Purplebricks is under pressure from a serious downturn in instruction levels and has an activist investor, who owns around 4% of the business, vocally calling for its chairman, Paul Pindar, to be removed.
The online estate agency has seen its share price plummet over the past 18 months or so, prompting Citi to downgrade the company’s investment prospects to “neutral” due to “current unsupportive market conditions”.
According to the investment bank, investors need to wait and see what impact the new management’s strategy has on the company, and whether it is able to turnaround the estate agency’s fortunes.
After the publication of the firm’s delayed full year accounts earlier this month, Helena Marston, CEO, said that she had set out a plan “to improve the performance of the business”.
“Central to our plans are initiatives which we expect to drive higher instructions, grow revenues, reset our cost base and raise standards,” she said.
Marston accepted that last year’s financial performance “was not good enough”.
As expected, the accounts revealed that revenues were down to £70m from £90m in 2021.
Gross profit fell 27% from £57.7m to £42.1m.
Adjusted EBITDA is minus £8.8m and the overall loss from total operations is £42m. This contrasts with a profit of £6.8m in 2021.
Total fee income was £63m, down 28% on 2021 and the instruction level was 40,141 units, down 31% from 2021.
Average revenue per instruction remained almost static at £1,568, compared to £1501 last year, while cash balance stands at £43.2m, down from £74m in 2021.
But analysts at Citi see upside potential at Purplebricks.
It said: “With the cost saving actions now largely implemented, it will be the return of top line growth that takes the group back to profitability, with cash generation expected to restart in H1 FY 24.”
The analysts concluded that “there is undoubtedly long-term value” in Purplebricks shares, with opportunities for the business to refocus marketing spend, focus more on the buying side of customer behaviour, focus more getting a pricing ‘sweet spot’.
The view that Purplebricks offers potential room for growth is one shared by Dave Reynolds, a prominent analyst at Davy.
“As the UK residential market slows into the coming recession, Purplebricks Group will need to contend with a less benign market,” he said.
Reynolds yesterday said that he believes that there are three things which need to happen to regain investor confidence in Purplebricks: a return to market share growth; a change of Chair; and evidence of effective cash preservation.
On the change of chair, Reynolds added: “Chair is a tough job, it hasn’t gone well at Purplebricks. Change is required.”
EYE asked what difference a chairman would make, and is awaiting further comment.
Activist investor Adam Smith, who last month increased his stake in Purplebricks to 4.2%, has recently stepped up his efforts to oust the chairman of the online estate agency, by calling for Pindar to resign.
Smith is unhappy that the company’s share price, which currently stands at 17.2p, is performing so poorly, and wants Pindar to leave in order to “restore the credibility of the company with investors”.
Shares in Purplebricks have dropped sharply since it listed on Aim in 2015, after a series of profit warnings and operational blunders, causing market value to shrink to just over £45m, from £240m.
Shares in the online estate agent have plummeted since its all-time high in 2017 of 525p, with recent regulatory failings, contributing to that decline. The significant fall in the firm’s share price has caused many investors to sell up, concerned that Purplebricks might be vulnerable to a takeover.
Despite growing pressure to resign, Pindar purchased 1,537,000 ordinary shares of £0.01 each in the share capital of the company at a volume weighted average price of 16.96p per share between 12 August and 16 August 2022
Earlier this month, Paul Pindar purchased 2,500,000 ordinary shares of £0.01 each in the share capital of the company at a price of 14.76p per share.
Following the latest acquisition, Paul Pindar and Sharon Pindar, a person closely associated, together hold 15,618,056 Shares representing 5.09% of the total issued share capital.
EYE NEWSFLASH: Purplebricks’ chairman acquires more than 1.5m shares in the firm
Where is this room for growth – As we move into a market where properties will need to be actively introduced to the right buyers in order to sell, how will a listing only agent achieve growth?? I just can’t see it.
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FSBO internet listing hampered by working time regulations, tax and national insurance constraints is not a very attractive opportunity for listing reps now instructions are harder to come by and the chance to earn ‘£100,000 as a business owner’ are unlikely.
Perhaps the analysts should show Helena the business plan they’ve come up with, detailing just how it could be so much better. Reckoning is one thing delivering what one reckons is another
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why the obsession with PB get on with your own businesses
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Because they have dumbed down our industry -the sooner they go under the better
Know yourself and know your enemy.
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sorry I do not get the obsession
As a developer I know what the competition is doing in the areas I am and m ost are cheaper and not as high a spec as us in but I am not obsessed by them
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You are way to late to the party, is the answer to your question. Since inception PB have been anti-high street agents and the rhetoric didn’t gel well with many over many years. Often PB threads would have near 100 responses from readers and many were just nuts comments from antagonists with more egg on their faces that in a chicken farm today and why you don’t see them popping up support for PB today. Some of it outlandish anti-high street agents comments. If you had been subjected to years of hostility, I doubt you would have ignored it, particularly if it was intended to close you down with all their goings on. I can only assume you are too late to the party to know what went before.
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If you don’t check out the competition how do you know they are cheaper and poorer spec.If you haven’t checked you should-you may be cheaper and your spec could be poorer. You can only gauge spec by physically looking
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