Purplebricks Group Plc (LON:PURP) is the topic of discussion when Robin Savage, Research Director at Zeus Capital talks to DirectorsTalk. Robin explains the differences between the UK and USA platforms, how investors can monitor the companies success in each of its countries and with shares trading at just over 400p the importance of PURP USA as an investment case.
Purplebricks is the leading next generation estate agency in the UK and Australia, combining highly experienced and professional Local Property Experts and an innovative use of technology to help make the process of selling, buying or letting so much more convenient, transparent and cost effective. Purplebricks is transforming the way people perceive estate agents and estate agency. Building on its UK success, Purplebricks launched into Australia in August 2016 and in February 2017 announced plans to enter the US market.
Unlike traditional agents, where customers only pay upon the sale of the property, which effectively means that those that do sell pay more in order to cover the costs of those that do not sell, Purplebricks believes it is more equitable that everyone should pay, charging a flat fee at instruction. This helps to avoid the industry issue of timewasters and those that are merely ‘testing the water’ and underpins the low, flat fee model.
Customers in the UK and Australia can choose to pay at instruction or defer, at no extra cost, to the earlier of ten months from the date of instruction or the date of sale. If a customer wishes to defer payment, they are required to use Purplebricks’ conveyancing services for the sale.
Purplebricks charges £849 (inc. VAT) for a sale anywhere in the UK other than in London and surrounding areas where there is a charge of £1,199 (inc. VAT). There are additional charges if the customer wants Purplebricks to undertake the viewings on their behalf, if they require an energy performance certificate or a Rightmove premium display, amongst other services that are available.
The business model is low cost, flexible and cash generative, without the need for an expensive leased estate. LPEs are self-employed and receive a flat fee per instruction and can earn additional fees from the sale of ancillary services including, but not limited to, conveyancing, mortgage referrals and insurance.
Purplebricks Group Plc listed on the Alternative Investment Market (AIM) in December 2015, raising £25m of growth capital before listing costs at 100p per share. In February 2017 Purplebricks raised an additional £50m (gross) through a share placing to fund US expansion.
