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Purplebricks disputes findings of Jefferies report after shares drop

U.K.-based real estate agency Purplebricks Group PLC refuted the findings of a Feb. 1 Jefferies analysis that found that the company's ability to sell a home tracked more closely to the U.K. national average than what the agency claims.

Shares of Purplebricks, which uses a combined agent and technology approach to sell homes in the U.K., U.S. and Australia, lost about 7.6% in Feb. 2 trading to close at £418.60 per share. In a statement, the company attributed the drop to the Jefferies report, authored by equity analysts Anthony Codling and Sam Cullen.

According to the investment bank's analysis, 51.6% of clients who listed homes in November 2016 with Purplebricks, which charges a fixed fee of about £1,000 regardless of whether a home sells, had sold their home within 10 months. Purplebricks CEO Michael Bruce had claimed in an October 2016 radio interview that 88% of homes listed with his agency sold in 10 months, according to the report.

Purplebricks said Jefferies arrived at its estimated completion rate using only one month of data and excluded certain properties, including those that had sold but were not uploaded in the Land Registry.

"Purplebricks reiterates its most recently published sales conversion rate from instruction to sale agreed of 78 per cent, which it believes more accurately reflects its sales performance, although this figure itself does not include those properties in the sales pipeline at the end of the period which will in due course sell," the company said.

The company said trading is in line with the board's expectations for the year ending April 30.

Jefferies, which gave a nod to Purplebricks' speedy growth and ambition, also raised concerns about Purplebricks' accounting policies, stating that "either its contractual obligations to its customers end with their home being listed on the major property portals or that revenue may have been overstated and deferred income provisions understated in its audited accounts."

The investment bank has an "underperform" rating on the stock.