Purplebricks, the online estate agent backed by fund manager Neil Woodford, insists it will turn a profit in the coming year as it expands the business Down Under, despite revealing mounting losses on home soil.
The company, which made its debut on London’s junior market in December, increased revenues 448pc to £18.6m in the year to April 30, as house sellers flocked to its “hybrid” model that combines a website and network of estate agents called ‘local property experts’.
But heavy advertising and marketing costs meant Purplebricks booked a loss of £12m in the year to April 30, from £5.4m in 2015.
The Aim-listed company, set up by brothers Michael and Kenny Bruce in 2014, will plough £10m into setting up the business in Australia over the next two years, and says it has already hired a management team.
It had previously been criticised for not revealing how many homes it had sold, unlike other listed estate agencies. For the first time, it revealed 2,386 sales were agreed in May, although this does not necessarily mean they were completed.
It sold a total of £2.8bn of property during the year. By comparison, Savills, the large and long-established agent, sold a total of £5.9bn worth of residential property in 2015.
Michael Bruce, Purplebrick’s boss, insists the company will move into profit in the coming year as it expands into Australia, where it hopes to gain market share by undercutting the fees charged by bricks-and-mortar estate agents.
“We are leading change in an industry that has long been stagnant,” he said. “We’re looking to replicate this success in Australia.”
The company said Australia’s £3.3bn estate agency market presented a “compelling” opportunity, where sellers are currently charged around £5,900 to list their properties on other online portals.
Purplebricks hopes to break even there within two years. “The technology is already in place, and we can leverage what we have in the UK. The opportunity is greater there, because the fees are higher,” said Mr Bruce.
Anthony Codling, an analyst at Jefferies, said: “We believe that the structure of the Australian residential market is actually more readily suited to PB’s model than the UK market, and that a PB portal would work there. Next stop America?”
“We continue to demonstrate that our full-service estate agency model has growing appeal, having sold and completed on £2.8bn of property this year,” Mr Bruce continued. He added that the company hoped to emulate Zoopla’s one-stop-shop model.
It comes as more of the big players in the industry enter the online market. Last week, Savills announced it had invested in online agency Yopa, while Countrywide has launched a trial of a hybrid agent. Mr Bruce shrugged off this competition: “We are way ahead of anyone in the market, traditional or online, in terms of investment in tech, marketing and infrastructure.
“The difficulty will come for them in cannibalising their own models against each other.” He added: “For every £1 we spend, they will spend £5.”
Purplebricks shares were trading hands at £1.34 this morning, up from 97p at the beginning of the year.