Opinion: Where do Purplebricks and Countrywide go from here?

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

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8 Comments

  1. agent37

    So much agenda in this, ‘opinion’ doesn’t quite cut it!

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    1. PeeBee

      Is that an opinion – or is there an agenda behind it, agent37?

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  2. Hillofwad71

    BRICKS

    Well the much maligned Neil Woodford has already made a decent return on his original £7m investment .You can’t fault him for that. In addition he has cleverly allowed Tosca and Merian a couple of major players  now holding 10% and 16% respectively into the game to  give Axel a run forr their money.

    In addition this has moved the SP back up from 100p to 125p+ Woodfords remaining  21.1% shareholding now sufficent to give Axel a majority shareholding and takeover the company  should they choose to do so

     

    Bricks are badly in need of some wise Teutonic management.

     

    It looks just to be a case of timing. What is clear is that the tier of management below  the  greatest showman M Bruce  were never quite up to the job .Some shuffled out to the colonies to drum up the expansion which has backfired miserably .They even seem to be making hardwork  of shutting down the operations  .Initial recruits were mates of the  Bruces  from their Burchell Edwards  days .

    Fair play they managed to  reel in the investment   create a perception of value for money over reality .Ushered in some great sponsorship

    The Scottish  rugby team with Purplebricks emblazoned on the pitch and the players  running around covered in purple .Inspired choce .Doddie Weir campaign  agaian  a clever ploy Melbourne Storm the rugby league team in Oz are having one of their best ever seasons .It was a shame that  Bricks were having the polar  opposite !

    They are now desperately in need of  finding new avenues to increase fresh reveue streams now instructions have reached a glass ceiling inthe UK and in reverse

     

    Vic already  looks very short on ideas Increasing fees will only serve to inceasingly alienate a sceptical audience

    Time to pass the baton  .

     

     

     

     

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    1. Ostrich17

      “Ushered in some great sponsorship”

       

      Very true, although selecting the team to back is always a bit of a gamble – worse odds than tossing a coin 😉

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  3. Alexwebb

    Has Spicerhaart left Rightmove yet  or is this just a promo of OntheMove? ( sorry I mean Onthemarket).

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  4. padymagic

    I think you’ll find rightmove are making hay while they can. There is good chance whole geographic areas will switch off rightmove, once they have confidence OTM and Z are reliable enough.  When this happens a couple of times then and only then will rightmove change their tactics.

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    1. MH -RM

      Here’s hoping … every month When that big old DD hits the back of RM nett it gives me the ump …  bitter? Yup … you got. Come on Paul … lead the way

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  5. Malcolm Egerton

    “When did you last see a Countrywide branch doing well in the search engine rankings?” Greene & Co? They are first in Maida Vale, Belsize Park and Kensal Green and second in West Hampstead, not bad when you think of the competition in those areas.

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