A prominent analyst has suggested three ways Purplebricks could boost investor confidence and contend in a recessionary market.
Davy Research released an analyst note yesterday on Purplebricks, that suggested the beleaguered online agent had to return to market share growth, change its chairman and show evidence of cash preservation.
David Reynolds, analyst at Davy, said: “As the UK residential market slows into the coming recession, Purplebricks Group will need to contend with a less benign market.
“Chair is a tough job, it hasn’t gone well at Purplebricks. Change is required.
“Navigating 2022/23, rebuilding the business model at the same time as preserving cash is quite some ‘ask’ in a housing market that is likely to become more competitive for estate agents; even more so, investors will need to see progress visible in the financials.”
Estate Agent Today has asked for further comment on what difference a new chairman would make.
Responding to Purplebricks’ 2022 full year results and subsequent 2023 guidance suggesting broadly flat revenue growth in the range of £67.5m to 72.5m, Reynolds cut his own forecasts for the brand.
The note suggests that full-year 2023 revenue would be flat on 2022 as the estate agency “becomes more competitive in a challenging economic backdrop.”
It suggested the company’s gross profit margin will be squeezed by the new employed model and cost efficiencies won’t be visible until the 2024 results when revenue is expected to be up 15% annually.
Davy Research revised its revenue forecasts for Purplebricks from £83.6m to £70m for 2023 and from £96.2m to £80.5m in 2024, before rising to £92.6m in 2025.
The analyst has a neutral stance on the stock.
It comes after an activist investor upped its stake and called for the online agent’s chairman to resign last month.
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Revenue vanity, profit sanity.
Just how long can you run with multi-million losses year on year?
Add in the possible class action/s on the horizon the likely 3.2M provision for the lettings fine, and you see a dwindling cash at bank situation. Recession means everyone spends less and does less, Purplebricks is a one trick pony, it takes a fee upfront sale or no sale, but if people are not moving, then its upfront cashflow diminishes.
Add in adverse brand publicity over the PAYE status or otherwise of LPE's in the past, and quite soon Purplebricks could be a toxic brand, frowned on by the public.
Add in a CEO who has never been a CEO or had any experience selling property - did no one check her CV? And you can see why some shareholders are up in arms. The biggest problem, has any company that has seen it shareprice drop by 95%, ever made a comeback? 17.5p a share seems about right.
Given that the company is now a decade old, I think it is at the end of its cycle, and no amount of fighting talk, or 'new ideas' from the new CEO will cut it. The agency model is simple, and it is simple to get it wrong. Purplebricks seem to be getting it wrong on a constant basis.
They should try selling property...
why the obsession with PB get on running your own businesses
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