Purplebricks could be sold after the group warned that costs from a “turnaround plan” had proved higher than expected.
In a statement released today, the UK online estate agent said while its brand had value due to its name recognition, it may reach its potential under an alternative ownership structure.
Launched in 2014, the Purplebricks board said the group has decided to conduct a strategic review “with the aim of delivering maximum value for shareholders”.
Zeus has been appointed as financial adviser to assist with the strategic review.
Purplebricks states: “The outcome of the strategic review may or may not result in a sale of the Company or some or all of the group’s business and assets.”
The group announced that an offer period has now commenced.
In the same statement, the group said it now expects to deliver revenue for FY23 of between £60m and £65m, and an adjusted EBITDA loss of between £15m and £20m.
Purplebricks chief executive Helen Marston says: “We have undertaken a huge amount of work in the last nine months to improve our sales business, raise standards, establish Purplebricks Financial Services, and stabilise lettings, all of which means the company has never been in better shape for the future. “
“Yes, the actions we have taken have caused more short-term disruption to our Q3 performance than anticipated, but we remain confident in returning to positive cash generation in early FY24.”
“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.”
In December, Purplebricks launched a mortgage broker business, called Purplebricks Financial Services.
The business said the unit will be able to “provide personalised mortgage advice from a team of qualified experts providing customers with access to thousands of mortgage deals”.
In the last month of 2022, Purplebricks posted a half-year adjusted operating loss of £11.7m, which widened by 5% from a year ago, while sales fell 16% to £34.5m in the same period.
The group blamed a mixture of restructuring costs and tax charges for the loss, but said its plans to diversify its revenue streams were running ahead of plan.
Commenting on the news, EHF Mortgages managing director Justin Moy suggests that signs of Purplebricks’ demise “have been there for some time”.
“With their cheap fixed-fee model, they may have shaken up the estate agency model, but you need to drive large volumes for that model to be successful. And as the market cools, Purplebricks will be one of the first to suffer. Even their venture into mortgages has come too late to save them.”
“There will be more casualties as firms look to cut costs, and unfortunately employees will be some of the first to go.”
R3 Mortgages director Riz Malik says: “Purplebricks have their place in the market, but in life, you get what you pay for.”
“We’re financing a home for a client buying through Purplebricks, and my client, a Millennial, has found the process to be smooth and efficient. Despite having diversified into other areas such as financial services, they will continue to suffer if the market remains sluggish through 2023.”
“Their most valuable asset is their brand recognition, but I doubt that will bring them the bids they seek. When I tried to find out more information on their site I kept on getting a ‘404 page could not be found’ error which doesn’t look good for a company that prides itself on its tech looking for suitors.”
Meanwhile, Highcastle Estates director Zaid Patel states: “The problem with Purplebricks is they focused on cheap price and quantity but poor customer service. The core of the estate agency sector is quality and personal customer service. It doesn’t just need an alternative ownership structure, it needs an overhaul in the way it treats its stakeholders, from their local property experts to their vendors.”
“Saying that, the brand definitely has value and if the marketing and concept from the new owners are spot on, they can easily be one of the big players in the market.”
