“If the horse is dead, get off of it.”
That’s the less than flattering analogy property veteran Russell Quirk used to describe the travails at online estate agency Purplebricks.
On Friday, Purplebricks announced it was up for sale in a trading statement to the Stock Exchange.
Concerns for the future of the tech-led estate agency business have been rife for years and the trading update for the financial year ending April 2022 did nothing to quell those rumours.
Quirk is the co-founder of ProperPR and a property veteran. In 2009 he launched eMoov, growing it to become the second biggest online estate agency behind Purplebricks, before it went into administration after running out of cash.
He said: “Purplebricks, the once £1bn marauding innovator that promised to democratise estate agency, now relegated to a share price equivalent to a small handful of pick n mix.
“It turns out that the house selling public want a proper end-to-end service and are willing to pay for it. Not a cheap, arms-length substitute.”
Quirk claimed it was now a case of when, and not if, ‘the vet will be brought in to finish the thing off’.
Purplebricks is currently in the middle of a high profile turnaround strategy, which has seen it focus on the most profitable arms of the business and make a raft of cost savings.
This process has resulted in £1.2m of one-off exceptional costs being incurred, prompting the board to identify another £4m of annual cost savings.
Purplebricks will make the savings by streamlining their lettings business and making a ‘more conservative investment’ in ramping up their mortgages business.
As a result Purplebricks expects to deliver revenue for FY23 of between £60m and £65m, and an adjusted EBITDA loss of between £15m and £20m.
Leeds-based entrepreneur Sohail Rashid spent 12 years running his own property and data businesses before launching his weighting app Brawn.
He also worked as an experienced property NED and CEO, and also supplied thousands of estate agents, including Purplebricks.
He said: “I think the original model didn’t appreciate the complexity of the home moving process and didn’t address the problems and challenges that a pure online model would have post SSTC (i.e. between price agreed and exchange).
“I also believe that you can’t fully digitalise the process. A good estate agent does a fantastic job in getting a house sold and this requires a ‘hands on’ approach. A difficult process to fully automate.
“Interestingly, I see similarities in the consumer fitness space. You can digitise some elements of personal training but a fully digitalised service will never be as good as face to face.
“Purplebricks remains a strong consumer brand and I can see the right management team being able to evolve the model so that it’s closer to fixing the consumer problems.”
Lancashire-based estate agent Michael Bailey said Purplebricks encountered problems once they’ve signed customers up.
“The majority of the relationship is then conducted via the app and tech they have got,” he said. “There’s little or no interaction with customers from a person which is very disconcerting and for people that don’t sell or negotiate house sales every day extremely stressful and this is what consumers remember.
“Purplebricks are completely transactional meaning their client acquisition cost is huge and with low fees this leaves little margin hence why they have burned through money on advertising.
“A firm like mine and many others are relationship based as such get huge numbers of recommendations from previous clients, 85 per cent of our listings last year came this way with little or no acquisition cost.
“Like any market when things are buoyant the consumer is happy with low touch for cheap cost. However when a market tightens up consumers look for the experts to help navigate the tougher market.”
According to the statement to the Stock Exchange: “The board recognise that the potential of the group may be better realised under an alternative ownership structure, and has, therefore, decided to conduct a strategic review of the group’s business with the aim of delivering maximum value for shareholders.
“The group has appointed Zeus as its financial adviser to assist with the strategic review. The outcome of the strategic review may or may not result in a sale of the company or some or all of the Group’s business and assets.
CEO Helena Marston, CEO said: “We have undertaken a huge amount of work in the last nine months to improve our sales business, raise standards, establish Purplebricks Financial Services, and stabilise lettings, all of which means the company has never been in better shape for the future.
“Yes, the actions we have taken have caused more short-term disruption to our Q3 performance than anticipated, but we remain confident in returning to positive cash generation in early FY24. We recognise that our upside potential is not currently reflected in our market valuation, which is why the entire Board has therefore concluded that a strategic review is now in the best interests of all shareholders.”