‘Purplebricks feeling the heat and may never be profitable’ – warning to investors

Purplebricks has ‘fallen out of favour’ with investors and the decline has hit shareholder and fund manager Neil Woodford hard, finance website Motley Fool has said.

According to the latest figures, Woodford owns 28.88% of Purplebricks.

But, says a writer on Motley Fool, the number of analysts and investors who continue to believe in Purplebricks’ growth story “is dwindling and it is easy to see why”.

Author Rupert Hargreaves, writing that “this Neil Woodford favourite could slump 45%”, says: “As I have mentioned before, Purplebricks’ low-cost, upfront fee model works when the property market is booming, and properties sell themselves, but when the going gets tough, properties don’t sell themselves, which is where estate agents earn their fees.

“Purplebricks hasn’t really been around long enough to prove that its model can work in a property market downturn, and this concerns me.

“The company is already starting to feel the pressure here in the UK.

“After years of rapid growth, the firm reported that trading in its home market is currently ‘challenging’ when it released its revenue warning at the end of February.

“In my view, this could be a sign of things to come.

“The UK property market has started to slow over the past 12 months, and Purplebricks is feeling the heat.

“As the group is still not profitable, and even the most optimistic City forecasts do not expect the business to achieve profitability for the foreseeable future, I think there is a genuine chance that this business will have to tap shareholders for further funding shortly.

“Analysts at City broker Berenberg agree, which is why they recently slapped an 80p price target on the stock — that implies a decline of 45% from current levels.

“Unfortunately, if the group’s revenue outlook continues to deteriorate, I don’t think this target is bearish enough.

“Unless the company abandons its global expansion plans, there is a strong chance it may run out of money altogether, and shareholders may not be willing to support a business that is unlikely ever to be profitable.

“With this being the case, I think it is worth selling up and moving on to better opportunities.”

https://uk.finance.yahoo.com/news/think-neil-woodford-favourite-could-092530572.html

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44 Comments

  1. Property Poke In The Eye

    Bye Bye PB.

    £8million a month burn rate..ouch!!

    Remember Agents, dont forget to show the love and hit on the PB Google ads to speed the burn rate. Its costing about £8-15 a  lead on Google at the moment.

    Happy Monday!!

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    1. smile please

      I really should put this on my daily to do list.

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    2. Moveaside01

      It just goes to show how little even the analysts know about the industry and the PB business model let alone the investors? In tough market conditions like this the one thing you have no problem with is listing properties, it’s selling them that’s the problem?

      So Purple Bricks who only need to list in order to get paid are at a massive advantage over the rest of the High Street agents yet still can’t make it work financially? They should be streets ahead of the competition in a market like this……….

      So forget market conditions for their plight, it simply comes back to the fact that it’s a poor business model propped up purely by one of the most expensive advertising campaigns ever!

      The truth will out!

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      1. ArthurHouse02

        But in a market where everyone is concerned about their property selling, vendors are less likely to spend their non-refundable £1500 (ish) is their house isnt going to sell.

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      2. Mark Walker 2

        I have been following the PB share price / share news / daily share trades on the Hargreaves Lansdown investment website for a while now.  They have carried a “strong buy” brokers’ forecast all the way from the share price being at 500p down to 120p.  It’s taken this move by Berenberg move on the price target to drop them to a “neutral” buy or sell status.  Sheeesh, imagine taking that broker consensus at 500p.

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        1. cyber_truth

          I’m not sure what the equity analysts were evaluting. Purplebricks doesn’t disclose sold homes and their model is built on pure speculation. They are bleeding cash flow and do not have a leader. Michael and Kenny Bruce already cashed out and are not experienced to run a global company successfully. Paul Pindar,  Chairman is sleeping at the Board level. He needs to make a move and push the Bruce brothers OUT unless they are looking for a rich buyer to save them. Not sure if Axel Springer has anymore appetite after seeing their investment lose over 66% within the first year. 

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  2. Londonbound

    Staying classy Poke, as always.

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  3. simpletruth47

    Stuff them – if a few clicks can increase their spend so be it!

    interestingly, and something I feel speaks volumes of PB’s mindset – it is easy to get a PB google hit on a ‘sell’ search term – not so easy with a ‘buy’ term though!

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  4. Ohmygod

    I hear their AML fine is a whopper!

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    1. agent37

      The LPEs are individual businesses so I’m not sure the central office would receive a large AML fine. Depends how they view it I guess

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      1. Chris Wood

        As has been said previously, NTSEAT classed franchisees as employees whereas TPO classed them as individual companies. PURP will hope that they can deflect blame and cost of any AML fines that may be due onto the the LPEs along with any GDPR issues which may also arise.

