In a shock move, co-founder of Purplebricks, Michael Bruce, has been ‘ousted’ from his position as Chief Executive of the online estate agent.
Michael Bruce founded Purplebricks in 2012 alongside his brother Kenny. He has been replaced by Vic Darvey, formerly Operations Chief of the organisation, who was poached from price comparison website Moneysupermarket at the start of the year.
In addition to Bruce’s resignation, the company, which has expanded into the US and Australia has announced that they will be closing their Australian operation saying that returns were ‘not sufficient to justify continued investment’, and will be scaling back their operations in the US.
However, it’s Canadian business, which launched in July 2018, continues to perform well.
The company has blamed the falling share price for Bruce’s exit. During the past year, share prices have tumbled a massive 67%, with an overall fall of 77% from its high of July 2017. Following the announcement of Bruce’s departure, the price tumbled another 12% in a single day as investors fretted about the future of the company.
Purplebricks also blames its expansion abroad, which it now describes, in the words of Chairman Paul Pindar, ‘too rapid’.
In addition to the falling share price, earlier this year Purplebricks significantly downgraded its sales forecasts from between £165m and £175m to between £130m and £1445m, with cash balances of around £62m. And, in February, it was announced that the UK Chief Executive Lee Wainwright, and US Chief Executive Eric Eckardt were leaving the business.
Pindar said that the board was ‘very conscious’ of the poor performance.
‘We sincerely apologise to shareholders for that,’ he added. ‘With hindsight, our rate of geographic expansion was too rapid and as a result the quality of execution has suffered. ‘
He said Purplebricks had also made ‘sub-optimal’ choices about how to spend cash, and added ‘’we will learn from these errors and will not make them again.’
As of the 7 May, the company’s share price stood at 119p, a fall of 16p from the previous day. While this remains an increase of its launch price of 100p in December 2015, this is a far cry from the high of July 2017, where share prices stood at 498.5p.
As if this wasn’t serious enough, a number of banks have cut their price forecasts for the business. Less than a week ago, Swiss bank UBS cut its price forecast to just 100p.
This follows a previous price cut forecast in March, where they downgraded their forecast from 305p to 285p. In April, Berenberg Bank also reduced its price target for Purplebricks by a shocking 80%, from 470p to just 80p, describing the organisation has having ‘flown too close to the sun’.
UBS also predicted that the business’ Australian operation, which was launched in September 2016, wouldn’t break even until 2022.
The US operation, which launched in a year later fares even more badly with a prognosis that no profit would be seen until 2025. This is partly due to extensive marketing campaigns that have generated little return.
Despite its clearly challenging situation, the firm remains optimistic about its future in the UK, saying ‘Having established a market-leading position, there remain many opportunities for further profitable growth and this will be a key area of focus going forward.’