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Expect Purplebricks to make lettings acquisitions, says analyst

Purplebricks needs to expand its lettings activities to boost the volume of business it has and increase cash flow, according to an analysis by Investors’ Chronicle.

The publication admits that it has been “a fan of Purplebricks since it listed in December 2015” but admits that it is “pricey for a company that has not yet posted a profit.”

The publication’s latest article on the hybrid agency gallops over familiar territory - listings versus sales, its extremely successful share price progress since the new year, the quality of Local Property Experts on the ground, and the broader online versus traditional estate agency business model debate.

But more unusually, the article says there are gaps in the Purplebricks’ model.

Firstly, the agency needs to expand its geographic reach, which the publication thinks is in hand through the recruitment of more LPEs. 

However, IC says it also needs to broaden its revenue streams, especially as Countrywide and others are seeking to emulate parts of the hybrid model. “Lettings will be key, as a liquid and higher volume business: expect acquisitions to complement organic growth” says the article.

So far, few analysts have considered online or hybrid agencies taking over existing traditional letting agencies.

The article does not give further indications of how or when this should be achieved, but does return to Purplebricks’ upbeat financial results reported to the City recently.

It praises the agency for offering a fuller service, for less, than the pilot Countrywide agencies also testing the hybrid route. 

“I think Purplebricks will be tougher to catch up than rivals suspect. But if there is a sales gap in its estate agency business, it will soon become apparent” the piece concludes.

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    How can they need to improve cashflow when they get paid up front, whether it sells/lets or not?

  • Kristjan Byfield

    How would acquiring lettings businesses on a completely dofferent fee structure boost their cashflow. Whilst online agents have established some (apparently) margins in the sales fees Leetings is a lot more onerous and fees are substantially lower. This wreaks of yet another journalist commenting on a sector they dont really understand with the sole aim of tearing down our industry.
    Due to the ever increasing legislation in lettings it's our experience that Landlords are looking for their agents to do a lot more for them. The simple reality is, the more an agency takes on, the more costly the process (and potential liabilities) become requiring an uplift in charges. Sales and Lettings are radically different beasts and lettings will be a lot harder to convert and still make any sort of money.

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