        That said, I, and a number of others on here, have long argued that Purplebricks franchisees are, in fact, no more than convenient patsies to help PB avoid paying National Insurance, Maternity, holiday and sick pay. Should the GMB Union or HMRC ever bring a case as they have with other similar firms, any AML fines will be piffling in comparison to the can of worms that such a case might bring including VAT issues that may also arise from any case that might be theoretically brought and be successful.

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        1. cyberduck46

          >Should the GMB Union or HMRC ever bring a case as they have with other similar firms
           
          Chris, I see you keep mentioning this point. Could you advise of other similar cases HMRC have been involved in.
           
           

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          1. smile please

            Pimlico Plumbers would be a good start.

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            1. wardy

              Hermes is another. The list goes on.

               

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            2. cyberduck46

              smile please, Pimlico plumbers was a civil case brought by workers. Are you sure there have been implications from HMRC? Or is this just speculative?

               

              wardy, it looks like HMRC are looking into Hermes but there doesn’t appear to have been any action. Do you know of any cases where HMRC have imposed additional tax?

               

              Chris Wood was implying HMRC have actually brought cases “Should the GMB Union or HMRC ever bring a case as they have with other similar firms”. If they haven’t then he is misleading people.

               

               

               

               

               

               

               

               

               

               

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              1. Chris Wood

                It’s a forum. Forums are where ideas are expressed, arguments are proposed and countered and theories are discussed. HMRC may bring a case, they may not. I certainly don’t know Wharton’s they will or will not do but, I can speculate.

                What I DO know, is that some current and former LPEs ARE on record as saying they may bring a case and, that GMB Union DID bring a case and have said they may bring more.

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                1. cyberduck46

                  Last run through of the day.

                   

                  Chris, if you are speculating you should say.

                   

                  “Should the GMB Union or HMRC ever bring a case as they have with other similar firms”. Here you have said they have brought cases with other similar firms. Nobody has been able to substantiate this claim.

                   

                  If you can’t substantiate claims then it is misleading.

                   

                   

                   

                   

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                  1. The date & time sponsored by PIE is;

                    You must be spitting feathers that purp cant substantiate their sold/completion ratio then cyberduck?

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  5. AgentV

    Does anyone know the total of investors money that has been spent by PB since launch? Just interested.
    BSOS23PC

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    1. Bless You

      It worries me that investers looking after billions aren’t doing their research. Top names were saying this share was worth billions a few weeks ago … they can’t be even reading trade forums like PIE . We’ve all know it was a fake business from day 1 .

      Suppose we sounded like remainers. Idiots don’t want to hear the truth.

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      1. cyber_truth

        We agree.  You have to give Bruce brothers credit for cashing in making tens of millions within a few years. Even some of the former founding members, David Shepherd, David Kavanugh, Matthew Farrow and Neil Cartwright all cashed in on a broken model. At least they were smart enough to exit.  

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  6. cyberduck46

    >“The UK property market has started to slow over the past 12 months, and Purplebricks is feeling the heat.

     

    I’ve got PB’s UK sales instructions for FY2019 slightly ahead of FY2018 with a couple of weeks to go. So still growing but very slowly. Fewer LPEs.

     

    Things not going as well as they had hoped perhaps and the USA and Oz will need more investment if they are going to continue but operationally the UK is in decent health.

     

    This isn’t a comment on which way the SP is heading. That’s anybody’s guess.

     

     

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    1. AgentQ73

      Hi Cyberduck

      How many fewer LPEs and what the turnover rate like ?

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      1. cyberduck46

        >How many fewer LPEs
         
        Unfortunately it’s been a couple of weeks since I have a number because PB have changed their page where it was possible to count LPEs. Now it isn’t. Not sue if there’s another method.
         
        I have 642 on 1/4/19 compared to 735 on 1/4/18. So increased instructions from quite a significantly lower number of LPEs.
         
        PB acknowledged that they increased LPEs in anticipation of a strong 2018 spring period and it didn’t materialise. I see the drop to around 640 as reflecting market conditions as it’s been oscillating around thte 640 mark for a while now. Probably since November last year.
         
         
         
         

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    2. MarkRowe

      Hi @Cyberduck,

      – Where did you get the instruction figures from?

      – What are the instruction numbers that you have for 2018/2019?

