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.”
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It was only a matter of time before the weaknesses in the Purple Bricks system came to light. Obviously the BBC started highlighting some of the shortcomings and faults and there are more to come. Look at the level of their testimonials on 'Trust Pilot' and then look at them on 'All Agents'. Can there be that much difference? Their profit figure are minimal and can only reduce as more and more customers become disillusioned (and tell others), so how long before investors start to become apprehensive and reduce their holding or even withdraw altogether. Then the slide (or collapse) will inevitably follow.
Do you think ASA has read the Times article/seen the BBC Watchdog program /listened to Money Box/looked at the review sites......should they have ?
We think what many people forget is, that it's not what's happening now, but where PB could be in the years to come that many Investors are focusing on.
The market is changing and they are probably going to be one of the key leaders in the future.
After the initial morning drop from the Sunday times article. They bounced back form a low of 410p to a close of 465p today on strong volume all afternoon.
All this buying came in during the afternoon when the US markets became operational.
Many investors in the US are heavily buying technology this year and PB could be on their radar.
Once PB get their operation in full swing in the US this year it might attract even more buying.
The market isn't property - it's big data. Image in how many people enter their details into the PB Portal every day? They have all effectively flagged themselves as homemovers.
Now think about all the businesses that like to know who the homemovers are and how they can target this group with their product offering.
This data is valuable not only to PB for selling ezie conveyancing but packaged up and sold to other data hungry businesses adds even more value. This may be why the sales to income ratio presented by PB doesn't stack up - a lot it comes from data sales and onward commissions from third parties.
In my opinion PB customer facing business is a front for data collection in the same way agencies used to be a front for mortgage products.
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