Purplebricks, the UK’s biggest online estate agent, has swung to a loss and warned it is not likely to break even until 2024 despite a surge in sales after the coronavirus pandemic lockdowns were lifted.
The company, which promised to disrupt the traditional estate agency business model when it was launched in 2014, revealed in delayed results on Tuesday that it swung from an operating profit of £7mn last year to a £42mn loss in the year to April 30.
The results compounded a challenging year for the company, which has lost market share, incurred a string of charges related to the restructuring of the business and historic problems in its lettings division and unexpectedly replaced its chief executive.
Helena Marston, who joined Purplebricks as chief people officer in 2020 and was promoted to chief executive this year, said the results were “very disappointing and frustrating”.
She said financial performance had been affected by the switch to a new operating model, under which its agents are on staff rather than self-employed, and by “a housing market which played against us”.
Average house prices rose more than 10 percent last year and sales volumes were above pre-pandemic levels. But Purplebricks, which is paid a flat fee at the point of instruction, rather than sale, said it was affected by a slowdown in the number of houses coming on to the market after a temporary tax break for buyers ended in September.
The company also lost market share to rivals.
Marston said: “We are still a disruptive model but after the last couple of years we have tried to look and behave more like a traditional agent and that’s been our undoing.”
This year’s loss has reduced Purplebricks’ cash on hand from £74mn at the end of April 2021 to £43mn at the end of this April.
“We’re very much focused on stopping the cash burn and getting back to break even,” said Marston. But the company is unlikely to reach that point before 2024, according to internal forecasts.
Purplebricks grew rapidly after launching, fueled by investment from fund manager Neil Woodford and publisher Axel Springer. It attracted customers with the promise of low, fixed fees rather than a commission based on a percentage of the sale price.
The business has no branches and because its estate agents were self-employed, it did not have the cost of a permanent workforce.
But a change in that model — after a number of current and former Purplebricks agents threatened legal actionclaiming they should have been designated as full employees — has added to costs.
Purplebricks losses included a series of charges arising from the restructuring as well as historical issues, including a £3.6mn provision to cover “process issues” in the company’s letting business.
Its shares fell 7 percent to 14 pence on Tuesday morning, and have lost about 80 percent of their value in the past 12 months.