      With respect, you’re usually quite vocal about the share price, so are you saying that confidence is severely lacking in Bricks now, so it’s hard to guess which way they’ll go?

      My fairly well informed and logical guess? Down, they’re going downwards. There’s now so much evidence supporting the fact that as a group they haven’t made profit yet, coupled with a tougher market and the fact that customers have to pay no matter what the result… add in a whole host of other issues… they’re going down, just to repeat that’s the opposite direction of up. I would have thought that was quite a straight forward observation? That and the fact that they’ve lost almost another quid off the shareprice within the last six months..

       

       

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      1. Hillofwad71

        Mark

        Being no great fan of Bricks Cyberduck is correct they have shown a modest increase in instructions this financial year ending shortly and that is excluding those that have been rebooted and recycled

        Still no sign of any reduction in marketing spend The overseas ventures are chewing up the cash Oz has stalled and no evidence of any serious penetration  in the USA

        Their transportation of players overseas hasnt worked well with Ken returning with his tail between his legs Still that means he will be able to attend more home games at his football club Larne more easily.

        They have sent Vickerstaff over to Germany to teach  them a thing or two .Another one of the  Bruce’s ‘mates from Burchell Edwards They can only hope that Ronaldo has arrived not Ali Dali !

         

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      2. cyberduck46

        >With respect, you’re usually quite vocal about the share price, so are you saying that confidence is severely lacking in Bricks now, so it’s hard to guess which way they’ll go?  
         
        Mark, I rarely if ever talk about the SP. It’s determined by supply and demand and trying to guess how other investors think is nigh on impossible. It wouldn’t surprise me if the SP moved in either direction.  
         
        >they’re going down, just to repeat that’s the opposite direction of up  
         
        UK Instructions are up very slightly. Perhaps 6% year on year by the end of the month if things continue as they are. My proxy for FY 2018 was 61625 sales instructions and my proxy saying 825 more than that so far.
                

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    3. Woodentop

      Err no it isn’t in decent health, you do talk utter tosh at times in a  vain attempt in support of PB. Again PB have backtracked announcing that they will still be in the red first quarter, as every quarter from the very begining. They are losing LPE’s left right and centre,  who they stuffed with commission only that requiries them to slave labour 70 plus hours a week to get £26,000 PA (90 hours LPE reports) as reported last week.  
       
      In business, a respected employer is one who is there for its employees as well as its self interest and a successful company is one that also looks after its public customers. A viable business is one that makes a profit. A honest and respected company is one that doesn’t have the need to mislead or rig its public perception. A good honourable owner and member of staff are ones that can go to bed at night and sleep knowing they did their utmost best and proud to be an estate agent.  
       
      Where will you find these people ……… in the High Street and why they still retain 95% of the public confidence after all these years and £m’s spent by these cheap fee, non-profit making on-liners who to try and win the public  over ….. and failed miserably.

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      1. cyberduck46

        >you do talk utter tosh at times in a  vain attempt in support of PB
         
        I have no motive to support PB. I just report on what I see. I see modest instruction growth in the UK. They have been profitable in the UK for a while now and if they continue to increase margins and costs remain under control then I expect to see profit growth for the UK.
         
        We will see if I’m right soon enough.
         
        USA & Oz are a completely different story.
         
         
         
         

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        1. Woodentop

          I did say you often speak utter tosh and your reply is a classic and now confirms you also live on another planet. Before it was Jeffries who gave a professional and fair assessment (proven correct), now the other are starting to line up and agree. The facts are there and yes you do support PB, just about everyone here must be falling of their chairs laughing.

           

          “We will see if I’m right soon enough”. When is soon….. how long is a piece of string? Its been 7 YEARS.

           

          Todays fact by Founder Michael Bruce “Traditional estate agents have charged too much, for too little, for too long.”

           

          It should read “PB have charged too much, for too little, for too long”.

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  7. WiltsAgent

    Their TV ads used to really get my goat. Now, however, I just laugh at them as they continue burning the cash.

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    1. Woodentop

      Commisery ….. for vendors who paid a fee for no success.  
       
      Commisery ……. for vendors that expected an high street agents serivce but didn’t.  
       
      Commisery ………… for LPE’s who thought they could earn meggar bucks without much effort  
       
      Commisery ………………. for LPE’s working 70 to 90 hours week, the equivelant return of the minimum working wage.

