Member Info for cyberduck

>I think the kicker here is - if you as a client are paying upfront on a non-refundable basis £1,345 on average.

PB charged until recently £849 (outside London) and £300 for a viewings service. They said their viewing service was used by 40% of customers so the average fee outside London is just under £1000. With the recent price increase just over £1000.

>then that online agent has a duty of care to tell you the risk.

Perhaps you are right but then so do a traditional agent. If your property languishes on the market people start to think there's something wrong with it so there is a cost even if it's "no sale, no fee".

It's fairly obvious that there's a chance you won't sell with PB. In effect you set your own odds by how realistic you are going to be in regard to pricing.

Perhaps traditional agents also have a duty to explain that those who sell through them are effectively paying all the agents profits & costs because the 50% who don't sell pay nothing. Seems a bit unfair.

Stantini,

Just found the EOY results presentation.

TwentyCI state "81% of listings sold within 12 months".

The fact they say "within 12 months" makes it clear they aren't referring to the same thing you are. You are just listing the percentage of currently marketed properties that are sold subject to contact. The figure from TwentyCI is far better for measuring performance but they don't give a figure for other agents as far as I can tell.

There's a disclaimer too "The information contained in this presentation has been obtained from Company sources and from sources which the Company believes to be reliable but it has not independently verified such information and does not guarantee that it is accurate or complete."

Always best to do your own research. Take a sample of properties and see what happens to them over the time period of interest. One thing to be aware of is that a property can complete and still take months before it is recorded at the land registry.

I'm currently looking at a sample of 100 properties I saved back in January. Waiting 16 months before coming to any conclusions on the number completed in 12 months. From what I'm seeing so far I wouldn't be surprised if this small sample shows something like 70% or more complete. Currently showing around 50% but like I say it can take months to show in the Land Registry.

>Regarding flawed analysis, properties sold subject to contract, remain on the rightmove site for a period of some months, so in fact could still be flagged as sold, when in fact they have completed and so perhaps should not be shown. So if there is a skew on the real figures the skew is probably to the advantage of the agent.

If somebody is quoting a conversion rate to SSTC then this includes properties that have gone on to exchange and complete. Your figure doesn't count these.

e.g. 100 properties. 50 completed, 20 currently SSTC, 10 on the market, 15 off the market and 5 with another agent.

The conversion figure is 70% for SSTC. You are ignoring the properties that have exchanged and completed.

I'll see if I can find the Twenty CI report but you're not comparing like for like. They are talking about something completely different to the current percentage of SSTC among the listed stock.

Stantini,

Not sure why you persist with your flawed analysis of data. What you are looking at is the proportion of SSTC properties to total listed. If a company is growing the number of listings like PB are then there will be a higher proportion of new listings which of course are unlikely to be SSTC. Also if a property completes it will be removed and will have been SSTC before completing.

You simply are not measuring the conversion rates. Just what is currently on the market.

I pointed this out to you earlier but you just ignore it and keep on coming up with the same flawed analysis. Why?

Which company do you say claims an 81% conversion rate for PB? Is this a listing to SSTC conversion rate? What time period? What size data sample?

I think PB's completion rate will be getting on for about 80% over the full time that people will list their property for. A couple of years perhaps? Probably about 20% give up permanently or move to another agent but remember you can take your property off the market with PB and list again without paying any more.

When I was selling with PB other Agents were offering me incentives to move to them and I'm sure I can recall Arun Estates offering PB customers up to £1000. They can be quite good at planting that seed of doubt as to whether you will be able to sell using PB. In fact, if I was PB I'd set up some traps to catch competitors misleading potential clients. That would be some good publicity for them.

> If they were in no rush from the limited information I have it sounds like they have been badly advised.

No, they got asking price. Originally 4 offers, 3 at asking price with the buyer in the better position offering less but then talked into increasing their offer to asking price. None of us can say whether they would have paid more.

Just checked other sales in the area and not much to go on but he achieved 6.7% more than another property which completed in January. HPI for the local authority since January is 6.3% so on that limited basis the price looks fine.

> If your friend had four asking price
offers in three days and he only got the asking price he has undersold his property

Well that would have been my assumption too but the LPE considered all 4 offers and advised against a bidding war so perhaps the one chosen stood out as a more reliable offer they didn't want to lose. I know it was a cash offer. My friends had been keeping an eye on prices too and they aren't fools when it comes to these things. Far from it. Downsizing to go and live in another property they already owned so in no great hurry to sell either.

There's a huge potential market for online agents.

Loads of properties sell easily. My friend just sold with PB and he listed on a Friday and had 4 offers at asking price by Monday. And, no they weren't listed too low. Like most people they knew what properties were selling at and were delighted with PB. The LPE looked at the 4 offers and saw that the one more likely to complete was slightly less at first and he advised that rather than go for a bidding war and end up with the wrong buyer he would ask the one with the lower offer to match the other 3 and that's what happened and they've just completed.

