Troubling times at the EA office indeed

[sancho panza]

22 hours ago, Boon said:

Personally I think this is an interesting situation myself.

They have no bank debt and £31m cash. They are loss making, but this has covered up that the UK segment has been OK, every single expansion into another country has been a failure and expensive. Hence the huge destruction of shareholder value seen in the historic price.

Cash burn according to the house brokers is said to be around £6-7m for the next half year, and then positive for the next year. So not in danger of equity raise; I doubt they will be chasing overseas expansion again.

Today's note was of activist shareholding trying to throw out the chairman and replace him with Harry Hill (ex Rightmove/Countrywide), obviously much needed to balance out the inexperienced management team.

Listing volumes have fallen sharply - the number of listings on Rightmove dropped by about half in the pandemic. So you could argue Purplebricks lost half its business as well, maybe more as people switched to competitors.

I do think listing volumes will go higher in 2023 than 2022, as people are forced out due to costs, but also people wanting to bank whatever gains they have, plus those who realise that upsizing is cheaper in a falling market.

I also do think that if Hill comes in the product will become better and there may be a niche for them, especially in a market where people have lost money. Ie if you have a likely gain of £100k you may not mind paying Foxtons £10k to try and squeeze the bidders. If you have a likely loss of £50k, a £10k fee might seem to be adding insult to injury. And with the ultra-cheap ones you have to do the viewings yourself, so not suitable for many.

I think this could drop lower but end up multi-bagging.

 

They look done to me.I'm with @spygirl..Give it a year.

Total expenses is quite eye opening,as is other assets at £17.6mn(can't imagine what that would be),intagibles at£5.4mn again-there's no vaue in the trademark.The claim of equity at £43.6mn is not one I'd be planning to bank on.

They're claiming £1621 revenue per customer which I think is putting them in the realm of a local EA looking to get custom.

H1 23 will be much worseas they only get paid on completion.

In addition they're burnging £10mn a quarter without revenues collasping

Purple bricks resutls

[Boon]

I think the assets referred is deferred income and prepayments. It is not paid on completion, as you can only defer payment if you take their conveyancing service. You pay their fee whether the house sells or not (they got rid of their money back guarantee)

Here is a snapshot of the broker report (published December 8)

The huge cash burns of the past related to loss making overseas gambles, included in last years were £23m of exceptional charges. So the brokers are saying that with this gone, the rate of cash burn slows - down to £6.7m in 2H and then turns positive in 2024. 

It just seems to me if you are extrapolating previous years expenses into the current year, yes, you will get a scenario where the company are insolvent and the market will be pricing that in by the end of next year. But if you are factoring in a decreased spend then you might end up with something above. 

Now obviously the further you go out the more uncertainty there is, especially on revenues. Much is dependent on them actually winning more business but also getting them onto the more profitable conveyancing/mortgage side. At the moment I would guess we are on 350,000 Rightmove listings. Next year, could it go to 700,000? Historic property transactions are well below GFC levels. So for some reason many people have not moved property. Is there pent up selling demand, and will increased cost pressures lead to many more sales? I suspect yes.

I don't think this is a good purchase yet. The management team lack relevant experience and someone like Hill coming on board would help. It is clear that execution is just not good (Trustpilot ratings are bad) but I think an actual estate agent who knows what customers want could improve it. I think that is what the activist investor is trying to do.

Also, the tidal wave of listings has not materialised. If next year plateaus out at 400k Rightmove listings (where it was in October) or even just a little above then that too will be very bad for them.

If we get both of these factors I could get interested, but not at the current price.

[Ash4781b]

Starting to anecdotally come across Estate agents in panic mode. Tallies with Zoopla article. What normally happens next is people whispering in Tory ears so I guess a bailout is coming?

[sancho panza]

2 hours ago, Boon said:

You pay their fee whether the house sells or not (they got rid of their money back guarantee)

I think this is definitely going to affect their front door revenues going forward.Most EA's don't get paid until completion,in a transactionless market,especially one where the average EA's 1% cut is rapidly apporaching PurpleBricks flat rate charge,I suspect a lot of people will opt for the no upfront charge.

I always found charging upfront for a service implies that the provider is worreid you'll pay them after the fact which reinforces your point on reviews.

2 hours ago, Boon said:

So the brokers are saying that with this gone, the rate of cash burn slows - down to £6.7m in 2H and then turns positive in 2024. 

   In my limied expereince of trading,the trend is indeed your friend.For one excuse or anotehr,total assets has been converging with total liabilities for 5 years.

AS you say,the new CEO seems particualrly unsutied to the role given she appears to mainly have a PR background.Will she be able to stop the money pouring out of the back door?I don't think the portents are great.

