Member Info for cyberduck

>It also doesn't include any details of USA, Canada

Jimmy_88. That was the point. You were saying that you didn't think the SP factored in any overseas success. That would mean the fact that PB are now valued at close to £3 rather than the £2 (rather generously some would say) they were valued at on just the UK & Oz suggests either the UK or Oz or both have done better than originally anticipated in the report. The reality is that Oz have done a lot worse and for the UK it looks like PB won't reach 100,000 UK listings per year in the year starting in May 2019 and ending April 2020. That's just 9 months away and we're currently looking at about 6000 a month and that's the seasonal peak months. November & December are typically awful for new listings.

So given the UK & Oz aren't growing as quickly as first thought the current valuation of the UK surely can't represent £2+. Perhaps as much as £2 of the £3 is USA valuation?

For me, having watched the SP react to news about the US, I strongly believe there is some level of US success (i.e profitable contribution) factored into the supply & demand for the shares which is why I won't touch them for the time being (other than possibly over the short term when I think there might be an opportunity).

The fact that the US market is so big makes owning the shares for the long term pretty much a big gamble on the success or failure over there. This is what Zeus Capital said "I estimate the opportunity in the USA is over 10 times the opportunity in the UK because the population in the US is greater, the revenue per transaction is greater and the market is even more fragmented than in the UK. The opportunity in Australia is approximately the same as the UK because although the Australian population is half the UK the revenue per transaction is over twice the UK."

>Tendency to hype this 24/7 all up

Nonetheless, it is a lot more convenient than traditional agents. For me as an ex-software developer I imagine the PropTech addons to be a bit like trying to fit a square peg into a round hole rather than an elegant fully functional platform designed from the outset.

Dealing directly with the buyer is 24/7. I agree that if the LPE is showing the property then they are not as reliable as the owner in terms of flexibility as to when you can view and probably also more likely to change an appointment. PB say 60% of their customers show their own homes.

I've mentioned it several times but a survey of 30,000 traditional agents said that 40% of them didn't even answer their emails. See http://www.propertyindustryeye.com/unanswered-phone-calls-and-ignored-emails-found-during-giant-mystery-shopping-exercise-of-30000-branches/. You really have to wonder whether it's a case of not being able to teach an old dog new tricks for a lot of them. I see the PropTech offerings on PIE but I also see a real reluctance to change from some of the posters.

To be fair, Steve Morgan did sell RDW when they were priced around £6.50. Perhaps Steve Morgan thought the market would react to slower sales growth the way it has after such a good run, perhaps he just fancied investing in a new private jet?

Perhaps both signals are right. 20% off recent SP highs is enough of a correction. Who knows?

>Most agents are already responding to the Bricks disruption by absorbing proptech and many have changed their fee structures to counteract the"commisery" Lets face it Bricks haven't reinvented the wheel just shaken the pot

Do traditional agents allow you to do everything online? Book viewings, change prices, submit new pictures and new descriptive text for approval? I wonder whether the small agents are keeping up with technology. I think one thing traditional agents will be reluctant to do is allow buyer & seller to communicate directly which takes the process out of office hours.

You could argue that if traditional agents are dropping their fees then their service levels will get even worse.

>Lettings Essentially failed and must be losing money

Last time I checked there were 60 LPEs and this hadn't increased or reduced since the time I checked previously. I see that there are quite a lot of negative comments re. the letting side of things but PB did say it represented a bigger percentage of their income and it's an accumulative model, even if half your newly added landlords leave, you are still increasing revenue. Perhaps standards do need to improve but I don't think social media gives a true reflection of things because everybody who is unhappy with something nowadays seems to rush to social media. People who aren't happy don't.

>Challenging market for everyone

Yes, I keep hearing this but my data which is a proxy for the market as a whole suggests new listings for the whole market are up on last year by about 5%. Perhaps sales are down, I don't know. If Bricks are going to get to 100,000 listings per year by the end of April 2020 they're going to have to grow market share of those listings a lot faster. Just 64,376 for the year to the end of April 2018.

Jimmy_88,

I would certainly put selling your most expensive asset in a different class to buying something on amazon so perhaps it will be a few years yet before a big enough percentage of the oldest milennials come into the frame. Perhaps the average age of those selling is moving up at the same time with fewer young people able to afford their own home. We'll see. I am not seeing any signs of this growth yet though.

>I would disagree with you that the current SP factors in any international success though and would actually say the opposite.

Have you read the Hardman report from September 2016? This was pre-USA and made some projections for the UK & Oz market and came up with a valuation. I'm pretty sure PB commissioned Hardman to produce this report and that it was distributed at the AGM.

