Purplebricks posted mixed full-year numbers as the operating loss widened to £52.3 million, from £27.8 last year. Group revenue jumped by 55%, but as administration and marketing costs surged, the operating loss widened.
The company decided to close its US division in a bid to conserve cash. The group remains committed to its Canadian and UK businesses, and it reiterated its medium-term goal to achieve 10% of the British market. The firm confirmed the Canadian business is performing in line with expectations, but it cautioned the UK market remains challenging.
The company will look to move to a progressive dividend policy in future years, which is their way of saying they will pay a dividend when they can comfortably afford to pay one. Purplebricks has had a tough time lately, but today’s update shows they are tackling the problems.
Purplebricks' share price plunge prompts takeover talk
Purplebricks share price has had a tough 2019 as the company cut its revenue forecast in February, and in May announced it was exiting the Australian market. It also said the US business was under review. In the same update, COO Vic Darvey was named as the new CEO, as Michael Bruce stepped down. The group's overseas rapid expansion led to a poor ‘quality of execution’, and that played a role in its underperformance. The plunge in Purplebricks' share price has prompted Germany's Axel Springer to ramp up its stake in Purplebricks to 27%, leading to speculation of a takeover bid.
Purplebricks has struggled in recent years as the cooling UK housing market, in particular across the London and south-east regions, has hurt the business. The company listed on the stock market in the latter half of 2016, and it seems it was a little late to the party, as the Purplebricks share price fell to an all-time low in May.
Brexit uncertainty casts cloud over housing sector
The EU referendum in June 2016 caught many off guard, including participants in the property market. The Bank of England loosened monetary policy as a response to the Brexit vote, and the severe drop in the pound in the second half of 2016 was of great assistance to the British property market as it made investment more attractive to overseas buyers.
Earlier this week we saw the UK construction purchasing managers' index (PMI) survey plummet to its lowest reading since early 2009, in a clear sign that there are major concerns about the state of the sector, and that is likely to persist until some clarity is provided in relation to Brexit.