Purplebricks shares went up yesterday, despite announcing losses and a decision to close its business in the US.
Despite the apparently negative news, the shares went up from 93p at the start of trading to as high as 98p, before closing at 95p.
The City seemed undismayed by Purplebricks’ pre-tax losses of almost £56m in the year to the end of April, and looked to have been more impressed by Purplebricks’ performance in the UK.
Here, Purplebricks said it had revenues of £90.1m and an operating profit of £5.3m.
Closing the American and Australian operations is going to cost Purplebricks £10-12m.
Industry figures were unimpressed.
On EYE’s busy comments section yesterday, there were repeated questions asked about how many sales Purplebricks had actually completed on, and in how many cases people who had paid upfront went on to instruct another agent who did sell their property.
There were also questions asked about the £1,243 Purplebricks reported as making per instruction, split between listing fee and ancillary income.
Away from EYE, City analyst William Packer of Exane, calculated that the revenue per instruction represented a fee of 0.6%, against the industry average of around 1.1%.
While it was not clear how he calculated this, he said that the critical cost per instruction was £382, up 15%.
Colby Short, of comparison site GetAgent, also criticised the results posted yesterday as being heavily spun.
He said: “Purplebricks has put more gloss on their UK performance than a drunk decorator, and no wonder, considering the monumental failures elsewhere around the world.
“Now that they’ve returned from their international crusades with their tails between their legs, they will no doubt be lining the City up for further investment to support their focus on the UK.
“However, whilst they’ve grown revenue and claim they are ‘successful’ at selling, you just need to read between the lines to see that this success isn’t all it’s cracked up to be.
“Although they are very vocal about their figures up until the sold subject to contract stage, their performance when actually getting a sale over the line remains shrouded in mystery.
“There is a good reason for this, and at a top level they have failed to gain any meaningful ground when it comes to the number of properties listed despite huge marketing spend.”
Marc von Grundherr, director of London agent Benham and Reeves, said: “Unfortunately for Purplebricks, the figures and the failure of their international escapades will have left them feeling a little blue. That’s if the colour hasn’t drained from them completely.
“A retreat from the US being announced as well as its previous admission that their Australian project has also flopped will come as a real blow to the validity of their business model and certainly raises questions about their future on a domestic level.
“While the losses are eye-watering enough, they’ve actually burnt £90m which is a story all too familiar with the online model, and one has to wonder when enough is enough.”