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Purplebricks property website halves losses as it plans US expansion

Purplebricks property website halves losses as it plans US expansion

Purplebricks property website halves losses as it plans US expansion
June 29
08:59 2017

Purplebricks, the digital estate agency that aims to disrupt the UK property market, has almost halved its losses in its first full year since listing on London’s junior market. 

Revenues doubled to £46.7m in the year to April, from £18.6m a year earlier, while pre-tax losses fell to £6m from £11.9m.

The group has launched an Australian offshoot and is preparing to enter the US in the hope of shaking up these markets with its fixed-price model as it has done in the UK.

Michael Bruce, Purplebricks chief executive, said the company, which is backed by fund manager Neil Woodford, was “now in a strong position to become the number one estate agent in the UK for both listings and sales”.

He said the group’s UK operation had achieved its first operating profit, of £200,000, and had enabled the sales of £5.8bn worth of UK homes. The group now expects UK revenues of £80m for the current year, almost doubling the 2016-17 figure. 

Purplebricks does not own branches but instead runs a network of self-employed estate agents, combined with its digital platform. Customers pay a fixed fee for a basic service with add-ons for extra services.

This contrasts with the standard UK estate agency model, in which agents charge vendors a percentage of the final sale price. Purplebricks now has 448 UK agents, more than double the figure a year ago. 

Investors appear optimistic about its prospects: its share price has swelled to the point where its market capitalisation is more than triple that of Countrywide, the largest traditional agency for residential sales, which has about 800 branches.

Purplebricks’ shares rose 4.4 per cent in early trading on Thursday to 416.5p.

Anthony Codling, analyst at Jefferies, said that the group’s business growth had entailed rising marketing spending, which increased to £18.2m from £12.9m a year earlier. 

“The digital model may not have to fund a branch network, but it appears to us that the virtual high street is not as cheap as one might imagine,” he said. 

William Packer, analyst at Exane BNP Paribas, said: “We see Purplebricks as a major force in UK estate agency for years to come [but] critical to its achievable scale will be the trajectory of the cost of vendor acquisition.” 

Purplebricks is the largest of a series of start-ups aiming to take business from traditional players by offering fixed fees. This has drawn the attention of large estate agencies. Countrywide has launched its own digital offering with a similar model, while Savills has invested in Yopa, another start-up. 

Both traditional and start-up agencies must, however, contend with a housing market in which fewer homes are changing hands than before the 2008 financial crisis, and price growth in London and the southeast is now slowing.

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