Purplebricks’ most influential investor says there is “opportunity aplenty” for the company but says it would back the closure of the US business to help bolster the UK operation.
Neil Woodford - who spent 25 years building a strong track record at investment consultancy Invesco Perpetual before setting up his own business in 2014 - has made the statement on his fund company’s website Woodfordfunds.
In a post the fund company, which owns over a quarter of the hybrid agency, says there is a “net positive” in three recent shock moves by Purplebricks - the departure of founder Michael Bruce, the closure of its Australian business, and the strategic review of its US activities.
The fund’s post says: “Management can … now concentrate on near-term profitable initiatives (primarily UK and Canada) where they continue to see plenty of untapped opportunity … We would be supportive of a decision to close the US operations, which would materially advance the prospect of group-wide profitability and, as such, should be received very positively by the market.”
The post also says: “Whilst the UK property market remains challenging, Purplebricks continues to outperform the market and the company is clearly confident about the future of the business. Having established a market-leading position, there remain many opportunities for further profitable growth – this will be a key area of focus going forward.”
In an overview of the agency, the fund is just as fulsome in its praise, despite a broad two-year decline in its share value, saying: “Following a comprehensive due diligence process, we first invested in the business in August 2014, initially as an unquoted position. The business was in its very early-stages, but we formed a positive view of an ambitious management team with a significant long-term opportunity to deliver growth through technologically-driven disruption.
“With the company delivering results ahead of its business plan, we supported a further fundraising in July 2015. The business floated on the London Stock Exchange in December 2015 at a price of 100p per share, already a meaningfully higher valuation than our initial investments.
“The shares have been on a journey since then, rising to above £5 per share as excitement about its overseas expansion grew, before retreating back towards the IPO price, as first its Australian business, then its US business, experienced growing pains. Purplebricks is reviewing its overseas operations which remain a cash drag for the group overall.
“Nevertheless, it is now profitable in the UK and the key reasons we originally backed Purplebricks still persist. It is the only online-focused, single brand, national, estate agency business in the UK which has achieved scale. There is still opportunity aplenty for this business, through the pursuit of market share and also by increasing the lifetime value of each customer.”
As with many UK real estate companies quoted on the London Stock Exchange, Purplebricks has enjoyed a roller-coaster ride, but the broad trend for some time now has been a decline in share value.
Last Friday alone the share price was at one point only a little over 95p before closing at 104p, and City analysts at Hargreaves Lansdown calculate the agency’s share value rose by a full 10 per cent over last week alone.
However, over the past month Purplebricks share price has lost around 22 per cent; over six months the loss is 41 per cent; and over two years the lost is 74.68 per cent.
Purplebricks’ next scheduled trading statement is early next month, when it is though the agency will report on the findings of its review of its US operations.
* Meanwhile Toscafund, an investment fund with interests in several online agents, has launched a takeover bid for the parent company of easyProperty; that agency, which has struggled to establish itself against Purplebricks another other onliners, could face closure under the terms of the offer.
Some 600 shareholders in eProp, which also owns The Guild of Property Professionals and Fine & Country, are being offered 50p a share by Toscafund.