The Sunday Times made uncomfortable reading for Purplebricks yesterday as the newspaper raised more questions about the number of homes the hybrid agency actually completes on - and it recommended that investors should consider selling their shares.
Business columnist John Collingridge questions why Purplebricks resists setting out precise completed sales figures, and in the absence of exact ones from the agency he attempts his own calculation.
“Take its revenue oif £43.2m in the UK last year. Based on an average fee of £1,035 per customer that’s 41,739 instructions. [Purplebricks] claims to sell 83 per cent of these homes, which implies it sold 34,643 properties last year” he says.
Collingridge then cites the agency claiming the total value of the property it sold was £5.8 billion in the year ending April 2017.
“If it sold 34,643 homes for a total of £5.8 billion, that’s an average house price of £167,400 - 22 per cent below the UK average and well short of the average £240,000 Purplebricks says it sells for.
“Fast forward to June and it was apparently selling a property every nine minutes 24/7 - that’s 58,400 a year. Countrywide, Britain’s biggest estate agent with 4.9 per cent share of the market, only sold 61,314 last year” he adds.
Collingridge then asks whether customers will “continue to flock” when they read the small print of Purplebricks’ contracts which “contains nasty surprises.” He then goes through some of the additional charges that can be levied for non-basic services and refers to the controversial deferred payment scheme involving merchant bank Close Brothers - the subject of BBC investigations in recent weeks.
The column then notes that Purplebricks’ lettings director Richard Jacques sold 60,000 shares recently - elsewhere in the Sunday Times, it reminds us that this sale was shortly before the BBC programmes and a temporary seven per cent share drop for the agency, although Purplebricks is quoted in the paper as saying Jacques knew nothing of the upcoming investigations.
Collingridge then concludes his article by saying: “Some staff have begun to reduce their stakes ... Add a slowing housing market to the equation and maybe they’ve got the right idea. Sell.”