The Purplebricks share price rocketed yesterday for the second day running. As a result, the firm starts today’s trading with a valuation of some £360m – yet, as one financial website, the Investor’s Champion, pointed out yesterday, it has “yet to make a bean”. Purplebricks had reported a ‘maiden’ profit of £300,000 but this was after costs and share awards were stripped out, and the Telegraph reported that it had actually posted losses of £2.8m. Purplebricks shares started yesterday morning at 125p and ended at 145p, having leapt in two days from 105p after the results were unveiled. The City has been clearly impressed by this week’s interim results for the six months to the end of October. Yet Purplebricks has still not said how many homes it has sold in the UK. One guesstimate, based on the value of properties it says it has sold, suggests an impressive 11,500 transactions. However, Purplebricks itself has not come back to us after saying it would prefer to calculate the number of sales based on its boast that it is selling a home every 16 minutes. Investor’s Champion yesterday commented on Purplebricks’ “amazing growth” but added that the “valuation still looks a bit crazy”. It went on: “The so called ‘hybrid’ estate agent providing a new way to buy, sell or let property, delivered fabulous top line growth for the six months ended 31 October 2016, boosting the share price, which had fallen 38% from previous highs. “However, before everyone gets too excited, it’s worth remembering this business is valued at approximately £360m and so far hasn’t made a bean! Our latest Blog ponders the valuation further. “Management talks of a ‘seismic shift underway in the estate agency market’ and while we are all in favour of a wholesale change to this status quo and commend their offering, it’s a struggle to see how one business can be an outright winner where there are so few barriers to entry, which PURP’s current valuation surely implies, and a growing number of rivals – think easyproperty.com, emoov.co.uk, tepilo.com, urban.co.uk, housesimple.com, housenetwork.co.uk etc. “Revenue in the 6 months was up 159% to £18.7m with the newer Australian business contributing £0.4m and first-half sales exceeding full-year 2016 sales of £18.6m. “They recruited 124 Local Property Experts (‘LPEs’) in the period bringing the total to 329 at period end with the full-year target 360 LPEs. They also claimed that the UK business generated a maiden profit, but for profit read ‘adjusted EBITDA’ of £0.3m (H1 FY16: loss £6.0m). The operating cash outflow was £989k and a further £919k of capex was incurred. “While first half instructions increased 108% that seems to be lagging the sales growth of 159%, although we are probably being picky as it’s hard to complain too much with growth of 100%+ and a sale every 16 minutes. “The comment that the UK market backdrop is tough is slightly concerning but with £29.1m of cash and some willing shareholders, management is no doubt confident they can see off most of the competition. “The proposed £10m investment in the Australian market will consume some of that cash as will the launch of new marketing initiatives from Boxing Day which has the objective of achieving a market leading position in the UK as early as possible. “We agree it’s looking good but that valuation is still perplexing. “The house broker is forecasting full year sales of £47.1m meaning there is £28.4m to do in the second half to end April 2017 in what is the peak property selling period. For the year ending April 2018 sales are forecast to rise significantly to £83.5m when a maiden adjusted pre-tax profit of £16.1m is also forecast, with resulting adjusted eps 6.p. At the current share price of 145p this puts the shares on a c24x multiple. “This doesn’t sound too demanding but assumes a top line growing at a significant 77%, which is! “This is also a business that’s surely going to demand meaningful marketing spend to attract what amounts to short term customers. “We hope they succeed as it’s certainly a market that needs shaking up … but really struggle with that valuation.”
Online estate agent Purplebricks ' share price has risen to 145p , impressing some quarters , but the company 's recent £ ##30 m valuation has left others " disappointed " . Purplebricks said revenue for the first six months of 2016 rose by 159 % to £ 18.7 m , while sales grew by 159 % . However , Website Investor ’s Champion said in a blog post that the growth was " amazing " but scoffed at maiden profit figures of £ 300,000 , saying Purplebricks " had n't got a bean " . The Telegraph reported the online firm as having made a profit of £ 2.8 ##m .