One of the fastest-expanding disruptors in the real estate brokerage space says it is facing some challenging market conditions, prompting a re-think of parts of its business.
British company Purplebricks, which launched in Canada in January 2019 with operations in Ontario, British Columbia, Manitoba, and Alberta; has announced a review of its US operations and a pull-back in Australia.
Founder Michael Bruce has also quit as CEO to be replaced by COO Vic Darvey. The publicly-listed firm’s shares dropped 5% earlier this week as it apologized to shareholders for its performance.
“I would like to place on record our thanks to Michael for the truly remarkable contribution that he has made to the creation and development of Purplebricks,” commented non-executive chairman Paul Pinder. “Michael's vision in creating the UK's leading hybrid estate agent has been deeply impressive, as has his relentless energy in developing the business both in the UK and internationally.”
Mr Pinder added that the “disappointing” performance of the company over the past 12 months meant some changes ahead.
“With hindsight, our rate of geographic expansion was too rapid and as a result the quality of execution has suffered. We have also made sub-optimal decisions in allocating capital. We will learn from these errors and will not make them again,” he said.
In Canada, the Purplebricks expansion was facilitated by the acquisition of the existing ComFree Network and is performing “well and trading is in line with management's expectations.”
The firm’s board say it has a strong belief in the future opportunities in the Canadian market.
Its original UK business, while facing challenges, is also progressing well and outperforming the market.
However, the Australian operation has failed to realise its potential over two and a half years in business and the company has decided to exit the Australian market.
Meanwhile, in the US the firm is cutting back its investment in marketing and other overheads. It says it will review options for delivering its next phase of growth amid a materially scaled-back business.
“Going forward, we have a very clear understanding of the levers available to us to achieve growth,” said new CEO Vic Darvey. “We have two outstanding businesses in the UK and Canada, both of which enjoy market-leading positions. We have also made significant progress in the US building a disruptive brand in the Real Estate market and our proposed strategic review will allow us to determine how we deliver the next phase of growth in a more effective and cost efficient way.”