Purplebricks losses widen; US exit confirmed

Online estate agent Purplebricks said on Wednesday that it will withdraw from the US as it reported a widening of its full-year losses.

In the year to 30 April 2019, operating losses widened to £52.3m from £27.8m the year before as costs increased and as the US and Australian businesses suffered losses of £53m. Revenue rose 55% to £136.5m, with UK revenue up 21% to £90.1m, driven by a 9% jump in the number of instructions and a 6% increase in average revenue per instruction.

Meanwhile, the Canadian division contributed £23.7m in revenue following the acquisition of Duproprio last year.

The company, which announced back in May that it was exiting Australia and looking to scale back its US operations, confirmed that it was withdrawing from the US market. The company estimated losses and closure costs of between £6m and £8m for Australia and between £4m and £6m for the US.

Chief executive officer Vic Darvey said: "It's been another year of strong revenue growth and we continue to build a highly relevant disruptive brand and defensible position in the market. With a base of clear brand leadership in both the UK and Canada and a differentiated, technology-led proposition driving business model advantages, we now have a clear plan to unlock the next wave of growth and extend our market leadership.

"We have taken the difficult decisions to exit our businesses in both Australia and the US as it is very important that we now focus our resources on the UK and Canada, where we have a strong established presence and where there are significant opportunities to grow market share and deliver profitable growth for shareholders. Both exits will be conducted in an orderly manner with the expectation they will be completed by the end of 2019."

Purplebricks reiterated its medium-term objective to gain 10% share of the UK market. However, it said current economic and political uncertainty in the UK means market conditions remain challenging, with volumes continuing to trend downwards, partially offset by higher revenues per instruction.

At 0915 BST the shares were up 2.2% at 95p.

Russ Mould, investment director at AJ Bell, said: "A good business strategy is to focus on what you know best and retain a sharp focus. Spreading yourself too thinly can lead to mistakes and an inability to do the job properly.

"Purplebricks has paid the price for going down the latter road. It is now in retrenchment mode after trying to do too much at once. Its international ambitions have been grossly scaled back following the decision to pull out of the US as well as Australia which was announced in May.

"This is probably the correct decision to make. It will allow Purplebricks to fine-tune its proposition in the UK and Canada where operations are more established. It is better to take time and make sure the core business is functioning well and new ideas are tested and refined. Indeed, investors seem to like the decision as the share price is up on the news.

"While longer-standing shareholders may have suffered losses - given how the share price has fallen so much in the past few years - the new strategy should give Purplebricks a stronger footing to try and bounce back."