                                                                                                   2018                                                                                                 2022

 

3 hours ago, Boon said:

Now obviously the further you go out the more uncertainty there is, especially on revenues. Much is dependent on them actually winning more business but also getting them onto the more profitable conveyancing/mortgage side.

The conveyancing side if jsut a hustle using Premier Property Lawyers(based in Leicester),they jsut get a cut for the referral.I've heard the service of the supermarket conveyancers is pretty poor and actually not that cheap compared to High St sols who have cut their pricing back to compete.They apparently get £350 per referral,although that seems steep and means PPL costs need to be kept incredibly low.

I agree their revenues look particuarlyl susceptible to High St competition and aside from a miracle turnaround in H1 2023,cant see why anyone would buy them.

[Boon]

I kind of view it a different way. If you are not a forced seller in a rising market and can wait for a better price then engaging a paid agent makes sense as the agent might be able to play bidders off against each other.

If you are a forced seller in a falling market and have to sell at some point then paying £1k upfront is better than £10k at the end. If there are several comparable properties up for sale at the same time as yours then your pricing power has gone.

The new CEO/CFO according to their latest interview have already delivered £17m worth of savings. Most of these were quite easy because they related to things they are doing no longer.

The forecasts imply they will be able to slow the cash drain, whether it turns positive is another matter. The company pay Zeus to make these forecasts so I think they are ballpark, missing expectations then has consequences for the CEO.

If we rewind back to the last time that things were not affected by Covid, you can see what I mean about the UK side being let down by overseas expansion. Headline £52.3m loss but the UK turned a £5.3m profit.

Today there is only one segment left, the UK. At large cost all the other countries have been exited.

The main competitors are Strike and Yopa; both are in even worse shape than this, and are dependent on raising equity every year from private equity. The investment case for these I think has drifted somewhat, as online agents were tipped to 'disrupt' the industry, but I don't think these will progress to being beyond a niche. So one, or both might end up ceasing. Another company (Boomin) ended, because shareholders would not fund it.

Anyway this isn't a ringing endorsement of it, just my assertion that it has enough cash not to go bust in the next year, and if loads of houses are sold next year it could be a good year for agents.

[DownwardSpiral]

Just throwing in some anecdotal evidence, one of the local EAs has binned the company that they outsourced rental inspections to and have brought that in-house (one junior member of staff). One of many cost cutting measures I’m sure.

Re Purplebricks - this is another company where the CEO has a senior HR background. I find this an interesting trend given the growing awareness that layoffs and headcount reduction are going to be big talking points throughout 2023.

[spygirl]

Purplebricks seeks buyer as it warns on earnings

UK online estate agent expects full-year loss after costs prove higher than expected

https://www.ft.com/content/1a0f5ea9-40d4-431a-a184-20eab649fb65

 

Market Summary > Purplebricks Group PLC

8.22 GBX-87.28 (-91.39%)all time

[PatronizingGit]

On 21/12/2022 at 15:00, spygirl said:

Oh not even close spunky.

https://www.estateagenttoday.co.uk/breaking-news/2022/4/purplebricks-finally-confirms-appointment-of-new-ceo?source=newsticker

Following a series of unexplained delays, Helena Marston has now finally been confirmed as the new chief executive of beleaguered agency Purplebricks. 

 

Phwoaor!

 

In line with these rules, the following disclosures have also been made:  

-  Marston, aged 39, does not currently hold any directorships or partnerships, nor has she held any directorships or partnerships within the past five years. 

-  Marston holds options over 1,983,282 ordinary shares of 1p each in the Company under the Purplebricks Performance Share Plan at an exercise price of 1p per share. 

OK .... got to start somewhere ....

-  Marston voluntarily declared herself bankrupt in September 2014 owing approximately £103,000 to creditors. This was discharged in September 2015. 

Er you what?

She previously held human resources roles at Virgin Media, Kuwait Energy, Jaguar Land Rover and Vodafone.

However, her official appointment on April 4 was mysteriously delayed, with due diligence checks not yet complete.

You treble fuckign you what?

It was then reported by The Telegraph that the checks were taking longer than expected because Marston had a previous personal bankruptcy that was not revealed to Purplebricks’ shareholders when her appointment to the role was announced to the markets on March 10 - and something that has now been confirmed in the note to the LSE.

You mean she lied?

 

 

 

 

Pretty much a poster child of Bliarite/20th century tory spiv 'dynamism' 

If only she were a bit browner. 

[Underwhelmed]

5 minutes ago, PatronizingGit said:

Pretty much a poster child of Bliarite/20th century tory spiv 'dynamism' 

If only she were a bit browner. 