"Three years from now, the current EPS in FY20 is 15.6p, with EPS growth in the following two years of 26% CAGR. Placing Purplebricks at that stage on the same PE as Rightmove (see point below), the price at that stage would be 15.6p x 26.9 = 420p. Discounting back the 420p for three years gives the current price basis on this methodology. If discounted at 20%pa, the current equivalent is 243p. At the current early stage of the Australian development, we would add a risk weighting to this, but in round terms a target current price of 200p would be warranted"

Let’s ignore the valuation method and see whether PB are likely to achieve the 2020 forecast on which the £2 valuation was based.

If you look at the Hardman projections they say they expected profits to rise quickly while LPE numbers grew to about 590 by 2020 and that from 2020 growth would be harder to achieve. PB however increased LPE numbers more rapidly to achieve the number of LPEs sooner than anticipated and look like they may have reached the slow progress stage already. They expected 590 LPEs by 2020 and 100,000 instructions with £55.5M when marketing costs were taken off gross profit. For 2018 the figure for gross profit less marketing costs was £23.7M but the number of LPEs was 630 according to PB (Currently 658 with about 60 being lettings).

LPE growth seems to have stalled now so you really have to ask how the figure of £55.5M number can be achieved by 2020 and have to question the value of the shares being worth £2 back in September 2016.

So for me, eventual success (profitability) in the USA is hugely factored into the SP and if that starts to look uncertain the SP will suffer drastically. When the USA expansion was announced it was February 2017 and if you look at the volume of trades before and after there is a significant difference. On the day of the announcement the SP rose from 226p to 262p although the SP had been rising since the interim results in early December but for me was a big factor in the continued SP increase.

>Remember its commission only so you are only given a guide .Initial guidance was £50k OTE A little less in some areas Yes it's the way of all flesh enticed away with a better offer but the turnover does seem high

Don't leave a safe job if you don't want the risk. Are traditional jobs safe anyway? I know when I became self employed I knew it was a risk and have had my ups and downs but so have my friends who stayed in "safe" jobs.

weston25,

Interesting to have your opinion.

I keep a close eye on the number of listings by PB and also have a proxy for market share in the UK. My main concerns are that market share is not growing very quickly now and that there has been quite a large decrease in the number of LPEs.

I wonder whether it's still too early for most people to be selling properties via their mobile phones? I read somewhere that the average age of a home seller is around 40. I see that everybody has a smart phone these days but am not convinced that everybody above a certain age use them to their full extent. I know for a fact that my friends don't! For most people above a certain age, I wonder is going from using it to message your friends to selling your house a step up that many at this time aren't prepared or capable of making.

As for the USA & Oz. I feel that these will be harder markets to crack than the UK so until I'm convinced about the UK or see signs that PB are progressing well overseas in terms of property listings I'll still be hesitant to invest because I think the SP is currently factoring in success in the USA which isn't even guaranteed if they take a good share of the UK market.

>You have just described a pyramid structure

Yes, I've told you what my LPE told me but you are not agreeing with that because you are saying the TO gets a cut of everything. The PIE article doesn't describe a pyramid structure so you're not agreeing with that either. So the question remains where do you come by the idea that there's a pyramid structure where the TO gets a piece of everyone below?

>The problem lies for the poor guy at the bottom when he reaches a point where he can take on more business but cant expand geographically Nowhere to go but leave!

Is that such a problem though? You take on a job, you get paid what you are told you're going to get. You find you can get more elsewhere so you leave. Isn't that what happens with Traditional Agents?

>This lack of stability cant be good for vendors

With all traditional Agents I've used you lose contact with the valuer/expert the day they leave after the valuation. Left with whoever answers the phone after that. Can't find your file. No idea who's viewed the property. The market is very quiet now because ??? (fill in ??? with whatever excuse you can think of). "Have you thought about reducing the asking price?". Pretty low standards of service and I've sold and bought more properties than most people.

>As the areas get carved up and smaller it gets more difficult to increase the number of listings. Those at the bottom are reliant on commissions not only to make a living but to pay the TO and maybe yet another layer above a cut

>Great news for the TO

Where are you getting your info. It's not in the PIE article which doesn't even suggest a pyramid structure. It doesn't tally with what I was told by my LPE either which is as described earlier. My LPE was just in the process of recruiting 2 underlings when i completed. The TO wasn't part of it, they would have been directly under my LPE. So for my LPE who was immediately below the TO - he would have to give the TO a cut and he would get a cut of the 2 LPEs below him (but the TO wouldn't).

Thanks for the comments. Took most of the day off from being an internet forum poster yesterday.

Strictly, yes I do look at that graph occasionally.

Sain, I'll keep an eye out for Steve Morgan investing again.

Sain,

The way I understood it to work was that each LPE could have 2 sub-LPEs. So not your typical pyramid scheme where everything works its way to the top.

So the Territory owner starts off by themselves then when the demand exceeds what he can deal with he splits up his territory and benefits from the next 2 sub-LPEs added. Then when demand exceeds what the 3 of them can handle a new LPE comes under one of the 2 LPEs and then that LPE starts benefiting but none of that benefit gets passed to the TO.

