Purplebricks facing millions in potential claims, delays results

Online estate agency Purplebricks Group has delayed its results after it emerged it is facing potentially millions of pounds of claims.

In a brief statement on Monday, the Aim-listed firm said its interim numbers - due out on Tuesday - would be delayed after an internal review discovered a “process issue in how it had been communicating with tenants on behalf its landlords in relation to deposit registrations”.

The firm said enquiries were ongoing, and the communication process was being corrected.

But it also believed it “prudent” to provide for any future claims, which could be brought under the Housing Act, and is suggesting a potential financial risk of between £2m and £9m.

Purplebricks did not provide further comment. But in recent weeks reports have claimed that some Purplebricks’ clients were facing potential fines after an IT error meant tenancy deposits were not registered with the government-approved deposit protection scheme within the 30-day statutory limit, leaving landlords liable for potential fines.

As at 0930 GMT, shares in Purplebricks were off 19% at 25.74p. The stock has now lost 75% so far this year.

Russ Mould, investment director at AJ Bell, said: “There will be red faces at Purplebricks this morning.

"Liabilities are initially expected to run to as much as £9m. The longer running impact could be worse if it leads to an exodus of landlords away from the platform.

“The company enjoyed a strong start to life as a public company after its 2015 IPO, but in recent years has come unstuck as its efforts at overseas expansion sank miserably and it lost market share in the UK.”

In November, Purplebricks warned that its interim numbers were likely to be worse-than-expected. It said there had been a sharp slowdown in business activity, with new instructions off 23% on the same period last year, after various housing market tax breaks came to an end.

As well as warning on the interim figures, it also said that full-year earnings before interest, tax, depreciation and amortisation were likely to fall to £58m from £75.8m a year previously.