Shares in U.K. online real estate company PurpleBricks fell by more than 35 percent last week after it cut its revenue forecast for 2019.
It now expects sales to be between £130 million ($170 million U.S.) and £140 million ($183 million U.S.). This is down from its previous forecast of £165 million to £175 million.
PurpleBricks cited a “slower than expected” response to its latest U.S. marketing campaign and “headwinds” in the Australian housing markets as reasons for the cut.
PurpleBricks CEO Michael Bruce
The company is about to lose its U.K. and U.S. chief executives. U.K. boss Lee Wainwright (LinkedIn profile) will be replaced by Vic Darvey (LinkedIn profile) for now. Darvey joined the company as COO from MoneySuperMarket.com in January.
Group chief executive Michael Bruce (LinkedIn profile) will run the U.S. business, as well as the wider group business, while a replacement for Eric Eckardt (LinkedIn profile) is sought.
PurpleBricks shared some good news for its U.K. business as it expects U.K. sales to rise between 15 and 20 percent from last year.
Company response
“The company also expects to maintain its 75 percent share of online instructions and for PurpleBricks to continue to be the clear market leader in hybrid estate agency,” the group said in a statement.
“Although there are macro and industry headwinds across markets, we are well placed to capitalize on the significant opportunity for growth that exists in each country, albeit not entirely as we would have wanted before our year-end,” CEO Bruce added.
PurpleBricks has expanded quickly but has seen trading losses increase. It reported a £26 million loss for the last financial year — up from £6 million in the previous year.
Analyst reaction
Russ Mould, an analyst at AJ Bell, said: “PurpleBricks is a classic case of trying to do too much, too fast. Efforts to crack the U.S. and Australia haven’t resulted in the expected revenues and so the company has been forced to issue a profit warning, triggering a 38 percent slump in its share price.
“The overseas setbacks will be a huge embarrassment for the company, which has tried to be a pioneering force in the real estate sector.”
City analyst William Packer, of Exane BNP Paribas, said: “PurpleBricks’ disruptive model has grown rapidly in the U.K. in recent years and is now among the leading agents in the U.K.
“Today’s update underpins our view that PurpleBricks is set to remain an important U.K. player but a hoped-for massive scaling is unlikely in our view. We view this as reassuring for RightMove, the U.K.’s leading property portal.”