 

[spygirl]

2 hours ago, PatronizingGit said:

Pretty much a poster child of Bliarite/20th century tory spiv 'dynamism' 

If only she were a bit browner. 

The corporate parent of Purplebricks was initially registered in April 2012 with the name New Portal Limited. In October 2012, the name was changed to New Broom Limited, signalling a desire to sweep clean the existing UK residential property market and bring about a fresh approach.^[13][7] Early investors included DN Capital, the London-based technology fund, Paul Pindar, the former CEO of Capita, Martin Bolland, Capita's then non-executive chairman, and Errol Damelin, the founder of Wonga.^[14][15]

How could it fail?

Just needed THG n Amigo loans to put money in....

Edited February 17, 2023 by spygirl

[sancho panza]

the delusion runs deep,after 7 months of small falls in hosue prices,Knight Frank are going long.

I look at leicester,for transactiosn where they are they probably need half the EA's they have.

https://www.estateagenttoday.co.uk/breaking-news/2023/3/knight-frank-march-was-drama-free-for-the-property-market

There was little sign of a major spring bounce in March for prime London markets, Knight Frank analysis suggests, which the agent argues is positive for the sector.

Knight Frank has claimed that the market was “reassuringly uneventful,” which it argued is a good thing compared with recent years.

In March 2023, average prices in prime central London (PCL) were just 1% lower than three years ago, when the pandemic first struck. 

The one real change was supply, with the number of sales instructions 22% higher. This return to more normal stock levels after the tight conditions of the pandemic partly was also seen as a reason why annual price growth is flat compared to being up 2.1% a year ago.

The agent is still forecasting a 3% price decline in PCL this year and a 4% drop in prime outer London before a return to modest single-digit growth but adds that there are other factors driving the market such as the return of international travel, the currency discount and the higher percentage of cash buyers at a time when mortgage rates are notably higher than a year ago.

 

[reformed nice guy]

1 hour ago, sancho panza said:

In March 2023, average prices in prime central London (PCL) were just 1% lower than three years ago, when the pandemic first struck.

On top of 18% inflation that is a big drop

[sancho panza]

51 minutes ago, reformed nice guy said:

On top of 18% inflation that is a big drop

This is where your man Charlie does provide a service bascially reminding that transactions rather than rising prices rpeserve EA livelihoods.

The losses are looking brutal and remember the data is particualrly backward looking given teh lag at the Land reg

[jamtomorrow]

Which of the big agents are the most exposed to transaction volume?

I would guess (but don't know) that with volume being increasingly hard to come by, EA business models are becoming ever more dependent on "lettings" which presumably insulates many of them from the ups and downs of "sales".

Edited April 1, 2023 by jamtomorrow

[Wight Flight]

34 minutes ago, jamtomorrow said:

Which of the big agents are the most exposed to transaction volume?

I would guess (but don't know) that with volume being increasingly hard to come by, EA business models are becoming ever more dependent on "lettings" which presumably insulates many of them from the ups and downs of "sales".

I wonder how much new lettings business they are getting? From my perspective if you have a current tenancy you hang on to it.

Also, with landlords being squeezed it wouldn't surprise me if a lot of them switch to self managed.

[jamtomorrow]

2 minutes ago, Wight Flight said:

I wonder how much new lettings business they are getting? From my perspective if you have a current tenancy you hang on to it.

Also, with landlords being squeezed it wouldn't surprise me if a lot of them switch to self managed.

Contracts and contracts admin is going to get eaten by ChatGPT in pretty short order, especially in regulated high-volume sectors with standardized legals.

All that's needed then is a bit of augmented reality to simulate a shiny-suited pointy-shoed parasite in a branded Mini Cooper for viewings, and we're there.

A different kind of rush for the exits?

[spunko]

Imagine having this pillock as your boss. He insists on inserting his meaningless and trite comments into every listing.

I was very impressed with the energy efficient meaasures installed here, crucial to lowering living costs -- Alex Davies, Managing Director
 

You what?

https://www.rightmove.co.uk/properties/133281695#/?channel=RES_BUY

Must be a really shitty office to work in.

[BoSon]

50 minutes ago, spunko said:

Imagine having this pillock as your boss. He insists on inserting his meaningless and trite comments into every listing.

I was very impressed with the energy efficient meaasures installed here, crucial to lowering living costs -- Alex Davies, Managing Director
 

You what?

https://www.rightmove.co.uk/properties/133281695#/?channel=RES_BUY

Must be a really shitty office to work in.

No need to try to meaasure his ego.

[HousePriceMania]

3 hours ago, spunko said:

Imagine having this pillock as your boss. He insists on inserting his meaningless and trite comments into every listing.

