Purplebricks has put a new asset on the market: itself. The online estate agent issued a profit warning and said a strategic review could result in the sale of the company.
The company said on Friday its efforts to cut costs had “involved more disruption to the sales field than originally envisaged”, adding £1.2m in costs and pushing down the number of people who signed up to sell their houses using the website.
It is not in talks with any potential buyers but said it was open to “a sale of the company or some or all of the group’s business and assets”, in an announcement to the stock market.
Purplebricks was once seen as one of the vanguard of companies that would shake up the property industry with digital technology. It launched in 2014 and listed at a float price of 100p. By the summer of 2017 it had risen to more than £5 a share, valuing the company at £1.3bn. However, it had slumped to less than £25m on Friday.
The company charges a flat fee for every property, and has no branches. Initially, it also used self-employed agents but was forced to make them employees after some threatened legal action. It was eventually forced to scale back a planned expansion, and has also suffered a series of costly errors, including failing to follow the law on tenants’ deposits.
The company, which is listed on London’s alternative investment market, said it expects to bring in revenue for the financial year to the end of April of between £60m and £65m, and a loss of between £15m and £20m after its own adjustments.
It will also make cuts to its business letting properties, and will cut planned investment in a business offering mortgages.
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The company’s share price dropped by 15% on Friday to a record low of 8.2p.
Lecram Holdings, which controls a 5% stake in Purplebricks, said it was “regrettable that the lack of relevant experience at the helm of Purplebricks, which we highlighted last June, has led the company to arrive at this unfortunate juncture”.
The investor said it wanted Purplebricks’ chair, Paul Pindar, to step down immediately should the review not lead to an “acceptable offer for the company”. Pindar also owns 5% of the company.
Helena Marston, Purplebricks’ chief executive, insisted “the company has never been in better shape for the future” after the company identified £4m in extra cost savings.
“Yes, the actions we have taken have caused more short-term disruption to our third-quarter performance than anticipated but we remain confident in returning to positive cash generation in early [financial year 2024],” she said.
“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.”
Russ Mould, the investment director at AJ Bell, an investment platform, said: “It’s hard to see who would rush into buying the business but someone might think the brand is worth more than the current £26m market valuation of the company.”