I think the problem is that the public are in the main sticking with traditional agents and aren't ready to use online to the extent that everybody thought. Perhaps it's something they will never want to do or perhaps it's just going to take longer for the right people to realise that it's better for them.

>Revised figures - according to Purplebricks website they had taken to the market as of today 37,464 properties, of which 16,224 are sold subject to contract, a 43.3% conversion

I don't use PurpleBricks' website. What do they do when a property completes or is withdrawn from the market? 37,464 looks like a massive understatement of the number of properties listed by PurpleBricks so I suspect it's not a complete picture and that properties are being removed from the site.

If they take a property off their website when the sale completes or is withdrawn then your method is flawed and the conversion rate is being understated.

>I fully embrace that other agents do not show their conversion rates, but 50% is about the normal conversion rate of exchanged business to property taken to the market, take to the market 10, sell 7 subject to contract, lose 30%, exchange on 5.

Do you think PB customers "paying anyway" is a factor that could give them an improved conversion rate? If they switch to another agent then they have to pay more. Perhaps they stick with PB longer than traditional agents and therefore have a better conversion rate?

Hi Stantini,

>The company had a 70M cash margin last year, and without selling off part of the company and raising in excess of 100M in 2018 that would be now a 50M cash margin, which shows a decline rather than a rise in its fortunes.

No, not really. In the UK they made a loss before moving into profit. The trick is increasing income faster than costs in each new territory to such an extent that you eventually move into profit in that territory. Not saying it can be done. If it can be done, I'm not saying how big the profits will be. Not looking to debate it really. It's as clear as day to me but explaining it to other people is not something I'm good at.

>On the need to look at the whole of Purplebricks listings as one, and then look at the ratio of sold to for sale, I did to it today, it takes about 5 minutes, and the conversion rate of for sale to sold is 50%

No, this is not the conversion rate. It's just a ratio of currently 'sold' to currently 'for sale'. If you want to see the conversion rate then you need to look at a sample over a period of time. Traditional agents are not growing their listings at the same rate as PB - you need to take this into account. So if PB have the same ratio as traditional agent then they have a better conversion rate (unless they have more withdrawals). Like I say, better to follow a sample of listings.

>What I find interesting is that many agents and industry commentators have asked Purplebricks to publish their completion figures and they never have, why is that?

Traditional Agents aren't exactly forthcoming either. They don't seem very keen to publish their average commission rates either :)

>A bit naughty, because if a double glazing company said it would install a window for £1,345 up fron and out of 100 clients it only put in 56.7 out of the 100 windows, the Trading Standards would definitely be up in arms. maybe Purplebricks should refund the fee if they fail to sell, that would seem fairer.

Here's one for you. If PB sell 50% of their properties, that would mean that about 45,000 customers haven't sold their properties within a year or more with PB. You'd think there would be outrage from this amount of people if they believed PB had promised to sell their property. I'm not saying they have sold these properties, more like the vast majority of the vendors realised PB would be about the same as a traditional agent and that they weren't expecting any better. Everybody sees properties come on the market, some sell, some change to another agent, some go off the market, some stay on for years. I'm not sure they'd think it would be any different with PB just because they pay anyway and perhaps that is why there's no big deal being made by tens of thousands of people?

Hi stantini,

I haven't checked your figures but here are PB's published # of listings for the years starting May 1st 2014 onwards.

I'm not sure how much faith I'd put in RM's average 73 days to sell figure and this may have been different at different times over the years. But worth looking at things that way I suppose.

For me, the way I would check would be to have a sample of 100 properties and follow them for a year. Even this method can be flawed because properties are taken off the market and can be put back on later. Also it can take months for a property to get registered at the land registry. Even with the land registry data you can't be sure it was sold by PB.

Also remember that when PB refer to 'sale agreed' they mean SSTC. They don't publish their listing to completion ratio.

Anyway, here are the published # of listings...

2014/15 4330
2015/16 19200
2016/17 41211
2017/18 64376

They have just reported double digit growth for H1 2019. I'm estimating that to be around 13.5%.

Oh, another thing to look out for if you're using RM. PB's listings are listed under a number of different branches. For a National picture you need to use them all.

Hi Jamie,

Try not to take too much notice of analysts. See what they are saying and what proof they give to back up their opinions. If they can back up their opinions with actual data and reasoning then perhaps give them some credit. Look to see if the Analyst has a relationship with PB or one of its competitors.

Do your own research.

Hi stantini,

>So the cost of a sale is all the elements that make up that cost, marketing, advertising, salaries, etc, the true cost of each Purplebrick sale is unfortunately more than they charge, hence never ever making any profit as a group.

If the group was just the UK then they would be making a profit even presenting their accounts the way you suggest.

