Purplebricks has this morning confirmed that it’s ending its self-employed Local Property Experts operation and is moving to “a fully employed model for its field sales agents.”
The agency has long prided itself on LPEs being self-employed, and waged many battles with critics arguing that the self-employed status could not survive; as recently as last month, chief executive Vic Darvey told Estate Agent Today that LPEs in their self-employed form were to be the backbone of a new emphasis on ‘localness’ in a marketing blitz this autumn.
Purplebricks currently has some 600 LPEs; in addition today's announcement, made to the London Stock Exchange, speaks of an extra 100-plus "of the best agents in the industry who are ready to join it as opportunities arise.”
The statement says: “The move to a fully employed model for Purplebricks' agents represents a further enhancement to the Company's business model, following a review of how the Company can best serve its customers, support its field teams in the future, and meet the demands of a strong market.
“The Board now believes that moving to a fully employed model will ensure that the Company can scale up quickly to meet consumer demand and, to that end, the Company has already created a talent pool of over 100 of the best agents in the industry who are ready to join it as opportunities arise.
“Having ownership over the recruitment, training and management of a unified high-performing team will support the delivery of a consistently high level of service to Purplebricks' customers across the country, including an enhanced opportunity to increase ancillary revenues.
“Additionally, it will provide greater security and benefits to incentivise Purplebricks' agents. The Company's newly employed sales team will enjoy a highly incentivised package with the ability to work flexibly and remotely, in keeping with the Purplebricks entrepreneurial ethos and changes to ways of working that have come about because of the pandemic. Agents will also benefit from the rights that come with employee status as well as having access to many new opportunities for career development and growth.”
Vic Darvey tells shareholders: "I am proud to be announcing plans to make our sales team permanent employees. The pandemic highlighted the challenges of being self-employed for many people - which is why we created the £2.2m fund to support the agency field during recent challenging times. As normality returns, we believe that moving to a fully employed sales model will benefit and support our people and make Purplebricks fit for the future.
"Not only will this enable us to better protect and incentivise our agents, it will also allow us to scale up quickly to meet consumer demand, and continue to deliver a high quality, locally based service for our customers. It will also ensure that we can continue to drive a more consistent, high-performance culture and experience for all of our customers, helping us deliver a next generation estate agency service to buyers and sellers alike.
"The Board strongly believes this move will increase market share and enhance performance in the coming years."
Yesterday the stock market pundit website Motley Fool suggested investors look afresh at Purplebricks. It said the agency “finally put years of losses behind it and recorded and pre-tax profit of £3.6m for the financial year to April 2021. This was driven by a 13 per cent improvement in annual revenues, which clocked in at £90.9m.”
Although Motley Fool went on to caution that Purplebricks’ shares were still high priced, two factors fell in its favour.
The first was the recent house buying boom in the UK, and the second was that it was expected that “the online business model [would] thrive as the broader e-commerce market lifts off. Britain has the third-largest online shopping sector on the planet. And whether it be for shoes, groceries, cars or houses, virtual shopping is growing strongly in the wake of Covid-19.”
Despite speculation over the LPEs, Purplebricks’ share price yesterday fell only 0.97 per cent to just over 71p.
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Could well be another "Alison Platt" moment.
The share price tells all, when it listed on the Alternative Investment Market in December 2015 its share price was 95.5p, it rose to 498.5p in July 2017, and now it is 71p. It has been going since 2012, so after nearly nine years years and the 'best' housing market in memory, where an online model should thrive in lockdown conditions, it managed only a 3.6M pre tax profit.
To date, it has burnt through hundreds of millions in investment and cashflow, and it could be argued that any new venture requires cash to build a new model, but if it pivots its model to having to absorb the cost of employing staff, and a whole layer of staffing personnel, and add in the no sale no fee model losses, and you are probably at minus £4M to £6M a year profit wise.
For me the bigger story that no one is following is this 'New Model' around employment that has been signalled, rather than a sudden epiphany - is it in fact that HMRC who have long looked at the Purplebrick gig economy model, where LPE's are solely working for Purplebricks, who provide them the sole amount of work, train them and give them a schedule of what they do - and decided that they are employees all along.
So Chris Arnold not so much an Alison Platt moment maybe more an Uber moment, where businesses based on 'not employing people' swerving holiday, sickness and holiday pay, but giving people the freedom to earn is finally being seen as a great model for employers keeping costs off the books - not so good for those doing the work.
Though on reflection Chris you are right it is an Alison Platt moment, she destroyed Countrywide by trying to change it to Purplebricks, not doing the mathematics of the cost base of each branch, and now Vic Darvey is doing the same loading the business with costs it can not cover.
So far from self employed LPE's being an enhancement it was simply a cost saving stepping stone?
Cannot fault the Bruce's they got out at the right time !
Lets put this into some kind perspective and disregard the nonsense the CEO wrote about the pandemic. The only reason why Purple Bricks have now taken this position is because of the changes to the Off-Payroll Working Rules and it's really as simple as that. These people will be classified by HMRC as disguised employees and Purple Bricks have suddenly woken up and smelt the coffee and obviously need told by their advisors and probably the City to make them all employees because if they didn't they should be carrying in their balance sheet a contingent liability for HMRC. The whole world is changing regarding employment status we have seen it in the gig economy with the likes of Uber, Hermes and Addison Lee to name just a few all of which have been taken to task in the court and ended up having to give backdated employee rights (holiday pay, pension contribution, SMP, SSP) to their workers
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