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TODAY'S OTHER NEWS

Michael Bruce leaves Purplebricks and company shuts Australian business

In a shock announcement Purplebricks says founder Michael Bruce is to leave the business and its Australian operation will shut.

“With hindsight, our rate of geographic expansion was too rapid” the firm says.

The news came in the form of a trading statement delivered on the agency’s website and then to the London Stock Exchange.

Here is the announcement:

Trading update

With the financial year now concluded, the Board confirms that it expects Group revenue to be within the £130-140 million range it guided to on 21 February 2019.
Cash balances as at 30 April 2019 will be not less than £62 million.

UK


Whilst the UK property market remains challenging, the Company continues to out- perform the market and the Board remains confident about the future of the business. 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.

The Group’s Canadian business continues to perform well and trading is in line with management's expectations. The Board has a strong belief in the future
opportunities in this market.

Australia

During the two and a half years that Purplebricks has been operating in Australia, market conditions have become increasingly challenging. This, combined with some execution errors, has resulted in the business not delivering the progress the Board expected.


The Board has therefore concluded that the prospective returns from Australia are not sufficient to justify continued investment. Accordingly, the Group has chosen to exit the Australian market and the business there has been put into an orderly run down with immediate effect, pending closure. The business remains committed to our current customers.

US

Whilst good progress has been made in launching our brand across the US, the Board has   to reduce expenditure to sustainable levels   As part of this review, management proposes to examine the options for delivering the next phase of growth in a more effective and cost-efficient way including more closely considering the opportunities and risks associated with a materially scaled back US business. A further announcement on this strategic review will be made in due course.


Management changes

Michael Bruce, the Group's Founder and Chief Executive Officer is stepping down from the business with immediate effect. In turn, the Board has appointed Vic Darvey, previously Purplebricks’ Chief Operating Officer, to the role of Chief Executive Officer and to the Board of Purplebricks.


Vic joined Purplebricks in January 2019 following a successful career most recently as Managing Director of Moneysupermarket.com Group plc. Vic has extensive experience of leading strong technology-focused, customer-centric businesses and will play a key role in guiding Purplebricks through a period of greater focus and strong execution.

Paul Pindar, Non Executive Chairman, said: “Firstly, 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. 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."


"The Board is delighted to have an executive of Vic Darvey's calibre to take on the leadership of our business for its next important phase of development. We have a lot to do and Vic has a clear vision of the priorities we need to address."

"Importantly, we are very conscious that the Group's performance has been disappointing over the last 12 months and we sincerely apologise to shareholders for that."

"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.”

  • Simon Shinerock

    This is the beginning of the end, the States will be next and the UK will follow as people wise up to an expensive cheap service that is no more than portal sponsored repackaged classified advertising.

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    Michael has been the main innovator in beginning great change in the industry for the better and for the good and deserves great credit. Change will continue rapidly.

    Simon Shinerock

    Really? Check out Seekers from the 80s, you may change your mind

     
    Ashley  Sorensen

    A great change for who and what exactly?!

     
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    Haters be loving this news! Purplebricks can now concentrate on winning here in the UK which I believe will now grow exponentially.

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    I’m not sure what’s stopped them concentrating here, 100s of LPEs and millions spent on advertising? What change do you envisage?

     
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    Thanks for the laugh (and coffee down my nose).

     
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    WALMART CREEPS OUT THE GERMANS
    STARBUCKS TOO HOT (AND EXPENSIVE) FOR AUSTRALIA
    BEST BUY TOO BIG FOR ITS BRITCHES IN THE U.K.
    TESCO FAILS TO WHET U.S. APPETITE


    Just like the above companies who we all know are doing great things PB can concentrate on what works!

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    You are Michael Bruce and I claim my £5

     
  • Simon Shinerock

    I’ve got a brilliant tape from a taxi driver ex PB client that says otherwise

  • Andrew Stanton Estate Agency Insights And Strategies

    Purplebrick's epitaph will be: - we took millions of pounds from vendors and never sold their property, and we ran a massive TV advertising campaign involving cakes in the face. More of a cheap circus act, than a sustainable, profit making enterprise.


    Babonday Brian

    We need this to be advertised on tv by ON the MArket etc.. open goal for them if they woke up .