>Also, if you go on rightmove today and look at the amount of unsold property listed on rightmove by Purplebricks and then look at the amount of sold subject to contract property, you will see they are agreeing sales at around a 50%

You can't do that, what about all the stock that has completed?

To get a good idea of their listing to SSTC rate you have to follow a sample of listings over a period of time. Just looking at the current stock including SSTC does not show you the listing to SSTC conversion rate.

I can remember the BBC paying £500K for a new logo a long time back and it was essentially the same as the old one :)

Hi JVSOZ,

Woodford's initial 30% stake in PB cost him £7m.

PB then raised capital on the stockmarket at I think £1 a share. You should see all the warnings in the IPO document in regard to risk. Page 1 "Prospective investors should read this document in its entirety. An investment in the Company includes a significant degree of risk and prospective investors should consider carefully the risk factors set out in Part II of this document.". Page 2 index. Page 3 "Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this document are based on certain factors and assumptions, including the Directors’ current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company’s operations, results of operations, growth strategy and liquidity. While the Directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Prospective investors should therefore specifically consider the risk factors contained in Part II of this document that could cause actual results to differ before making an investment decision. Save as required by law or by the AIM Rules for Companies, the Company undertakes no obligation to publicly release the results of any revisions to any forward-looking statements in this document that may occur due to any change in the Directors’ expectations or to reflect events or circumstances after the date of this document."

I think the next fundraise to expand was an investment of £50m to enter the US market. This was at £2.20 and was approved by shareholders.

Recently they raised further funds at £3.60 to accelerate expansion in the USA and enter other markets and this has been Canada and Germany so far. Again, approved by shareholders.

Buying shares in a company like PB is high risk. The institutions who have paid £2.20 and £3.60 received significant stakes in the company and they are seasoned investors.

Apart from those hefty investments into the company the SP is dictated by supply and demand. For every buyer there's a seller. Nobody is allowed to trade shares without being told that it's high risk, especially companies listed on AIM.

Most of that is from memory so I apologise if I've got something wrong. As always people, do your own research.

Data supplied by High Street Agents.

>I wonder at what point PB's numbers will need to actually stack up like a normal business?

PB have the UK performance from day 1 to refer to. Investors will want to see the UK increasing profits to a degree that the original investment looks worthwhile and will want to see the overseas markets following in the UK's footsteps. Each overseas market could be quite different of course.

You can see also that PB like to measure brand recognition in each market. This, together with what they are seeing in terms of growth and the UK at the same stage will also influence how they are thinking and how I imagine investors will be if they decide to raise more funding.

JVSOZ,

"cost of sales" is usually something that is a cost that you can associate with an individual sale in my experience. I'm not sure whether there is any accounting standard method though.

sales & marketing expenses has its own figure (£21.4m) and so does admin. expenses (£19.5m).

I'm struggling to think what else comes into the "cost of sales" number other than LPE costs. The total £33.1M works out at £514 per instruction!

There were 60 letting LPEs last time I checked but that doesn't explain things.

There were 376 staff in sales and marketing, 99 technical & 94 admin. A total of £23M in wages. Not sure how that is accounted for. I think that's the Group rather than just the UK. Perhaps they're including the UK marketing & sales staff costs in the "cost of sales".

£477K to the directors.

Thanks JVSOZ,

I'm sure everybody is bored with this but looking once more at the accounts and the £33.1m sales, there is a note which says "The majority of cost of sales is represented by the earnings of self-employed LPEs."

Now some of the LPEs are not self-employed (or were) but assuming they all are self employed and taking the worst case scenario this means at least £16.55m was paid to LPEs. So with 64376 instructions this suggests the average would be at least £257 per instruction.

Well I can't say for sure how the system works but both our understandings suggest LPEs earn different amounts per instruction.

Looking at the 2018 company accounts, revenue is £93.7m and cost of sales is £41.1m. Admin expenses & Sales & Marketing expenses come under different headings.

£41.1M is a pretty big percentage of £93.7M and if you multiply the number of instructions by £150 you get £9.7M so there's an extra £31.4m getting paid out somewhere. So in regard to the original post saying LPEs earn £20K I'm certainly leaning towards believing that's nowhere near the average.

Sain, that's not my understanding of a Pyramid scheme where I always thought money worked its way up to the top. With what I understand to have been (still is?) PB's system, the money goes up only one level.

It looks like even my understanding of a pyramid scheme is incorrect (although the name is unimportant) because Wikipedia says "The difference between a pyramid scheme and multi-level marketing is that multi-level marketing provides an actual product or service whereas pyramid schemes don’t and only funnel the money up from recruitment costs."

As an LPE, you have your postcodes and if your appointment book is always full, you give up some of your postcodes to another LPE and they compensate you.

I think it's a good model (may just have been where I live - I don't know) as a basis and of course if it's not working out the parties can always renegotiate in theory.