One of the property industry’s best known figures, Harry Hill, has said that Purplebricks’ £240m valuation is a case of the emperor’s new clothes.
Online agent Purplebricks is due to start trading on the AIM stock market next Thursday, with a valuation of £240m.
Hill ran Countrywide for 20 years, founded Rightmove and is now CEO of Hunters, having steered it through its stock market flotation earlier this year.
At flotation, Hunters had a valuation of £16.9m – vastly short of the well-publicised Purplebricks price tag.
Hill told EYE yesterday: “Does the emperor actually have no clothes?
“Not everybody will remember a funny little song about masses of people admiring his new clothes until one little boy observed that actually the poor chap was naked!
“However, I brought it to mind recently when I saw that someone in their eternal wisdom had decided that Purplebricks, created by guys that I know very well and like, is worth £240m, and that many people believe they will change the world (is that what a disruptive model means?).
“I am a directors of Hunters, a well-run profitable and publicly quoted franchise agency business.
“There are three not dissimilar quoted businesses in the UK– Belvoir, Martin & Co, and Winkworth.
“These four businesses have roughly approaching 800 offices trading around the UK.
“I suspect that more than 50% of the revenue of the four is driven from established letting clients and that next year the four will produce profits of circa £10m and pay shareholders a significant dividend.
“Their combined market capitalisation is around £100m.
“I haven’t seen Purplebricks’ business plan but would bet my house to a box of matches that it will not create a similar profit in the next several years, if ever.
“And yet it is considered to be worth well over twice as much as these four businesses put together.”
Hill added: “Good luck to the founders, and even better luck to people who opt to buy the shares when they start trading on the stock exchange.
“I do think that a percentage of UK home owners will opt to try the very low prices being quoted by online agents, but whether enough of them will do so to enable even one to make significant profits remains to be seen.
“Meanwhile, the Hans Christian Andersen song just keeps going round and round in my head.”
Hill’s words are likely to resonate not just with high street agents, but with Purplebricks founders Michael and Kenny Bruce.
The brothers ran high street chain Burchell Edwards, which they placed into administration and then bought out, with a number of jobs having been shed. The business, with branches in the midlands, was subsequently sold to Connells.
They said they would concentrate on JKM Property Solutions, a business that had Hill as chairman.
JKM had a complicated business model involving buyers putting in offers for run-down properties and JKM doing work such as putting in Magnet kitchens and new bathrooms between exchange and completion.
The business, into which Hill had personally poured £1.5m, was wound down in 2012.
Hill also has personal experience of online agents, having been on the board of easyProperty and originally named as its chairman.
However, he revealed last December that he had resigned – without animosity – because he had “vehemently” disagreed with easyProperty’s valuation, then £66m but now over £100m.
We ran the story about Hill’s resignation here