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Hybrid sector could reach 20-30% market share, says Purplebricks CEO

The new chief executive of Purplebricks believes hybrid agents could win '20-30% market share' in the UK.

Vic Darvey, who replaced Michael Bruce as the agency’s chief executive in May, says the hybrid sector remains 'a very nascent opportunity'.

"People forget that the sector is only around five years old," he says in an interview with Estate Agent Today, following the publishing of the agency’s full-year figures for the year ending April 30 2019 yesterday. 


"At Purplebricks, we are now only talking to some consumers for the first time as they look to move home."

Darvey says Purplebricks is aiming for 10% total market share within a 'three to five-year horizon' after achieving market share of around 4% in its first five years of operation. 

Yesterday, the agency reported an operating loss of £52.3 million, up from almost £30 million in 2018, despite annual revenue rising by 55% to £136.5 million. 

The agency also reported a UK operating profit of £5.3 million and confirmed it would be withdrawing from the US market by the end of 2019. 

"We wanted to use this trading statement to highlight how well the UK business has performed and that the flagship UK business is now in a position of cash generation," says Darvey, who was previously managing director of the MoneySuperMarket Group. 

When asked about the fortunes of the property market and what this means for Purplebricks and the hybrid sector going forward, Darvey is optimistic.

"The UK property market can thrive in the medium-term after a period of stabilisation and recovery," he says.

He adds the online sector can 'return to growth' and that Purplebricks believes there is a 'continued willingness' among consumers to 'use hybrid agents'.

"The challenge for hybrid agencies, without bricks and mortar, is to build a brand," says Darvey. He explains this is usually done through 'broadcast marketing', which is expensive.

He acknowledges consumers' brand recognition of Purplebricks, saying it has reached an 'incredible' level for a brand that only communicates with customers every six to seven years when they come to move home.


Darvey describes the opportunity to grow in the hybrid sector as a marketing and branding 'arms race' and that although Purplebricks has not won this race, it has established itself as a 'firm preference' among many consumers. 

When asked if Purplebricks will ever be 'accepted' into the wider agency industry, he says that Purplebricks remains a 'challenger brand' that values consumers at the 'heart' of its business.

He says it will be difficult to be accepted when trying to win market share from competitors is the 'nature of the business'.

Darvey also confirms that there are currently 'no plans for Purplebricks to enter any other market'. The agency says it is now focusing on extending 'market leadership' in the UK and learning from the 18-year old Canadian business it acquired in 2018.

2019 has been a turbulent year so far for the agency, following the departures of several senior members of staff including founders Michael and Kenny Bruce, UK chief executive Lee Wainwright and US boss Eric Eckardt.

At the time of Michael Bruce's departure in early May, Purplebricks also announced it would be closing its Australian business

Meanwhile, its share price has faltered in recent months, down below its starting price of 100p from highs of over 498p recorded in July 2017.

Following the release of yesterday's figures, the Purplebricks share price closed on 95p, up 2.15%.

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    If UK Estate Agents dont buck their ideas up and start to see Estate Agency less as a transactional business (get them and get 'em sold) and more of a holistic long term for life relationship between people and moving home (like they do in Oz), the commoditised estate agency model, such as PB have done so well will only continue to grow.

    Nationally, depending on regions, the average number of buyers that use the agent they bought with is between 12% and 14% ... that shows there is huge opportunity for every estate agent, PB or anyone else.

    Those agents that stay in the middle will die .. the market will polarise, and agents need to commoditise (like PB and go inexpensive and stack 'em high sell 'em cheap) or go boutique and specialise like hell and offer top-level personal service for top fees.

    Simon Shinerock

    Interesting point of view Chris. When I started Choices 30 years ago, I did so with a holistic concept in mind, one of our strap lines which we still occasionally use today being ‘Life is about Choices’

  • Andrew Stanton CEO Proptech-PR    Proptech Real Estate Influencer

    Vic Darvey has obviously been speaking to Ashkay Rupareilia of Doorsteps who in his original pitch on crowdcube stated that by 2020, that's five months away online agents will have 20% of the property market. The reality is that Doorsteps has raised over £889,000 from poor private investors with two rounds of cash raising at crowdcube, and the company has failed to make a penny profit.

    I think it is time that 'fake news' regarding online agents as being the future of agency should be faded out - and people start to look at the reality. They tell me Ashkay is a millionaire, but is this true?

    His company is valued at 18M, (how?) and he has sold some shares of an unlisted company for £889,000. If the company stock/shares was listed on the stock market or even the Alternative stock market and the shares had real value, then the holding that Ashkay and his relative has would indeed make him a millionaire, but holding massive amounts of shares of an unlisted company - which is set to need further funding is just another empire built on thin air.

    Looking at the Purplebricks figures, just released Vic Darvey would do well to look at the actual running cost of the Purplebrick operation. In 12 months PB have burned through 90M of their cash. Or burnt 7.5M every month for the last 12 months.

    A year ago they had 152.8M of cash, now they have 62.8M.

    Regarding the UK arm of the company, the supposedly profit making part, the Purplebricks balance sheet is very creative.

    In the period 2017 – 2018 (3rd July) it states that in the UK it made 74.4M in revenue, and the cost of sales was 31.3M, giving a gross profit of 43.1M, or gross profit of 57.9%.

