OPINION: Is the Purplebricks wall collapsing?

With Purplebricks’ CEO Vic Darvey leaving the business, citing ‘personal reasons’, how long it will be before the Board is forced to resign over the catastrophic failure of the business?

Surely the writing is on the Purplebricks’ wall given its disastrous slide in share price in recent weeks to 14.7p as I write – and 12.25p at its all-time low.

How much more will German shareholder Axel Springer take before pulling the plug on this doomed venture? I’ve always said estate agency businesses should be run by estate agents.

Less than five years ago, shares were at an all-time high of 514.5p. The business is now worth a tenth of what it was then. Just £45.1m. It’s a sobering thought. Will there be a For Sale going up on this company any day soon? I’m pretty sure there will be plenty of organisations wanting the brand name, but with a better model, one that turns a tidy profit.

Investors have got cold feet, running scared after its dramatic collapse in market share, from 5.1% to 4.6% over the year to April 2021– and now at 3.9%, as revealed in their half year trading update in January.

How Purplebricks thought they could achieve a 10% market share, as they consistently stated, is beyond me, particularly with so many online agents snapping at their heels. Though I can see the likes of Strike and Yopa heading exactly the same way.

Vic Darvey
Vic Darvey

I must admit I also raised an eyebrow when I read Vic Darvey’s comments that they’d had ‘4,500 applications from the High Street’ since September. Given that there does not appear to have been a mass exodus of High Street staff (and I don’t know of anyone in the industry talking about such an exodus) the high number of applications does not appear to have resulted in significant numbers of experienced staff joining Purplebricks.

These sorts of comments are like those that came out of the Countrywide camp with Alison Platt at the helm – and look what happened there.

Falling cash levels in a market where instructions and sales are dwindling is not a recipe for success, especially at a time of rising inflation and international uncertainty. So I can’t imagine why existing agents would rush to jump on the Purplebricks’ bandwagon. Nor can I see them ever becoming a truly national brand as there are many areas that simply won’t be profitable at the fees they charge.

With so much uncertainty, surely customers too must be questioning whether they should be putting their property on the market right now with Purplebricks?

When it first launched, a decade ago, Purplebricks was a real challenger to the ‘old’ model of estate agency and was innovative in becoming the largest estate agency by stock. So to see what’s happened to it, with its lettings woes and the way it is burning through investors’ cash, is a tragedy for its workforce under its new fully employed model.

The company has potentially put both itself and landlords at risk of claims in relation to registration of tenancy deposits, which could result in Purplebricks having to pay out almost £4m. It also reported a £20m loss for the first six months of the year, plus it’s facing a class action lawsuit from former Local Property Agents.

Even its latest ad campaign is coming under fire amid concerns that it’s misleading. It’s thrown millions at its branding and marketing – an eye-watering £18.9m in the year to April 2021 – a fifth of its revenue, although down 8% from £20.6m the previous year, and way down from the £26.7m reported in 2019.

If it can’t make money with all the exposure and brand recognition that it has, it has only one choice, which is to up its fees by at least £1k and behave like a ‘normal’ estate agency business or give up!

The City just doesn’t believe its business model is a model of the future.

Paul Smith is chief executive officer of Spicerhaart. 

 

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23 Comments

  1. Diogenes

    A couple of years ago, before the madness, a near neighbour instructed Purplebricks and paid them their upfront fee. The house went on the market for £580k. She did so because of a promised saving of c. £4k. After no communication for 3 months, she went to a local agent – lovely people who have been here for years. They charged her 1.2% inc. VAT and sold the house in 2 weeks for £610K. Everyone locally knows this story as every agent still relates it at valuations.

    The point is, the arrogance of PB refusing to acknowledge their model doesn’t work is astonishing. All that ‘commisery’ stuff was cheap and untrue. If they are to survive, they need to get people who have actually run a business. Lettings will not improve which is where the inherent value of a business actually lies. They had the audacity to claim decent estate agents were ripping people off.

    I suspect they will de-list so that they can work without the eyes of the world watching the business unravel further.

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    1. janbyerss

      I know 2 people who sold in a week with PB

      I have also instructed high street agents who have been useless

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      1. Malcolm Egerton

        You can fool some of the people…

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        1. janbyerss

          2 people I know sold via PB at the same price they were quoted by high street agents

          I fail to see how that makes them a fool

          As a developer I have never used PB personally but I have used high street agents some of whom have been excellent some of whom have been useless

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          1. Woodentop

            Do you mean accepted offers! Big difference as I have sold many (using your analogy) within less than 24 hours and so have many other agents and its been happening for decades.
             
            It is not the brand that sells a property … its is the people that help sell. Some are good and some are bad, no matter which camp they are in.

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  2. Robert_May

    “If it can’t make money with all the exposure and brand recognition that it has, it has only one choice, which is to up its fees by at least £1k and behave like a ‘normal’ estate agency business or give up!”
     
    If Purplebricks specialised in portal listings and dropped any notion of offering a duty of care and skill estate agency service the consumer offering would be clear and defined. 
     
