Axel Springer takeS 11.5% stake in Purplebricks as agent warns on revenues

Shares sharply lower after poor weather hits sales

German publishing giant Axel Springer said it was spending £125m to take an 11.5% stake in Purplebricks as the online estate agent warned full year revenues would be 5% below estimates.

Purplebricks Group

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The investment includes a £100m subscription for new shares and will also be used to enter new markets, including an accelerated rollout in the US, Purplebricks said in a statement.

It added that market conditions in the UK have been subdued "due to some underlying macro issues and exacerbated by the recent periods of poor weather".

The revenue warning hit the share price on Monday, sending it 11.8% lower in mid afternoon trade.

"These have resulted in a slower than expected start to the key spring market with external market statistics showing that for the industry as a whole instructions for the first three weeks of March 2018 are down 17% compared with the same period last year."

"While Purplebricks has experienced strong growth in its UK division to date and it continues to build market share in both the total estate agency market and hybrid estate agency sector in the UK, it has experienced lower than expected levels of new instructions for the company during the period."

The company said as a consequence group revenues would be around 5% lower than its consensus of £98m with the consequential impact on the operating profit line reflecting the operational gearing in its business model.

"Both Australia and the US are on track to at least meet the board's full year revenue expectations. The company will end its financial year with a year on year increase in revenue of around 100%," Purplebricks said.

Springer's head of classifieds media Andreas Wiele will join the Purplebricks board as part of the investment deal.

"For Axel Springer, this minority stake offers the opportunity to participate in an innovative, fast growing business model in new markets," he said.

Purplebricks has clashed with analysts over the way it books its sales. The shares fell in February as the company got into a public spat with broker Jeffries over a note challenging its completion figures.

The company also fell foul of the Advertising Standards Authority last October as it upheld a complaint about TV ads which gave a misleading impression about customer fees.

The ASA said Purplebricks had not made it sufficiently clear that its services demanded a fee even when a property had not been sold.