Home Purplebricks founder steps down as chief executive
May 8, 2019
Purplebricks has parted ways with its chief executive and indicated it will scale back its international operations as the struggling online estate agent conceded it had rushed a push into overseas markets.
Michael Bruce, who set up the group in 2012, will leave his role with immediate effect, the company said on Tuesday. He will be replaced by Vic Darvey, who joined as chief operating officer in January from price comparison site Moneysupermarket.com.
Purplebricks — which operates a business model based on vendors paying an upfront fixed fee whether their property sells or not — also indicated it would pull out of Australia and dial back its US presence.
The company’s shares opened down 10 per cent after the announcement on Tuesday morning, before paring some of those losses to trade down 7 per cent by late morning.
The online disrupter, which has been backed by fund manager Neil Woodford since before its 2015 listing, has come under pressure from slowing growth in its core UK market and deteriorating performance in its Australian and US operations. This prompted it to cut its revenue outlook by a quarter in February and replace its US and UK bosses.
Analysts at Berenberg last month slashed their target price for the group by more than 80 per cent as they said limitations had been “laid bare” in its upfront fee model and its capacity for growth was proving smaller than anticipated. They predicted it would either have to abandon its Australian and US operations or raise additional equity.
On Tuesday Purplebricks said it would pull out of the Australian market after two-and-a-half years, citing “increasingly challenging” conditions. It said prospective returns from the country were “not sufficient to justify continued investment”.
In its US business, which has also been struggling, it announced a strategic review and said it had cut investment in marketing and other outgoings in order to reduce expenditure to “sustainable levels”. Its year-old Canadian business is faring better, however.
“With hindsight, our rate of geographic expansion was too rapid and, as a result, the quality of execution has suffered. We have also made suboptimal decisions in allocating capital. We will learn from these errors and will not make them again,” said Paul Pindar, Purplebricks non-executive chairman.
Mr Pindar apologised to shareholders for what he described as a “disappointing” performance over the past 12 months.
Russ Mould, an analyst at AJ Bell, said Tuesday’s announcement was “effectively an admission of failure” for the company.
“Ultimately, Purplebricks has been trying to do too much too fast. It would be better served by fine-tuning the UK operations and slowly expanding overseas one step at a time.”
Mr Bruce founded Purplebricks with his brother Kenneth in 2012 as “the world’s first 24-hour estate agent”, after their previous venture, property group JKM, was wound up.
The brothers, originally from County Antrim in Northern Ireland, had also run another estate agent company, Burchell Edwards, which they sold to rival Connells in 2011, three years after buying it out of administration.
Purplebricks listed on London’s Aim in late 2015, with its shares valued at 100p. They rose to hit a peak of 526p by mid-2017, but have since fallen almost 75 per cent to close at 119p on Tuesday.
Mr Bruce and his wife Isabelle retain an 11 per cent holding in Purplebricks, while Kenneth has a 3 per cent stake.