Purplebricks admits uncertainty ahead after sharp drop in revenue

Purplebricks says there’s an uncertain period ahead following a sharp loss of revenue in the first half of its trading year.

In the release of its half year trading figures this morning - delayed by several weeks because of crises at the agency - the company admits to a year-on-year revenue drop of seven per cent and a year-on-year profits drops of 11 per cent to £26.2m. 

More significantly, instructions plummeted 38 per cent to 21,131 and total fee income dropped 29 per cent to £34.7m.

This is at a time when many other agencies, even in the online sector, are reporting soaring business.

Chief executive Vic Darvey says: "The first half was undoubtedly challenging, with the implementation of a major change to our operating model coinciding with the UK property market experiencing a substantial fall in new instructions. This dynamic led to a disappointing financial performance but we are confident that we now have the right levers in place to drive a stronger financial performance going forward.”

He goes on to say: “The outlook for the housing market remains uncertain and we expect the constrained levels of sales supply to continue throughout the second half [of the year].”

Darvey insists that radical changes to the employment structure and some modifications of the pricing model have paid benefits despite the poor financial performance. And he dismisses the well-publicised problems regarding non-compliance of Purplebricks' lettings department as "process issues".

He says: "Central to our business transformation, is our move to a fully employed workforce which we are confident will increase conversion rates, drive higher standards and improve customer outcomes. Early signs are encouraging with recent rises in conversion levels and market share gains ....

“Looking ahead, the initial results from our operational improvements are very encouraging and there are early signs of improving market conditions during January, although we do not anticipate a meaningful financial benefit until full year 2023.”

Purplebricks has also revealed this morning that it will cost some £3.6m to correct compliance issues in its lettings division.

The agency continues to stay quiet on how many tenants and landlords were affected by its failure to comply with the law requiring deposits to be placed in a government-backed scheme. It is also silent how long tenancy deposits were held by the agency before they were eventually placed in an approved scheme.

However now, for the first time, it has put a specific figure on the cost to the agency of the problem - some £3.6m.

In its trading statement it says: “We have taken appropriate and swift actions to address the process issues that we became aware of within our lettings business in December. We are very confident that all issues are being addressed and the business has stabilised. The provision of £3.6m is towards the lower end of our previous guidance.”

Vic Darvey says: "Our lettings business, while relatively small, has significant potential. We were disappointed by the process issues that we became aware of in our lettings business in December. These are being corrected and a root and branch review of the lettings business has been completed in relation to our processes and procedures.”

Late last year the Daily Telegraph revealed that an unknown number of deposits taken from tenants by Purplebricks were not registered with any one of the three government-backed schemes - they’re operated by MyDeposits, Deposit Protection Service and the Tenancy Deposit Scheme.

A statement from the agency at the time said: “Due to the introduction of a new lettings IT system, a small number of tenant deposits were not paid into an authorised deposit scheme. As soon as we identified this issue, we took action and have now registered these deposits. We are currently communicating to the affected landlords and tenants.”