    A professional passive intermediary service that is unequivocally clear that vendors are getting a portal listing and nothing else aimed at FSBO vendors, asset managers, equity release sales and  part exchange developers;  any vendor who has no need  for the skills, empathy and service of an agent. It’s a nice simple niche that doesn’t require the trappings of full service.
    A staff determined by the  volume of listings and controlled costs, its not hard to see an ego and ambition driven shambles being rationalised into a  sizeable, sensible business.
     
    I’m not being rude or mean by describing the problem there as ego and ambition driven, that is the nitty gritty; attempting to be  cut  price  full service  Waitrose rather than great value no frills  Lidl is by my  opinion of where their problem lies.
     
    The share price doesn’t really matter now, the money building the brand has been spent, the trick for someone is to take what’s there and do something sensible with a very  well known national brand.  
     
    Purplebricks, we put your property on the portals for a fee- we don’t do  everything traditional agents do but you can’t buy  Finest at Value prices!  
     
     Current market cap for what’s there is a bargain.  The 5% sector niche is worth  about £60m a year

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    1. Estate Agent W1

      Agree with your comments Robert but I think Strike are stealing the 5% & offering a fee service. What the greedy public who use these agents do not understand is the monies they earn from the referrals and the potential loss of value when selling through these type of companies.

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      1. Malcolm Egerton

        The flip side of all this is that estate agents – FS agents – need to differentiate themselves from the likes of PB and Strike. PB mobilised the power of online reviews when Trustpilot and Feefo had credibility (one look at their Google reviews – oh dear!) and, like it or not, prospective fee earners are mightily impressed by any business that scores 4.5+ with three figures of reviews.

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      2. Robert_May

        The competition between Strike and Purplebricks is something the incoming CEO has to understand and tackle. Fighting 6  #local agents  for instructions per activity centre isn’t something they should concentrate on, making sure they don’t lose out to Strike is.

        What the 5% do is hardly worth thinking about now,  full service agency comes at a price and  consumers know what to expect from  portal listing passives; not actually  local, not actually expert, not actually open 24/7/365, the claimed saving is a net loss of about 4% and having  their  ‘barge pole’ offers recommended by traditional agents or accepted by  vendors in a chain is errr…. unlikely because of the now stereotypical delays and issues that result  from a lack of service and sales progression.

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  3. FutureWarrior

    PB has had its day and now it’s time to move on.

    it’s clinging on and it’s embarrassing. There is not that number of applicants from the high street – every credible recruiter knows what’s happening in talent acquisition at the moment and that’s simply not the case.

     

     

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  4. Jon Hunt

    Exodus of staff. A quick search on linked in reveals SH has a vacancy list of 975. I would imagine tough to recruit after recent scandals, an aged business model combined with odd leadership choices. We have all seen some of the bizarre SH linkedin videos online, one even with an owl. It is understood even Mr. Vickerstaff has now gone too, quite sensibly in terms of his onward career.

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  5. 0racle

    “ I’ve always said estate agency businesses should be run by estate agents.”

    interesting comment from a guy whose most senior people are mortgage brokers and IT geeks, who have never sold a house between them!

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  6. watchdog13

    It would be a mistake to write PB off entirely. Ok , it’s model is flawed but it has massive brand recognition. Most homebuyers do so very infrequently and probably don’t know anything about PB’s offering but do know the name. Therefor if it switched its model to that of a standard high street agent, could it be a successful model?
    Thoughts please

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    1. janbyerss

      You make a valid point.

      The vast majority of people are not engaged in the estate agency business.

      It is not the centre of their lives.

      They have no idea who is a good agent and who is not.

      Indeed the only way to find out is by instructing an agent.

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      1. Woodentop

        Err no!

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    2. AgentQ73

      In theory they could but the cost involved and the lack of income before exchanges come in would finish them off. Especially if they carry on referring to their current conveyancing partners.

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  7. Malcolm Egerton

    I’m surprised no one has mentioned Strike?

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  8. Epicurus

     

    Vic Darvey, Alison Platt

    Vic Darvey, Alison Platt

    Vic Darvey, Alison Platt

    Vic Darvey, Alison Platt

    Vic Darvey, Alison Platt

    Vic Darvey, Alison Platt

    Vic Platt, Alison Darvey

    Vic Platt, Alison Darvey……………

    The End

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  9. conoco9

    I know two people in senior positions in PB who were useless high street agents. The recruitment has been nothing but shocking.

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  10. Woodentop

    Tick tock, tick tock …..

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    1. Robert_May

      You say that  Woodentop but even if PB is allowed to stall and spin into the ground   something else will fill the void and satisfy the demand; 60,000  completions a year  ( 115,00 instructions @ £999) that don’t sit naturally with full service agency will find a home.

      In my book this 5% fringe is a natural loss leader for Connells/CW whose sector dabble via Hatched was up against  the glory days of  disruption which was being dominated by PB.

       

      The  brand and the technology they’ve got  combined with the sector income opportunity plus the up-sell opportunity to full service  has, in my mind got to be worth more than the current market cap; £57.3m.

       

       

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  11. NHGURU

     

     

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  12. NHGURU

    PB relies on a volume  market or the numbers don’t stack. -no lettings -no new homes-cheap fees

    -Lightweight management -panic recruitment and now HR running the show -what could go wrong

    i wonder  if Spicerhaart would do a deal-JV- on this with Axel -they want hyprid  product -the brand is the right colour

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