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Give Purplebricks more credit, says analyst rejecting criticism of agency

One of the top PropTech analysts in the world, Mike DelPrete, says Purplebricks deserves more credit for its performance in the UK in particular and in its other territories in general.

In his latest summary of digital activities, DelPrete days the response of the media and agency industry to Purplebricks’ recent financial figures “really grinds my gears”.

He says the headlines are too negative and revolve around a sensational narrative of "mounting losses" for the business: the company last week reported a pre-tax loss of £26.1m for the year to April, up from a loss of £6m the year before.


DelPrete is especially critical of the investment bank Jefferies which he says has the “singular achievement [of] being consistently and definitively wrong on the [agency] sector for the past three years.” 

DelPrete says a more appropriate analysis of Purplebricks would characterise the agency’s performance as doubling revenues once again, enjoying substantial international expansion and maintaining steady growth and profitability in the UK.

He says the agency’s performance in the UK is based on a model that works - “it makes money, and - at scale - is profitable” he says.

DelPrete - former head of strategy at the property portal Trade Me in New Zealand and now an international real estate consultant - says that like all growing businesses “you need to spend today to make money tomorrow.”

He says this is investment rather than a loss. “It's ‘losing money’ in the same sense that you are ‘losing flour’ when you bake bread. It's not about ‘mounting losses’ in your flour reserves; it's about what you can make with that flour”.

He adds: “One impressive aspect of the Purplebricks operation is its marketing efficiency. I've always been interested in the customer acquisition costs, as it's a critical KPI for the online agency model. ... The cost per instruction has improved slightly from last year, but is relatively flat.”

Last week DelPrete said he had played “a small part” in Purplebricks’ acquisition of a Canadian online listings platform.

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    with 26m losses they will probably need more credit.


    But they are clearly not losses (certainly not in the same way that Countrywide are reporting losses for example). If they were just operating in the UK they would have posted profits of c. £8m this year. Do you really expect the acquisition of the Canadian business and the cost of starting up in the US and Australia to have cost nothing?

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    You're right Mark I was being flippant, however the interesting point is 'it makes money and 'at scale' is profitable. Expansion at the pace purple bricks is pushing cant be sustainable for long. How long before at least some of the seemingly bottomless pits of investors get a little nervous and start asking for a return? Without continued expansion of LPE'S to bring the money in the business doesn't work, however the more LPE's you add to an area the smaller and smaller the income for each LPE gets, making it very hard to continue to recruit in the numbers they need. In my area this already appears to be the case.


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