I was very impressed with the energy efficient meaasures installed here, crucial to lowering living costs -- Alex Davies, Managing Director
 

You what?

https://www.rightmove.co.uk/properties/133281695#/?channel=RES_BUY

Must be a really shitty office to work in.

 

I dunno who this 2nd hand house salesmen is trying to fool

Dunning Kruger Effect

 

 

 

[HousePriceMania]

when morons are getting 1-3% on sales of wooden sheds at £1M backed by 0% IRs and dodgy QE sub-prime lending I guess they start to believe they are gods.

[Boon]

One disappointing thing is that I would have thought there would be a surge of listings (at least in the areas I track)

Because the Easter is kind of ideal for families. Being generous this is about the very last chance you have to list if you want to move in school summer holidays.

But the number of listings (London +1 mile) has stayed stagnant at around 49.5k for almost a month now. If we add +SSTC that number is not stagnant and has risen from c.74k to c.75.5k.

So we could conclude that at present the number of properties going STC amd being taken off market is equal to the number of new listings going on. Some kind of equilibrium has been reached, but all of these seem quite low numbers.

On the other hand rental properties have continued to increase a lot, up to 23k from 22k in the last month alone. I do think some of this is BTR but also the 'if I can't sell it I will rent it' brigade.

So not very good news for estate agents who only list (ie Purplebricks). But maybe good news for those with letting based revenues.

[BoSon]

20 hours ago, HousePriceMania said:

when morons are getting 1-3% on sales of wooden sheds at £1M backed by 0% IRs and dodgy QE sub-prime lending I guess they start to believe they are gods.

Same as when Beeny was telling 'property developers' that they could have made a similar amount of profit if they'd not done all the work on the property due to the rising market.

Shame she's been having a battle with breast cancer recently. Wonder if the bigger baps make hers more susceptible, or just genetic lottery due to her mother dying from it when she was a kid, or a bit of both?

[Guest]

5 hours ago, BoSon said:

Same as when Beeny was telling 'property developers' that they could have made a similar amount of profit if they'd not done all the work on the property due to the rising market.

Shame she's been having a battle with breast cancer recently. Wonder if the bigger baps make hers more susceptible, or just genetic lottery due to her mother dying from it when she was a kid, or a bit of both?

Breast cancer can happen to anybody but there are heritable forms caused by mutations in the BRCA1 and BRCA2 genes that can be passed down from parents to their children.

Quote

Breast cancer: About 13% of women in the general population will develop breast cancer sometime during their lives (1). By contrast, 55%–72% of women who inherit a harmful BRCA1 variant and 45%–69% of women who inherit a harmful BRCA2 variant will develop breast cancer by 70–80 years of age

https://www.cancer.gov/about-cancer/causes-prevention/genetics/brca-fact-sheet

[apples]

On 05/04/2023 at 14:32, spunko said:

Imagine having this pillock as your boss. He insists on inserting his meaningless and trite comments into every listing.

I was very impressed with the energy efficient meaasures installed here, crucial to lowering living costs -- Alex Davies, Managing Director
 

You what?

https://www.rightmove.co.uk/properties/133281695#/?channel=RES_BUY

Must be a really shitty office to work in.

Every time I look for houses, I have to scroll past wankery by these twats:

https://www.rightmove.co.uk/property-for-sale/find.html?includeSSTC=true&locationIdentifier=BRANCH^68365

Quote

Keeping a family together is like building a puzzle, it may be hard to gather all the pieces, but once gathered, they fit together seamlessly, and you most certainly will fit seamlessly within this magnificent home, or should I say homes!

Quote

True love is not something that comes every day, but true happiness comes when you realise that you have walked through the doors of your next dream home, like the true meaning of Pendana, you will instantly fall in love with each other.

Quote

A house is made from wood and stone, cold and empty and all alone, until a family sought to own and made this house into a home!

Quote

What the light looks like in the pear trees in October, is a hundred teardrops of gold, the whole orchard weeping, and we’re sure that you’ll be weeping a thousand teardrops if you aren’t the next lucky owner of this sensational family sized home.

They're just houses, for fuck's sake! Does this shit really attract buyers? It puts me off!

[Austin Allegro]

On 22/12/2022 at 09:15, spygirl said:

Since letting fees were banned EAs must be blowing off tramps in the park for loose change.

 

 

 

 

'This particular vagrant we believe is of very high standard with a large, south facing penis in immaculate condition requiring only a minimal cosmetic upgrade before blowing. His bench, which also comes with a cardboard box 3'x 2.5' (with potential to extend) is located close to Upton Park tube station and the A12. '