I think it's quite a good model.
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https://www.afr.com/real-estate/residential/inside-the-purplebricks-sweatshop-former-agent-accuses-it-of-toxic-culture-20180726-h135t7

>I obtained the properties for sale by Purplebricks in the USA by going to their website clicking on buy with purplebricks putting USA in location and the number of properties listed is shown right there

Yes, this is all the properties listed by every broker/agent. PurpleBricks only receive sales commission on the ones they are broker for which you can't identify easily via the PurpleBricks site. Think a lot, lot less.

PurpleBricks can also earn a commission as buying broker in the USA. If you look at https://www.zillow.com/profile/Purplebricks/ and click through the "our past sales" list you will see who they represented "Buyer", "Seller" or "Both". When they act for the buyer they earn a percentage commission but I think offer a $1000 incentive. When they act for the seller they earn the listing fee which I think is $3600.

It's possible that Zillow only represent their California activities.

All information provided in good faith but please do your own research.

Headline "House sales fall in ‘flat’ market as all regions in UK see a decline in transactions". Trying to work out what is going on.

"The taxman’s latest property transactions data shows 105,940 UK sales last month. Despite the monthly decline, the figure was up 0.3% annually."

"The seasonally adjusted estimate showed transactions decreased by 0.8% between June and July and was down 3.2% annually to 99,270."

What do they do to adjust seasonally? I would have thought they have some factor to normalise months. So if over time it was seen that June had half the transactions of July on average you would compare June & July using a factor of 2 when deciding on the seasonally adjusted change.

But saying seasonal adjusted figures show a decline of 3.2% annually when non-adjusted shows a 0.3% increase suggests the same factor has not been applied for both years.

Anybody else think this doesn't make sense. Can somebody explain what I'm missing?

>currently stands at 324,643

copesway, that sounds awfully high, where do you get your number from? You do know that PB list all properties by all agents on their website?

Take a look at Zillow https://www.zillow.com/profile/Purplebricks/ which isn't a complete picture. 379 active listings and 658 sales (but I think includes sales by their agents before joining PB as some of the dates are pre-launch).

I did some research a while back. Found some other listings that weren't in Zillow and estimated the turnover in the USA for PB and came pretty close to the $2m of revenue that was reported for the year to the end of April 2018. Early days but there was certainly nothing to get excited by last time I looked.

Sain, I can remember when the RDW chairman sold that large tranche of shares and you said to me something like "looks like he's calling the top of the market" which has turned out to be the case so kudos for that, however I do think you had expected worse results from the builders than have actually been the case.

>The reports this time next year will be telling an entirely different picture

When you say "entirely" that sounds pretty drastic. Isn't it possible that the likes of PSN & BWY (the builders who seem to have the lowest ASP) could just have a slightly different picture? After all, I don't think any of the builders are saying profits will rise as much but it sounds like you think they will start making losses.

More to the point, is the market now pricing in this decline of profits or has perhaps even overreacted and we could see SP recoveries from here on in.

Sorry for putting you on the spot but I did give kudos earlier on :)

Another question. Do you not see a decline in profits for TEF?

Thanks Dako,

I can't find any reference to Greystar in the last Trading statement but am aware that the 9 Elms deal is not part of the pipeline but hadn't appreciated that deals not in the pipeline were not included in guidance. I would have thought though that TEF account for estimated BTR profits when they give guidance. BTR is something they've been doing for some years now so surely it would be prudent to include estimated profit from BTR even if a particular deal was not ratified.

If that's not the case then had the 9 Elms planning permission gone through by the end of 2017 we would have been looking at guidance for FY 2019 that was seriously understated.

I'm fairly new to the housebuilder sector and learning all the time but in other sectors I wouldn't expect guidance to only include profits from contracts that were already signed - there is always some degree of estimation. I note also that RDW gave guidance for 2020 some time back and would be surprised if that only included developments currently in their pipeline (but ready to be told otherwise :)).

>I don't agree with the proportion being 95% to high street agents and 5% to online agents (or even solely Purplebricks).

Jimmy_88,

Actually thinking about it, if an Agent goes under then 100% of the listings they would have got are likely to end up with another traditional Agent. After all just because an Agent goes bust doesn't change the thinking of the homeowner selling the property.

Do you agree now? If not please elaborate.

Sain,

I'm not as convinced as you.

Look at the 9 Elms deal. Originally they expected planning approval at the end of 2017. 9 months later and still no approval. This must have an impact on profits. It's probably something like £16m a year profit and you'd think a large chunk of that would have been expected in the 2019 financial year.

It probably wouldn't take many agents going to the wall to make the remaining ones secure enough to continue. There seem to be too many of them where I live and I'm sure if one of them closed down the others would get about 95% of the properties with about 5% going to PurpleBricks.

Every little bit helps I suppose but unlikely to be hugely significant for PurpleBricks. If the market recovers you may even find new traditional agents popping up.