Exclusive: Purplebricks swings to a loss amid legal woes
Online estate agent Purplebricks saw profits tumble in the first half of the year amid legal challenges and housing stock constraints.
In results published today, the company revealed its total loss from operations was £20.2m in the six months to 31 October 2021, down by 397 per cent from profits of £6.7m a year prior. Purplebricks attributed a “disappointing” performance, which saw its market share decline from 4.8 per cent to 3.9 per cent, to a new “operating model,” supply constraints and legal challenges following tenancy law breaches.
“The first half was undoubtedly challenging, with the implementation of a major change to our operating model coinciding with the UK property market experiencing a substantial fall in new instructions,” said chief executive Vic Darvey, referencing a 38 per cent decline in instructions from above 34,000 to around 21,100.
Purplebricks switched its staff from self-employed to employed status in August 2021 leading to a rise in short term business costs which affected earnings in the first half of the year.
“Obviously, in the short term, the cost associated with these changes has impacted on profitability,” Darvey told Morning Wire. “This dynamic led to a disappointing financial performance but we are confident that we now have the right levers in place to drive a stronger financial performance going forward.”
Purplebricks landed itself in hot water after it failed to tell tenants that their deposits were to be placed in a national deposit scheme within 30 days of receiving payment. Tenants are now entitled to claim back three times the value of their deposit from Purplebricks.
While Purplebricks said compensation claims would be as high as £9m in December, it revised estimated downwards today to £3.6m.
Despite the controversies surrounding Purplebricks, including a 78 per cent plummet in the group’s share price over the past year, estate agents are still queuing up to join the firm. Darvey revealed that 43 vacancies advertised in January have received over 12,000 applicants.
“Our absolute focus is on turning around the business,” Darvey told Morning Wire, adding “we feel very confident in the prospects of the business moving forward.”
Share price is up by 2.65 per cent today despite Purplebricks warning that the outlook for the housing market remains uncertain with constrained levels of sales supply expected to continue throughout the second half.
Read more: Purplebricks shares fall by a fifth on £9m bill for tenancy law breaches