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      1. The Future Is Tech

        Commisery…… for sellers who instructed an online agent to save money but set the price higher because they were allowed to then went on not to sell Commisery…… for sellers spending ridiculously high fees to sell a house with the high street. If you are motivate to sell, why spend so much on a 9 til 5 service? Commisery……..for over recruited areas or LPE’s taken on thinking they didn’t have to work very hard as the fee is a no brainer. Commisery…..for LPE’s who have no idea how to be self employed and manage their working time. Give it a rest mate, PB have a good product, just needs tweeking on the execution.

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        1. htsnom79

          As was once memorably said of Sam Allardyce, the self satisfied air of someone savouring the smell of their own farts..

          Make some money bud, then come back to me.

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  8. smile please

    Question is ‘when’ not ‘if’ it goes the way of the likes of Emoov.

     

    However, watch this space for news on Yopa.

     

     

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  9. Woodentop

    “Purplebricks hasn’t really been around long enough to prove that its model can work in a property market downturn, and this concerns me”.

     

    They had tried as estate agent and failed long before they came up with PB, so the knowledge was there and they knew only too well what they have been doing …. not use their own money, not pay salaries, not sell properties …. a real confidence vote for any sensible investor. All hyped up for share price which has come crashing down. We haven’t heard the last of this SCANDAL.

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  10. Woodentop

    “With this being the case, I think it is worth selling up and moving on to better opportunities.”

     

    And so it starts.

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    1. cyberduck46

      >And so it starts.
       
      What starts?
       
      You do realise that when somebody sells shares, somebody else buys them don’t you? 
       
       
       

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      1. Chris Wood

        “You do realise that when somebody sells shares, somebody else buys them don’t you?“
        You do realise the people who buy shares in a fire sale or falling market are often risk-tolerant/ foolhardy/ thrill-seekers/ hubristic investors (delete as applicable) who buy in the belief the fall is temporary and the company may recover earning them huge profits but many of whom will just end up substantially poorer owning masses of virtually worthless shares?

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      2. HMHB49

        Cyberduck, please do not suggest you do not favour PB, your fingerprints have been on numerous forums for several years. PB’s numbers have been more or less static since June/July last year. With regard to share transactions, market makers!

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        1. cyberduck46

          >Cyberduck, please do not suggest you do not favour PB, your fingerprints have been on numerous forums for several years.
           
          I said I don’t have a motive to support them. If I see misleading information then I may feel the desire to respond. If you’ve seen my comments elsewhere then you will have noticed I was poining out the dropping LPE numbers in Oz before anybody else. I tell it how I see it and I try and stick to facts and figures. 
           
          We’ll see what PB’s UK performance was like in the 2019 FY pretty soon. I doubt I will be proved wrong but it wouldn’t be the first time and I’ll hold my hand up if I am. 
           
          >PB’s numbers have been more or less static since June/July last year.
           
          A modest increase of UK sales instruction between financial years is what I said. I think they will increase profitability in the UK but a lot depends on marketing & admin costs. 
           
          “The UK property market has started to slow over the past 12 months, and Purplebricks is feeling the heat.”.
           
          I just don’t see that as accurately reflecting what has actually happened and that is a moderate increase in instructions with fewer LPEs and an increase of fees in there too. I would also wager a higher profit margin from selling more ancillary products. Whether they’ve had to increase marketing & adming costs as a percentage of turnover is unknown so this can’t be the grounds for the claim from Motley Fool. 
           
          Of course market makers are involved but they don’t build up holdings. Essentially it’s a buyer for every seller. The question was “what starts” when woodentop said “and so it starts”. Unfortunately he didn’t reply.
           
          That’s it for the day from me.
           
           
           
           
           

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          1. Woodentop

            “That’s it for the day from me”. Normal response when you have been caught with your pants down.  
             
            “You do realise that when somebody sells shares, somebody else buys them don’t you?”  
             
            Yes if is it a profitable business or has potential, which PB is not and never will be. It will be treated like the plague!!!!!  
             
            And precisely Mr Duck who receives the revenue when investors sell their shares? and how can this be of benefit to any failing company? I can’t wait to hear your reply.  
             
            Ever heard of any on-liners failing and going bump ……. the list is long and now its starts for PB as the city analyts, they very experts investors with due diligence listen to, have given up on them!

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          2. AgentQ73

            I believe the increase in fees went directly to the LPEs in an attempt to staunch the flow of leavers. Anecdotally a failed attempt.

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            1. cyber_truth

              The increase in fees was to try to stop LPEs from exiting. Kenny Bruce came up with that wisdom in all markets while still trying to sell everyone on the future share options.  Michael and Kenny lost the team.  Just read the comments and as a former LPE, morale is sinking fast.

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