Purplebricks seeks buyer as it warns on earnings

Purplebricks, the UK online estate agent that launched in 2014 with a promise to disrupt the property market, has put up a “for sale” sign for its own business, after a punishing run on the public markets.

The company on Friday warned that efforts to turn the business round would cost more than forecast. It is now expecting a larger than previously guided adjusted loss before interest, tax, depreciation and amortisation of £15mn to £20mn for the year to April.

It is the latest blow to a company whose shares once traded at £5 but now cost less than 10p. A failed international expansion, costly restructuring efforts, problems at its lettings business and the unexpected departure of its chief executive last year have all contributed to the slump.

“The board recognises that the potential of the group may be better realised under an alternative ownership structure, and has, therefore, decided to conduct a strategic review of the group’s business,” it said in the statement.

This “may or may not result in a sale of the company”, it added.

Although a formal offer period has opened, Purplebricks said it was not in talks with any potential acquirer and had not been approached.

Chief executive Helena Marston said the company “has never been in better shape for the future”, though admitted that management actions had “caused more short-term disruption” than it anticipated.

“We recognise that our upside potential is not currently reflected in our market valuation, which is why the entire board has therefore concluded that a strategic review is now in the best interests of all shareholders,” she said.

Shares in the company plunged 16 per cent in early trading.

Activist investor Lecram Holdings, which owns 5 per cent of the group and has been pushing to replace its chair, said “the lack of relevant experience at the helm of Purplebricks . . . has led the company to arrive at this unfortunate juncture”. It called for a “swift conclusion” to the review, and the immediate departure of the chair should no “acceptable” offer arise.

Purplebricks, founded by entrepreneur Michael Bruce with his brother Kenny, made a splash when it listed on the stock market in late 2015, and in the few years that followed its shares quintupled in value. In 2018, German media group Axel Springer made a significant investment.

Purplebricks initially drew praise for its disruptive business model, which was aimed at house sellers tired of paying big commissions to estate agents. It recently rebooted an advertising campaign with the tagline “Save yourself from Commisery”.

“It was a real hot, flavour-of-the-month business model — can we bring the internet to the most staid, the most dinosaurlike of all sectors?” said David Reynolds, an equity analyst at Davy. “It had a lot going for it.”

Purplebricks expanded quickly into Canada, Australia and the US, but later confessed to “execution errors” in these efforts, triggering Bruce’s departure and a withdrawal from these markets.

In more recent years it had to set aside money to cover “process issues” in its lettings business, while its agents threatened legal action against the group in 2021, claiming they should have been designated as full employees, not self-employed. A change in that model pushed up costs.

Davy’s Reynolds argued that estate agency groups might not want to bid for Purplebricks given its core mission was to push down on agency fees, and the “only sensible buyer” was Axel Springer, which owns just over 26 per cent of the group, according to S&P Capital IQ. Axel Springer declined to comment.