     
  • Andrew Stanton Estate Agency Insights And Strategies

    No online agent will make a penny profit in 2019, and with 5 large online agents closing or being forced to close since last September, it is likely that those brave online agencies still burning sometimes as much as £1m a month, may well decide enough is enough.

    The fundamental flaw is that estate agency like all business is certainly becoming high tech, but the cost base of a sale is still on average £2,500 to break even, and listing property on portals is not the same as having a sales team selling them.

    So, under-charging clients, relying heavily on tech, and deciding not to have a sales force to ‘sell’ property is always going to result in loss, lack of engagement with the clients and buyers, and an unsustainable business model, always looking for another round of cash from shareholders.

    It costs only 160k to cold start a single traditional estate agent, typically producing 95K revenue in year one, breaking even at the end of year two, (so all seed capital returned) and then making profit year three, and 20 to 28% profit by year 4 onwards.

    Just think of the tens of millions pumped into Purplebricks, and others, it could have set up a national chain of 120 branches, with the money it has used as cashflow. Many of them would have paid their investment back and actually be paying dividends to shareholders.

    Maybe that is why 96% of estate agents are not purely online. Thoughts?

    Simon Shinerock

    So clearly and unemotionally expressed Andrew, excellent summary

     
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    Brilliant post!

  • Algarve  Investor

    Commisery for Purplebricks?

    Or whatever the equivalent is for a business seemingly going nowhere good.

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    To ALL good High Street Agents...just keep on doing what your doing on a daily basis, supporting and servicing your clients on a personal basis. You do a brilliant job...without the “borrowed”millions PB have!

  • Ashley  Sorensen

    Obviously advice has been sought in determining the mileage in foreign territories for this brand, which is difficult to rely upon - first hand and detailed knowledge of an area (certainly a country) is essential in order to have a chance to succeed.

    In terms of the U.K., low charges come at a non fiscal cost to the clients, and those clients who do not appreciate this are all too often the ones that are not worth dealing with. They are often the same breed that will have installed a purple kitchen with green worktops, live by a main road, have an electricity pylon 50 feet from their home, and then blame the agent when their house doesn’t sell!

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    They're never going to make money continuing to do what they are doing. However a change strategically in a few areas could see them being really profitable.

  • Phil Hathway

    When your business model relies on massive referral fees from conveyancers and misleading advertising there is only so long you will survive. I feel sorry for the investors and staff who are likely to lose out.

  • Andrew Stanton Estate Agency Insights And Strategies

    Hi James - regarding a change of strategy, PB should first employ a sales team to market the property they list, second instead of apologising to shareholders for mounting losses - PB should refund the 50% of vendors who paid upfront and only got to eat cake (hang on didn't some French lady come up with this idea - just before 'the great terror' caught up with her).

    My thoughts are that PB's cash burn is so rapid they will soon be looking for yet more cash from a new round of investors/victims. That will be the real tragedy.

  • Steve James

    Hate to say it... nope I am liking to say I told you so. I predicted this in 2018. Michael Bruce is a slime ball lawyer and now he's gone it won't be long before Kenny will exit too. These pump it and dump it duo have had their fill. Pb is burning through cash and losing its team in dramatic fashion. They will certainly exit the US market, they bit off more than they could chew just like Australia. Kennys short tempered now and he will step down soon, no comment from him which says a thousand words. He will jump before he's pushed as Axel the current investors will want him gone. Pb will probably survive in the UK but not a big deal as the brothers Grimm pumped it. Still both these pumpers will walk away with a cool 20 to 40 million reach. When I saw Micheal Bruce brag about his new Bentley at the summer conference I knew pb days were numbered, hes an arrogant big headed fool.

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    Michael & Kenny are so arrogant I bet they didn't see this coming which is why Michael had no option but to leave before being pushed. His ego must now be in tatters although a very rich man so why would he need to worry. Kenny is very aggressive in his attitude and soon he will be gone. So purplebricks and there 20% market share in 5 years is so laughable it beggars belief. I know first hand how Kenny runs his business, he does not take the blame for anything and blames everyone else around him. Does not understand the fundamentals and never will. This announcement should make high street agents feel great and imagine what you can now tell your vendors! Wont be long now bye bye Purplebricks...

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