City consultancy Jefferies has made a blistering attack on Purplebricks’ sales performance and finances, saying “the arithmetic…still does not add up.” Last month analyst Anthony Codling disputed the agency’s claim of a 77 per cent conversion rate, stating one in three of its vendors paid a fee but did not sell. Now Codling has returned to the fray - with a vengeance.
In a note to investors he writes: “We hope that for their customers the saying 'all comes to they who wait' is true. The lucky 14 per cent who have sold their homes waited on average around 4.5 months between selling subject to contract and actually selling. For the rest the wait has been around 6.5 months so far and the clock is still ticking.” Two months ago Jefferies analysed the properties marked on Purplebricks’ website as being ‘sold’ in Birmingham, Bournemouth and Southampton. Now it has revisited them; the Jefferies note says that “due to time lags in the Land Registry database we only looked at properties which were registered as sold on or before March 31 2016. Overall we were able to trace 14 per cent of the properties classed as 'sold' between October 29 2014 and March 31 2016 to the Land Registry database.”
Codling says Purplebricks’ advertising message that ‘selling houses and supporting customers is what we do’ may be correct but he then says this does not happen “as quickly as we'd expect from their website which states that 'On average it takes us just 14 days to find a buyer’.” He suggests that if Purplebricks also quoted the average time it takes to legally complete the sale “potential customers could better assess the cost/benefit trade off of the attractive fixed fee.” The analyst concludes his note by saying that Purplebricks’ current share value is “priced for perfection” and warns that “should the relatively new and innovative model stumble the share price may follow.”
But - in a final sentence showing that Jefferies is hedging its bets - Codling says: “However should the model bed down and sales accelerate ahead of our expectations, the shares may not currently reflect the true value of a disruptor.”