Purplebricks in trouble? UK chief quits and warning about overseas expansion

Purplebricks has this morning warned investors its foreign activities are not going as well as predicted - although it insists it is still in good shape in the UK.

However, the agency also admits that UK chief executive Lee Wainwright is quitting the firm after two years “for personal reasons.”

The UK operation will now be led by Vic Darvey who joined the firm only last month.

An unscheduled statement to shareholders and the City issued at 7am today says that it remains strong in the UK despite the challenging market - it expects to maintain a 75 per cent share of the online sector and expects to report a revenue increase of up to 20 per cent more than a year ago.

But there are problems overseas - it warns its shareholders that revenue from its Australian and US expansion “will not be sufficient to meet expectations for this financial year.” 

In Australia, where Purplebricks launched a new PR campaign only last month, the agency had to change its charging structure to ensure vendors pay only a proportion upfront with the rest of the fixed fee payable when a sale completes.

In the US, Purplebricks has ditched its country-wide flat fee structure and instead varies charges by location and offers a payment option for when a property is sold, rather than upfront - more in line with traditional operators in the US real estate sector.

This morning’s full statement reads:

Purplebricks Group plc, a world leading hybrid real estate agency, provides an update in relation to current trading and changes to its non-Board leadership team.

Whilst the UK housing market has continued to be challenging for the estate agency industry, the Board still expects to report UK revenue for the current financial year of approximately 15-20% above the prior year. The Company also expects to maintain its 75% share of UK online instructions and for Purplebricks to continue to be the clear market leader in UK hybrid estate agency.

Although the Australian housing market has experienced a number of headwinds, the Board is encouraged by the new leadership team, the positive changes made in the model towards the end of 2018 and the current level and quality of activity. However, the anticipated amount of recognisable revenue will not be sufficient to meet expectations for this financial year. 

In the US, the Company is making better than expected progress with conversion from opportunity to listing, listing to sale and sale to ancillary revenue, receiving positive reviews and feedback from customers. However, there has been a slower than expected response to the second US marketing initiative that concluded towards the end of January. There are some early positive signs from the third US marketing initiative and a recent change in business model to payment on completion. The vast majority of short-term investment will be focused on the Los Angeles and Florida markets. As a result of this, the Board does not expect the amount of US revenue to be sufficient to meet its expectations in this financial year. 

The business in Canada has performed well and remains on track to meet management's expectations. The Board continues to be encouraged by current and future opportunities in this market.

The Company announces that Lee Wainwright, UK CEO, and Eric Eckardt, US CEO, will shortly be leaving the business.

After two years with Purplebricks, Lee Wainwright will leave the business for personal reasons. Lee played an important role in helping Purplebricks become the UK’s largest estate agent. His responsibilities will be taken on in the interim by Vic Darvey, Purplebricks’ Group Chief Operating Officer, who joined the business in January 2019 from MoneySuperMarket.com. Vic has extensive experience of leading strong tech-focused, customer-centric businesses and will play a key role in the future direction and next stage of growth for Purplebricks.

Eric Eckardt will also be leaving the Company after two years. Michael Bruce, Group CEO and co-founder who was instrumental in the growth of the Purplebricks business in the UK and has proven experience in bringing together marketing, technology and customer centric estate agency operations will take on day-to-day management of the US business with immediate effect.