don’t think they’ve proved that yet in their current model.
They’ve admitted their current sales and marketing initiatives haven’t worked, so they’re now going back to the table with a new ‘highly targeted’ campaign. What does that mean? What weren’t they doing previously in their well-trumpeted marketing? Is it just PR spin?
Purplebricks, you have been an annoying thorn in our sides, your model has now been found out. Please don’t make it a long, painful goodbye. Go now.
You’ve had your fun, be honest with your investors but, more importantly, your long-suffering staff.
I’ve no doubt the thorn is wilting – and will eventually shrivel up.
Paul Smith is chief executive officer of Spicerhaart.
Comments (4)
You have to admire Mr Smith for his rhetoric on other firms. In other news the branch manager of an office in West London has not been seen at his desk for months.[Sentence removed as it breached posting rules]
Having worked for Purplebricks for 2 years only recently leaving this year, I have to say it is the worst company I’ve ever worked for. Absolutely poorly managed with no regard for the staff on the front line. I did not know one colleague that was happy, my T O was corporate through and through with no people skills at all. Making you go to appointments purely as PR to households with absolutely no intention of listing yet still requiring 38% conversion you are always doomed to fail as it basically was a free valuation service to most people. Not within standing it absolutely ruled your life, no start time and no stop time, no such thing as holidays.. No one would listen, there was no exit interview, simply no care for its staff whatsoever. Even if it was the best business model in the world it can’t operate with a 99% miserable workforce. Good riddance
Tick tock … the battery is about to expire. Never was a business model that could survive, as many other before have demonstrated. Once times get tough, it was always going to be exposed to a tough market and sold its self as a national company when in reality it was a very small player once you take a step back and look at local coverage and that is where it has a very small presence in reality. Spent meggar £m’s on advertising to prop itself up and where has it got it? Burned investors cash, share price collapsed which was inevitable for those who know what they are talking about, while other buried heads in the biggest bucket of sand., reputation for treating its own self employed/employees poorly, poor management supervision and more than one investigations for poor practices.
They came out of the starting block to cripple the high street agents, not many will be sorry to see them go. Not long now.
Hope this passes the sensor But how’s the property mark investigation going and is the worm catcher still there? PB have not been seen to have similar