Purplebricks is a national estate agency and lettings business driven by a combination of professional Local Property Experts (LPEs), technology and customer facing software designed to change the whole experience of selling, buying and letting property.
What is interesting is that the gap between a portal (real estate's online marketing arm) and a broker (the transactions involved in selling / renting real estate) is closing. They have streamlined the processes involved and have seamlessly integrated themselves into the online marketing efforts required to sell and rent property.
While other traditional estate agencies are fighting the development of these "hybrid estate agencies", perhaps the "traditional" property portals should also start to get a little nervous as these business could, over time, challenge the online real estate world.
Here is the details of the listing ...
Purplebricks, a leading hybrid estate agency, has conditionally raised £58.1 million before expenses from an institutional placing and is expected to be admitted to AIM with a market capitalisation of £240.3 million and on a fully diluted valuation of £255.0m.
Purplebricks is a national estate agency and lettings business driven by a combination of professional Local Property Experts (LPEs), technology and customer facing software designed to change the whole experience of selling, buying and letting property. The Company is becoming a major brand through extensive advertising and marketing, providing a service intended to exceed customers' expectations, whilst charging a fraction of the cost of a traditional estate agent.
The Company has grown rapidly since its regional launch in April 2014, with its revenue in September 2015 being around 10 times greater than the previous year. Based on the Company's recent monthly run-rate of fee paying customers Purplebricks already has the fourth highest number in the UK1. In the 18 months since its regional launch, Purplebricks has also emerged as the market leader in the hybrid and online sector, with a market share of the top six national online competitors in excess of 60%; and has approximately 4,300 residential properties for sale, which represents more than twice the number of properties as the next largest online agency. Purplebricks typically also sells its properties faster than its online competitors.
Trading in Purplebricks' shares is expected to start at 8.00am on 17 December 2015. (Ticker symbol PURP.L).
Zeus Capital is acting as the Company's Nominated Adviser and Broker.
It is estimated that annual UK estate agency fees amount to over £4.4bn. Purplebricks' strategy is to build upon its market leading online proposition and increase Purplebricks' share of the UK estate agency market for both sales and lettings.
The attainment of the strategy is based on the following key pillars of the Purplebricks' offer:
The business model
Instructions convert quickly to cash
Purplebricks has a competitive and transparent, flat fee pricing structure of £665 plus VAT for a sale anywhere in the UK other than certain defined London postcodes, where there is a charge of £965 plus 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. The Company's additional sources of revenue currently comprise fees from conveyancing, mortgage referrals and insurance.
The average Purplebricks' fee including all other sources of income is £1,080 (inc. VAT).
The customer can choose to pay upfront on instruction or they can delay the payment (at no additional cost) until the earlier of the sale of the property or ten months from instruction. The deferred payment is financed by Close Brothers. Purplebricks is paid by Close Brothers the next working day. If a customer wishes to defer payment, they are required to use Purplebricks' conveyancing services for the sale.
Low and flexible cost base
The cost structure of the business is different to that of a traditional estate agent. First, the hybrid model does not require the overheads of a high street estate agency business, with extensive, leased branches. Secondly, the LPEs typically operate under licence (89%) with fees payable upon instruction, rather than as an employee (11%). As a result gross margins are substantial, reaching 59.2% for the year ended 30 April 2015. The marketing budget is in alignment with the strategy of consistent presence in the media such as television, and aims not only to build awareness but also to help maintain and extend the Company's position as the market leader in the online sector.
Current trading and prospects
Since the Company's 30 April 2015 year end, Purplebricks has continued to see an encouraging growth in recognition of its brand and service offering with consistent progress across its key performance indicators in numbers of valuations and instructions and market share.
In November 2015, Purplebricks completed its national footprint with its launch into Scotland. Purplebricks expects to build on its progress to date through the remainder of the current financial year ending 30 April 2016 by filling out its national footprint through increasing numbers of LPEs, by introducing new technological features for its software, including an App to offer customers more choice and convenience, and through the evolution of its advertising and marketing strategy to raise brand awareness.
The Company's aims are to continue to build its lettings business, grow its mortgage business and optimise the significant and growing traffic visiting its website. Purplebricks approaches the key trading period of the first quarter of the new calendar year with confidence and, in the Directors' opinion, with the Purplebricks hybrid model set to continue to change the way that houses are sold and let.
Reasons for Admission and use of proceeds
The Placing and Admission will assist Purplebricks in its development by:
The Placing is expected to raise before expenses approximately £25.0 million for the Company and approximately £33.1 million for certain of the Company's shareholders who are selling shares pursuant to the Placing.