Where now for Purplebricks?
With its founding fathers no longer in residence, those connected to Purplebricks must surely be now wondering where its future direction lies.
All eyes are on new CEO Vic Darvey who took over the helm in May, just weeks before Purplebricks reported £52m losses.
And what a challenge he has on his hands.
As well as overseeing the company’s exit from Australia and the USA after their failed ventures overseas, along with very little impact in Canada, he now has to shore up the home territory to bring the company back into profit.
So just how will he do that? The company has tried to buy its place in the market by throwing millions of pounds into advertising campaigns in order to get volumes of listings. So where are those millions coming from now?
I’d hazard a guess we’re going to see far less advertising over the coming months and particularly into the winter period.
It’s rumoured that they will move to a no sale no fee model, which is music to most estate agents’ ears as it will mean that Purplebricks will be competing on the same footing as everyone else.
It will make the public think twice about risking an internet / hybrid versus traditional service.
This will surely ring alarm bells with every Purplebricks’ Local Property Expert, who have been working all the hours possible in order to make a living from their meagre commission – with all the added complexities and costs of being self-employed.
Not only does Mr Darvey and his executive board have to appease their staff and LPEs but they’re also under huge pressure from their main shareholders.
German publishing giant Axel Springer holds 26.5% of the shares while beleaguered fund manager Neil Woodford has 21.5% of the shares and is desperate for a bigger return on his investment, one of many which has had disappointing results and caused him to close his fund.
We’re all hoping the market picks up after Brexit – but I imagine Vic Darvey is one person hoping more than most that his background at MoneySuperMarket.com will help Purplebricks become the next Amazon.
He just needs to convey that to the troops – who at least understood what the Bruce brothers were trying to achieve – even if they couldn’t make a profit from their failing business model.
Unless he starts investing in customer care, training and technology, and keeps up his ad spend, the exodus of key people will continue – along with their Trustpilot reviews – and Purplebricks could well be staring into the technology bin of history.
Meanwhile, what hope is there for Countrywide now?
Countrywide – described recently by its former CEO Harry Hill as ‘beyond salvation’ – continues to limp along with its share price hovering around the 5p mark.
Yet the company managed to put a magnificent gloss on its recent results – only losing £37.7m (£46.4m before the benefit of changes to its accounting for leases) in the first six months of this year, down from £206.4m a year earlier.
This was set amidst a backdrop of falling sales from £302.9m to £290.6m.
The main way they are cutting their losses is to get rid of a number of branches. Yet they remain coy over the exact number. They can’t be worried that disclosing this will cause their share price to tumble – it’s already at rock bottom.
It strikes me as odd that Countrywide should describe its turnaround as ‘bearing fruit’ when it is built around a closure programme, aimed at combatting almost £200m’s worth of debt (when lease liabilities are included with the £100m of bank debt).
I’m also struggling to see where it’s investing in its marketing, social media or online advertising. When did you last see a Countrywide branch doing well in the search engine rankings?
Closer analysis of their balance sheet shows another £15m was needed in H1 and drawn on the £125m debt facility, leaving only £25m available, and the leverage covenants had to be increased to avoid potential breaches.
There also appears to be an £8.9m spend on tech but this seems a big spend when the business is contracting.
Will it ever turn the corner? It’s hard to see how.
Rightmove leads in wrong direction
It must be galling for every estate agent to see Rightmove’s revenue and profits increase yet again – despite agency membership falling alongside a 7.6% decline in leads.
Their profits are made from hard-working agents desperately fighting for survival in a tough market, whose average monthly payment to Rightmove has now broken through the £1,000 barrier.
A number of agents have left Rightmove – though these were passed off as low-stock branches who had been forced to leave the industry – yet I understand that many of them have switched to OnTheMarket instead.
The combined effect of higher charges and lower leads means that for every £100 they spend, Rightmove’s advertisers now receive just 16 leads compared with 28 leads in 2015.
At the same time, OnTheMarket’s leads have grown rapidly and branches are also reaping the benefits of increasing their social media and digital advertising spend.
It’s a shame that Rightmove have taken their customers for granted. But given their track record, it doesn’t come as any surprise.
* Paul Smith is CEO of Spicerhaart