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Purplebricks investment website raises questions over its profitability

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Mon 02 Oct 2017

Purplebricks investment website raises questions over its profitability

says comparisons between forecast and actual profits reported by Purplebricks suggest the company’s position isn’t - in its words - “entirely rosy.”

Motley Fool is a website on which different investment analysts put forward different opinions about stocks. Over the weekend, the investment analyst G A Chester wrote on the Motley Fool a column entitled “10 Reasons I’d Sell Purplebricks PLC”.

The first two points concerned analyses made by the investment consultancy Hardman & Co in reports issued on December 17 2015 and again just a few weeks ago during September 2017. 

The Motley Fool points out that a private funding brochure to potential investors in 2014 projected a maiden profit of £17.6m for 2015 followed by £24.9m for 2016. 

The Fool then says: “By the time it floated in December 2015, a maiden profit was not forecast until fiscal 2017: a research note (17/12/2015) issued by Hardman & Co (paid fees by Purplebricks, so presumably not far off the company’s own projection) forecast £8m. Purplebricks posted a pre-tax loss of £6.1m. And even when the cost of entering the Australian market that year is stripped out, it still missed the £8m profit forecast by a mile. The latest from Hardman (September 2017) is for a maiden profit of £7m in 2019.”

The Motley Fool then claims that Purplebricks also fell short of Hardman’s December 2015 projection of £49.2m revenue for 2017. 

“The miss was £6m, excluding Australian revenue, which wasn’t in view in December 2015. The company has undoubtedly shaken up the UK market, but do revenue and profit projection misses (plus the timing of the move into Australia, and recently the US) suggest all isn’t entirely rosy?” asks Motley Fool author G A Chester. 

A Purplebricks spokesman told Estate Agent Today on Sunday evening: ”Purplebricks has taken the UK market by storm in a little over three years and is aiming to replicate this success in Australia and the US.  This increased ambition necessitates increased investment in people, infrastructure and marketing, which is reflected in updated budgets. Purplebricks continues to trade strongly, in stark contrast to traditional peers, and as set out in our latest trading statement is on-course to meet full year expectations. Purplebricks continues to deliver for shareholders and year-to-date has been one of the strongest share price performers."