    But, then in the next line down in the accounts, when admin costs of 19.5M are added in, and marketing costs of 21.4M are added in the operating profit is 2.2M (not 43.1M).

    2.2M as % of 74.4M revenue = 2.9% return.

    Also, it had 152.8M cash as a war chest to trade forward.

    In the period 2018 – 2019(3rd July) it states that in the UK it made 90.1M in revenue, and the cost of sales was 33.3M, giving a gross profit of 56.8M, or gross profit of 63%.

    But, then in the next line down in the accounts, when admin costs of 24.8M are added in, and marketing costs of 26.7M are added in the operating profit is 5.3M (not 56.8M).

    5.3M as % of 90.1M revenue = 5.8% return.

    But, the company as a whole had no longer got 152.8M cash as a war chest to trade forward, this had reduced to 62.8M over the 12 month period. So, the company had burnt through 90M in 12 months, or 7.5M a month.

    Given that Axel Springer injected over 130M into the company in the recent past, when the share price was three times its present level, it is unlikely that a further round of funding will happen, which means that even with closing down operations in Australia and America, commissary to all those self-employed realtors, the cash burn will continue for the scaled down Purplebricks model, with over 30M a year used in tv and other advertising alone, to keep the brand alive.

    Even if the cash burn is only 3M a month, in a year that is 36M, and as can be seen increased revenue in the UK, has only yielded a wafer thin return, so even if the average fee was to rise another £100 and revenue was 120M in the UK next year, the admin and marketing costs will grow even larger, and it could be a case that they make a 5M profit, but the cash to trade forward will dwindle by year end 2020 to only 26.8M or less than 9 months of capital to trade forward into 2021.

    What the accounts actually show is that the true cost of the sale for the Purplebrick online brand is prohibitive, as in;-

    In 2017 – 2018 is 74.4M monies in, 31.3M + 19.5M + 21.4M monies out, or 74.4M monies in, 72.2M monies out. Giving a true cost of sale of 97% of revenue generated.

    And in 2018-2019 is 90.1M monies in, 33.3M + 24.8M + 26.7M monies out, or 90.1M monies in, 84.8M monies out. Giving a true cost of sale of 94% of revenue generated.

    So the other money or cash washing around Purplebricks – comes not from making vast trading profits, but from raising capital from private investors and then from investors, private and blue chip companies when it was launched on the Alternative Investment Market.

    The allure of the company and its perceived value is that it has few fixed tangible assets or employees, though HMRC are likely to think that the Pimlico Plumbers have a lot in common with the self-employed LPE’s, but without high street premises (those assets), the company is forced to continue spending a multi-million budget on reminding the public that they exist.

    Am I anti-Purplebricks and online agents? No, I just feel sorry for the investors backing them, and as each online agency fails, Emoov, Tepilo, etc they damage the reputation of the industry as a whole. Vendors losing upfront fees paid in good faith and self-employed hard working estate agents losing their livelihood and investors losing their life's savings.

    The only winners are the banks and finance houses and brokers putting together these online companies who are charging vast fees, that is where a substantial amount of revenue disappears to.

    Lastly, Chris from my experience most estate agents I have dealt with over the past 33 years do not have a mentality of get em on get em sold. The mentality is do a good job each and every day, the actual listing and selling part of agency is only a small part of the process, it is the other multi-component parts of an estate agents day that most agents take a great pride in.

    As most agents are sole traders or a joint partnership, these people take a huge pride in what they do, as it is their name over the door, and their money on the line if things get tough. That is why many independent agents deliver massive profits each year as they are part of the community, they do not need to fake it - they are it.


    Get post, excellent read.

  • Andrew Stanton CEO Proptech-PR    Proptech Real Estate Influencer

    Chris, you spoke about Australia - and the need for agents to change their approach - you are aware that Purplebricks just lost millions there and closed down their operations? And in the U S. Maybe the world just does not understand the bright future of online agents.

  • jeremy clarke

    Hybrid? What the hell is hybrid?
    If the online call centres are talking about sticking a board up and posting on portals being hybrid then they are so wrong. Your local agent will do that but combine it with personal service, accessibility and years of local knowledge and you have a proper estate agent!
    20% market share??!! More B******t from a business that has failed in every sense apart from the fact that they continue to burn investors money at a huge rate and still manage to walk away with the director's pockets lined with gold!!

  • Michael Riley

    Does EAT need to a Twitter style character limit?

    Less = More

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    I have a hybrid car, runs on petrol and electric.
    The IOW have a £42m Hybrid car ferry.

  • Rob Brady

    It will be interesting to see that after removing their focus/spend from taking over the globe to directing it back to the UK market, how this will change. The idea when it comes to venture capital fundraising sometimes is to see if a business is given a certain amount of money what can they do with it. Of course, Purplebricks did 'test' the American/Australian markets too soon but at least they will have a certain understanding of what scaling will be needed to done in the future to seek further investment. 2017 was when the global venture started and the burning of cash began alongside the lessened fear for the online model. Now back in the UK, will share confidence start again once the burn rate goes down? With the fall of all the other online models, which naturally was going to happen and with PB taking market share from them, will this further increase presence?

    Time will only tell once they exit the American market and how that costs, will determine what time further fundraising will be sought after.....


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