Online estate agent announces departure of both UK and US heads after second downgrade
Shares in the UK’s largest online estate agent, Purplebricks, plunged 40% after the company slashed its revenue forecasts and announced the surprise departure of both its US and UK bosses.
The company blamed slower than expected growth in its fledgling US business and “headwinds” in Australia, as it said revenue for the year was unlikely to exceed £140m compared with an earlier forecast of up to £175m.
The revenue prediction had already been downgraded once, at the time of its disappointing half-year results, from £185m.
Last year’s revenues were £93.7m, which yielded an operating loss of £19.6m. The combined £45m downgrade to this year’s full-year sales forecasts is significant given that Australia and the US, the two divisions it said were struggling, only reported revenues of £12.5m combined in the first half of the year.
Shares dropped by 40% after the news but later staged a partial recovery. However they were still down 28%, at 118p, cutting the company’s market value by £140m.
The fall is bad news for Woodford Investment Management, led by the City investment guru Neil Woodford, which is the largest shareholder in the company, with a stake of about 27%.
Purplebricks’ founder and global chief executive, Michael Bruce, is to take control of the US business with immediate effect, as its US chief executive, Eric Eckardt, leaves the business. No reason was given for his departure but revenues in the US grew less rapidly than the company had hoped, after a lacklustre response to a marketing drive that finished in January.
The UK chief executive, Lee Wainwright, is also leaving. The company said this was for “personal reasons”.
Purplebricks said the housing market in Britain, by far its largest business, was “challenging” but Bruce said the UK division was in good shape. “The UK is leading the way with continued profitable growth and a strategy to deliver greater success,” he said.
However, analysts at Investec said predicted UK sales growth of 15%-20% was disappointing compared with their own prediction of 27%, although they said this was mitigated by the likelihood the company would retain double-digit profit margins and a 75% share of the online market.
Bruce said: “The board remains confident of the long-term growth potential of the business and the opportunity to deliver substantial value for shareholders.”
Purplebricks was involved in a bitter row with City analysts at Jefferies last year, after the stockbroker questioned the company’s claims that it sold more than three-quarters of homes listed on its website.